Looking at InterMune's Lead Drug

It's been awhile since we last checked in on Rule Breakers pick InterMune's (Nasdaq: ITMN  ) lead drug. At the Wachovia Healthcare Conference yesterday, InterMune provided new investors a comprehensive overview of the company.

InterMune's only late-stage drug candidate is a small molecule compound, pirfenidone. It is testing now in two phase 3 studies as a treatment for idiopathic pulmonary fibrosis (IPF). IPF is described as a progressive scarring of the lungs that makes breathing very difficult and often leads to death in two to five years. Its cause is unknown.

It's estimated that 100,000 people suffer from IPF in the U.S., and there are about 30,000 new cases every year. There are no approved drugs to treat it, but compounds like Pfizer's (NYSE: PFE  ) Viagra and a mid-stage Novartis (NYSE: NVS  ) compound are being tested as possible therapies. InterMune estimates that, based on the similarly rare pulmonary hypertension market, the U.S. market opportunity in IPF treatment could be $1 billion and growing. 

Results from InterMune's two phase 3 pirfenidone studies are expected in early 2009. Investors (like me) are excited about pirfenidone because a drugmaker in Japan with the rights to the compound has completed positive phase 2 and phase 3 studies for pirfenidone in what InterMune describes as a "similar patient population." That's no guarantee that InterMune's studies will be successful, but it does raise the odds.

If its phase 3 trials are successful, then InterMune expects FDA approval in late 2009 and possible European approval in 2010. The patents behind the drug are very weak, so InterMune will rely on the short seven years of marketing exclusivity (10 years in the E.U.) that an orphan drug gets in the U.S. to sell pirfenidone.

The good news is that InterMune owns worldwide rights to pirfenidone outside of a few Asian countries. Last year it eliminated all future royalties it would have to pay on sales of the drug if it gets approved.

InterMune expects to commercialize pirfenidone itself, but investors don't have to worry so much about it bungling the launch. It has some (maybe a little too much) expertise in off-label marketing of another compound to IPF patients.

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