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Stifel Downgrades InterMune; Roche Offer 'Appropriate Ending'

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Shares of InterMune (NASDAQ: ITMN) were downgraded to Hold from Buy by Stifel following Roche's proposed $8.3 billion acquisition over the weekend.

InterMune has been the subject of various takeover rumors. On August 13, Bloomberg reported that Roche, along with other European drug markers like GlaxoSmithKline and Actelion, were also interested in acquired the U.S.-based InterMune.

Related Link: InterMune Spikes On Report It Hired Goldman Sachs; Mulls Multiple Bids

Investors were speculating who would ultimately emerge as InterMune's acquirer, and the answer was revealed on Monday. The board of directors of both Roche and InterMune agreed to merge for $8.3 billion or $74 per share.

InterMune's $74 acquisition price represents an approximate 38 percent premium to Friday's closing price of $53.80.

"We're not terribly shocked by Sunday's announcement – but the origination and the magnitude of the offer is a bit surprising," Stephen Willey of Stifel wrote in a note to clients on Monday. "We believe the recent presentation of competitive IPF data sets at the May 2014 ATS meeting represented the last significant de-risking step required for purposes of valuation."

Willey adds that Roche's interest in InterMune has been "a little out-of-the-box" given InterMune's pirefnidone. Roche's only exposure to the respiratory space includes the marketing of Pulmozyme which contributed $600 million in sales throughout fiscal 2013 and the co-promotion of Xolair which contributed $850 million in sales.

Regardless, Roche's offer of $74 per share reflects what that analyst believes to be a competitive process. The combination of the two companies will close seamlessly with little risk associated with the upcoming pirfenidone PDUFA date on November 23.

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