(Reuters) - Swiss drugmaker Roche will buy U.S. cancer drug specialist Ignyta Inc for $1.7 billion in an agreed deal to broaden its oncology portfolio, the firms said on Friday.
Roche would pay $27 per share for Ignyta, representing a premium of about 74 percent to the stock's closing price on Thursday, they said.
Reuters had reported on Thursday that Ignyta was in advanced talks to sell itself, just three years after going public with a focus on precision drugs and diagnostics.
Ignyta will continue its operations in San Diego and will be responsible for the ongoing pivotal study of entrectinib, its most advanced drug.
The U.S. company has a suite of drugs in early stage development that use gene therapy to kill off the underlying diseases that drive cancer tumour growth.
"Cancer is a highly complex disease and many patients suffer from mutations which are difficult to detect and treat. The agreement with Ignyta builds on Roche's strategy of fitting treatments to patients and will allow Roche to broaden and strengthen its oncology portfolio globally," said the company's pharmaceuticals head, Daniel O'Day.
The deal is expected to close in the first half of 2018, the companies said.
Roche stock eased 0.3 percent by mid-morning, in line with the European sector average.
Zuercher Kantonalbank analyst Michael Nawrath said the deal reflected Roche's strategy of making bolt-on acquisitions, adding it was not overpaying for the new assets.
"The data speak for themselves. We expect approval in the first half of 2019 and this could become a blockbuster given the wide field of use," he wrote in a research note, keeping his "market weight" rating.
Bank Vontobel analysts said the deal was set to boost Roche's efforts to address cancers with specific mutations by precision medicines that work hand in hand with diagnostics.
Citi advised Roche on the deal, while BofA Merrill Lynch and J.P. Morgan Securities LLC advised Ignyta.
Sidley Austin LLP and Latham & Watkins LLP were legal counsel to Roche and Ignyta, respectively.
(Reporting by Parikshit Mishra in Bengaluru and Michael Shields in Zurich; Editing by Gopakumar Warrier and Edmund Blair)
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