InterMune Up on Narrower-than-Expected Q1 Loss


InterMune Inc.’s (ITMN) shares were on a high ever since the company announced its first quarter 2014 results and raised its 2014 guidance for Esbriet sales last week. Shares of the company have gained 2.3% so far. InterMune’s first-quarter 2014 adjusted loss per share of 60 cents was flat on a year-over-year basis, but was narrower than the Zacks Consensus Estimate of a loss of 62 cents.

InterMune reported revenues of $30.3 million in the first quarter, compared with the year-ago revenues of $10.5 million. Revenues also increased 18% on a sequential basis. The sharp increase in total revenues was primarily due to a boost in Esbriet (pirfenidone) sales. The drug was launched in Germany in Sep 2011. Revenues were also above the Zacks Consensus Estimate of $29 million.

Quarterly Details

Esbriet was the sole contributor to InterMune’s revenues in the first quarter of 2014. Esbriet is approved for the treatment of idiopathic pulmonary fibrosis (IPF), a fatal lung disease.

During the quarter, research and development (R&D) expenses increased 23.9% to $32.1 million. The increase in R&D was primarily due to expenses associated with the completion of the ASCEND trial and related to the RECAP open-label extension study.

Selling general and administrative (SG&A) expenses were up 47.9% to $44.3 million during the reported quarter. The increase in SG&A expenses during the reported quarter was primarily attributable to expenses related to pre-launch preparations of Esbriet in the U.S.

Esbriet Update

In Feb 2014, InterMune’s shares skyrocketed 170.8% following the announcement of encouraging top-line results from the phase III ASCEND study on Esbriet. The ASCEND study is evaluating Esbriet in patients suffering from IPF in the U.S. Results from the study showed that treatment with Esbriet significantly reduced IPF disease progression at week 52 thus meeting the primary objective of the study. Esbriet also demonstrated significant treatment effects in the six-minute walk test distance change and progression-free survival. Moreover, the drug demonstrated favorable safety and tolerability profiles.

InterMune intends to resubmit the New Drug Application (:NDA) early in the third quarter this year. InterMune will launch Esbriet in the second quarter of 2015 in the U.S. assuming approval.

To date, Esbriet has been successfully launched in 14 European countries, namely, Austria, Belgium, Denmark, France, Germany, Iceland, Luxembourg, Norway, Sweden, Finland, Italy, England, the Netherlands and Ireland. The company expects to provide an update on pricing and reimbursement discussions in Spain in the second half of this year.

We note that Esbriet is also being developed in a phase II study for the treatment of systemic sclerosis-related interstitial lung disease (SSc-ILD). Results from this study are expected in the last quarter of this year.

2014 Guidance

InterMune raised its 2014 Esbriet sales guidance to the range of $130−$140 million from the previous range of $115−$135 million. The Zacks Consensus Estimate for 2014 total revenues of $140 million is at the high end of the company’s guidance range.

The company however maintained its 2014 R&D expense guidance in the range of $110 million to $120 million and SG&A expense guidance in the range of $210 million to $225 million. 2014 operating expense guidance is also maintained in the range of $320 million to $345 million.

Our Take

We are encouraged by InterMune’s progress with Esbriet so far. The positive top-line results from the ASCEND study was a huge positive for the company. We expect investor focus to remain on the company’s progress with its lead product in the U.S. Though Esbriet is the only approved medicine for IPF, companies like Novartis (NVS) and Sanofi (SNY) are developing therapies to treat IPF.

InterMune, a biotechnology company, presently carries a Zacks Rank #3 (Hold). A better-ranked biotechnology stock is Gilead Sciences Inc. (GILD) carrying a Zacks Rank #1 (Strong Buy).

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