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InterMune Cuts Loss, Affirms View

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InterMune Inc.’s first-quarter loss per share of 66 cents was narrower than the Zacks Consensus Estimate of a loss of 76 cents and the year-ago loss of 75 cents per share. The narrower loss during the quarter was primarily due to higher revenues.

Quarterly Details

InterMune reported revenues of $10.5 million in the first quarter of 2013, compared with year-ago revenues of $4.9 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 below the Zacks Consensus Estimate of $11 million.

Esbriet was the sole contributor to InterMune’s total revenues in the first quarter of 2013. 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 11.5% to $25.9 million. The increase in R&D was due to expenses associated with the ASCEND trial.

The ASCEND trial is supporting Esbriet for the treatment of IPF in the US. In Jan 2013, the company completed enrolment for the phase III study in the US. Results from the ASCEND trial are expected in the second quarter of 2014.

Selling general and administrative (SG&A) expenses were up 14% to $30 million during the reported quarter. The increase in SG&A expenses during the reported quarter was primarily attributable to expenses related to the launch and pre-launch of Esbriet in the EU along with development of InterMune’s commercial infrastructure.

2013 Guidance

Apart from announcing its results, the company also reiterated its previously announced guidance for the year 2013. InterMune still expects Esbriet sales in the range of $40−$70 million in 2013. The guidance includes $40–$55 million from countries where the product is currently launched and the rest from countries where the drug is yet to be launched. Total revenues for 2013 as per the Zacks Consensus Estimate are $62 million.

The company still expects 2013 R&D expenses in the range of $100–$120 million. SG&A expenses are continued to be projected in the range of $145–$165 million.

Esbriet Update

To date, Esbriet is successfully priced and reimbursed in 12 European countries, namely, Austria, Belgium, Denmark, France, Germany, Iceland, Luxembourg, Norway, Sweden, Italy, England, and Finland. InterMune expects to generate revenues from Esbriet in all these countries from the second half of the year.

InterMune plans to launch the drug in Italy by mid-June, in Finland by June and in England by mid-August. InterMune intends to conclude pricing and reimbursement discussions in Ireland this June and potentially launch the drug there in the third quarter of 2013. Moreover, the company expects to provide an update on pricing and reimbursement discussions in Spain and the Netherlands by the end of the year.

Our Take

Though Esbriet is the only approved medicine for IPF, companies like Novartis (NVS - Free Report) and Sanofi (SNY - Free Report) are developing therapies to treat 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, a biotechnology company, carries a Zacks Rank #2 (Buy). Other biotech stocks such as Athersys Inc. (ATHX - Free Report) currently look better positioned carrying a Zacks Rank #1 (Strong Buy).

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