Roche in $1 billion-plus Foundation Medicine deal to boost cancer efforts

[January 12, 2015]  ZURICH/LOS ANGELES (Reuters) - Roche Holding will acquire a majority stake in molecular and genomic analysis business Foundation Medicine, it said on Monday, signaling its determination to expand in cancer immunotherapy by paying a hefty mark-up on the U.S. company's current price.

The deal will help the world's largest maker of cancer drugs push ahead in developing treatments that help the body's own immune cells fight tumors, jostling with rivals including Bristol-Myers Squibb, Merck & Co and AstraZeneca.

The Swiss company, which will buy Foundation through a combination of outstanding and newly issued shares, said the deal should help it to develop combination therapies and identify cancer patients more accurately.

"By combining Foundation's pioneering approach to genomics and molecular information with Roche's expertise in oncology, we can bring personalized healthcare to the next level", the head of Roche's pharmaceuticals division Dan O'Day said in a statement.

The move to bolster its personalized cancer treatments could cost the Swiss drugmaker up to $1.18 billion.

Roche said it will tender for about 15.6 million Foundation shares at $50 a share, worth about $780 million and at a premium of 109 percent to Friday's closing price. It will also invest $250 million by acquiring 5 million newly issued Foundation shares at $50 a share.

"Roche has shown once again its availability on paying no matter what price to strengthen its position in the oncology field," said one Zurich-based analyst who asked not to be identified.

FINANCIAL IMPACT

The deal highlights Roche's belief that personalized treatment will be key in the battle against cancer, while the immediate financial impact on the company is negligible, the analyst said.

At the end of the second half of last year Roche had at its disposal 7.9 billion Swiss francs ($7.77 billion) in operating free cashflow.

Despite the hefty premium, news of the deal lifted Roche's shares in morning trade. By 1149 GMT the stock was up 2.2 percent at 284.10 Swiss francs, beating a 1.1 percent rise for the wider European sector.

A targeted approach to treating disease is gaining traction in many fields and is attractive to governments and insurers because it means that drugs should go only to patients who are likely to benefit.

The initial focus of Roche's acquisition will be on developing genomic profile tests for cancer immunotherapies and for continuous blood-based monitoring. The companies said the deal includes the potential for more than $150 million in additional funding by Roche.

Roche will own between 52.4 percent and 56.3 percent of Foundation and gain minority representation on the board, with the U.S. company retaining its management team.

The deal comes fast on the heels of two others. Roche said last month that it would buy Bina Technologies for an undisclosed sum and pay up to $489 million for Austrian biotech company Dutalys.

California-based Bina provides technology for the processing and management of genomic information, while Dutalys specializes in so-called bi-specific antibodies.

(Reporting by Katharina Bart and Caroline Copley in Zurich and Deena Beasley in Los Angeles.; Editing by David Goodman)

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