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Executives

Jim Goff – Senior Director, Corporate Communications and IR

Dan Welch – Chairman, CEO and President

John Hodgman – SVP and CFO

Steve Porter – Chief Medical Officer

Analysts

Brian Abrahams – Oppenheimer & Co.

Thomas Russo – Baird

Jason Kolbert – ThinkEquity

John [ph] – Leerink Swann

Liisa Bayko – JMP Securities

Matt Duffy – BDR Research

Adam Cutler – Canaccord

Maged Shenouda – UBS

InterMune, Inc. (ITMN) Q1 2009 Earnings Call Transcript April 30, 2009 4:30 PM ET

Operator

Good afternoon, my name is Teresa and I will be your conference operator today. At this time, I would like to welcome everyone to the InterMune First Quarter 2009 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)

And it is my pleasure now to introduce Mr. Jim Goff, Senior Director, Investor Relations for InterMune. You may begin your conference, sir.

Jim Goff

Thank you, operator. Good afternoon and welcome to the InterMune earnings conference call. This afternoon, we issued a press release that provides details of the company’s financial results for the first quarter ended March 31, 2009, our 2009 guidance and the summary of our first quarter and recent business highlights. The press release is available on our website at www.intermune.com.

During the course of this conference call, we will state our beliefs and make projections and other forward-looking statements regarding future events and the future financial performance of InterMune. We wish to caution you that such statements are predictions and expectations, and actual events or results may differ materially.

We refer you to the company's publicly filed SEC disclosure documents for a detailed description of the risk factors affecting our business, especially our Form 10-K, filed with the SEC on March 16, 2009 and our prospectus supplement filed with the SEC on February 17, 2009. These documents identify important factors that could cause our actual results to differ materially from our projections and other forward-looking statements. These risk factors include regulatory, revenue, intellectual property, clinical development and other risks relating to our business.

Throughout the call, we will refer to our commercial product, interferon gamma-1b, using its trade name, Actimmune, even when describing investigational uses. We refer you to our website for complete prescribing information for Actimmune.

On the call today are Dan Welch, InterMune's Chairman, Chief Executive Officer, and President; and John Hodgman, our Chief Financial Officer. Dr. Steve Porter, our Chief Medical Officer will join us for questions and answers.

During today’s call, we will review our progress in the first quarter of 2009, share our financial results for the three months period ending March 31st, 2009 and discuss our 2009 financial guidance. We will then open the call to your questions.

I will now turn the call over to Dan Welch.

Dan Welch

Thanks Jim and thank you everyone for joining us today. The first months of this year were an exceptionally productive period for our company. We began the year by reporting strong data from our triple combination study of 191 in HCV patients and shortly thereafter reported results from our Phase III CAPACITY program of pirfenidone in idiopathic pulmonary fibrosis or IPF.

At the EASL Conference just last week, we reported with Roche and Pharmasset exciting new data from INFORM-1, the first-ever combination of a nucleoside polymerase inhibitor and a protease inhibitor in the absence of interferon in patients infected with HCV. Based on these positive early results with relatively low doses of ITMN-191, we recently announced our plans with Roche and Pharmasset, to expand the study to different types of patients and with twice daily and higher dosing of ITMN-191.

We also recently strengthened our balance sheet by raising $63 million in cash and exchanging $32 million in convertible debt for shares of our common stock. The remainder of this year is expected to be as productive for pirfenidone and 191 and we look forward to sharing those results with you as they develop.

Now some brief details about these accomplishments starting first with our clinical development accomplishments. On February 3rd, we reported results from our Phase III CAPACITY program in IPF, which consisted of two, multinational, randomized, double-blind, placebo-controlled trials named CAPACITY 1 and CAPACITY 2.

As many of you know, the primary endpoint of change in percent predicted Forced Vital Capacity at Week 72 was met with statistical significance in CAPACITY 2, as were the important secondary endpoints of categorical change in FVC and Progression-Free Survival.

The primary endpoint was not met in CAPACITY 1, but supportive evidence of the pirfenidone treatment effect was observed in this study at several of the six observation periods for the primary endpoint. In addition, in this study CAPACITY 1, there was evidence of a pirfenidone treatment effect on the pre-specified secondary endpoint of Six-Minute Walk Test distance compared to placebo.

