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.