Roche pays out $8.3bn in latest drugs sector deal

The deal will be the Swiss drugs groups largest acquisition for five years. Picture: AP

The strategy for the all-cash deal is to allow Roche, the world’s leading maker of cancer drugs, to expand into the treatment of rare or incurable diseases.

In particular, the firm is attracted to the commercial potential for InterMune’s new medicine for a previously untreatable lung disease.

It is the Swiss drugs group’s largest acquisition for five  years, but its fourth this year, highlighting the spate of consolidation as the majors seek ways to put strong cash balances to work.

Other large recent deals include US group AbbVie’s £32bn takeover of UK-listed Shire, which also focuses on developing medicines for rare diseases, so-called “orphan drugs”.

Pfizer, the US giant run by Scots-born Ian Read, made an unsuccessful takeover approach for British/Swiss giant AstraZeneca earlier this year, and is rumoured to be weighing up coming back for another tilt by the end of 2014.

Roche’s latest transaction – at $74 a share – is pitched 63 per cent above InterMune’s share price before takeover speculation ignited earlier this month. The company’s previous biggest deal was its $47bn acquisition of US biotech group Genentech in 2009.

Analysts described InterMune’s price tag as “hefty” given it only has one marketed product in a field that is likely to become increasingly competitive over time.

But one commented: “Big pharma is in scramble mode in the competition for assets at present. That is driving what some might think are ‘toppy’ valuations. I think we will see more of this, particularly out of America.”

Roche said the latest deal would be neutral to earnings in 2015 and accretive from 2016. InterMune, a California-based business, is focused on a product called Esbriet (pirfenidone) to fight a deadly lung disease called idiopathic pulmonary fibrosis.

Esbriet, which has Canadian and European approval and expects to get US approval by the end of 2014, is expected to double its revenue this year to $144m and reach $675m by end-2016, say analysts at Credit Suisse.

In the past three months, Roche has splashed out $2.5bn on a string of smaller deals: Seragon Pharmaceuticals and Genia in the US, and Denmark’s Santaris.

Roche has had only patchy success in producing successful non-cancer drugs from its own laboratories in recent years, suffering setbacks for experimental medicines against heart disease, diabetes and schizophrenia.

The acquisition of InterMune has the recommendation of both companies’ boards.