UPDATE 2-Roche boosts position in diabetes market with buy

* Roche to make upfront payment of $160 mln for Medingo

* To pay up to 25 pct of $160 mln in performance milestones

* Stock slightly weaker, marginally underperforms index

(Adds details, analyst comment)

By Katie Reid

ZURICH, April 13 (BestGrowthStock) – Roche Holding AG (ROG.VX: ) has
bolstered its position in the diabetes market by buying Elron
Electronics’ (ELRN.TA: ) Medingo unit in a deal worth up to $200
million, the Swiss drugmaker said on Tuesday.

Roche will make an upfront payment of $160 million to
shareholders as well as up to 25 percent of the upfront payment
in performance-related milestones for Medingo, which is
developing a semi-disposable insulin patch pump.

Elron, an Israeli technology holding company, owns 92
percent of Medingo and it expects to post a net gain of between
$58 million and $81 million from the sale of Medingo.

“With this acquisition we will broaden our portfolio of
innovative insulin delivery technologies and strengthen our
position as a leading player in the diabetes care business,”
said Roche Diagnostics Chief Operating Officer Daniel O’Day.

Roche is the world No. 2 in the insulin delivery system
global market and it competes with Bayer (BAYGn.DE: ), Johnson &
Johnson (JNJ.N: ) and Abbott (ABT.N: ) in pumps and blood glucose
monitoring, a spokeswoman for the group said.

The Medingo patches can be stuck on to the skin, without the
need for tubes, making it easier for patients to get insulin.
They also offer patients an alternative to insulin injections
from leading suppliers such as Novo Nordisk (NOVOb.CO: ) and Eli
Lilly (LLY.N: ).

OUTSIDE ONCOLOGY

Roche, the world’s largest maker of cancer drugs, is seeking
to broaden its business beyond oncology and at its investor day
in March, it said it was eyeing blockbuster sales outside
oncology. [ID:nLDE62H08Q]

“While the acquisition has no impact on our earnings
forecasts, diabetes care and diabetes therapy is becoming an
increasingly important franchise of Roche’s product offering,”
said Kepler Capital Markets analyst Martin Voegtli.

Voegtli pointed to the two late-stage projects that are
currently in phase III testing for the treatment of diabetes
type 2: taspoglutide, which is estimated to have peak sales of
3.3 billion Swiss francs ($3.12 billion), and aleglitazar, which
is forecast to have 1.1 billion francs peak sales.

At 0745 GMT, Roche’s stock was trading 0.3 percent lower at
173.00 Swiss francs, slightly underperforming a near flat Stoxx
European healthcare index (.SXDP: ).

The Medingo patch pump is not yet marketed and the global
launch is expected by 2012, Roche said in a statement.

The patch pump will also be cheaper than the durable pumps,
which can have an upfront cost of between $2,000 and $3,000.

“With the patch pump, we will be talking about investments
more in the hundreds of dollars range, which allows greater
access to patients out there where economics have been a
barrier,” Day told journalists on a conference call.

In 2009, the insulin delivery system global market was
estimated at 1.6 billion francs, and expectations for the growth
of the patch pump segment are even higher than for the market as
a whole, Roche said.

Investing Research

(Additional reporting by Tova Cohen in Tel Aviv; editing by
Will Waterman and Jon Loades-Carter)
($1=1.057 Swiss Franc)

UPDATE 2-Roche boosts position in diabetes market with buy