Roche Holding AG (OTC:RHHBY) is reportedly contemplating the divestiture of Flatiron Health, a cancer data specialist Roche acquired in 2018 for $1.9 billion.
The move underscores the complexities and potential pitfalls that large pharmaceutical companies encounter when investing in early-stage health technology firms.
Also Read: Roche's New Immunotherapy Fails To Show Benefit Over Merck's Blockbuster Keytruda In Lung Cancer Patients.
Flatiron Health was founded by two former executives from Alphabet Inc's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google.
The company manages electronic patient records for numerous U.S. cancer clinics, boasting one of the most extensive repositories of cancer data.
The start-up mines this data and sells it to pharmaceutical companies to aid in research and development.
Roche's acquisition of Flatiron has not been without its challenges. Despite operating as a separate legal entity, Flatiron's association with Roche has deterred some rival drugmakers from engaging with the start-up, impacting its sales.
Flatiron generates approximately two-thirds of its revenue from selling data to pharmaceutical companies, a business model similar to that of Warburg Pincus-backed Modernizing Medicine, which has seen profitable returns for private equity investors.
The departure of key Roche executives who initially supported the Flatiron acquisition has left the company with fewer advocates within Roche.
The Financial Times report adds that Roche is collaborating with Citigroup Inc (NYSE:C) to explore strategic options for Flatiron, including a potential divestiture or partial sale to a partner who can assist in managing the business.
Despite its financial struggles, Flatiron's data has significantly contributed to Roche's cancer drug development, currently with about 60 oncology drugs in clinical trials.
The strategic review may not result in Flatiron changing hands, the FT report added.
Last month, Roche announced topline results from two arms of an ongoing multi-part Phase 1 clinical trial for CT-996 for type 2 diabetes and obesity.
The data showed that treatment with CT-996 in participants with obesity and without type 2 diabetes resulted in a clinically meaningful placebo-adjusted mean weight loss of -6.1% within four weeks.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.