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Roche (RHHBY) Clinches $1.7-Billion Deal to Acquire Ignyta
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Roche Holdings AG (RHHBY - Free Report) entered into a definitive merger agreement with Ignyta, Inc. at a price of $27 per share or total value of $1.7 billion in an all-cash transaction.
The price of $27 per share represents a premium of 74% to the closing price of Dec 21, 2017.
California-based Ignyta is focused on precision medicine in oncology aiming to test, identify, and treat patients with cancers harbouring specific rare mutations.
Per the terms of the agreement, Roche will start a tender offer to acquire all outstanding shares of Ignyta common stock.
Rationale of the Deal
The acquisition adds an important mid-stage candidate to Roche’s pipeline. The lead candidate of Ignyta is entrectinib, an orally bioavailable, CNS-active tyrosine kinase inhibitor being developed for tumours that harbor ROS1 or NTRK fusions. The candidate is currently being evaluated in an ongoing phase II trial which if successful will support NDA submission. The candidate is designed to target tumours with one of two genetically defined gene rearrangements: ROS1 fusions in non-small cell lung cancer (NSCLC) and NTRK fusions across a broad range of solid tumours.
The interim data from the STARTRK-2 trial on entrectinib in patients with ROS1 fusion-positive advanced NSCLC demonstrated a 78% and 69% confirmed objective response rate (ORR). The candidate also showed a median duration of response of 28.6 months and median progression free survival of 29.6 months with 53% of patients remaining on study. The safety data was consistent with previous studies of entrectinib.
The closing of the transaction is expected to take place in the first half of 2018.
Our Take
The acquisition broadens Roche’s pipeline and a tentative approval will strengthen its already strong oncology portfolio.
Roche has a strong presence in the oncology market. In particular, the company dominates the breast cancer space with strong demand for its HER2 franchise drugs. Apart from its strong breast cancer franchise, Roche’s oncology portfolio also boasts drugs like Avastin and Tarceva for lung cancer.
Roche’s stock has rallied 11.7% year to date compared with industry's gain of 19.6%.
However, the company hasn’t been quite active on the acquisition front. The recent acquisition announcement puts focus on the company’s efforts to strengthen its pipeline through acquisitions.
Big companies are on the lookout to acquire/develop pipeline candidates of developmental stage companies. Last month, Bayer AG (BAYRY - Free Report) entered into a collaboration with Loxo Oncology, Inc. , a biopharmaceutical company to develop and commercialize larotrectinib and LOXO-195, Loxo Oncology’s franchise of highly selective TRK inhibitors for patients with TRK fusion cancers.
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Roche (RHHBY) Clinches $1.7-Billion Deal to Acquire Ignyta
Roche Holdings AG (RHHBY - Free Report) entered into a definitive merger agreement with Ignyta, Inc. at a price of $27 per share or total value of $1.7 billion in an all-cash transaction.
The price of $27 per share represents a premium of 74% to the closing price of Dec 21, 2017.
California-based Ignyta is focused on precision medicine in oncology aiming to test, identify, and treat patients with cancers harbouring specific rare mutations.
Per the terms of the agreement, Roche will start a tender offer to acquire all outstanding shares of Ignyta common stock.
Rationale of the Deal
The acquisition adds an important mid-stage candidate to Roche’s pipeline. The lead candidate of Ignyta is entrectinib, an orally bioavailable, CNS-active tyrosine kinase inhibitor being developed for tumours that harbor ROS1 or NTRK fusions. The candidate is currently being evaluated in an ongoing phase II trial which if successful will support NDA submission. The candidate is designed to target tumours with one of two genetically defined gene rearrangements: ROS1 fusions in non-small cell lung cancer (NSCLC) and NTRK fusions across a broad range of solid tumours.
The interim data from the STARTRK-2 trial on entrectinib in patients with ROS1 fusion-positive advanced NSCLC demonstrated a 78% and 69% confirmed objective response rate (ORR). The candidate also showed a median duration of response of 28.6 months and median progression free survival of 29.6 months with 53% of patients remaining on study. The safety data was consistent with previous studies of entrectinib.
The closing of the transaction is expected to take place in the first half of 2018.
Our Take
The acquisition broadens Roche’s pipeline and a tentative approval will strengthen its already strong oncology portfolio.
Roche has a strong presence in the oncology market. In particular, the company dominates the breast cancer space with strong demand for its HER2 franchise drugs. Apart from its strong breast cancer franchise, Roche’s oncology portfolio also boasts drugs like Avastin and Tarceva for lung cancer.
Roche’s stock has rallied 11.7% year to date compared with industry's gain of 19.6%.
However, the company hasn’t been quite active on the acquisition front. The recent acquisition announcement puts focus on the company’s efforts to strengthen its pipeline through acquisitions.
Big companies are on the lookout to acquire/develop pipeline candidates of developmental stage companies. Last month, Bayer AG (BAYRY - Free Report) entered into a collaboration with Loxo Oncology, Inc. , a biopharmaceutical company to develop and commercialize larotrectinib and LOXO-195, Loxo Oncology’s franchise of highly selective TRK inhibitors for patients with TRK fusion cancers.
Zacks Rank
Roche carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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