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The Food and Drug Administration advisory panel was about as good as InterMune (Nasdaq: ITMN  ) investors could have hoped for. Is the company's lung drug, pirfenidone, more likely to be approved than it was yesterday? By the looks of the 60%-plus increase today, on top of last week's 60% increase, investors seem to think so. Is the uncertainty of an approval removed? Not even close.

The advisory panel voted 9-3 that the drug should be approved. Not a bad showing, but as I mentioned earlier this week, other drugmakers, including Dendreon (Nasdaq: DNDN  ) and Merck (NYSE: MRK  ) , have watched FDA rejections follow similarly positive panels.

It should also be noted that the committee voted 7-5 that "pirfenidone provides a clinically meaningful beneficial effect in the treatment of patients with IPF to reduce decline in lung function." I'm not exactly sure why two committee members voted that there isn't evidence that pirfenidone works, but still voted for approval of the drug. Given the circumstances of the mixed clinical trial results, the FDA may be more interested in the closer vote about whether the drug worked.

We should know by May 4 whether the drug wins approval. That's assuming no more snowstorms hit Washington, which pushed back the PDUFA date for once-weekly Byetta from Amylin Pharmaceuticals (Nasdaq: AMLN  ) , Eli Lilly (NYSE: LLY  ) , and Alkermes (Nasdaq: ALKS  ) ; that decision now arrives this Friday.

Given the high uncertainty about weather (sorry) an approval would come, InterMune has conserved its cash, and it hasn't built out a sales force or commercial supply of the drug. If there is an approval on May 4, don't expect pirfenidone, which would then be called Esbriet, to launch on May 5.

Is InterMune a buy here? Obviously, that depends on what the FDA does -- which still isn't clear in my opinion. There's still plenty of room to run from its current $1.8 billion market cap if -- and that's a big if -- the FDA does approve the drug. 

There are roughly 200,000 patients with idiopathic pulmonary fibrosis (IPF) in Europe and the U.S.  If half take the drug at a price of about $10,000 to $15,000 per year, that gives annual revenue on the order of $1 billion to $1.5 billion. At a sales multiple of about three to five -- similar to where other biotechs with a drug on the market have traded -- that gives a market cap of about $3 billion to $7.5 billion. Yeah, I'd call that a significant upside potential.

There are a lot of assumptions there about how patients, InterMune, and investors will react after an approval, assuming it comes. I tried to stay fairly conservative, especially on the patient uptake and price (that's near the lower end of where Actimmune has sold, including its off-label use to treat IPF, according to InterMune management), as well as the sales multiple. Also keep in mind that this includes InterMune's marketing the drug in the EU, where it's under review.

Another double or more from here is certainly possible. Just realize that InterMune could easily go back to where it started if, a few short weeks from now, the FDA sends the company back to the drawing board.

If you'd like further analysis on InterMune, grab a free trial of Motley Fool Rule Breakers, where InterMune has been a pick since 2006. 

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

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