Roche grabs majority share in Foundation Medicine for $1B plus milestones

Michael Pellini, CEO of Foundation Medicine

Roche ($RHHBY) is shelling out $1 billion plus milestone payments for a majority share in Foundation Medicine ($FMI), bolstering its diagnostics offerings for cancer and continuing its dealmaking streak.

Under the terms of the deal, the Swiss pharma giant will pay $50 a share for around 15.6 million shares of Foundation Medicine worth up to $780 million, a 109% premium to Foundation's closing price of $23.93 on Friday, the companies said in a statement. Roche will own between 52.4% and 56.3% of the company, and will also invest $250 million in Cambridge, MA-based Foundation by purchasing 5 million newly issued shares at $50 per share. The companies expect to close the deal in the second quarter of 2015.

The deal hearkens back to Roche's earlier investment in Genentech, its now-subsidiary, The Boston Business Journal reports. Foundation will keep its operational independence as part of the collaboration, and CEO Michael Pellini will continue to lead the company postclosing along with the company's current management team. Roche will have three members on Foundation's 9-person board.

"The structure of our agreement with Roche also allows us to maintain the entrepreneurial spirit at Foundation Medicine and ensures that our business model, network of partnerships and objectives are not altered," Pellini said in a statement.

The collaboration stands to benefit both sides, as Roche can accelerate Foundation's innovative molecular information and genomic analysis platforms and Foundation can help Roche develop next-generation treatment options for cancer patients. Foundation markets two gene tests that help find suitable drugs for cancer patients, FoundationOne and FoundationOne Heme, and the company in a separate announcement this morning unveiled positive 2014 earnings results driven by the tests' performance. Foundation roped in $61 million in revenue last year, an eye-popping 111% increase from $29 million in 2013, and sold 24,271 of its FoundationOne clinical tests for solid cancer tumors--a 167% increase over the previous year.

As part of its deal with Foundation, Roche will also commit up to $150 million in funding over the next 5 years to beef up R&D for cancer diagnostics. The companies initially plan to focus on developing genomic profile tests for cancer immunotherapies and for continuous blood-based monitoring.

Meanwhile, Roche continues to forge ahead with meaningful diagnostics M&A to diversify its product offerings. Last month, the company snatched up Ariosa Diagnostics to get its hands on the company's noninvasive prenatal testing technology. Days later, Roche bought Bina Technologies for an undisclosed sum to gain access to the company's innovative genomic sequencing system.

- read the statement
- get more from The Boston Business Journal

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