Given that evidence of the treatment effect was observed on the primary endpoint measure of FVC change at several of the six observation periods in CAPACITY 1, we conducted an exploratory repeated measures analysis to assess the overall treatment effect of pirfenidone over the full course of the two studies, not just at Week 72, repeated measures as a recognized analytical technique that is often used to assess treatment effects over an extended period of time in studies of chronic progressive disease.

The repeated measures result for CAPACITY 1 demonstrated strong evidence of the treatment effect of pirfenidone on the primary endpoint when compared to placebo with the P value of this difference of 0.004. For CAPACITY 2 using this analysis, the P value was 0.001. Using the same repeated measures analytical method, but on the pooled data from both CAPACITY studies, the P value for the difference in FVC change between pirfenidone and placebo over the duration of the two studies was less than 0.001. These results provide further evidence of a positive pirfenidone treatment effect on the primary endpoint of FVC change over the six observation periods of the two studies and highlight what we believe is a pattern of overall consistency of FVC findings between the two CAPACITY studies.

Additional exploratory analysis of the pooled data from the two CAPACITY studies provided strong evidence of a pirfenidone treatment effect on three clinically important pre-specified secondary endpoints notably, Progression-Free Survival, categorical FVC change, and Six-Minute Walk Test distance.

Overall survival was pre-specified as the exploratory endpoint in CAPACITY, because we lacked statistical power to detect the difference in survival between treatment arms in these studies. That said the best estimate of the treatment effect on overall survival is the hazard ratio in the analysis of pooled data, which was 0.78, representing a 22% reduction in the risk of death with the P value of 0.326.

We also note the consistency between the efficacy and safety results of the two CAPACITY studies and those observed in the Phase III study conducted by Shionogi in Japan, particularly during the one-year observation period of all three studies, CAPACITY 1, CAPACITY 2, and the Shionogi Phase III.

For example, the magnitude of the treatment effect in the Shionogi study, a 44% relative reduction in vital capacity decline versus placebo at 52 weeks was very similar to that observed in both CAPACITY studies at Week 48, again a consistent theme of consistency.

In addition, the key secondary endpoint of PFS and the Shionogi study was statistically significant in this study with the P value of 0.028, a similar result on PFS was observed in CAPACITY 2, as well as in the exploratory analysis of pooled data from both CAPACITY 1 and CAPACITY 2.

Pirfenidone was safe and generally well tolerated in both studies. There was no difference between pirfenidone and placebo in the percentage of patients that experienced a serious adverse event and the pattern of AEs was, in general, comparable to that observed in previous clinical studies of pirfenidone notably the Phase II and the Phase III IPF studies conducted by Shionogi.

In summary, the collected data from both CAPACITY studies provide strong support of a clinically meaningful treatment effect in IPF patients as measured by four important metrics, FVC change, Progression-Free Survival, categorical FVC change, and Six-Minute Walk Test distance. And this treatment effect is accompanied by a favorable safety and tolerability profile.

In the context of a uniformly fatal disease for which there is no medicine approved in the United States or Europe, we believe that pirfenidone has a favorable risk benefit profile and if approved for commercialization, has the potential to make a meaningful contribution to the care of patients with IPF. We are now in the process of preparing our NDA for submission to the FDA, expected to be submitted this summer, to be followed by an MAA submission to the EMEA around the end of this year.

Results from the CAPACITY studies will be presented in an oral late-breaker session by Dr. Paul Noble of Duke University, protocol co-chair of CAPACITY and that presentation will take place at 3:35 PM on May 19th, at the International Conference of the American Thoracic Society or ATS in San Diego.

Now keep in mind the poster topic on the topic of CAPACITY – sorry, a poster on the topic of CAPACITY will also be presented on Sunday, May 17th from 8:15 AM to 10:45 AM. But since only demographic data were available at the time of the submission of this abstract, no results of CAPACITY will be reported with that poster. So therefore, the late breaker presentation by Dr. Noble will be venue at which the CAPACITY results will be presented at ATS. For those of you who do not plan to attend the ATS on May 19th, we plan to have a webcast of the ATS CAPACITY presentation by Dr. Paul Noble, so please watch out for details of this event.

