Roche will acquire a majority stake in Foundation Medicine (FMI) for $1.18 billion, the companies said today, launching a personalized medicine partnership intended to help develop new Roche cancer drugs by harnessing FMI’s capabilities in molecular information and genomic analysis.

The companies said their partnership is intended to optimize treatments for oncology patients through a broad R&D collaboration designed to accelerate FMI’s new product development initiatives, and better design and understand the results of clinical trials based on molecular information. The partnership will also include commercial collaboration agreements aimed at expanding global sales for current and future FMI products.

The partnership, according to FMI and Roche, is expected to help support development of combination therapies, novel targets, more accurate patient population identification and inclusion in clinical trials, and next generation companion diagnostics.

The initial focus of the R&D collaboration, according to Roche and FMI, will be on developing genomic profile tests for cancer immunotherapies and for continuous blood-based monitoring. Roche will use FMI’s molecular information platform to standardize clinical trial testing—with the goal of enabling comparability of clinical trial results for R&D purposes, and ultimately in clinical settings.

“FMI’s pharmaceutical business will not be impacted and could be enhanced as FMI capabilities increase with the investments and experience in working with Roche as a customer,” the companies declared in a statement.

Added Daniel O’Day, COO of Roche Pharma: “By combining FMI’s pioneering approach to genomics and molecular information with Roche’s expertise in the field of oncology, we can bring personalized healthcare in oncology to the next level.”

In addition to the R&D collaboration, the companies also agreed to a commercial collaboration agreement. Roche will obtain outside-U.S. rights, under the FMI brand, to existing FMI products, as well as to future co-developed products.

In the U.S., Roche will engage its U.S. medical education team in providing medical information to pathologists, the companies added.

FMI will continue to operate independently, with its president and CEO Michael J. Pellini, M.D., continuing to lead the company. Roche will obtain minority representation on an expanded FMI board of directors.

FMI’s board will be increased to nine directors, including three designees of Roche that include O’Day. Dr. Pellini and four existing independent directors of FMI will continue as directors and one new independent director will be added. “It is anticipated that Alexis Borisy will remain chairman,” the companies said.

The boards of FMI and Roche has already approved the deal, expected to close in the second quarter of this year.

The partnership is set to become effective upon completion of Roche’s direct investment in FMI and its planned tender offer. Before that happens, the partnership will require FMI shareholder approval, clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.

Roche plans to acquire a majority stake in FMI of between 52.4% and 56.3% by acquiring 15.6 million FMI shares at $50 per share through a tender offer with a value of about $780 million; as well as by investing $250 million in the company, allowing it to acquire 5 million newly-issued shares at $50 per share.

The share price reflects a 109% premium over FMI’s closing share price of January 9.

To advance the tender offer, three investor shareholders owning a combined approximate 31% of FMI equity—Third Rock Ventures, Kleiner Perkins Caufield & Byers, and Google Ventures—have entered into a support agreement under which each has committed to vote in favor of the transaction, and tender at least a majority of their shareholdings in the tender offer.

Roche also agreed to fund the partnership’s R&D at “potentially more than” $150 million for at least five years.

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