On Monday, August 25th, Roche Holding Ltd. (VTX:ROG) (OTCMKTS:RHHBY) announced its fourth acquisition this year by agreeing to buy InterMune Inc (NASDAQ:ITMN) for $8.3 billion, as the Swiss group responds to investor pressure to put more of its cash to use.
With the boards of both the companies agreeing to the deal, the acquisition is expected to close by the end of the year.
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Biggest in five years
The all-cash transaction would be Roche Holding Ltd. (VTX:ROG) (OTCMKTS:RHHBY)’s biggest acquisition in five years. In 2009, the pharma giant acquired the 44% of another US-based Genentech Inc. for about $46.8 billion.
InterMune Inc (NASDAQ:ITMN) is focused on a deadly lung-scarring disease called idiopathic pulmonary fibrosis, which affects 50,000 to 70,000 people in the U.S. and 80,000 to 110,000 in Europe. The US biotech company’s medicine Esbrief has been approved in Europe and Canada and is anticipated to secure U.S. backing by the end of this year.
During the past three months, Roche made deal announcements worth up to $2.5 billion to acquire U.S.-based Genia and Seragon Pharmaceuticals, as well as Santaris of Denmark. The Swiss pharma group generated nearly $19 billion of free cash flow last year.
Roche – Intermune acquisition represents 38% premium
In April, Roche Holding Ltd. (VTX:ROG) (OTCMKTS:RHHBY) announced its acquisition of medical diagnostic test manufacturer IQuum for a price of up to $450 million.
InterMune Inc (NASDAQ:ITMN) has emerged as an attractive acquisition target after the chances of Esbrief (pirfenidone) gaining U.S. approval brightened following the announcement of encouraging top-line results from the phase III ASCEND study on the drug in March. InterMune’s shares were up 10.8% on March 7 after reports from news agencies claimed that the company was attracting takeover interest from several pharmaceutical giants.
The U.S. biotech company’s stock price surged over 14% in May after announcing positive results of the clinical study of pirfenidone, its treatment for patients with idiopathic pulmonary fibrosis (IPF).
InterMune has been attracting interest from rival drug makers, including GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) and Actelion Ltd (VTX:ATLN) (OTCMKTS:ALIOF). The Swiss group Roche will pay $74 a share for the biotechnology company, InterMune, representing 38% premium to the August 22 price for Brisbane, California-based InterMune.
Following the announcement of Roche’s acquisition of InterMune, Adnan Butt of RBC Capital Markets noted while healthcare M&A deal size year-to-date has surpassed any year in the last 10 years, multi-billion dollar biotech M&A has been fairly lackluster.
Andrew Peters and team at UBS in their research note dated August 25, 2014, argue that at $74 per share, the valuation makes sense. The analysts note their other buy-rated ACHN shares also reflect M&A potential.