InterMune, Inc. (ITMN">ITMN) recently reported preliminary fourth quarter revenue for its potential blockbuster drug Esbriet. Esbriet is approved in the European Union (EU) for the treatment of mild-to-moderate idiopathic pulmonary fibrosis (IPF). The drug has been launched first in Germany in September 2011. InterMune also announced updated data from the drug’s RECAP study.

Preliminary Esbriet Update

InterMune reported Esbriet revenue of $2.8 million since launch in September 2011, of which $2.7 million was generated in Germany. Management announced that 1,022 new patients started Esbriet therapy across EU at the end of 2011. Of these, 612 patients have been given Esbriet in Germany and 410 patients have enrolled in the named patient program (NPP) outside Germany.

Under the NPP program qualified physicians can make Esbriet available to IPF patients in EU (who meet certain pre-specified medical criteria and conditions) free of charge until Esbriet is commercially available in their country.

In Germany, the initial price of a new medicine is set by the manufacturer on launch and then the final price is negotiated over a 12-month period under the new AMNOG law. In December 2011, the German Institute for Quality and Efficiency in Healthcare (IQWiG) issued a preliminary opinion saying that Esbriet did not demonstrate any additional benefit over placebo.

InterMune has submitted a response to the preliminary assessment, disagreeing with it. The final assessment of the IQWiG will come in March 2012, upon which the final price in Germany will be established. Though Esbriet has had a decent launch, the pricing uncertainty remains a concern.

Esbriet is expected to be launched in France, Spain and Italy in the second quarter of 2012 and in the United Kingdom in October 2012. The company also plans to launch Esbriet in some other mid-sized European countries through 2012. Esbriet is sold in Japan since 2008 by InterMune’s partner Shionogi under the trade name Pirespa.

US Regulatory Status for Esbriet

In the US, InterMune is conducting a late stage additional study (ASCEND; n~500) of Esbriet for the treatment of IPF. InterMune had received a complete response letter (CRL) from the US Food and Drug Administration (FDA) in early May 2010. The regulatory body had requested data from an additional clinical trial before considering the regulatory approval of Esbriet.

Accordingly, InterMune began the ASCEND study to meet the requirements of the FDA. The trial is expected to be fully enrolled by the second quarter of 2012 with data to be presented in mid 2013. InterMune expects to launch Esbriet in the US in 2014.

RECAP Data

InterMune also announced new efficacy data from the RECAP study, which is an extension study of the pivotal CAPACITY trials to assess the long-term safety of Esbriet. Long-term data from the RECAP trial showed that the decline in Forced Vital Capacity (FVC -- a measure of lung function) and overall survival were similar to the CAPACITY trials.

Moreover, the proportion of the patients, at week 60, who had a decline of 10% or greater in FVC was 40% lower than in the CAPACITY placebo group. Safety data from the RECAP study was earlier presented at the European Respiratory Society in September 2011. We believe the data is encouraging and increases the chances of success of the ASCEND study and subsequently of US approval.

Expense Guidance

Management also discussed its expense guidance for 2011 and 2012. InterMune reduced its 2011 research and development (R&D) expense forecast to a range of approximately $75–$80 million from a prior range of $85–$95 million. Selling, general and administrative (SG&A) expense was however upped from a range of $75–$85 million to $85–$90 million.

For 2012, R&D is expected to be in the range of $95–$115 million and SG&A in the range of $120–$145 million.

Our Recommendation

We currently have a Neutral recommendation on InterMune. The stock carries a Zacks #4 Rank (short-term ‘Sell’ rating).