Roche Holding AG, the world's largest maker of cancer drugs, is strengthening its portfolio of medicines for respiratory ailments with an agreement to buy InterMune Inc. for $8.3 billion in cash.
Roche will pay $74 a share for InterMune, an unprofitable biotechnology company that's awaiting U.S. approval of its biggest drug, the Basel, Switzerland-based company said in a statement. The agreement reflects Roche's confidence in pirfenidone, potentially the first drug in the U.S. for a rare lung disease that typically kills in five years.
The deal is one of several this year involving a handful of disease areas where the medical need is great, treatment options are few and prices may be substantial. Roche's interest was piqued when research released in May showed pirfenidone cut in half a patient's risk of dying from idiopathic pulmonary fibrosis after the first year of treatment.
Although the disease is diagnosed in only about 48,000 Americans annually, analysts have predicted the drug could generate $1 billion a year.
"This is an extremely good example of what our M&A strategy is about. We really focus on targeted bolt-on acquisitions where we can complement our existing franchises, that can be products, that can also be technology and platforms," Roche Chief Executive Officer Severin Schwan said.
"What stands out here is the size of the deal," he said. "That reflects the imminent approval of the drug in the U.S."
Pirfenidone will add to existing respiratory medicines sold by Roche that include Pulmozyme for cystic fibrosis and Xolair for asthma, both approved more than a decade ago. The agreement with Brisbane, California-based InterMune reflects Roche's strategy of adding specific brands that will enhance its product offerings, rather than diversifying or expanding with a mega- merger, Schwan said.
Roche's shares rose less than 1 percent to 267.70 Swiss francs at the close in Zurich, giving the company a market value of 230 billion francs ($251 billion). InterMune jumped 35 percent to $72.85.
The deal makes sense because Roche already has a sales force for pulmonary drugs, Tim Anderson, an analyst at Sanford C. Bernstein & Co. in New York, wrote in a report. Investors are likely to question the price, since Roche is buying a company with one product in a therapeutic area that will get more competitive over time, he said.
