publication date: Mar. 2, 2018

Roche to acquire Flatiron Health for $2.1 billion, with focus on real-world data

By Matthew Bin Han Ong

Roche has signed an agreement to acquire all shares of Flatiron Health, a health care technology and services company headquartered in New York City, for $1.9 billion.

The deal, which would raise Roche’s stake from 12.6 percent to outright ownership, is subject to regulatory approval and is expected to close in the first half of 2018. The total price tag is closer to $2.1 billion, including about $200 million in cash balances.

Flatiron will retain autonomy in its operations and continue to be able to share data with collaborators beyond Roche, officials said.

“Flatiron’s objective is, of course, to clearly improve the patient experience with the provider base and provide regulatory-quality real-world data that allows researchers, academics, industry to create insights from that data to make better decisions on new medicines and new interventions,” Roche Pharmaceuticals CEO Daniel O’Day said to The Cancer Letter. “So, the objectives are all aligned, and therefore creating autonomy within the Roche Group, we think, makes sense to make sure that Flatiron maintains its independent decision-making towards providers and towards other life sciences customers.

“We’re confident that when that happens Roche will also benefit as a leader in cancer medicine and our mission of developing transformational cancer medicines.”

A conversation with O’Day appears here.

The Roche-Flatiron deal is the first, specific purchase of a health tech startup by a pharmaceutical company—a move that, some say, signals a turning point in cancer Big Data.

“It’s an acknowledgement by the Roche Group that evidence development is fundamentally changing. This is a conversation you and I have been having for a while now, Matt,” said Amy Abernethy, chief medical officer, chief scientific officer, and senior vice president of oncology at Flatiron Health. “We are turning of the corner from real-world evidence being cute to real-world evidence being substantive and credible enough to be able to make real decisions.

“Why such a high valuation? Roche isn’t buying a traditional health care company, nor a biotech company. Flatiron is a tech company and so that kind of acquisition comes with pretty substantive growth opportunities made possible by a rapidly scalable tech infrastructure,” Abernethy said to The Cancer Letter. “And does the investment stop there? If you’re Roche, if you’re going to pay something like $2 billion for an organization, then you’re not going to let it wither on the vine. You’re going to keep investing in it for the future.”

The Roche price tag is “exciting” for other health technology companies watching the acquisition, said Brigham Hyde, CEO Precision Health AI, a company that uses artificial intelligence to define cancer datasets for precision oncology.

“I think what is probably more interesting is that pharma would not have been considered a buyer, classically, for this type of business, and they’re now entering the space,” Hyde said to The Cancer Letter. “I also think this signals the importance in oncology in particular.

“Although, it’s important to realize Roche is unique. They’ve always had a diagnostics difference, which puts them a little bit in the data space already, and also in the clinical decision support space. They have run that successfully, and somewhat separately for years.

“It’s a question mark to wait and see how providers react to the idea of the EMR they use being owned by a pharma company. Even though that would be highly regulated, and I do take Roche at their word, that they will operate Flatiron separately. But it is an open question.”

A conversation with Hyde appears here.

PH.AI recently announced a deal with Tempus and the American Society of Clinical Oncology to curate and license more than one million patient care records contained in CancerLinQ, the professional society’s venture into Big Data (The Cancer Letter, Jan. 5).

Flatiron will continue to operate the EHR completely independently, said Bobby Green, senior vice president of clinical oncology at Flatiron and a medical oncologist at Florida Cancer Specialists in West Palm Beach.

“I think one of the most notable and short-to-medium term changes that we’re going to see is more resources put in to our OncoCloud suite of products,” Green said to The Cancer Letter. “Not only is community oncology important for cancer delivery in this country, but it’s really important to us as a company, and and community oncology is  one of our core clients and partners.

 

“A rising tide lifts all boats”

Flatiron, which is currently backed by Google Ventures, First Round Capital, Roche, and others, has partnerships with over 265 community cancer clinics, six academic cancer centers, and 14 therapeutic oncology companies.

“The Roche acquisition amplifies the positive signals we are seeing in the real-world data and oncology evidence development space,” Abernethy said. “I think that you’re going to likely see more investments go into organizations that have been historically been our competitors like, for example, Tempus or Precision Health AI, or maybe Cota.

“Honestly, I think the Roche acquisition of Flatiron is good for everybody. It’s actually one of those ‘a rising tide lifts all boats’ activities, because it alerts the whole pharma and healthcare industry to the role of data and tech in evidence development”

The acquisition also signals that different players in oncology are converging to use Big Data in a meaningful way, said Jonathan Hirsch, president and founder of Syapse, a precision medicine company that integrates oncology data from electronic health records with genomic data.

“The Roche-Flatiron deal validates what we’ve believed for a long time at Syapse: to advance the fight against cancer, the entire health care ecosystem must come together,” Hirsch said to The Cancer Letter. “At Syapse, we’re focused on using precision medicine to defeat cancer, and to do that, we believe that continued collaboration across the ecosystem is necessary to bring critical data and insights to the health systems and oncologists who need it most.

“We expect to see more partnerships across the health care ecosystem in the future that further this goal. When we can do this effectively, we can more rapidly improve patient care and make precision medicine a reality for more patients.”

