The Swiss company has a radical vision for the future of pharma.
I'm a great fan of science programmes like Horizon. A recent episode, entitled 'Playing God', was about the emerging discipline of synthetic biology. Put quite simply, by combining a series of basic building blocks, scientists can now create artificial life.
There are many other advances taking place in the blossoming field of bioscience. Stem-cell biologists are getting ever closer to the holy grail of growing whole human organs. And the science of genetics is developing with leaps and bounds. It used to take years to sequence a person's genes. Now it can be done in just one day.
Bringing bioscience and pharmaceuticals together
Yet there is a curious dichotomy here. On the one hand, we have a bioscience industry that is making breakthrough after breakthrough. And on the other, we have a pharmaceutical industry faced with a steady stream of drugs going off patent and a future of seemingly inevitable decline.
Surely we can bring these two sides of the healthcare industry together. But exactly how? Well, pharmaceutical giant Roche thinks it has the answer.
Last week, the Swiss company made a £3.7 billion bid to take over the American firm Illumina (NASDAQ: ILMN.US). The San Diego-based company is at the forefront of genetic technology. It is one of the primary players in the race to fully commercialise full-genome sequencing.
One of its competitors, Life Technologies (NASDAQ: LIFE.US), was the first to demonstrate complete human genome sequencing in a single, one-day run.
The pace of change in this industry is incredible. Illumina's chief executive, Jay Flatley, has predicted that gene sequencing for every newborn baby will be technically feasible and affordable by 2014. By 2019, it will have become routine to map infants' genes when they are born. Illumina already runs a gene-sequencing service called Every Genome at a price of just £3,000.
Let's get personal
DNA sequencing is seen as central to personalised medicine, which allows scientists to predict a patient's response to a particular drug and target medicines at those who could benefit the most.
Roche is already one of the biggest players in diagnostics, and it could work with Illumina's scientists to make sequencing a part of routine diagnostics. Potentially, companion diagnostics could be paired with specific drug treatments.
Why is this so important? Well, because it is a myth that we are all genetically the same. Each person has their own unique genetic makeup. If we can sequence a person's genes, then we can tailor treatments for that person.
If Roche really can take sequencing from the scientific lab to the healthcare clinic, then this purchase could prove to be a canny move.
One of the long-term winners in pharma
For me, this is further proof that Roche is the most forward thinking of the pharmaceutical companies. In a previous article, I talked about the coming boom in biologics (biological drugs). Alongside personalised medicine, biologics represent the future for pharma.
And guess who was the first mover in this field? Yes, it was Roche again. The Swiss drug maker took over Genentech and is now, by some distance, the world leader in biologics.
Just as Roche's purchase of Genentech triggered a land grab of major biotech companies by Big Pharma, it may be that Roche's bid for Illumina could set off another burst of acquisitions. Possible takeover targets include Life Technologies and Affymetrix (NASDAQ: AFFX.US).
It may be that Britain's pharma champions, AstraZeneca (LSE: AZN) and GlaxoSmithKline (LSE: GSK), also want to get in on the act. But Roche has first-mover advantage -- many think Illumina is the best sequencing company out there. And as the storm of patent expirations ravage the drugs industry, I see Roche as one of the long-term winners in pharma.
The company, at its current price of CHF163, is on a trailing price-to-earnings ratio of 16, so it isn't dirt cheap. But I still think it is a good bet on a brave new future for the pharmaceutical industry.
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> The Motley Fool owns shares in AstraZeneca and GlaxoSmithKline.
