InterMune Inc. (ITMN) posted fourth-quarter adjusted loss per share of 69 cents, wider than the year-ago adjusted loss per share of 42 cents, afflicted by lower revenues and higher operating expenses. The loss was, however, narrower than the Zacks Consensus Estimate of a loss per share of 71 cents.
InterMune reported revenues of $7.8 million in the fourth quarter, way below the year-ago revenue of $241.7 million. The year-ago revenue however included $232.3 million of one-time proceeds from Roche Holdings Ltd. (RHHBY) following the sale of pipeline candidate danoprevir to the latter and the recognition of deferred revenue in connection with the termination of a research agreement. Excluding the one-time item, fourth quarter 2010 revenue was $9.4 million. Revenues in the reported quarter were still below the prior-year quarter due to the absence of collaboration revenues. Revenues, however, edged past the Zacks Consensus Estimate of $8.0 million.
In 2011, InterMune reported total revenue of $25.6 million below 2010 revenue of $259.3 million for the same reasons as discussed above. In 2011, adjusted loss per share was $2.58 versus a loss of $1.77 per share in 2010. The Zacks Consensus Estimate for revenue was $26 million and loss per share was $2.59.
Quarterly Details
Revenue in the quarter included $2.7 million from sales of InterMune’s potential blockbuster drug Esbriet which was launched in Germany in September last year. Esbriet is approved for the treatment of idiopathic pulmonary fibrosis (IPF), a fatal lung disease. InterMune’s other marketed drug, Actimmune, recorded revenue of $5.2 million in the fourth quarter of 2011 versus $4.9 million in the prior-year quarter.
During the reported quarter, research and development (R&D) expenses increased 27% to $21.0 million in preparation of the ASCEND trial.
Selling general and administrative (SG&A) expenses shot up 60.0% to $26.9 million primarily from establishing the European infrastructure (including increased workforce) to support the commercialization of Esbriet.
2012 Guidance
At the preliminary fourth quarter conference call held in January 2012, management issued its expense guidance 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. The guidance was maintained at the fourth quarter earnings release.
Esbriet Update
Esbriet, already approved in the European Union (EU), was launched in Germany in mid-September 2011. 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. InterMune believes that all orphan drugs like Esbriet are deemed to have added benefit. The final assessment of the IQWiG will come in March 2012, upon which the price in Germany will be established.
At the fourth quarter preliminary update, in January 2012, InterMune announced that 1,022 new patients started Esbriet therapy across EU during 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. Of the 612 patients in Germany, only 172 were transitioned from NPP, which indicates that most of the growth is coming from new patients.
At the preliminary call, InterMune management had stated that Esbriet was expected to be launched in France, Spain and Italy in the second quarter of 2012 and in the United Kingdom in October 2012. However, at the fourth quarter conference call, management tepidly announced that it expects to complete pricing and reimbursement issues in those countries by the given timeline and launch as soon as possible. We believe the pricing and reimbursement uncertainty in Europe is the reason behind management’s cautious stance. The company also plans to launch Esbriet in other mid-sized European nations through 2012 though Esbriet usage in these countries is expected to gain momentum in 2013. Esbriet is sold in Japan since 2008 by InterMune’s partner Shionogi under the trade name Pirespa.
Our Recommendation
We currently have a Neutral recommendation on InterMune. The stock carries a Zacks #3 Rank (short-term ‘Hold’ rating).
We believe Esbriet has significant commercial potential as it targets IPF which is an orphan indication. Currently, there is no FDA approved therapy for the treatment of IPF in the US. With the EU approval of Esbriet, InterMune became the first company to offer an IPF medicine in Europe. Hence, a huge market opportunity exists for the drug. Nonetheless the pricing uncertainty in Germany as well as in other EU countries remains a concern despite the drug’s decent launch.
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