Friday, March 9, 2018

Very Brief Blog: Forbes Posts Strategic Analysis of Roche's Flatiron Acquisition

On February 15/16, there was a flurry of initial press about Roche's $1.9B acquisition of Flatiron (of which it already owned 12%). 

On February 26, Reenita Das, an SVP at Frost & Sullivan, provided a deeper-dive strategic review in Forbes - online and open access here.

A few takeaways, with direct quotes indicated:

  • Flatiron provides EHR services to oncology clinics, but "regulatory barriers prohibit a pharma from directly collaborating with a provider."   
    • Like any business or service, Flatiron has to create value - it sells something for $500 that creates $1000 of value for the buyer - yet not underprice or "create too much value" that might seem like a giveaway from one healthcare entity to another, especially where one is an ordering provider.
  • Flatiron has huge potential to facilitate "clinical trial eligibility assessment," improving speed and registration in clinical trials for Roche (versus other pharmas?)  
    • By speeding patient identification Flatiron "can help save developers millions of dollars."
  • Roche, with a market cap of about $200B, had $55B in 2017 sales, $40B in gross profit (above cost of goods), and $8B in net profit.  It's 60% oncology - think Genentech drugs like Avastin and Herceptin - much of its oncology franchise is burning through its patent life.
  • Flatiron is potentially a world pioneer in large scale real-world evidence.  
    • Chief Medical Officer Amy Abernethy MD has written a range of articles on RWE in the last couple years; see PubMed.
  • The "Flatiron oncology practice network and patient data can be used by Roche in its digital marketing programs, patient assistance programs, and other commercial applications."  (Direct quote from Das.)
  • Flatiron, Foundation Medicine, and Roche Oncology form a trio.  Roche also has agreements with digital genomics and machine-learning company GNS Oncology "to analytize proprietary EHR and next generation sequencing data for insights on drivers of drug response and cancer progression....Roche has one of the strongest portfolios of database and analytics platforms at its disposal to support its personalized drug discovery program in oncology."
  • Other biopharmas may look for NGS or EHR tie-ins to remain competitive against the Roche-Flatiron-FMI triad.  

For an earlier article on Flatiron at the time of its 2016 $175M round, here.  Aetna oncologist/medical director Michael Kolodziev joined Flatiron in July 2016 and transitioned to consultancy ADVI in October 2017.

Investors in GNS include:  Amgen, Celgene, Zambon Pharma, Regence BCBS, Horizon BCBS, Mitsui, GHO Capital, Fort Rock Capital.

Investors in COTA include:  IQVIA (publicly held holding company), EW Healthcare Partners, MSKCC, Boston Millenia Partners, Horizon BCBS, Hackensack Meridian Health, ATOC Holdings.

Prior investors in Flatiron included founding investor Google Ventures, Roche, Allen & Company, Baillie Gifford, Casdin Capital.