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Why InterMune Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company InterMune (Nasdaq: ITMN  ) are getting walloped, down as much as 15.5% after the company posted disappointing second-quarter earnings results.

So what: For the quarter, InterMune reported a huge boost from the sale of Actimmune to privately held specialty-drug maker Vidara Therapeutics for $55 million. Without the addition of this one-time gain, InterMune would have lost $0.78 for the quarter, compared with a loss of $0.70 in the year-ago period.

The truly disappointing news concerned Esbriet, which was approved by the European regulatory committee in 2011 and is currently in late-stage trials in the U.S. (It was rejected by the FDA in 2010.) The drug is designed to treat idiopathic pulmonary fibrosis -- a disease causing inflammation and scarring of the lungs -- and has a treatment price of approximately $33,000. Wall Street had expected revenue from the drug to come in at $40 million this quarter and $77.9 million for the year. InterMune reported sales of only $5.5 million for the quarter and forecasts full-year revenue of just $20 million to $25 million from Esbriet.

Now what: It seems that every quarter, at least one or two biotechnology companies manage to get a drug approved but stall getting it out of the gate. It appears that could wind up being Esbriet's biggest stumbling block.

Also, InterMune shareholders should be thrilled with the $55 million from the Actimmune sale, because the company is burning cash at an alarming rate -- at least in my opinion. With this new tepid forecast for Esbriet sales and no assurance that Esbriet will be approved by the FDA (or that InterMune will be able to successfully launch the drug in the U.S.), I have to say that today's drop doesn't appear to be a great buying opportunity.

Craving more input? Start by adding InterMune to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 24, 2012, at 12:38 AM, Clint35 wrote:

    What made those silly analysts think sales of such an expensive drug would reach $77.9 MIL per year?At $33,000 a treatment would think very few people could afford it. Is the disease mentioned some strange disease that only effects the wealthy? What were they thinking?

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