West Coast Editor

Six months after selling its anti-infective drug Amphotec to Three Rivers Pharmaceuticals LLC, InterMune Inc. has agreed to dispense U.S. and Canadian rights to its hepatitis C compound Infergen to Valeant Pharmaceuticals International Inc. for about $135.5 million in cash.

Dan Welch, president and CEO of Brisbane, Calif.-based InterMune, said the latest move came as a result of having too many opportunities and not enough money to pursue them all.

"We had alternatives," he said. "We could go out and raise a great sum of money that would be highly dilutive to shareholders, and/or partner pirfenidone [the Phase III compound for idiopathic pulmonary fibrosis] and the protease inhibitor [in preclinical study also for HCV]. Or we could divest Infergen for lots of money, and avoid the dilutive capital and partnering."

InterMune's stock (NASDAQ:ITMN) closed Tuesday at $15.24, down 45 cents.

Some "might have expected the shares would be punished today, but what we saw was a lot of volume and the share price was very stable," Welch said, predicting a "little shakeout period" in the coming months during which investors will analyze the value of changes made at InterMune.

Valeant's deal for Infergen (interferon alfacon-1) is expected to close by the end of this year. Under the terms, Costa Mesa, Calif.-based Valeant will make an up-front payment of $113.5 million, a fixed cash payment of 2 million (US$2.35 million) to be paid in 2007, and milestone cash payments in 2007 and 2009 that could total up to $20 million. Also, Valeant will buy about $6.5 million in inventory. The fixed cash payment is expressed in Euros because it's related to a manufacturing deal for Infergen with Boehringer Ingelheim GmbH, of Ingelheim, Germany, Welch said.

"For a product [such as Infergen] that's growing, depending on the profitability, you tend to see anywhere from two times [annual] revenues to five times" as the sale price for rights, he noted.

"The value of this deal is roughly four times the revenues, so it's on the high end of the multiples," Welch told BioWorld Today. "For Valeant, the strategic value is very high. They have a Phase III [HCV] program, the results of which they will have in 2006, so they would tend to pay more than someone who doesn't have an interest" in the disease.

Valeant's oral Viramidine, a nucleoside analogue, is undergoing two pivotal Phase III trials for use in combination with pegylated interferon to treat chronic HCV in treatment-naive patients.

InterMune also is letting 160 full-time employees go, and expects to see operating expenses drop by about $50 million per year, as the firm reduces money put into awareness programs related to idiopathic pulmonary fibrosis (IPF), for which InterMune has Actimmune (interferon gamma-1b) in Phase III trials.

Approved by the FDA in 1990 for infections associated with chronic granulomatous disease and in 2000 for delaying the time to disease progression in patients with severe, malignant osteopetrosis, Actimmune sales were $125 million last year.

Data are expected from the Actimmune IPF trials in early 2008 and from the pirfenidone trials in early 2009. Actimmune also is being studied in Phase III trials testing the drug in combination with standard of care therapy against ovarian cancer, with an interim analysis expected in the first quarter of next year.

Also in 2006, InterMune plans to file an investigational new drug application for the HCV protease inhibitor, which the company has resolved not to partner yet.

"We decided to keep it through the next major milestone," Welch said. "At the end of Phase Ib, we could very well make the decision [to partner]. At that time, we'll take a look at whether shareholders would be better off if we partnered it or continued through Phase II on our own," although "finances and a whole host of other things" will figure into the equation, he said.

"There is an evolution going on, and changes in the HCV marketplace," Welch said. "We felt we wanted to invest in the small molecule side of things. Interferons will continue to have a role in the future," he added, but probably not the same as before.

Welch was referring in part to eye-opening interim data from the Phase Ib trial evaluating VX-950, the oral protease inhibitor for HCV from Vertex Pharmaceuticals Inc., disclosed this spring - results that helped the Cambridge, Mass.-based firm raise $152.8 million in a stock sale the following month. (See BioWorld Today, May 11, 2005, and June 9, 2005.)

Suddenly, InterMune's protease inhibitor looked a lot more valuable. Add to this the go-ahead from the FDA and European regulators for the pirfenidone Phase III program, and InterMune - with Actimmune work under way as well - had a full plate.

"Infergen's growth was another place to invest, and frankly, we ran out of money," Welch said. Hence, the deal with Valeant, for which talks began over the summer.

What about partnering pirfenidone? By divesting Infergen, "we don't need to anymore, and we can be more choosy" about potential hookups. After taking a restructuring charge of $6 million to $10 million associated with the latest changes, InterMune expects to finish 2005 with more than $200 million in cash.

If an alliance for pirfenidone could be found with an overseas firm, Welch said, "I'd probably do that. We don't have a European infrastructure. But the huge pharmas that have a presence over there unfortunately want the U.S., too, and we don't want to give up anything in the U.S. on pirfenidone."

In May, InterMune sold Amphotec (amphotericin B cholesteryl sulfate complex for injection) to Three Rivers, based in Cranberry Township, Pa., as part of InterMune's decision to back away from infectious diseases. Amphotec is approved for invasive aspergillosis, a fungal infection that occurs in patients with compromised immune systems. (See BioWorld Today, May 26, 2005.)

The firm still is looking to be rid of oritavancin, the Phase III, hospital-based glycopeptide antibiotic acquired more than four years ago from Indianapolis-based Eli Lilly and Co. (See BioWorld Today, Sept. 21, 2001.)

"That's one remaining piece of the refocusing program that we started a couple of years ago," Welch said.