Roche announced on Monday that it is spending $1 billion to acquire a majority stake in genomics firm Foundation Medicine as part of its initiative to develop new treatments for cancer.

"We are very pleased to enter into this collaboration with FMI, which has the potential to improve both the development of medicines and patient care," Daniel O'Day, COO of Roche Pharma, said in a statement. "By combining FMI's pioneering approach to genomics and molecular information with Roche's expertise in the field of oncology, we can bring personalized health care in oncology to the next level."

The deal with Foundation Medicine is expected to bring Roche ahead of its rivals Bristol-Myers Squibb, Merck & Co. and AstraZeneca, according to Reuters.

The Swiss drug manufacturer plans to use the genomics firm's technology to profile tests for cancer immunotherapies, or treatments that will help the immune system attack the tumor cells. Roche is allocating more than $150 million for research and development for at least five years.

Personalized treatment is becoming popular to governments and health insurers as it is only given to those who will benefit from it. Foundation Medicine has developed diagnostic tests that work by taking a patient's tissue sample and analyzing genetic mutations. The results of the tests will help doctors prescribe the best treatment for the cancer patient. So far, Foundation Medicine has sold more than 35,000 tests worldwide.

"Pharma companies are increasingly looking for patient populations that are going to benefit most from their drugs, and diagnostics is an integral part of that process" Samir Devani, a biotech analyst at Rx Securities in London, said in a telephone interview with Bloomberg News. "This shows that treatments will become more and more individualized."

Foundation Medicine's shares surged by 113 percent, or by $27.06 at $51.00, in pre-market on Monday after Roche's announcement.