InterMune Plays "Let's Make a Deal"

On Friday, biopharmaceutical company InterMune (Nasdaq: ITMN) released its third-quarter results, but the most interesting development for the company during the quarter was the great commercialization deal it signed with Roche (OTC BB: RHHBY.PK) for its hepatitis C drug candidate, ITMN-191. The drug is entering phase 1 trials later this year.

For the quarter, InterMune burned through approximately $11 million, ending with $169 million in cash and equivalents. Sales for its only marketed product, Actimmune, were down 13% to $22.5 million.

Getting back to the deal InterMune and Roche signed two weeks ago, the big question is: Did InterMune make a fair deal with Roche in its commercialization agreement over ITMN-191? Comparing the InterMune-Roche deal with the deal competitor Vertex Pharmaceuticals (Nasdaq: VRTX) made for its HCV protease inhibitor with Johnson & Johnson (NYSE: JNJ) may shed some light on the quality of InterMune's deal:

Keeping in mind that drugs in later development generally command better deals than earlier-stage drugs, InterMune's collaboration deal looks great compared to Vertex's deal, since ITMN-191 hasn't even entered clinical trials yet. InterMune gets more development costs paid for and receives nearly as much in milestone payments, assuming the drug gets to market. The huge advantage of the Vertex deal over InterMune's is that it retained all rights to sell VX-950 in the U.S., whereas InterMune will get only half a share of the profits from ITMN-191.

There's one other thing worth pointing out: Roche will take control of conducting clinical trials on ITMN-191 after the phase 1 trial is concluded in early 2007. Roche is one of the industry leaders in the hepatitis C field. Having the drug in the able hands of Roche's experienced clinical trial development teams is a valuable aspect of the deal that should speed up development and help the odds that positive clinical trial results will be seen, if any exist.

All in all, the deals for VX-950 and ITMN-191 look very similar. Considering the different stages of clinical trials that each drug is in, it appears Vertex and InterMune both received a fair shake in their deals. InterMune's deal significantly steps up the possibility of VX-950 facing a competitive threat sooner than expected, if both drugs can make it to market -- and that's good news for InterMune shareholders.

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Fool contributor Brian Lawler own shares of InterMune, but no shares of any other company mentioned in this article. The Fool has a disclosure policy.