West Coast Editor

In the wake of the Phase III Actimmune fizzle against idiopathic pulmonary fibrosis (IPF) about two weeks ago, InterMune Inc.'s plan to get rid of half its staff to cut costs surprised almost no one, and investors still have chips on a late-stage compound for the same indication as well as - farther back in the pipeline - a therapy for hepatitis C virus.

Shares of InterMune (NASDAQ:ITMN) closed Tuesday at $22.97, up 58 cents, on news of the restructuring, which says goodbye to 116 full-time and contract positions, saving as much as $50 million in operating expenses by 2008.

Research and development expenses will total $100 million to $110 million for 2007. Selling, general and administrative costs will land in the range of $25 million to $35 million for the year.

Most of the layoffs will take place in April, with the remainder done as the failed INSPIRE trial winds down, InterMune's president and CEO, Dan Welch, told investors during a conference call.

The company decided to stop its Phase III trial called INSPIRE with Actimmune (interferon gamma-1b) against idiopathic pulmonary fibrosis after an independent data monitoring board found lack of survival benefit compared to placebo. Actimmune is marketed for chronic granulomatous disease and severe, malignant osteopetrosis, and failed last year in Phase III trials for ovarian cancer as well. (See BioWorld Today, March 7, 2007, and Feb. 6, 2006.)

For IPF, InterMune has pirfenidone, a small-molecule p38-gamma inhibitor that garnered positive Phase III data near the end of last year in Japan. Another Phase III pirfenidone program, CAPACITY, will be refined and expanded, and will finish enrollment several months sooner than projected earlier, Welch said.

Specifically, 135 patients will be added to the previously planned 580, and the duration of therapy will increase from 60 weeks to 72 weeks, with forced vital capacity still the primary endpoint.

Data from INSPIRE and from the trial done by Japanese rights-holder Shionogi & Co. Ltd., of Osaka, Japan, helped InterMune fine-tune its two-study CAPACITY program, which Welch predicted would be fully enrolled in July, and finished in the first quarter of 2009. Steven Porter, chief medical officer for Brisbane, Calif.-based InterMune, acknowledged "small differences in eligibility" between INSPIRE and CAPACITY, but said they overlap otherwise.

Shionogi, for its part, has not disclosed all the details about its tested patient population, but Porter said the resemblances are close enough that InterMune was comfortable making inferences. More results might be available shortly, noted Brian Abrahams, analyst with CIBC World Markets.

For HCV, InterMune has ITMN-191, the NS3/4A protease inhibitor that was the focus of a potential $530 million deal with F. Hoffmann-La Roche Ltd., of Basel, Switzerland, last fall. Viral kinetic data from InterMune's 14-day, Phase Ib study with ITMN-191 for HCV are expected in the second half of this year, and the Phase Ia trial is slated for completion in the first half. (See BioWorld Today, Oct. 18, 2006.)

Although pirfenidone has a "good probability" of success, since the drug performed so well in the Shionogi trial, Abrahams predicted the main interest will stay on ITMN-191 this year, with the Phase Ib data likely to boost the stock.