ITMN's Esbriet Backed for EU Nod - Analyst Blog

InterMune's (ITMN) share price more than doubled after the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a positive opinion recommending the approval of Esbriet for the treatment of mild-to-moderate idiopathic pulmonary fibrosis (IPF), in the European Union (EU). The timing of the positive opinion was ahead of prior expectations. If approved, Esbriet would be the first available medicine for the treatment of IPF in the EU.

The positive opinion will be forwarded to the European Commission for ratification. The company expects final approval in the EU in February/March 2011, and a detailed label during that time.

On approval, InterMune expects to launch Esbriet in the top five European countries by 2012. It expects to launch Esbriet in Germany in the third quarter of 2011 and in France, Spain, Italy, and the United Kingdom by mid-2012. Esbriet is slated to be launched in five other countries (the Netherlands, Portugal, Belgium, Sweden, and Austria) by mid-2012.

InterMune expects to hire approximately 125 personnel over a period of 12 months for EU commercialization. The estimated Esbriet sales in EU, as per InterMune, could reach $3 billion.

The company expects to determine price on a country-by-country basis, but continues to expect a Tracleer (Actelion-ALIOF) -like price in the $40-45k/patient/year range.

Esbriet has been granted orphan drug designation by the EMA for the treatment of IPF in Europe, which provides for 10 years of marketing exclusivity in the EU. While the orphan exclusivity in the EU is 10 years leading to loss of protection in early 2021, management claims that patents covering formulation and safe use could extend protection through 2026 or even 2030.

There are currently 1,10,000 patients in the EU who have been diagnosed with IPF, a rare and fatal lung disease, of which 70000 have mild-to-moderate IPF. There are currently no approved therapies in the EU for the disease and thus there is huge market opportunity for the drug, if approved.

Esbriet is not approved in the US where the FDA rejected the company's application in May requesting an additional clinical study despite a positive advisory panel vote in March. The FDA rejection sank InterMune shares significantly. Given the complete response letter received in the US, few expected a positive opinion from the CHMP. Hence, the news itself is a fundamental positive.

Our Take

We currently have a Neutral recommendation on InterMune, which is supported by a Zacks #3 Rank (short-term Hold rating). We consider the favorable CHMP opinion on Esbriet as a major positive for InterMune shares given fairly low expectations. However, we prefer to remain neutral until visibility improves on US approval, which is now some years away.