Roche to buy US drugmaker InterMune for $8.3 billion

US entity unprofitable biotech that’s awaiting US approval of its biggest drug

Roche Holding, the world's largest maker of cancer drugs, is strengthening its portfolio of medicines for respiratory ailments with an agreement to buy InterMune for $8.3 billion in cash.

Roche employs over 300 people in its Irish operation in Citywest, Dublin 24, which reported revenues of more than €90 million in2012.

Roche will pay $74 a share for InterMune, an unprofitable biotechnology company that’s awaiting US approval of its biggest drug, the Basel, Switzerland-based company said yesterday in a statement.

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’s 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. While the disease is only diagnosed in about 48,000 Americans annually, analysts have predicted the drug could generate $1 billion a year.

"The key driver was the clinical data," Roche chief executive Officer Severin Schwan said in a conference call yesterday. "This will allow Roche to grow and strengthen its pulmonary franchise globally. It's a perfect fit from a portfolio point of view." P

irfenidone 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 0.6 per cent to 267.50 Swiss francs in Zurich at 9:05 a.m., boosting the stock’s increase this year to 7.3 per cent, for a market value of 230 billion francs ($251 billion).

The deal makes sense because Roche already has a sales force for pulmonary drugs, Tim Anderson, an analyst at Sanford C. Bernstein and Co. in New York, wrote in a report today.

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. InterMune’s “valuation reflects an unfortunate reality in the world of biotech M&A - 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.

As it worked on the InterMune deal, Roche was considering buying out Chugai Pharmaceutical Co., its Japanese partner on cancer and arthritis drugs, with a bid of about $10 billion for the 38 per cent it didn't own, according to a person familiar with the matter. The Swiss company decided against pursuing the deal after the Japanese management signaled opposition to a bid, and instead focused on InterMune, the person said. Chugai slid 9.2 per cent to 3,325 yen at 4:05 p.m. in Tokyo.

The price of the InterMune deal suggests that Roche believes the drug will generate more than $1 billion in peak sales and that it can slash InterMune’s current expenses by folding it into Roche’s existing operations, Michael Yee, an analyst at RBC Capital Markets in San Francisco, said in a note yesterday. It’s not likely that another bidder will come in with a higher price, he said.

Roche has struggled to expand outside of oncology, halting development of diabetes and heart disease drugs in recent years. The purchase is Roche's largest since 2009, when it acquired the 44 per cent of Genentech that it didn't already own for about $46.8 billion.