I have posted previous notes about the Roche's quest for Ventana Medical Systems, which has thus far been unsuccessful. In a previous note and also relevant to Roche (see: Five Alternative IVD + Software Business Models), I also discussed the company's strategy of combining the manufacture of pharmaceuticals with companion diagnostics. Here is an excerpt from that note (new boldface emphasis):
In-vitro diagnostics + pharmaceuticals. This is the [business} model being pursued by Roche. Although the company is a leader in terms of its IVD products, it understands that much of its future lies in the synergy between newly emerging drugs and the companion diagnostics that will be required for an individual patient to be considered a candidate for their use .... Up to this time, Roche's interest in lab software has been limited to middleware modules that enhance and support their analyzers and reagents.
In a recent new article, Roche's CEO Franz Humer discussed his hostile bid for Ventana but was also made some remarkably candid remarks about his overarching corporate strategy (see: Roche’s Humer Insists He Will Win Ventana). Below is an excerpt from the article (boldface emphasis mine):
The Roche CEO expresses unflinching confidence that the drugmaker will succeed in its $3 billion hostile bid for Ventana Medical Systems in an interview with The Financial Times....The Ventana bid is part of Roche’s broader strategy to “strengthen in the medium and long term” the diagnostics part of the business, which Humer says would continue to represent about 20 per cent of sales of the group. And Humer argues that greater benefits could be reaped from joint research and development on diagnostics and treatment when both functions were controlled by a single company. The alternative approach of alliances between drugs and diagnostics companies that remained independent from each other were less effective “because both sides protect their IP (intellectual property),” .... And over time, companies offering a combination of diagnostics and ever more personalised drugs to doctors would have a competitive edge because “you can justify your pricing based on the diagnostic”.
I can definitely understand Humer's remark that separate IVDs and pharmaceutical companies will protect their own intellectual property and that there are positive benefits from combining the two corporate efforts. There is definite overlap between the development of drugs targeted to interrupt molecular pathways and the diagnostics designed to measure these same molecules.
Turning to the topic of companion diagnostics and their relationship to drug therapy, it seems to me that there can be two difference perspectives. The first is that the companion test is used to exclude those patients who will not respond to a particular drug. The second is that the test is used to identify those patients most likely to respond to it. It is reasonable to assume, as Humer does, that patients who fall into the second category will be highly motivated to receive the drug in question regardless of the price. In this way, the price of the drug can be "justified" through the use of the companion testing.
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