Roche to spend $2.4bn buying rest of Foundation Medicine

Swiss drugmaker Roche is to spend $2.4bn buying out remaining shareholders in Foundation Medicine, a US molecular and genomic analysis company in which it took a controlling stake three years ago.

The deal, announced on Tuesday, aims to strengthen Roche’s development of personalised cancer therapies as the Swiss group looks for new growth areas to compensate for the loss of exclusivity on long-time blockbuster drugs.

Roche has been more exposed than rivals to a wave of copycat drugs, including cancer treatments, which has put pressure on its profitability.

The Swiss group’s share price has fallen more than 17 per cent over the past year, but despite weak global financial markets it had risen 0.5 per cent to SFr211 by late afternoon European trading on Tuesday.

Foundation, which reported a net loss of $161m on revenues of $153m in 2017, won US Food and Drug Administration approval last year for a broad comprehensive genomic profiling test for solid tumours.

In January 2015, Roche paid $1bn to acquire a 57 per cent stake in Foundation, which is based in Cambridge, Massachusetts, and pledged to invest more than $150m in accelerating product development.

Under Tuesday’s deal, Roche has agreed to pay $137 in cash for each of the remaining shares it does not own — compared with the $50 a share it paid in 2015. The deal valued Foundation at $5.3bn, with the offer representing a 29 per cent premium on Foundation’s closing price on Monday.

Roche said it planned to use its international operations to drive the global adoption of Foundation’s testing, which had so far been concentrated on the US. The deal fitted with its focus on data-driven precision medicine.

The acquisition would “fit very well with Roche’s personalised healthcare strategy and its status as an early leader in this field,” wrote Stefan Schneider, analyst at Vontobel in Zurich, in a note.

Roche said Foundation would operate independently and it had no plans to merge it with Flatiron Health, a start-up focused on using technology to improve cancer treatment, which it acquired in February.

Severin Schwan, Roche’s chief executive, told the Financial Times in an interview in January that he was looking for bolt-on acquisitions, “where we want to complement existing product franchises or technologies”. Apart from the Flatiron deal, Roche announced in December it was buying Ignyta, a California-based specialist in cancer medicines, for $1.7bn to strengthen its oncology portfolio.

Daniel O’Day, head of Roche’s pharmaceuticals division, said Roche believed “molecular insights and the broad availability of high quality comprehensive genomic profiling are key enablers for the development of, and access to, new cancer treatments.”

Troy Cox, Foundation’s chief executive, said the two companies agreed “that every cancer patient should have access to personalised care informed by validated molecular information”.