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Roche, Foundation Medicine Execs Discuss Rationale Behind Broad Diagnostics, Commercial Partnership


NEW YORK (GenomeWeb) – As part of their strategic partnership announced yesterday, Roche and Foundation Medicine plan to collaborate closely on the R&D side to develop new products, and on the commercial side to broaden the reach of Foundation Medicine's tumor profiling tests in the US and abroad.

In a webcast conference call to discuss the deal, representatives from both companies provided more information about the R&D and commercial agreements and talked about the rationale behind the partnership, which calls for Roche to take a majority stake in Foundation Medicine through a direct investment and a tender offer worth more than $1 billion in aggregate, and for Foundation Medicine to remain largely independent in its operations, including its ability to partner with other drug companies.

"This collaboration will add momentum to the universal shift in diagnosing and treating cancer from a tissue-of-origin approach to a precision approach based on the molecular drivers of each patient's disease," said Foundation Medicine President and CEO Michael Pellini.

The companies have had a longstanding relationship, with Roche Ventures being an early investor in Foundation Medicine's Series B round, but have not broadly collaborated before. The firms got together in early 2014 to discuss possibilities to collaborate, and "both organizations had a tremendous amount of respect for one another at the scientific level, but also how we thought about the future of molecular oncology," Pellini said.

Foundation Medicine "was really not looking for anything on the M&A front," he said, but "Roche approached us with this idea of doing something a little bit different that's not done all that often in this space," resulting in the new partnership.

Foundation Medicine expects to see additional revenue from the deal starting in the fourth quarter, according to Jason Ryan, the firm's senior vice president of finance.

On the R&D front, the companies plan to collaborate in four broad areas: Roche will integrate Foundation's tumor profiling platform into its clinical development; the firms will develop new diagnostics for cancer immunotherapy and for circulating tumor DNA; they will co-develop companion diagnostics for use with Roche therapeutics; and they plan to jointly develop in vitro diagnostic kits for Foundation Medicine's tests. Overall, Roche plans to fund Foundation's R&D activities with approximately $150 million, some of which will be performance-based.

Integrating Foundation Medicine's "molecular information platform" into its R&D pipeline will "enable Roche to create a common basis of genomic information across its clinical development activities," said Foundation Medicine Chief Operating Officer Steven Kafka. Besides the testing platform, Roche will be able to access Foundation Medicine's database, which currently includes about 35,000 cases.

Regarding new diagnostics, the partners will collaborate to develop a circulating tumor DNA platform and assay as well as an RNA-based cancer immunotherapy testing platform. "Both of these programs have been independently in development at FMI, and products arising out of this effort will be FMI-owned products," Kafka explained.

In terms of developing companion diagnostics, the companies have already identified several FDA-approved and investigational markers, he said, adding that "this effort is a potential accelerator towards the vision of a universal companion diagnostic."

In the future, the companies plan to collaborate to develop IVD kit versions of Foundation Medicine's current and future tests, which the firm currently offers as lab-developed CLIA tests, "for select markets and applications," he said. For now, the two will "work non-exclusively and in good faith to enter into a definitive agreement" about IVD kit development at a later point.

Foundation Medicine will continue to exclusively market and sell its products in the US. However, soon after the close of the deal, the firm will be embarking on an "education support program" with Roche's Genentech, where Genentech representatives will educate healthcare professionals at diagnostic labs, biopsy centers, and pathology practices in the US about the benefits of comprehensive genomic tumor profiling using "unbranded educational materials prepared by Foundation Medicine," Kafka said. Genentech also has the option to co-promote companion diagnostics developed by Foundation Medicine for Roche therapeutics in the future.

Outside the US, Roche will have exclusive rights to commercialize Foundation Medicine's current cancer profiling tests, FoundationOne and FoundationOne Heme, as well as future tests the partners develop in collaboration. At present, Foundation Medicine sells its tests outside the US through a number of distributors, or directly to self-pay customers, Kafka explained. This will change after a one-year business planning and training period, when Roche will become the exclusive commercial distributor abroad. "Roche will commit significant resources to market development activities and identify priority markets on agreed-upon timelines, and will collaborate with FMI to seek necessary regulatory and reimbursement approvals in markets across the globe," he said.

The companies have already defined Europe as "the first key region for market development" and plan to establish a regional laboratory for sample preparation and DNA sequencing. Over time, the partners expect to offer Foundation Medicine's tests "broadly around the world, including the rest of Europe, China, and other major markets," Kafka said. Foundation Medicine will  conduct the tests and report the results, and will receive royalties on product sales.

During the call, Foundation Medicine executives repeatedly stressed that their company will remain operationally independent, despite Roche's planned majority stake, and that its relationships with other industry players will remain intact. "We will be able to maintain and expand our current strong relationship with pharma partners, technology providers, and other key vendors into the future," CEO Pellini said.

For its existing deals with more than 20 companies, Foundation Medicine has built firewalls to protect its proprietary data, and "from the very beginning of our discussions with our new partners at Roche, we expressed the need to do that, and they very much appreciated the need that these firewalls continue to exist," he said.

According to Kafka, Roche's access to Foundation's molecular information platform is very similar to that of drug companies. Other aspects of the partnership, for example around companion diagnostics, "were carefully constructed so we could continue to work with other pharma partners in those areas as well," he said.

Roche could benefit from other drug companies collaborating with Foundation Medicine, according to Daniel O'Day, chief operating officer of Roche Pharma, because this would make it easier to establish its platform as a standard in the industry.

Foundation Medicine expects to continue to use Illumina's next-generation sequencing platforms to conduct its tests, but it is not wedded to the technology. "We will continue to work closely with Illumina as a partner within our laboratory," Pellini said. "But as there is additional technology that emerges, whether it's within Illumina, our current partner, whether it's within Roche, or whether it's within other organizations, we are simply going to continue to evaluate and then bring in the best technology that lends itself to the development of our clinical applications."

Roche is developing its own sequencing platform, based on technology from Genia, which it acquired last year, and has a partnership with Pacific Biosciences, another sequencing platform provider. Illumina, on the other hand, is forging its own alliances with pharma companies to develop a universal oncology test platform for companion diagnostics using its sequencing platform.