Roche Holding to Pay $1.03 Billion for Diagnostics-Firm Stake
Proposed Pact Points to Growing Role of Genetic Diagnostics in Cancer Treatment
Roche Holding AG agreed to pay $1.03 billion for up to a 56.3% stake in Foundation Medicine Inc. in a collaboration that underscores the growing importance of genetic diagnostics in the treatment and development of drugs for cancer.
Under the agreement, Roche will launch a tender offer for about 15.6 million shares of the Cambridge, Mass., maker of molecular diagnostic tests for about $780 million, or $50 a share, and it will also acquire five million new shares of the company, also for $50 each. The amount is a 109% premium over Foundation’s closing price of $23.93 on Friday.
Foundation has developed and markets two tests—one for solid tumors such as lung cancer and melanoma and one for blood cancers such as leukemia—that use next-generation genetic sequencing to identify mutations that are the drivers of a patient’s disease. Doctors can use the results to try to match patients with available drugs that target the identified mutations or with clinical trials testing such drugs.
This “personalized medicine” approach is helping to transform cancer treatment and prompting an intense search among drug and biotechnology companies for new driver mutations and drugs that take aim at them.
Under the agreement, in addition to the equity, Roche may invest at least an additional $150 million for research and development collaboration between the two companies. The R&D will include using the tests in the development of drugs in Roche’s pipeline, said Michael Pellini, Foundation’s president and chief executive officer.
Other R&D efforts will focus on developing new cancer blood tests known as liquid biopsies and tests that could be used in conjunction with drugs that enable the body’s immune system to fight cancer, he said.
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Roche is making “a meaningful commitment to Foundation Medicine as well as to the molecular information space,” said Dr. Pellini, who would remain as president and chief executive officer under the agreement. “The overriding reason for this relationship is that we believe we can have a greater impact on patient care in oncology.”
Foundation’s Foundation One test for solid tumors lists for $5,800 while its Foundation Heme test for blood cancers is priced at $7,200. The tests aren’t widely covered by insurance, though the company says it often succeeds in negotiating reimbursement on an individual basis. Foundation says it has sold about 35,000 tests since the first one was launched in June 2012.
As part of the agreement, Roche will market the tests outside the U.S. and support Foundation’s commercial efforts in the U.S., Dr. Pellini said.
Roche will get three seats on the board, which will be expanded to nine members, while Foundation will remain as an independent publicly traded company. Foundation has agreements with more than two dozen pharmaceutical and biotech companies involving the use of its tests in drug development, Dr. Pellini said. They won’t be affected by the deal, which is subject to regulatory approval.
In a statement, Daniel O’Day, chief operating officer of Roche’s Roche Pharma unit, said combining Foundation’s genomic and molecular information with Roche’s expertise in oncology will enable the companies to “bring personalized health care in oncology to the next level.”