What happened

Ignyta, Inc. (NASDAQ: RXDX) shareholders are getting an early Christmas present today after the cancer giant Roche (RHHBY -0.74%) decided to scoop up the company for $1.7 billion. According to the press release, Roche agreed to pay $27 per share for the cancer specialist, representing a 74% premium compared to where Ignyta's shares ended yesterday. The deal is expected to close in the first half of 2018. Ignyta stock is up by 72.67% in pre-market trading in response to this news.    

A rocket taking off.

Image source: Getty Images.

So what

A nearly $2 billion deal for a clinical-stage biotech might seem like a lot, but this buyout could very well turn out to be a bargain for Roche. Despite the lack of a true late-stage clinical candidate, Ignyta's pipeline of early- to mid-stage cancer drugs are on the absolute cutting edge of their field. Long story short, this deal should significantly advance Roche's goal of becoming a leader in precision anti-cancer therapies

Now what

Ignyta's most advanced clinical candidate, entrectinib, is presently in a mid-stage study for a wide range of tumors that harbor an NTRK1/2/3, ROS1, or ALK gene fusion. The key takeaway is that some industry insiders think that this trial could lead to an accelerated approval for multiple indications by as early as 2019.

If this line holds, entrectinib should become a blockbuster product in short order -- underscoring the bargain aspect of this deal. Even if entrectinib fails, though, Ignyta's promising lineup of earlier-stage clinical candidates could still make this deal a winner for Roche. Stated simply, Roche is taking on some risk by gobbling up Ignyta fairly early in its clinical lifecycle, but the price also seems to adequately reflect that risk.