Now on to 191, our protease inhibitor, on the 12th January, we announced our top line results of our 14-day Phase Ib study of 191 in combination with standard of care. And after 14 days of triple combo therapy, the median change in HCV RNA from baseline exceeded 5 logs in all but one of the six dosage cohorts, and was 5.4 logs and 5.7 logs in the best performing q12 and q8 cohorts, respectively. And 191 delivered viral kinetic performance that is comparable to the best results reported to date for other protease inhibitors in similar experiment. There was no evidence of viral rebound during 191 treatment in any cohort.

And then last Friday, April 24th, we reported at EASL that data from this triple combination study had informed the dose selection for the Phase IIb program of 191. And this Phase IIb trial is expected to begin in the summer of 2009 and conducted by Roche, which – who will study twice daily regimens both at 600 milligrams and 900 milligrams and one q8 regimen at 300 milligrams, will explore both 12-week and 24-week treatment durations. And more details on this study will be provided at the time that we initiate it.

Also at EASL, last Sunday, InterMune, Roche and Pharmasset, also reported top line results from the groundbreaking Phase 1b INFORM-1 study. This is the first ever direct acting antiviral or DAA clinical trial evaluating two oral DAAs without interferon or ribavirin in treatment naïve HCV patients.

Given its precedent-setting nature, INFORM-1 first used low doses of 191 and the nucleoside polymerase inhibitor R7128 in the first two cohorts. Then the doses of the two DAAs were slowly escalated through the remaining two cohorts, but still at doses of 191, they were only one-third of the highest total daily doses studied in Phase I multiple dose studies.

Data from the first four cohorts of the DAA study were reported as follows. The direct antiviral agent combination resulted in very rapid and continued viral load reductions during the dosing period. At day 14, 70% of patients in the last two cohorts had levels of virus in their blood below the level of quantification by the diagnostic assay and 33% of these patients had no detectable virus in their blood.

The principal investigator Dr. Ed Gane, noted importantly that in the last cohort tested two patients who started the study with base line viral loads of HCV/RNA in the millions of international units per ml of plasma finished the study with only one or three international units per ml of the level defined as being viral negative. So according to Dr. Gane, 50% of patients were undetectable or nearly undetectable at day 14.

In the last two cohorts, patients receiving the combination of 191 and R7128 for 14 days experienced a median reduction in viral levels of 4.8 to 5.2 logs. Now it’s worth underscoring an important point here, to appreciate just how good these results really are.

Since the median baseline viral load in these two cohorts was in the range 2 million international units of HCV/RNA per ml of plasma or 2 times 6 logs. And the level of undetectability for the assay was 20 international units per ml, a median 5 log drop is the maximum effect that could have been delivered by any therapy before reaching the level of viral undetectability or the level below which the assay cannot detect additional log drops.

In other words, the direct antiviral agent combination of 191 and 7128 in the INFORM study maximized the median viral load reduction that was possible in these two cohorts, more log drop was not possible. So these results are truly impressive.

The DAA combination of INFORM-1 was well tolerated over the 14 days, with no treatment related to serious adverse events, dose reductions or discontinuations. PK analysis confirmed that there were no drug-drug interactions between the compounds. So in summary, the early results with relatively low doses of 191 in the DAA regimen delivered viral kinetic results superior to those observed in studies in treatment naïve patients over 14 days of treatment with standard-of-care pegylated interferon plus ribavirin. And further the early results of this two compound DAA regimen delivered comparable to the best viral kinetic results reported to date for combinations using three agents including pegylated interferon, ribavirin, and a third antiviral compound. In addition, the DAA regimen appeared to be safe and well tolerated.

So concluding on INFORM, our two drug regimen maximized the possible log drop in the experiment and delivered VK results that three drug regimen – that a three drug regimen has delivered and the INFORM regimen avoided the unpleasant side effects of weekly injections of pegylated interferon.

These promising early results strongly encouraged the three companies, Roche, Pharmasset and ourselves to expand the DAA concept in three important ways and we announced the study expansion on April 21st.

First, we will explore the DAA regimen in two types of treatment-experienced HCV patients, both treatment failures and so-called no responders. Second, we will include twice daily dosing on ITMN-191. And third, we will escalate to higher daily doses, total daily doses of 191, 600 milligrams and 900 milligrams twice daily doses. And these doses were safely used in our Phase Ib triple combination study, the results of which we already discussed.

