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Swiss pharmaceutical behemoth Roche Holdings (OTCMKTS ADR: RHHBF) couldn't wait until Monday to announce its biggest deal in five years.
Sunday, the healthcare giant said it is buying California-based biotech company InterMune Inc. (Nasdaq: ITMN) in an $8.3 billion all-cash transaction.
Roche will pay $74 in cash for each outstanding share of InterMune. That's a hefty 38% premium to ITMN's closing price of $53.80 prior to the announcement and a whopping 63% premium before takeover chatter surrounding the U.S. biotech company started swirling earlier this month.
"We are very pleased that we reached this agreement with InterMune," Roche Chief Executive Officer Severin Schwan said in a statement. "Our offer provides significant value to InterMune's shareholders and this acquisition will complement Roche's strengths in pulmonary therapy. We look forward to welcoming InterMune employees into the Roche Group and to making a difference for patients with idiopathic pulmonary fibrosis, a devastating disease."
The deal is a shift away from Roche's key cancer, autoimmune, and accompanying diagnostic tools businesses. The hope is the tie-up will boost Roche's presence in the global pulmonary therapy market.
Indeed, it's InterMune's sole drug, pirfenidone, an oral tablet used to treat the progressive and fatal lung disease called idiopathic pulmonary fibrosis (IPF), that has Roche moving away from its core and heavily wagering on. Here's why...
Lucrative Prospects for Pirfenidone
Pirfenidone is approved for use in a number of the world's biggest markets. But it has yet to get authorization from the U.S. Food and Drug Administration's (FDA) for use in the United States.
Regulators, however, are considering giving approval for pirfenidone to be marketed in the United States. A decision on the drug is expected in late November.
The FDA rejected the drug in 2010, stating it needed more data on the treatment's effectiveness. Additional data from trials accumulated since then is also likely to be presented to European regulators in attempts to expand its use in a broader range of patients overseas.
Data showing even modest effectiveness might be enough for the FDA to give pirfenidone the okay.
Here's why there is such a great need for a drug that treats patients with IPF, and why pirfenidone is so attractive to Roche Holdings...