Roche to Buy Balance of Foundation Medicine

Three years after acquiring a majority stake in Foundation Medicine, Swiss pharmaceutical giant Roche has agreed to buy the remainder of the cancer-focused genetic-testing company.

The $2.4 billion deal announced on June 19, which builds on a $1 billion-plus investment and strategic research collaboration inked in 2015, is expected to financially benefit both partners.

Foundation Medicine has been striving for years to secure payer reimbursement for its DNA tests designed to match patients to specific cancer drugs. These include both laboratory-developed tests (LDT), which require only Clinical Laboratory Improvement Amendments certification, and companion diagnostics such as the company's FoundationOne CDx, which late last year became the first FDA-approved broad pan-tumor test.

Roche, as a much bigger player in the marketplace, “may be in a better position to negotiate coverage and pricing deals,” says Joshua Cohen, PhD, an independent healthcare analyst in Boston, MA, who has studied the companion diagnostics industry.

Cohen does not expect to see much difference in the pace of new product creation. “In my experience,” he says, “mergers tend not to be a boost for innovation, not a negative or a positive.” However, he notes that the partnership could make it easier for Cambridge, MA–based Foundation Medicine to test its assays in conjunction with Roche's cancer drugs in randomized, controlled trials. This would provide Foundation Medicine with more evidence to demonstrate clinical utility for its tests and up its chances of earning payer reimbursement.

Research from Cohen and others has shown that diagnostics approved after any corresponding targeted therapies, without joint development deals and the valuable clinical data they provide, can face greater challenges in earning reimbursement approval—a situation encountered by Foundation Medicine with its two LDTs for solid tumors and hematologic malignancies.

Roche, meanwhile, is hoping that with its own genome profiling unit it can further demonstrate the value of its targeted cancer drugs—and drive up sales.

In doing so, the company appears to be continuing its commercial strategy of acquiring smaller companies with complementary products and services that started with the 2009 purchase of Genentech—a deal that's proven vital to Roche's bottom line. Roche also recently took over Flatiron Health, a data analytics company in New York, NY, that specializes in electronic health-record software for patients with cancer, in a deal valued at $1.9 billion, and completed a $1.7 billion buyout of San Diego, CA–based Ignyta, a clinical-stage developer of targeted therapies.

“This is a customary behavior for Roche,” says Christopher-Paul Milne, DVM, JD, director of research at the Tufts Center for the Study of Drug Development in Boston. “Roche sees economy of scale this way.”

Under the terms of the Foundation Medicine agreement, day-to-day operations will not be significantly affected, according to Lee-Ann Murphy, a company spokesperson. There are no planned layoffs or leadership changes. “Foundation Medicine will remain an independent operating organization within the Roche Group,” she says. “Our management team will remain in place, and Troy Cox will remain as CEO, reporting to Daniel O'Day, CEO of Roche Pharma.”

Murphy also notes that preexisting development deals with Roche competitors Pfizer and Merck will continue without change. –Elie Dolgin

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