I will now reiterate our 2009 milestones on 191, before we get into the financial results of the quarter. And these milestones remain unchanged since we announced them a few months ago. We anticipate initiation of the Phase IIb study by Roche in the summer of this year and this would trigger a $20 million milestone payment from Roche to InterMune. We expect to present additional cohorts of INFORM-1 at the Annual – the Liver Disease Meeting in the fourth quarter of this year, subject of course to acceptance of scientific abstracts.

We anticipate the rapid viral logical response or RVR data will be available from the Phase IIb, 12-week regimen in the fourth quarter of this year or in the first quarter of next year. In summary, the first quarter was one of remarkable progress for our two lead programs, pirfenidone and 191.

I will now turn the call over to our Chief Financial Officer, John Hodgman, who will review our first quarter 2009 financial results and also cover our 2009 financial guidance. John?

John Hodgman

Thanks Dan, and good afternoon, everyone. I will focus first on our quarterly financial results. InterMune today reported a net loss for the first quarter of 2009 of $42.0 million or $1.03 per share compared with a net loss of $29.1 million or $0.75 per share in the first quarter of 2008.

Total revenue in the first quarter of 2009 was $6.9 million compared with the total revenue of $9.3 million in the first quarter of 2008. Total revenue in the first quarter of 2009 primarily consisted of Actimmune revenue of $6 million compared with $8.5 million in the same quarter of 2008, a decrease of approximately 29% reflecting the lower off-label physician prescriptions of Actimmune for the treatment of idiopathic pulmonary fibrosis or IPF, which InterMune does not promote.

Research and development expenses in the first quarter of 2009 were $24.4 million, compared with $27.2 million in the first quarter of 2008, a decrease of approximately 10%, reflecting completion of Phase III CAPACITY program or pirfenidone in late 2008.

General and administrative expenses were $8.5 million in the first quarter of 2009 compared with $7.5 million in the same period a year earlier, an increase of approximately 13%, primarily attributed to legal fees associated with the Department of Justice action against a former InterMune executive covered by indemnification agreement and cost related to preparation for the anticipated commercialization of pirfenidone.

First quarter 2009 expenses also included a milestone payment of $13.5 million for pirfenidone that was expensed as an acquired research and development milestone. The milestone was made in accordance with pirfenidone purchase agreement and our decision to submit NDA and MAA filings for pirfenidone. We also reported expenses of about $600,000 recorded as restructuring charges related to a reduction in force in February 2009

As of March 31st, 2009 we had cash, cash equivalents and available-for-sale securities of approximately $175.2 million, compared with $154.7 million at December 31st, 2008. The March 31st, 2009 balance includes a net proceeds of approximately $63.4 million from a follow-on public offering of 4,025,000 shares of common stock completed on February 19, 2009.

During the quarter, we made an accelerated payment to the Department of Justice of $4.4 million related to this recent financing event. The March 31st, 2009 balance also included approximately $6 million received in the first quarter of 2009 from the acquisition by The Medicines Company of approximately 3 million shares of Targanta Therapeutics Corporation.

On January 1st, 2009 we adopted Financial Accounting Standards Board Staff Position APB 14-1, and recorded additional interest expense for the first quarter of 2009 of $1.5 million. APB 14-1 requires retrospective application upon adoption; therefore, the net loss attributable to InterMune for the first quarter of 2008 has been adjusted from that which was previously reported to reflect additional interest expense of $2.8 million.

On April 3rd, 2009 we reported that we would retire approximately $32.3 million of our 0.25% Convertible Senior Notes due 2011 by exchanging Notes held by certain of our debt holders for shares of InterMune common stock. A total of approximately 2.1 million shares of common stock have been issued in connection with this transaction.

Turning now to our 2009 financial guidance, which is unchanged from our prior guidance of February 26, I will start with revenue for 2009. Including Actimmune and anticipated milestone payments from Roche, we expect to be in the range of approximately $40 million to $50 million. Actimmune revenue represents approximately 50% of this revenue range.

