Intermune’s Esbriet Sales Surprise on Upside

Intermune (ITMN) climbed 6% on Thursday morning after the company reported increased sales of their Idiopathic Pulmonary Fibrosis drug, Esbriet (pirfenidone). Q3 sales were $19.7 million, a 37% increase from last quarter, which resulted in a reported loss of 62 cents – analysts expected a loss of 71 cents. More importantly, ITMN raised low-end sales guidance for 2013 by $5 million and is now guiding in the range of $60-70 million for the year. Esbriet is sold in 13 European countries, plus Canada, with near-term expansion into Spain and the Netherlands likely.

A phase 3 trial is underway in the U.S. as well, key to the company’s future given that IPF presents a large market in the states. This January, ITMN completed enrollment in the phase 3 ASCEND study, and results are expected to be presented at the International Conference of the American Thoracic Society in May of 2014. Everything seems to be on track, as patient retention rates are over 90% and more than 90% of patients have rolled over into the open label, cross-over RECAP study to receive pirfenidone. ITMN estimates that there are 50,000 to 70,000 patients diagnosed with IPF in the US, and an additional 15,000 to 20,000 new cases per year.

New Esbriet formulations for other fibrotic indications are also being researched. While ITMN has received criticism for being a bit of a one trick pony, research investment comprises 20% of the $27.3 million spent on R&D this quarter. SG&A expenses have also been guided up, as headcount is expected to increase by about 35% to between 200-220 people in 2014 as commercialization efforts ramp. Total operating expenses for 2013 should come in at about $260 million. As the phase 3 trial concludes in a few months, investors must be cognizant of competing IPF drugs in the pipeline from Novartis and Sanofi.

ITMN gets more interesting in the first quarter of next year as the ASCEND read-out approaches. Pirfenidone has a rocky history with the FDA (read more here), but the current Phase III program is more appropriately designed to demonstrate a benefit in IPF patients. PropThink will continue to evaluate the stock and the Phase III program as the event approaches.