Roche to Boost Respiratory Product Lineup with InterMune Buy - Analyst Blog


In a bid to expand its respiratory product portfolio, Roche ( RHHBY ) announced that it has entered into a definitive merger agreement to acquire California-based biotechnology company InterMune, Inc. ( ITMN ) for $74.00 per share or $8.3 billion.

The offer price of $74.00 per share represents a premium of 37.5% to InterMune's closing price of $53.80 on Aug 22, 2014.

The agreement has been approved by boards of both companies. Roche will commence a tender offer by Aug 29 to acquire all outstanding shares of InterMune.

Roche expects the transaction to be neutral to the bottom line on a core basis by 2015 and accretive from 2016 onward.

We note that InterMune focuses on the research, development and commercialization of innovative therapies in pulmonology and fibrotic diseases. InterMune's lead drug Esbriet is approved for idiopathic pulmonary fibrosis (IPF) in the EU (2011) and Canada (2012). The drug is under review in the U.S.

The acquisition will further expand Roche's respiratory product portfolio, which markets Pulmozyme and Xolair in the U.S.

We remind investors that the FDA recommended InterMune to conduct an additional phase III trial to support the efficacy of Esbriet after rejecting its New Drug Application (NDA) in 2010. In May 2014, InterMune resubmitted its NDA for Esbriet based on encouraging top-line results from the phase III study, ASCEND, which was announced in Feb 2014.

In Jul 2014, Esbriet was granted breakthrough therapy designation in the U.S. A final decision from the FDA on the approval of Esbriet is expected by Nov 23, 2014.

Roche is well placed in the oncology market. In particular, Roche is a leader in the breast cancer market with its HER2 franchise. The HER2 franchise includes oncology drugs like Herceptin, Perjeta and Kadcyla. We are impressed by the company's efforts to expand its portfolio beyond oncology in the field of immunology, ophthalmology and respiratory.

Roche has been quite active on the acquisition front of late. Earlier in the month, Roche announced that it has entered into an agreement to acquire Denmark-based privately-held biopharmaceutical company Santaris Pharma to expand the discovery and development of RNA-targeting medicines.

In Jul 2014, Roche entered into a definitive agreement to acquire privately-held biotechnology company Seragon Pharmaceuticals, Inc. The acquisition will provide Roche rights to Seragon's entire portfolio of investigational next-generation oral selective estrogen receptor degraders (SERDs) for the potential treatment of hormone receptor-positive breast cancer.

Roche currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader healthcare sector include Allergan ( AGN ) and AstraZeneca ( AZN ). While Allergan sports a Zacks Rank #1 (Strong Buy), AstraZeneca is a Zacks Rank #2 (Buy) stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: IPF , RHHBY , AZN , ITMN , AGN

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