InterMune Inc. raised $150 million in a private placement of convertible senior notes as part of a plan to reduce its burn rate and narrow its focus in two therapeutic areas.

"The rationale behind the transaction is we have existing convertible debt that comes due in July 2006, and we wanted to restructure that debt in more favorable terms," said Sharon Surrey-Barbari, chief financial officer of Brisbane, Calif.-based InterMune.

The company sold 0.25 percent convertible senior notes due 2011. The notes are convertible into InterMune common stock at a rate of about 46.2 shares per $1,000 in notes - a 17.5 percent premium to the company's closing stock price of $18.41 on Tuesday.

InterMune's stock (NASDAQ:ITMN) closed at $18.41, unchanged, on Wednesday.

The company plans to use proceeds to purchase or redeem its outstanding 5.75 percent convertible subordinated notes due 2006, or to cover working capital and other general corporate purposes.

"We have been working hard to focus the company in two therapeutic areas, reduce the research and development burn rate to something more appropriate for a company our size, and manage the company's goal to reach profitability in the fourth quarter of 2005 and financial self-sufficiency after that," Surrey-Barbari told BioWorld Today. "So this was a big piece of trying to do that."

Surrey-Barbari said the private placement helps the company to reduce its burn rate by about $8 million a year for the next two years. Morgan Stanley & Co. and Banc of America Securities LLC, both of New York, served as co-lead managers. Other underwriters were Credit Suisse First Boston and Harris Nesbitt Gerard, both of New York, and RBC Capital Markets, of Toronto.

InterMune reorganized in 2003, focusing its commercial and development efforts in pulmonology and hepatology. The company has two marketed products - Actimmune and Infergen - and had total product revenues of $154.1 million in 2003.

Actimmune (interferon gamma-1b) is approved to treat severe, malignant osteopetrosis and chronic granulomatous disease. Infergen (consensus interferon alfacon-1) is approved for chronic hepatitis C virus infections.

InterMune also markets Amphotec to treat invasive aspergillosis, a life-threatening fungal infection, but it announced in the third quarter that it plans to divest the product.

"It didn't fit with our core focus of pulmonology and hepatology," Surrey-Barbari said. "So it was one of the assets that we defined as part of our strategic plan that we needed to divest of."

In pulmonology, the company is developing Actimmune and pirfenidone to treat idiopathic pulmonary fibrosis. InterMune initiated a Phase III trial with Actimmune in December. The company will announce its plans this year regarding a clinical development program for pirfenidone.

In hepatology, the company is focused on developing once-daily Infergen in combination with ribavirin for hepatitis C patients who have not responded to standard treatment. The company expects to start a Phase III trial in the first half of this year. It also expects to start a Phase II trial of once-daily Infergen in combination with Actimmune for hepatitis C nonresponders in the first half of the year. The company completed a Phase I trial in 2003 of PEG-Alfacon-1, a pegylated form of Infergen, to treat HCV.

The company also is studying oritavancin in a Phase III trial for complicated skin and skin-structure infection, as well as Actimmune in a Phase III trial to treat ovarian cancer. It expects data from the ovarian cancer trial in 2005.

In January, InterMune said Actimmune failed in a Phase II trial for liver fibrosis. The company decided not to do additional studies in that indication. (See BioWorld Today, Jan. 22, 2004.)