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