R&D expense is anticipated to be in the range of approximately $90 million to $100 million, net of development cost reimbursement under the Roche collaboration. Of this amount, approximately 60% is attributed to pirfenidone which includes the expenses for CAPACITY, RECAP, the preparation and support of NDA and MAA submissions and manufacturing.

Approximately 35% of the R&D expense is attributed to our one-third share of all development expenses incurred by collaboration with Roche on ITMN-191. The balance of 2009 R&D expense is related to the advancement of a named pirfenidone analog compound, ITMN-520, toward an expected IND filing in mid-2010.

G&A expense is anticipated to be in the range of approximately $35 million to $40 million. The G&A guidance range includes approximately $5 million of various pirfenidone pre-market costs and a similar amount in legal fees associated with the Department of Justice action against a former InterMune executive covered by an indemnification agreement.

That concludes the report of our financial results and our 2009 guidance. We are now ready to answer questions. Operator, please open the line for questions.

Question-and-Answer Session

Operator

Yes, sir. (Operator instructions) Your first question comes from the line of Mr. Brian Abrahams with Oppenheimer & Co.

Brian Abrahams – Oppenheimer & Co.

Hi, thanks very much for taking my question. A question on 191 and then a follow-up on pirfenidone. So obviously very exciting data at EASL from the INFORM-1 study and I am just wondering with the additional cohorts that you are going to be looking at, what’s your goal for way you would like to get to with respect to the undetectable rate at 14 days? And from a scientific standpoint, with the combination of the right kind of virals that excludes interferon, just wondering would you expect the undetectable rate would increase further if you were to dose out an additional two weeks, so between days 14 and 28, and the reason I am asking is just because of course we all know how important the RVR rate is in predicting the ultimate outcome. Thanks.

Steve Porter

Yes, hi, Brian. This is Steve. I will take that question. I think the way I think of it, and I've characterized it before, is that in a 14-day study, when one pretty much maxes out any viral activity towards the very end of those 14 days, I think in general and this could be seen by looking at our curves. One is, if you were passing through that zone of going to undetectable even in the – even in the situation where you apparently have shutdown virtually all the viral replication and so I think you see some wiggle around unquantifiable and undetectable.

I think the key thing and one of the things that encourages us so much from these studies is that if patients are still trending down in their viral loads at day 14 and show absolutely no evidence of rebound which has been the case in these clinical trials we are discussing, there is a strong expectation that those patients will continue to decline and thus there is an expectation that a significant number if not all, close to all those patients would be negative at day 28.

I think for me anyway the question about interferon is if you add interferon, could you see a difference in the rapidity with which the curves go down in the first 14 days. And no one knows the answer to that. What I think we can say is that, we’ve pretty much maxed out the direct antiviral activity from these drugs and you are not – I don’t think you’re going to see much more regardless of what agents you have used in 14 days, I think as Dan alluded to, this was about as good as it can get.

Brian Abrahams – Oppenheimer & Co.

Great, makes sense. And then just maybe a question for Dan, Dan now that you’ve had time to discuss the capacity data with potential ex-US partners, I am just wondering if you had any updated thoughts on what type of partnership structure you might look for, what you have look for in a prospective partner and what the timing of that can look like? Thanks.

Dan Welch

Sure, Brian. So previously we’ve stated that a number of companies expressed interest in pirfenidone. We’re in a very early stage discussions with several of these companies and we expect to use the next several months to determine what transaction to pursue if any. The discussions are currently focused on the possibility of an EU partnership for pirfenidone. And as we stated on prior calls, however, we will keep an open mind as to other types of transactions.

Now in terms of the timing and all, I think that’s as far as I want to go. We don’t intend to provide ongoing updates with respect of these discussions, regardless of how they may evolve. But essentially the way we are looking at it is the question can a partnership deliver more value to shareholders than InterMune prosecuting its strategic plan by itself? Unless that can be accomplished, we won’t do a deal.

Obviously we have – we have enough cash position, we feel optimistic about our chances for NDA and MAA approval. And therefore, we don’t feel compelled to do any partnership or any transaction for that matter, unless it’s in the benefit of shareholders and that’s the process we are going through.

So just to reiterate, we will – we intend – we don’t intend to provide ongoing updates. It will be a many several month process and with respect to these discussions regardless of how they may evolve.

