Alphabet-backed Flatiron Health is being acquired by Roche

Key Points
  • Swiss pharma giant Roche is acquiring Flatiron Health, which has an electronic medical record used by physicians treating cancer, then analyzes the information to come up with better treatments.
  • Flatiron was founded by ex-Google employees Nat Turner and Zach Weinberg and has raised more than $300 million from investors including Roche and Alphabet's venture arm, GV (formerly Google Ventures).
Severin Schwan, chief executive officer Roche Holding.
Scot Eells | Bloomberg | Getty Images

Swiss pharmaceutical giant Roche Group is buying Flatiron Health, an Alphabet-backed cancer-focused start-up founded by two former Google employees, according to sources familiar with the matter. The company will pay $1.9 billion, adding to its existing stake, for a total value of $2.1 billion.

The company has confirmed the deal in a press release.

Flatiron was valued at $1.2 billion when it raised its last round from Roche in 2016. Medical distribution giant McKesson was also interested in buying the company, sources say.

Alongside Alphabet's GV (formerly Google Ventures), Roche is one of the biggest backers in Flatiron, having led the most recent venture round of $175 million in 2016. It already owned 12% of the company. As part of the deal, Roche agreed to acquire several of the company's software products, which was intended to put the company in a position to go public.

Flatiron has an electronic medical record system used by doctors who are treating patients with cancer. It then uses this data to help researchers and life sciences companies figure out better treatments for cancer -- for instance, by making sure that the right patients are being recruited for clinical trials.

The company was founded by former Google employees Nat Turner and Zach Weinberg.

Flatiron's founders told the New York Times in 2016 that it planned to go public in two to three years. Prior to being sold, Flatiron had intended to raise an additional round of financing.

In a conversation with CNBC, CEO Nat Turner said the company will remain an independent legal entity "within the Roche family of companies." Turner said that was a requirement for Flatiron as it sought out interest in a potential deal. The employees, including the founding team, will stay on as Flatiron employees, he added.

"Nothing is changing from the brand identity perspective," he said.

Flatiron has raised more than $300 million from investors across the technology and health care investors, including Roche, Allen & Company, GV, First Round Capital and SV Angel.

The transaction is expected to close in the first half of this year and will bolster Roche's oncology portfolio. Roche has ramped up its interest in companies at the intersection of medicine and technology, through partnerships with 23andMe, Foundation Medicine as well as the strategic investment in Flatiron.