Roche takes $1B majority stake in Foundation Medicine to use genomic testing to personalize oncology treatments
The quest for those patient populations that will benefit the most from specific drugs and diagnostics has spurred Roche Holding, the world’s biggest seller of cancer drugs, to spend $1.03 billion for a majority stake in Foundation Medicine (FMI) to create a broad collaboration to advance the use of FMI’s genomic tests for solid tumors and blood cancers.
The investment is expected to boost sales of Roche’s cancer drugs by helping physicians more accurately choose the right patients for treatments. The two companies plan to develop a profiling test to determine how best to help a patient’s immune system attack tumor cells.
“This relationship is transformational for us,” said Steven Kafka, FMI’s chief operating officer. “We are both aimed at really furthering this goal of precision medicine, whereby each company brings a deep understanding of an individual patient’s cancer and the ability to develop and apply the right target medicines. They (Roche) want to broadly apply our tests, from our molecular information platforms to their trials, and also access our genomic database, to help inform their drug development strategy and really accelerate the advancement of these molecules.”
Under Roche’s majority ownership, FMI will continue its partnership work with more than 25 pharmaceutical and biotechnology companies, including Johnson & Johnson, Sanofi and Novartis. He said those arrangements will not change.
FMI also will expand its cancer diagnostic tool that identifies alterations in tumors to help physicians match patients with appropriate clinical trials. More than 35,000 of these personalized tests have been sold worldwide. These test results combine molecular information from FMI’s assays with the latest information on scientific and clinical data, which then are distilled into reports that inform physicians on patient treatment.
Last year, FMI ran 24,200 tests—significantly higher than the 9,000 tests run in 2013, according to The New York Times. However, only 25% of the estimated 10,000 oncologists in the U.S. have used the company’s tests. Expanding the use of FMI’s genomic tests also is part of the new ownership, as Roche’s subsidiary Genentech will be involved in educating and training cancer specialists and sales personnel, said Kafka.
Under the financial agreement, Roche will purchase about 15.6 million FMI shares at $50 each—a 109% premium over FMI’s closing price of $23.93 per share price on Friday, Jan. 9—for a total of $780 million. Roche also will acquire five million newly issued shares at $50 each for a total of $250 million—a combination that gives the Swiss drug company up to a 56.3% ownership, on a fully diluted basis, according to a statement by the two companies.
Together that’s more than $1 billion in cash up front for FMI. Roche also will provide $150 million to accelerate FMI’s new product development initiatives and optimize treatments for oncology patients by using their molecular information. Those funds also will go toward commercial collaboration agreements aimed at expanding FMI’s global sales efforts for current and future products, according to Roche.
“We are very pleased to enter into this collaboration with FMI, which has the potential to improve both the development of medicines and patient care,” Daniel O’Day, chief operating officer of Roche Pharmaceuticals, said in a statement. “By combining FMI’s pioneering approach to genomics and molecular information with Roche’s expertise in the field of oncology, we can bring healthcare in oncology to the next level.”
Earlier this month, FMI expanded its partnership with Novartis by providing a drug maker with greater access to its gene profiling technology to help develop cancer treatments. The two companies have been partners since 2011, and the new arrangement calls for FMI to lend its Foundation One technology—a sequencing-based diagnostic tool that looks at 236 cancer-related genes in tumors—to match patients with their ideal treatments and to tap its Big Data capabilities.
Providing companies such as Novartis, Johnson & Johnson and Sanofi with expanded capabilities for drug development makes up the majority of FMI’s revenue.
However, key for FMI is to expand its genomic profiling, for which the costs are relatively high. Foundation One, which is a one-stop shop for tumor profiling, carries a list price of $5,800, while Foundation One Heme, for blood cancers, is $7,200. A key goal for FMI, with Roche’s help, is making these tests a routine part of cancer evaluations, and having doctors use the results to suggest treatment options to patients, according to Kafka.
“[Roche’s] intention is to use Foundation One across all of their patients and, ultimately, better advance their medicines,” said Kafka. “That is the objective and ultimate goal of enhancing precision medicine.”
Under the new majority ownership, Foundation will gain four new board members including O’Day, and a new independent director. The top management at FMI will remain in place after the close, which is expected in the second quarter.
Email comments to Ronald at ronald.rosenberg@centerwatch.com. Follow @RonRCW
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