Brian Abrahams – Oppenheimer & Co.

Great. I appreciate the added clarity.

Dan Welch

Sure.

Operator

Your next question comes from the line of Steven Willey from Thomas Weisel Partners.

Dan Welch

Hello, Steve. Hello. Operator, we don’t seem to be hearing Steven.

Operator

My apologies. One moment, sir. My apologies, your next comes from the line of Thomas Russo with Baird.

Thomas Russo – Baird

Hi, like this is maybe more of a housekeeping question, but I noticed a reference to 33% undetectable in the two high-dose arms from INFORM-1 and if I look and I see what looked like four out of 15 patients, but what you’re saying implies five. Was there a patient that has since been determined to be undetectable at that point?

Dan Welch

We added numerators and denominators and got the 33%.

Thomas Russo – Baird

But you’re talking about the 1,100 and 1,200 arms.

Dan Welch

Correct.

Thomas Russo – Baird

Okay. The next question, just I kind of returning to the first half of an earlier question, for the additional dose arms, is the idea then not to look for incremental viral load reductions, but instead to kind of show that that those if you intend to take forward in IIb will perform similarly in the combo 7128?

Steve Porter

You’re asking about the subsequent cohorts to be dosed in INFORM, right?

Thomas Russo – Baird

Yes just – and if you are not expecting to get incremental viral load reductions with those, additional doses of 191, what are you – what is the outcome that you are looking for?

Steve Porter

Right. Well first and foremost the safety and to see how those doses in terms of drug interaction are more, more specifically tolerability and safety in combination with the polymerase inhibitor. But I think secondly and we have talked about this before is while at the end of 14 days, I think that you are pretty much as far as you can go. And as I said a minute ago, those patients are passing through that zone.

We have been intrigued in our triple combination study by the steep descent in the first phase that the 900 milligram dose twice daily resulted in. And we can’t determine in a 14-day study what that’s going to be mean down the line, but we are intrigued enough by those viral kinetics and as we have obviously said, we are taking that dose, just one of our doses into our Phase IIb, that we want to dose explore right now, both from viral activity and safety and tolerability, because we don’t know down the line what we are likely to take forward in – in the longer INFORM type study.

Thomas Russo – Baird

And then last question, maybe just – I know they’re very early stage, but just strategically at EASL, you showed some very early data for some other protease inhibitors and even some proprietary polymerase inhibitors, can you just talk about maybe where those sit in and when?

Dan Welch

Yes. We as to the protease inhibitors of course, we have the relationship with Roche and we are moving – we have been working on a second-generation protease inhibitor program, in fact, several compounds. And that collaboration has been very productive and we are in the early stages of development. I should say early stages of advancing those programs, but we are not providing additional color as to the timing that one might expect an IND for example. But we are very excited about a couple of compounds in particular with different characteristics that are moving through the various stages of pre-clinical development.

Thomas Russo – Baird

Okay, thanks.

Dan Welch

You’re welcome.

Operator

(Operator instructions) Your next question comes from the line of Jason Kolbert with ThinkEquity.

Jason Kolbert – ThinkEquity

Hi, Dan. Yes a very nice data at EASL, congratulations. Just wanted to focus in on a couple of other questions, as you start to talk with Roche, is Roche giving you an idea of the length and time the Phase IIb trial will take? When we will get the complete details on that?

Dan Welch

We haven’t – we haven’t shared that Jason. Thanks for the comments on the EASL data by the way. But we haven’t shared the information. Typically our pattern is we provide some color on timelines and dates around the time that we initiate the study. So we expect to be initiating that in the summer and at that time, you might expect to get some – some visibility on when we might have SBRs from the various arms.

We have – we have stated that we expect to get RVR late in the fourth quarter or sometime in early first quarter next year from the 12-arm group. But that’s all the visibility we’re prepared to share right now.

Jason Kolbert – ThinkEquity

Sure. And you can understand why I am asking, because things will get really interesting when we try to understand where you’re going to go beyond genotype I, into genotypes II, III, and IV, particularly when I look at a combination what the form is that compound. And so anything there is going to be really helpful for us.

Dan Welch

Yes.

