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Roche to Buy Rest of Foundation Medicine for $2.4 billion

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Roche (RHHBY - Free Report) and Foundation Medicine, Inc. announced that they have entered into a definitive merger agreement wherein Roche will acquire the remaining shares of Foundation Medicine, not already owned by it at a price of $ 137.00 per share in cash. This represents a total transaction value of $2.4 billion, and a total company value of $ 5.3 billion.  The offer price represents a premium of 29% to Foundation Medicine's closing price on Jun 18, 2018. The deal is expected to close in the second half of 2018.

The deal is a strategic fit for Roche as it will allow Roche to have more effective and targeted drugs, which should improve drug development and ultimately pricing power.The merger focuses on utilising Foundation Medicine`s high quality comprehensive genomic profiling (CGP) testing and innovative data services to realise Roche`s vision of personalised healthcare.  

FMI is a molecular information company specialised in cancer care. It offers comprehensive genomic profiling (CGP) assays to identify molecular alterations in a patient's cancer and match them with targeted therapies, immunotherapies and clinical trials.

We remind investors that in January 2015, Roche acquired a majority interest in Foundation Medicine of up to 56.3% on a fully diluted basis through a tender and acquisition of newly issued shares for about $1 billion. Shares of Roche have decreased 16.5% compared with the industry’s decline of 4.8%.

We note that Roche has been on a buyout spree. Earlier in 2018, the company acquired Flatiron Health and Ignyta, Inc. While Flatiron Health will accelerate development and delivery of breakthrough medicines for oncology patients, Ignyta’s lead molecule entrectinib targets tumors with one of two genetically defined gene rearrangements: ROS1 fusions in non small cell lung cancer, and NTRK fusions across a broad range of solid tumors.

 

Zacks Rank & Stocks to Consider

Roche has a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space are Aeglea BioTherapeutics, Inc. and ANI Pharmaceuticals, Inc. (ANIP - Free Report) . Both Aeglea and ANI Pharmaceuticals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aeglea’s loss per share estimates have narrowed from $1.93 to $1.67 for 2018 and from $3.86 to $3.57 for 2019 over the past 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters with an average beat of 19.32%. The stock has rallied 101.3% so far this year.

ANI Pharmaceuticals’earnings per share estimates have moved up from $5.54 to $5.79 for 2018 and from $5.72 to $5.80 for 2019 over the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters with an average beat of 8.69%. The stock has rallied 3.9% so far this year.

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