Roche invests $1B in U.S. genomics firm

Shares of Foundation Medicine more than doubled in pre-market trading early Monday, when Roche Holding AG announced plans to purchase a majority stake in the Cambridge, Mass.-based genomics company.

Foundation Medicine shares were up more than 113% or $27.06, at $51.00.

Roche said it plans to pay more than $1 billion for the majority stake, which would give it access to genomic tests for screening tumors. The company said the purchase would help it to develop a new generation of treatments to fight cancer.

Specifically, Roche will buy 5 million new shares of Foundation for $50 each and make an offer to purchase stock from existing investor for the same price, the companies said in a statement.

The move continues a wave of pharmaceutical company mergers and acquisitions that began in 2014. On Sunday, Shire PLC, an Irish-based drugmaker, agreed to acquire New Jersey-based NPS Pharmaceuticals for about $5.2 billion. Shire executives said the company wants to bolster its roster with medicines used to treat rare diseases.

The pharmaceutical deals over the past two years have been driven by different catalysts — some by tax inversions; some by the growing need for biotech expansion; and some by both.

The latest deal gives Roche, already the world's biggest cancer drug maker, yet more cancer-fighting tools in its war chest. Roche and Foundation also plan to develop a profiling test to be used for immunotherapies, or treatments that aid the immune system's attack against tumor cells. Basel, Switzerland-based Roche also gets the rights to sales of Foundation's tests outside the USA as part of the transaction, which is scheduled to be completed in the second quarter.

"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," said Daniel O'Day, COO of Roche Pharma, 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 personalized health care in oncology to the next level."

O'Day said that the emerging field of molecular information and genomic analysis will play an increasingly important role for future medicines and diagnostic solutions, in particular for cancer patients.

Roche also committed to provide $150 million of research-and-development funding for at least five years as part of the transaction.