Jason Kolbert – ThinkEquity

In terms of ATS and the data there, other than a presentation of what data we’ve already seen, can you give us some idea of what else we might see, for example, will we see any kind of robust statistical testing in terms of CAPACITY 1 and CAPACITY 2, so that we can understand just how robust the respective trials were and any kind of explanation in terms of the patient demographics themselves that might explain the difference between the trials?

Steve Porter

Right. Jason, this is Steve. As you well know when we presented the results originally back in February, we put out a fairly extensive amount of data on both trials. So we’ll certainly all of that data will be part of the presentation. I think that the way I would position it is that you should expect to see a little more color around the data I wouldn’t want to get into specifics right now.

We obviously – as we have talked about before, we’ve had ongoing analyses and we have of course examined the results of the two trials and the discrepant nature of the primary endpoint, although there was a lot of consistency at earlier time points. And I think I have said before that we don’t have a clear explanation for that. I wouldn’t want to point you to that. But I think you can expect a little color on what we’ve already presented.

Jason Kolbert – ThinkEquity

So it sounds Steve, like your statistical plan is coming together, your confidence level and in terms of your understanding of the data is kind of rising just incrementally, but rising a little bit from there?

Steve Porter

It’s certainly not decreasing. I think that we had the good fortune of having a very robust study conduct at the time we unwinded the study. So I think we had confidence in what we were seeing at the beginning. Obviously everyone and ourselves have looked into the Week 72 results and the discrepancy between the two studies and we continue to package up that full analysis for our submission. I would say our confidence continues to be strong.

We’ve seen absolutely nothing that erodes our confidence. But as I’ve said before, I wouldn’t want to point you to a clear explanation for the difference in the primary endpoints, because of course, we very quickly looked at the easy things to examine and as we said before, we really didn’t have a clear explanation at that time.

Jason Kolbert – ThinkEquity

Thanks, Steve. One last quick accounting question, I noticed that the COGS number in first quarter ’09 seems pretty high, compared to the Actimmune sales figure. Why is that? I think COGS were 28.58 versus 60.32 on Actimmune.

John Hodgman

Yes, the first quarter has a high percentage of royalty associated with Actimmune until it reaches a certain revenue level.

Jason Kolbert – ThinkEquity

Okay, thank you.

John Hodgman

Yes.

Operator

Your next question comes from the line of Howard Liang with Leerink Swann.

John – Leerink Swann

Hello, this is actually John [ph] in for Howard. Most of my questions have been answered, but I was wondering if you and Roche have already or planned on having discussions with the FDA regarding conducting a combination, all-oral combination trials in the US going forward?

Dan Welch

Thanks for the question, John. It’s Dan speaking. So at this stage, we are collecting the data, we meaning Roche, Pharmasset, and InterMune. We’re obviously prosecuting the next cohorts when we collect those data, we will decide how we want to go forward. It’s a little bit too soon to be talking about regulatory strategies and another territories beyond Australia and New Zealand where we are doing our studies at this time. Ultimately, clinical development in the US and Europe would be our goal. Exactly when and how and et cetera is a little bit premature to disclose.

John – Leerink Swann

All right, thanks. And I am just wondering if it’s ever been considered in the longer duration trials or when you go beyond 14 days potentially including ribavirin to see what effects or potential effects would have on resistance?

Dan Welch

Yes. You can imagine John, we – the combinations and permutations of combinations is quite large. Plus, minus ribavirin; plus, minus pegylated interferon for some period of time; plus, minus other direct antivirals; shorter durations, longer durations of those agents, the list is almost endless. But the direct antiviral agent team or the INFORM team of the three companies are assessing all of these alternatives and we will prosecute them in a proper way. This question you brought up, ribavirin is a very good one and of course it’s one that’s on the minds of the team.

John – Leerink Swann

Great. Thank you very much.

Dan Welch

You’re welcome.

Operator

Your next question comes from the line of Liisa Bayko with JMP Securities.

Liisa Bayko – JMP Securities

Hi. Most of my questions have been answered as well, but just to further on the conversation of in INFORM-1, what are the next steps in development of a combination inhibitor, once the dual combination inhibitor. What do you foresee after the rest of the INFORM-1 cohorts go through, what would be the next steps?

