Coverage: Roche is buying Flatiron Health for $1.9 billion

Swiss pharmaceutical giant Roche Group is buying Flatiron Health, an Alphabet-backed cancer-focused startup founded by two former Google employees, for $1.9 billion.

Christina Farr of CNBC.com had the news:

Flatiron was valued at $1.2 billion when it raised its last round from Roche in 2016. Medical distribution giant McKesson was also interested in buying the company, sources say.

Alongside Alphabet’s GV (formerly Google Ventures), Roche is one of the biggest backers in Flatiron, having led the most recent venture round of $175 million in 2016. It already owned 12% of the company. As part of the deal, Roche agreed to acquire several of the company’s software products, which was intended to put the company in a position to go public.

Flatiron has an electronic medical record system used by doctors who are treating patients with cancer. It then uses this data to help researchers and life sciences companies figure out better treatments for cancer — for instance, by making sure that the right patients are being recruited for clinical trials.

The company was founded by former Google employees Nat Turner and Zach Weinberg.

Matthew Herper of Forbes reported that Flatiron’s focus is on data:

Dan O’Day, the chief executive of Roche’s pharmaceutical division, had been on Flatiron’s board for years. Toward the end of last year, Flatiron, which had already raised more than $300 million in funding, was looking to raise more money. But Turner says that the he started to realize that a lot of what the company needed wasn’t money. It was resources, particularly an international presence, and around Thanksgiving he and Roche started to discuss an eventual deal.

Flatiron’s conceit has been that large amounts of data could be used to speed up and, in some cases, replace the arduous process of conducting clinical trials where patients are randomly assigned to one treatment or another, allowing them to be compared. The data space has heated up as the Food and Drug Administration, spurred by pressure from Congress, has expressed interest in using such “real-world data” in the drug approval process. The FDA itself has been one of Flatiron’s collaborators.

“This is an important step in our personalized healthcare strategy for Roche, as we believe that regulatory-grade real-world evidence is a key ingredient to accelerate the development of, and access to, new cancer treatments,” said Roche’s O’Day, in a prepared statement.

The deal fits in well with Roche’s stake in Foundation Medicine, a cancer genetics company and another Flatiron competitor, and with Roche’s interest in targeted cancer drugs. Roche bought Ignyta, a maker of targeted cancer drugs, for $1.7 billion late last year. The drug giant seems to be looking at data as the next big thing as it defends its dominance in oncology.

Erin Dietsche of MedCity News reported that Flatiron’s other backers included LabCorp:

Green noted that Roche “shares the vision of the importance of [Flatiron’s] network and electronic health record.” Both companies are dedicated to moving the needle on and improving cancer care, he added.

Flatiron’s other funding has also come from an $8 million Series A round led by Google Ventures, First Round Capital and LabCorp. Google Ventures also spearheaded a $130 million Series B round just two years later.

Jenny Edelston, the startup’s senior manager of corporate communications, said via email that upon the closing of the deal, Flatiron will operate as an independent subsidiary of Roche. Its leadership will remain in place and its products will remain the same.

During the interview, Dr. Green repeated what he told employees today: “Same team, same mission, more resources.”