Set to make idiopathic pulmonary fibrosis drug Esbriet (pirfenidone) available to patients in Germany Thursday, about six months after receiving European approval, InterMune Inc. is bolstering its cash position via two public offerings totaling $231 million.
The Brisbane, Calif.-based firm priced 4 million shares of common stock at $24 apiece – marking only a negligible discount from Tuesday's closing price, though the stock had dropped 10 percent the day before on news of the planned concurrent offerings. In a concurrent offering, the company priced $135 million in aggregate principal amount of its 2.50 percent convertible senior notes due 2018.
Shares of InterMune (NASDAQ:ITMN) gained 66 cents to close Wednesday at $24.86.
Net proceeds are expected to total $221 .9 million – that figure could be increased by about $34.65 million more if underwriters of the offerings exercise overallotment options in full – and will nearly double InterMune's cash position, which totaled $245.7 million as of June 30. Funds will be used to support the commercial rollout of Esbriet in Europe over the next two years, as well as to pay for the additional Phase III trial needed for pirfenidone approval in the U.S.
Underwriters for the offerings are Goldman, Sachs & Co., J.P. Morgan Securities LLC, JMP Securities LLC, Leerink Swann LLC, Oppenheimer & Co. Inc. and Wells Fargo Securities LLC.
Analyst Avik Roy, of Moness Crespi Hardt & Co., had anticipated "considerable appetite" for InterMune's convertible notes, and wrote in a research note that "those concerned about near-term launch stories could arbitrage the debt and equity offerings as a hedging strategy."
Biotech drug launches over the past few years, in general, have had slower-than-expected starts. And, since InterMune is starting in Europe, where it will have to undertake a sequential, country-by-country launch, it does not anticipate offering revenue guidance "for quite some time," Dan Welch, the firm's chairman, president and CEO, told investors on a late Monday conference call. He added that guidance might be available in 2013, the first full-year of Esbriet sales expected for the top European markets, but warned, "Don't hold me to that."
Esbriet gained approval in Europe earlier this year for mild to moderate IPF, a nearly always fatal disease in which patients have difficulty breathing due to scarring of the lungs. InterMune plans to move into France, Spain and Italy in the first half of 2012 and into the UK in the middle of next year, but the firm opted to start in Germany, where reimbursement and pricing issues tend to be more favorable. (See BioWorld Today, March 4, 2011.)
Even so, the final pricing came as a nice surprise to investors who had been told to expect pricing in the range of $32,000 to $45,000, the same as oral therapies for pulmonary arterial hypertension, a similar rare disease.
The gross ex-factory price of Esbriet is about $51,000 per patient per year, Welch said. Subtracting a mandatory 16 percent discount in Germany, net price will total about $42,638 per patient per year.
Pricing in the other European countries is likely to be lower, but the Germany pricing "is an important step because it's a step that creates some reference pricing," Welch said, "and that's intentional."
A good sign for InterMune is pricing in Norway, which reportedly has been set at about $50,000 – Norway is set for Esbriet rollout over the next year, along with Austria, the Netherlands, Belgium, Switzerland and the other Scandinavian countries. The firm is hoping that Esbriet's approval as the first therapy in the orphan IPF space will ensure favorable pricing in the countries as well.
"If we were launching a new . . . fixed-dose combination of well-known hypertensives, we'd all be very concerned about this situation," Welch said. But "it's our view that the reimbursement authorities will be sympathetic toward a disease for which there is no therapy, is uniformly lethal and is an orphan [disease]."
InterMune, which already has been setting up European headquarters in Basel, Switzerland, anticipates launching Esbriet in Germany with a 25-member team comprising 15 field-based personnel, including 13 sales reps, and 10 office personnel based in Berlin.
Welch said there are an estimated 13,000 to 17,000 patients with mild to moderate IPF in Germany, and 65 percent to 75 percent of those are treated at 150 centers. And, of those, 40 centers treat a "disproportionately large" number of IPF patients, he added.
In the top 10 European markets, IPF is believed to affect about 110,000 people.
Meanwhile, in the U.S., where there are roughly 100,000 IPF patients, InterMune is still working to convince the FDA of Esbriet's clinical benefit. Despite a positive panel review, the agency issued a surprising complete response letter last year, asking for an additional pivotal study. InterMune's new drug application (NDA) had been based on pooled data from two Phase III trials, one of which hit its endpoint while the other fell short. (See BioWorld Today, May 5, 2010.)
The new ASCEND (Assessment of Pirfenidone to Confirm Efficacy and Safety in IPF) is a 52-week trial expected to recruit a total of 500 subjects and measure the difference in forced vital capacity from baseline as the primary endpoint. (See BioWorld Today, May 27, 2011.)
Welch said the firm so far is "very pleased" with ASCEND's progress. The trial is on target for full enrollment in the second half of 2012, he said. Pending positive data, an NDA resubmission is expected in the second half of 2013, with possible FDA action in the first half of 2014.
The delay in the U.S. could give competing products a chance to catch up, though, fortunately for InterMune, IPF has proved a tough space for biotech. The only other late-stage contenders, endothelin receptor antagonists Tracleer (bosentan) from Actelion Ltd. and Letairis (ambrisentan) from Gilead Sciences Inc. failed in Phase III.
Coming down the pipeline are several earlier-stage drugs, including CNTO-888, an antibody candidate from Johnson & Johnson; STX-100, an antibody from Stromedix Inc.; PRM-151, a recombinant form of human pantraxan-2 protein from Promedior Inc.; IW001, an oral solution of Type V collagen from ImmuneWorks Inc.; and an LPA1 receptor antagonist that Bristol-Myers Squibb Co. gained in its July acquisition of Amira Pharmaceuticals Inc.