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Cramer: Behind Roche's InterMune Deal

NEW YORK (Real Money) -- You want to know what's the biggest change that has come over mergers and acquisitions in the last few years? No, it is not inversions. It's the definition of "bolt-on." This morning I sat and listened in amazement to how Roche described the $8.38 billion purchase of InterMune (ITMN) as a "bolt-on" acquisition that fits right into the company's emphasis on pulmonary care drugs.

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Since when is $8.3 billion bolt-on? That's like saying that a Cartier ring is a bolt-on to your jewelry collection.

In truth, all of the major drug companies are challenged for new products and are scrambling to make acquisitions just like this one, even as it is a 38% premium to where the stock went out on Friday and the stock was already up 265% for the year. They are scrambling because their own labs simply seem incapable of the kind of greenfield breakthroughs that biotech firms are developing.

This spring InterMune produced test results of Pirfenidone, its anti-idiopathic pulmonary fibrosis drug that showed dramatically life-saving possibilities against an illness that is now pretty much a death sentence. The compound, which addresses a disease that affects around 100,000 a year, will most likely be approved by this year's end.

There is nothing else on the market that has been able to arrest this progressive disease, so Roche will presumably have the market all to itself. Roche has a small pulmonary business with its own salesforce, and this drug will help it diversify away from its core oncology business. We highlighted this biotech company after TheStreet's Adam Feuerstein reported that there might be some very promising trials going on for this lead InterMune drug.

What else do we know about InterMune? How about that it is profitless? How about that it has lost more than a billion in the last nine years? How about that it has an amazingly overstretched valuation, to use the term that the Fed recently got nailed using when it talked about what's wrong with the stock market right now? How about the fact that there were apparently other, equally hallenged buyers out there that forced Roche to reach so high to get it?

Which brings me back to the new definition of bolt-on. Typically, on a conference call when analysts are worried that a company might do a big expensive acquisition, management soothes them with the words that if they do anything at all, not to fret, it will just be bolt-on. I think what we have here after this bid is a new definition of bolt-on; one that says: "Nearly ten billion is not anything to be concerned or worried; it's simply a welcome little addition to the product portfolio."

"Little," though, now encompasses what "huge" used to be. That's why you can now cull over all of these one- and two-product, money-losing biotechs, and try to find those that have important stage three trials for unmet needs of 100,000 people or so and recognize that they, too, could be the subject of bolt-on acquisitions that can give you a 300% return in a year's time.

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It's still one more piece of evidence that this dissed and allegedly distended market, so often labeled as propped up by the Fed, just keeps giving you amazing gifts when you least expect it. That's because $8 billion, once a monumental amount, is now just small change to these gigantic companies challenged to stay relevant when they are so focused on beating estimates, paying big dividends and just staying one step ahead of the shrinking price-to-earnings ratio posse.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned. Editor's note: This article was originally published on RealMoney at 6:51 a.m. EDT on Monday, Aug. 25.

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