In January, Roche and Syapse announced a collaboration that will focus on developing four specific software analytics to measure health outcomes and economic impact of precision medicine (The Cancer Letter, Jan. 12).

Flatiron’s OncoCloud suite, the company’s electronic health record solutions portfolio, allows Flatiron researchers to aggregate de-identified data and observe drug use and uptake, as well as patient outcomes in real time.

This information can be used to measure effectiveness, inform drug approval decisions—both for new and supplementary indications—and to also track adverse outcomes.

O’Day said Flatiron’s data helped Roche expand access to one of its drugs—specifically, Alecensa (alectinib), which was approved by FDA in November 2017 as first-line treatment for people with anaplastic lymphoma kinase (ALK)-positive metastatic non-small cell lung cancer.

“In order to support the access of this medicine in different countries around the world, different countries wanted to see more data on how the control arm of the trial would be used, given their regimen in their country,” O’Day said. “We were able to access the Flatiron database and give them confidence on how patients on the current standard of care medicine would perform and then they were able to compare that to the way that Alecensa performed in a clinical trial.

“It satisfied many questions that regulators and payers had in different countries to be able to support the quicker access of Alecensa for patients. We used this data in more than 20 countries around the world and it accelerated the access for patients by more than a year for this medicine in many of those countries.”

 

Creating regulatory-grade data

Roche’s investment is expected to accelerate Flatiron’s work on creating a data analytics infrastructure that could be used to generate “regulatory-grade” real-world evidence.

“Our expectation is Roche is going to bring more resources to the table and champion the building of a lot of solutions that we need on the real-world evidence side—such as real-world endpoints and improved data quality,” Abernethy said. “Another one that’s high in my mind is building out remarkably new and forward-thinking solutions for widespread adverse event monitoring. This will take us a couple of years, but they are the kinds of things that we now start to design and invest in, because we’re able to take the long view.

“I do feel that the Roche Group sees themselves as leaders in the space of, frankly, skating where the puck is going as it relates to development of new medicines, and they particularly see themselves as leaders in oncology.”

Roche understands Flatiron’s commitment to community oncologists, because these clinics are important to Roche’s vision of “doing exciting things” with real-world evidence, Flatiron’s Green said.

“The first way I think we’re going to really see change is being able to put more resources into the things that community oncologists care about, as we continue to operate as a relatively autonomous subsidiary of the Roche Group,” Green said.

Flatiron has been partnering with FDA to expand the role of real-world evidence in drug development. The 21st Century Cures Act requires the agency to establish, within two years from Dec. 13, 2017, a draft framework for combining real-world data and regulatory science.

Utilization data compiled by Flatiron and made available to The Cancer Letter in 2017 mark a fundamental shift in how cancer researchers can now understand and interpret clinical data in real-time (The Cancer Letter, June 2, June 9, 2017).

Together with Roche, Flatiron plans to boost their clinical portfolio by translating more rich datasets into results in drug development, and by expanding the company’s cloud services suite for community practices, company officials said.

“We’re just starting to turn the corner into the prospective evidence development side, so clinical trials and such, and I think that while that isn’t what has been the predominant attractant for Roche to acquire Flatiron, it’s certainly something that’s of high interest to them,” Abernethy said.

“Roche is very aware, and has said numerous times to us that they acknowledge that our ability to work independently with oncology practices and build software that delights oncologists has got to be something that we focus on. So, we can’t let Roche’s interest in real-world evidence distract us from that task, because otherwise, the real-world evidence, it just doesn’t exist.”

It’s a chicken-and-egg process, Green said.

“From the life sciences standpoint, I think more regulatory use cases, and ultimately seeing drugs get approved or expanded labels for existing treatments are going to be future milestones in that respect,” Green said. “From a provider standpoint, other than just continuing to build better products that we seek for our providers, ultimately being able to use real-world data, use analysis of unstructured data, bringing information back to clinicians that actually helps them to take better care of patients. We’re really building a learning healthcare system.

“We started to do some early pilots where we’ve been able to, using structured and unstructured data in a lot of the work that we’ve been doing, been able to look at bringing quality metrics like chemotherapy at the end of life, back to clinicians at a couple of our institutions and allowing them to benchmark against other clinicians within their institution, and to use that as a tool to actually change how doctors are taking care of patients and allow those institutions to do it.

“Every time you sit with a patient, one of the core things you want to answer is, what’s their expected outcome? What’s their prognosis?

“One of the things that we’re exploring: instead of me looking at the patient and then saying, ‘Well, I know that people with your disease treated in a clinical trial are this likely to be alive after this period of time or have this median survival,’ to be able to give them information that’s not based on a clinical trial, where the patient population may have been very different from that individual you’re looking at.

“But really, to be able to base it on, ‘What happens to an 80-year-old with underlying lung disease and underlying heart disease who has renal insufficiency? What happens to those patients when I treat them, rather than your ideal clinical trial patients?’

“So, I think being able to bring data like that back to clinicians is one of the things that really excites a lot of the folks at Flatiron and will be a pretty big milestone for us.”

Copyright (c) 2018 The Cancer Letter Inc.