InterMune takeover talk is tantalizing, but are investors too optimistic?

As InterMune ($ITMN) awaits FDA approval for its drug to treat a rare lung disease, reports emerged Wednesday that it has hired financial advisers to weigh takeover bids from the likes of Sanofi ($SNY) and Roche ($RHHBY). The news drove InterMune's shares up 14% to $52 on Wednesday, but then the stock fell back to $50.35 in pre-market trading Thursday.

All the excitement over InterMune centers around Esbriet (pirfenidone), its experimental drug to treat idiopathic pulmonary fibrosis (IPF), a lung-scarring disease that can be fatal. The company won "breakthrough" designation from the FDA in July and it expects to nab the agency's approval in November. The drug is already on the market in Europe and Wells Fargo analysts predict sales will exceed $1 billion globally in 2019, according to Bloomberg.

GlaxoSmithKline ($GSK) and Actelion ($ATLN) have also expressed interest in InterMune, and analysts tell Bloomberg that Gilead ($GILD) and Merck ($MRK) might also find it to be an appealing target. InterMune hired Goldman Sachs Group and Centerview Partners to assess any acquisition offers it receives, according to anonymous sources quoted by Bloomberg.

But some analysts say investors may be a bit too optimistic about the purchase price InterMune is likely to fetch. After the market closed Wednesday, Goldman Sachs analysts downgraded their rating of the company's stock to "neutral," which TheStreet suggested was the likely cause of the share pullback. Goldman noted that it expected Esbriet to be approved on time but that the stock was trading at a 6% premium to its target 12-month price of $49.

Separately, TheStreet rated InterMune a "sell" based on what it called "a few notable weaknesses" that "could make it more difficult for investors to achieve positive results." The ratings outfit noted that in the most recent quarter, InterMune's net loss widened 13% over the same period a year ago to $71.2 million. It added that the company's return on equity significantly trails the industry average and the S&P 500's ROE.

InterMune is locked in a tight race with Boehringer Ingelheim to become the first company to win U.S. approval for an IPF product. Boehringer's drug, nintedanib, also has breakthrough designation, though the company has not disclosed the regulatory timeline for it. Analysts expect the total IPF market will peak at $2 billion a year--and judging from InterMune's sky-high valuation, investors clearly expect it to grab the bulk of that.

- read more at TheStreet
- here's the Bloomberg story
- get more at Reuters