Michelle Fay Cortez Zurich
ROCHE Holding, the largest maker of cancer drugs, is strengthening its portfolio of medicines for respiratory ailments with an agreement to buy InterMune for $8.3 billion (R88.5bn) in cash.
Roche would pay $74 a share for InterMune, an unprofitable biotechnology company that was awaiting US approval of its biggest drug, the Swiss-based company said on Sunday.
The agreement reflects Roche’s confidence in pirfenidone, potentially the first drug in the US 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 for which 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. While the disease is diagnosed in only about 48 000 Americans a year, analysts have predicted the drug could generate $1bn a year.
“The key driver was the clinical data,” Roche chief executive Severin Schwan said on Sunday. “This will allow Roche to grow and strengthen its pulmonary franchise globally. It’s a perfect fit from a portfolio point of view.”
Pirfenidone will add to existing respiratory medicines sold by Roche, including Pulmozyme for cystic fibrosis and Xolair for asthma, both approved more than a decade ago.
The agreement with Californian-based InterMune reflected Roche’s strategy of adding specific brands that would enhance its product offerings, rather than diversifying or expanding with a mega- merger, Schwan said.
Roche’s shares rose 0.3 percent by 1.05pm in Zurich yesterday, giving the company a market value of Sf230bn (R2.7 trillion).
InterMune shares jumped 37 percent to $73.50 in trading before US exchanges opened. Before yesterday, the stock had risen 18 percent since August 13, when Bloomberg reported the company had drawn takeover interest from Roche, Sanofi and others.
The deal made sense because Roche already had a sales force for pulmonary drugs, Tim Anderson, an analyst at Sanford C Bernstein in New York, wrote in a report yesterday.
Investors were likely to question the price, since Roche was buying a company with one product in a therapeutic area that would get more competitive over time, he said.
InterMune’s “valuation reflects an unfortunate reality in the world of biotech mergers and acquisitions – good assets (especially late-stage ones) don’t come cheap, and drug companies are generally either forced to pay a high price or walk away empty handed”, Anderson wrote.
The $74 a share bid for InterMune is 38 percent more than Friday’s closing price for the California biotech company, and 63 percent higher than on August 12, when news of a potential sale emerged.
Analysts predict pirfenidone will generate in excess of $1bn a year in global sales by 2019.
The purchase is Roche’s largest since 2009, when it acquired the 44 percent of Genentech that it did not already own for about $46.8bn. By June 30 the company had paid off almost three-quarters of the debt it took on for the purchase, giving it more power for acquisitions.
As it worked on the InterMune deal, Roche was considering buying out Chugai Pharmaceutical, its Japanese partner on cancer and arthritis drugs, with a bid of about $10bn for the 38 percent it did not own, according to a person familiar with the matter.
The Swiss company decided against pursuing the deal after the Japanese management signalled opposition to a bid, and instead focused on InterMune, the source said.
Chugai shares slid 9.2 percent in Tokyo yesterday.
Drug and biotechnology companies have announced deals valued at $265.2bn in the year to date, almost quadruple the value in the same period last year. The 2014 tally does not include Pfizer’s failed bid for AstraZeneca. – Bloomberg