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Wider Loss at InterMune

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InterMune Inc.’s fourth-quarter loss per share of 91 cents was wider than the Zacks Consensus Estimate of a loss of 86 cents and the year-ago loss of 73 cents per share. The wider loss during the quarter was primarily due to higher operating expenses.

InterMune reported a loss of $2.82 per share for full year 2012, wider than the year-ago loss of $2.70 per share. Loss for the year was also wider than the Zacks Consensus Estimate of a loss of $2.35 per share. For the full year 2012, the company recorded total revenues of $26.2 million compared with the year-ago figure of $5.4 million. Revenues however, fell short of the Zacks Consensus Estimate of $29 million.

Quarterly Details

InterMune reported revenues of $8.2 million in the fourth quarter of 2012, compared with the year-ago revenues of $2.7 million. 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 just above the Zacks Consensus Estimate of $8 million.

Esbriet was the sole contributor to InterMune’s total revenues in the fourth quarter of 2012. Esbriet is approved for the treatment of idiopathic pulmonary fibrosis (IPF), a fatal lung disease.

During the reported quarter, research and development (R&D) expenses increased 52.4% to $32.0 million. The increase in R&D was due to the expenses associated with the ASCEND trial.

The ASCEND trial is supporting pirfenidone for the treatment of IPF in the US. In Jan 2013, the company completed enrollment for the phase III study in the US and some additional territories. Result from the ASCEND trial are expected in the second quarter of 2014.

Selling general and administrative (SG&A) expenses were up 10% to $29.6 million during the reported quarter. The increase in SG&A expenses during the reported quarter was primarily due to expenses related to the launch and pre-launch of Esbriet in the EU.

2013 Guidance

Apart from announcing its results, the company also maintained its previously announced guidance for the year 2013. InterMune expects Esbriet sales of $40–$70 million in 2013. The guidance includes $40–$55 million from countries where the product is currently launched and the rest from the countries where the drug is yet to be launched. Total revenues for 2013 as per the Zacks Consensus Estimate are $61 million.

InterMune’s total operating expense guidance for 2013 is in the range of $245–$285 million including R&D expense guidance of $100–$120 million and SG&A expense guidance of $145–$165 million.

Esbriet Update

In Oct 2012, Esbriet was approved in Canada for the treatment of adults suffering from IPF. Canada is the ninth largest pharmaceutical market in the world.

As of 2012, Esbriet is successfully priced and launched in nine European countries, namely Austria, Belgium, Denmark, France, Germany, Iceland, Luxembourg, Norway and Sweden.

InterMune is working on the pricing and reimbursement process in the remaining EU countries. The company expects to complete pricing and reimbursement in the UK, Italy, Spain and other mid-sized countries by mid-2013. The company expects to launch Esbriet in six more EU countries by mid-year. 

Other Developments

We remind investors that in Feb 2013, InterMune entered into an agreement with Shionogi & Co., Ltd regarding the terms of a settlement of the complaint filed by Shionogi against InterMune. As per the terms of the agreement, InterMune will pay a royalty of 4.25% on net sales of Esbriet in the EU effective from Jan 1, 2013. The royalty will be paid throughout the drugs orphan drug exclusivity in the EU which expires in 2021.

Our Take

Though Esbriet is the only approved medicine for IPF, companies like Novartis (NVS - Free Report) and Sanofi (SNY - Free Report) are developing candidates for IPF. We remain concerned about the fact that InterMune is dependent on a single product for growth. Meanwhile, we expect investor focus to remain on the pricing and reimbursement in the remaining EU countries.

InterMune carries a Zacks Rank #3 (Hold). Meanwhile, other biotech stocks such as Agenus Inc. (AGEN - Free Report) carry a Zacks Rank #2 (Buy).

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