Switzerland-based pharma company Roche’s $1.9 billion purchase of tech company Flatiron Health signifies Big Pharma’s need for data, according to industry watchers.
In what the company calls a move toward a personalized healthcare strategy, Roche will acquire oncology-specific electronic health record (EHR) software from Flatiron Health, as well as the curation and development of real-world evidence for cancer research. The deal is expected to close in the first half of 2018.
“The acquisition reveals pharma’s ever-expanding need for data, patient insights, and analytics to support new drug portfolios based on biologics, immunotherapies, and genomics,” says Anthony Chambers, a director in West Monroe’s Healthcare & Life Sciences practice with 15-plus years of experience in the life sciences sector. “It also marks the continued up-skilling of pharma’s need to understand and support patients better. As with many industries today, whoever controls the data will ultimately win the competitive landscape in oncology treatments.”
Roche clearly wanted to benefit from the uniquely ‘curated’ data enabled by the Flatiron transaction, agrees Robert E. Grant, CEO of CONCIERGE KEY Health. "Data is becoming increasingly important to treatment modalities and the research and development pipeline. Real-time data provided by health tech companies like Flatiron provides a significant improvement to previous data 'dumps', which are very difficult to understand and/or provide actionable information to inform enhanced treatment pathways and determine next steps."
Flatiron Health has worked with industry and regulators to develop new standards for how real-world evidence is used in regulatory decision making, including the design and validation of novel endpoints, according to a company statement.
“This acquisition will allow Roche to gain deeper insights than ever about its patients,” Chambers says. “A lot of patient-centricity messages by pharma over the years have seen little follow-through, but this acquisition by Roche puts patient information, specifically oncology, at the center of its already innovative and highly regarded R&D capabilities.”
What’s interesting about this transaction is the of an EHR platform by a pharma company, according to Brad Haller, a director in West Monroe’s M&A practice, who works almost exclusively on healthcare deals.
“Horizontal integration in healthcare seems to have come to a head … while we expect that to continue in certain regions and parts of the healthcare industry, vertical integration seems to be the new way to gain an advantage. And that includes software and technology acquisitions like this one,” Haller says.
At the end of the day, “healthcare executives should care because they need to think creatively about who they should acquire—and also be concerned with others acquiring them,” Haller.
This transaction may signal interest by other pharma companies to start securing their own data sources, or willingness to expand their partnership criteria on healthcare deals, according to Chambers.
The landscape is changing rapidly, says Grant. "Even traditionally focused pharmaceutical and diagnostic companies like Roche are seeing value and comparative advantage in health tech deals," he says. "The strategic rationale is compelling, however, the real question will be whether Roche will allow for continued innovation at the Flatiron Health division or whether the new parent relationship will ultimately stifle the innovation and iteration cycle necessary to compete in that space. With drug prices under pressure from sovereign nations around the globe, pharmaceutical companies are now forced to look outside their wheelhouse for growth, margin expansion and competitive strategy."
In similar news, in January Sanofi announced that it will pay $11.6 billion for Biogen’s spin-off Bioverativ Inc., which specializes in hemophilia and other rare blood disorders.
In addition, Bristol-Myers Squibb had agreed to pay $1.85 billion for an immuno-oncology program. The pharma giant entered a global strategic collaboration with Nektar Therapeutics to jointly research an experimental immunotherapy across nine tumor types, according to a company release.
As the pharmaceutical industry tends to enjoy its strategy echo-chamber among peers, Grant expects to see other pharmaceutical companies looking to enter the data and EHR space through acquisitions.
"Mergers and acquisitions have proven one thing: Culture can and often does eat strategy for breakfast. Intrepid new entrants into the emerging health tech field from the pharma and diagnostic sector will need to evolve to new operating models to allow innovation at acquired entities to keep pace with independent competitors," he says.