InterMune Wild Ride Set to Pay Off With Drug: Real M&A

By Tara Lachapelle

The 14-year roller-coaster ride for InterMune Inc. (ITMN) shareholders may finally be coming to an end.
The stock soared above $50 a handful of times since going public in 2000, and fell below $10 just as often as InterMune worked on developing the first treatment for a rare fatal lung disease. Now, with the remedy poised to win approval from the U.S. Food and Drug Administration, major pharmaceutical companies such as Sanofi and Roche Holding AG (ROG) are lining up to bid for the $5.6 billion drugmaker, people with knowledge of the matter said this week.
Absent a takeover, some analysts predict the stock will climb to as high as $55 over the next year -- near its record -- signaling offers may need to top that price. InterMune’s medicine, pirfenidone, is already sold in Europe, and Wells Fargo & Co. estimates it could surpass $1 billion in global revenue by 2019.
“InterMune as an acquisition is just the
most no-brainer idea,” Brian Skorney, a New York-based analyst at Baird, said in a phone interview. “It makes perfect sense for a ton of different companies.”
Besides Sanofi and Roche, GlaxoSmithKline Plc and Actelion Ltd. (ATLN) are among those bidding for InterMune, the people said, asking not to be identified because the process is private. AstraZeneca Plc, Gilead Sciences Inc. (GILD) and Merck & Co. are others that could find InterMune appealing because they have sales teams for respiratory drugs, according to Katherine Xu, an analyst at William Blair & Co.

Takeover Interest

Representatives for InterMune, Sanofi (SAN), Roche, Glaxo and Actelion declined to comment. Representatives for AstraZeneca, Gilead and Merck didn’t respond to phone calls or e-mails seeking comment.
Goldman Sachs Group Inc. (GS) and Centerview Partners LLC are helping InterMune sort through bids for the business, the people said. Paris-based Sanofi has so far shown the most interest in a deal, one person said.
InterMune’s stock rose 14 percent yesterday to close at $52.06, its highest price since 2000.
“If people assume that U.S. approval is very certain, they probably feel comfortable bidding for InterMune now,” Xu said in a phone interview from New York. “They could be acquired at any time.”

Blockbuster Treatment

InterMune is awaiting clearance from the FDA to market its potential blockbuster treatment for idiopathic pulmonary fibrosis, or IPF, which causes scarring in the lungs and makes it difficult to breathe. There is no cure and the cause is unknown. While the deadline for the FDA’s decision is Nov. 23, analysts including Skorney of Baird expect InterMune to get the green light even sooner.
Shareholders were whipsawed after the FDA rejected pirfenidone in 2010 because it failed to show benefit in one of two studies, sending the stock tumbling below $10 from almost $50. It then won approval a year later in Europe, where it’s sold under the name Esbriet, and the stock topped $50. The shares then collapsed again as the chance to enter the U.S. market continued to elude the company.
Earlier this year, InterMune reported positive data for the new trial the FDA asked it to conduct to prove the treatment works. That sent the shares up 422 percent from their low. The price has risen an additional 38 percent since then because the FDA designated pirfenidone a breakthrough therapy and is giving it an expedited review.

‘Wide Open’

Boehringer Ingelheim GmbH, a privately held German company, is also seeking approval for an IPF drug. The prospects for InterMune’s therapy look better, Xu of William Blair said, citing data the two companies presented at the American Thoracic Society in May.
“The IPF market is wide open,” she said. “There’s no competition to these two drugs in the next five to seven years, and InterMune definitely has an edge over the Boehringer Ingelheim compound. It could be a blockbuster drug.”
Of the interested suitors, Allschwil, Switzerland-based Actelion had attempted to enter the IPF market with its drug Tracleer, though it failed to help IPF patients. Tracleer is instead used for pulmonary arterial hypertension, another lung disease, and accounted for more than 80 percent of Actelion’s revenue last year.
A chunk of Glaxo’s revenue also comes from respiratory products. It had a lackluster debut for two new emphysema medicines and is grappling with the loss of exclusivity on Advair, its best-selling asthma drug, which is facing increased competition from AstraZeneca’s Symbicort and Merck’s Dulera.
“The most leverage you’re going to get is someone who’s already in pulmonology,” Liisa Bayko, a Chicago-based analyst for JMP Securities, said in a phone interview. “Companies with asthma programs would be natural fits.”