On Sunday August 24, 2014 Roche (RHHBY) agreed to buy a biotechnology company known as Intermune (ITMN) for $74 per share, which comes with an $8.3 billion dollar share price. The price was a good deal for shareholders because it was a 38% premium to the last closing price on August 22, 2014. Intermune is a company that is focused on treating a rare lung disease where patients have limited treatment options. We feel that this recent acquisition may spur other biotech merger deals in that big pharmaceutical companies will be looking for the next drug that could potentially make billions of dollars on the market.

The drug that Intermune has created is known as perfenidone which is already marketed in Canada under the name Esbriet. Esbriet treats a rare lung disease known as idiopathic pulmonary fibrosis which is a disease characterized by damaged lung pocket that form severe scars. These scars hinder the lungs by making them harder, because typically these lung sacs are thin. With these thickened lung sacs the lungs have a hard time expanding properly and exchanging oxygen at a normal rate. The drug compound from Intermune is an oral drug compound that is made up of a molecule known as TGF-beta which plays a major role in many fibrotic diseases.

Some are skeptical about the deal because the current drug Esbriet brings in $1 billion dollars so why would Roche pay $8.3 billion dollars? We can hypothesize that it is probably for the many other rare fibrotic disorders that are targeted in Intermune's remaining pipeline. Therefore, we believe Roche is looking at its future potential revenues. As a result, many other biotechnology stocks which are potential takeover targets have also seen a huge influx of investors interest.

Other potential take over stocks seeing a huge rise in volume would be Arrowhead Research Corp. (ARWR) and Achillion Pharamcueitcals (ACHN). That is because they both have what big pharmaceutical companies are looking for to fill their pipeline with a hepatitis B and hepatitis C drug candidate respectively. Both of these companies target large markets, and so many analysts on Wall Street along with many enthusiastic investors believe that these will be next on the list as a buyout candidate by big pharma. I have written about a possible buyout by a big pharma for Achillion Pharmaceuticals seen here "Achillion Pharmaceuticals Is Primed For An Eventual Buyout". A more detailed analysis on Arrowhead Research Corp can be seen in this article here " Arrowhead Starts It's Engine For Phase 2a Trial For Chronic Hepatitis B Infection ".

We believe there are many biotechnology companies that have the potential to unlock tremendous value. We believe that Roche took this opportunity because, other than Hepatitis C and Hepatitis B drug candidates, the next best thing is drugs that target fibrotic disorders. This is because there are many patients suffering from some type of fibrotic disease and it gives these companies the potential to make billions of dollars off of therapies for this disease area. Ultimately liver fibrosis is another huge market that could potentially be unlocked over time, and one company we have mentioned on many occasions before that has a strategic interest to target liver fibrosis is Rxi pharmaceuticals (RXII) which makes perfect sense since the company's lead drug candidate targets anti scarring of hypertrophic scars and keloids. Rxi is set to report phase 2a results in the coming weeks so good results there will automatically validate its target compound RXI-109 and its sd-rxRNA self delivering platform for Liver fibrosis as well. Be on the lookout for the next possible biotech merger deal because we are pretty sure this latest acquisition by Roche won't be the last one.