Dan Welch

It’s similar to what I answered just a moment ago. We will be informed by the data that we are collecting. And there we have a number of very specific ideas that the three teams, the three companies have – has generally agreed upon as to what would be the rational next steps, but we are not prepared to disclose those at this time for a host of reasons. But there is lots of different ways to prosecute this very exciting group of concepts and we are working together, the three companies to determine what the next steps might be, but not prepared to disclose that right now.

Liisa Bayko – JMP Securities

Okay, fair enough. And then when you – when you do get the data from the next three cohorts in INFORM-1, I know you said you will be presenting that at the Liver Meeting in the fourth quarter, but will you top line those results prior to that?

Dan Welch

Just to underscore the caveat, we would be presenting those at FLD if the abstracts are accepted, right?

Liisa Bayko – JMP Securities

Right.

Dan Welch

Everybody understands that. If the abstracts for some reason weren’t in time or weren’t accepted then we would consider to the extent – to the extent which the data are material to our shareholders, we would consider a press release around the time of SLD, perhaps depending upon the robustness of the dataset.

Liisa Bayko – JMP Securities

Okay. But I know – I mean, this time around, sort of the top line results came out prior to the presentation firmly at the EASL Meeting, is that – should we expect the same patterns, would you top line them maybe sometimes towards the end of the summer and then present them officially in the fourth quarter if they do get accepted?

Steve Porter

Yes, this is Steve. I don’t think we can say at this point. Obviously that’s not just a decision of ours to make. So –

Liisa Bayko – JMP Securities

All right. Okay.

Steve Porter

I don’t think we can commit to that right now.

Liisa Bayko – JMP Securities

Okay, fair enough. And then just a technical question, your interest rate, I believe you may be calculating it differently now based on the accounting treatment. Can you sort of give us a sense of what it will be on a going forward basis?

John Hodgman

On our investments you mean Liisa?

Liisa Bayko – JMP Securities

Yes, your – the interest.

John Hodgman

Income.

Liisa Bayko – JMP Securities

No, the interest expense.

John Hodgman

As far as the 14-1?

Liisa Bayko – JMP Securities

Yes.

John Hodgman

Is that what you mean? We actually don’t – we are not giving guidance on that. It is a rather complex calculation that it goes retrospectively as well as going forward.

Liisa Bayko – JMP Securities

All right.

John Hodgman

And can modify based upon extinguishment of notes and whatever. So – but you can imagine that it trends downward as you get closer. The non-cash item as well.

Liisa Bayko – JMP Securities

Right. Okay.

John Hodgman

Okay.

Liisa Bayko – JMP Securities

Thank you very much.

Operator

Your next question comes from the line of Matt Duffy with BDR Research.

Matt Duffy – BDR Research

Hi thanks for taking my questions. Most of mine have been answered also and congratulations of a good EASL by the way. Just one thing to sort of follow-on, when do you think the first study is going to take place is with the dual STAT-C kind of approach where we might actually see SVRs?

Dan Welch

Thanks for the comments on EASL. That remains to be seen. We need to get through our ascending cohorts here, we will also look at the treatment experience that the non-responders, et cetera. Then we are going to take an assessment of the data and decide in which direction we go. That’s clearly on our mind, that’s clearly – the ultimate group of concept in INFORM at 14 days is a proof of concept, but it’s a beginning of a story. So we are all over it, we are very excited about it the three companies, but we are not prepared at this time to give timing or details on the SVR strategy if you will.

Matt Duffy – BDR Research

Okay, thanks very much.

Dan Welch

You’re welcome.

Operator

Your next question comes from the line of Adam Cutler with Canaccord.

Adam Cutler – Canaccord

Hi thanks for taking the question. I am wondering if you can tell us given that you have outlined the next couple of milestones from your Phase IIb study for ITMN-191, how information do you think you will need from that Phase IIb study before you can proceed with plans for your Phase III studies?

Dan Welch

We would probably – we do want to have some look at both the 12 and 24 weeks, just to see if there is a differential advantage, a meaningful differential advantage. So that’s a little, that’s a little premature yet. We need to look at some data from at least RVR, EVR from both arms before we would be prepared to go that distance.

Adam Cutler – Canaccord

Okay. And then on IPF, I am wondering if you can just remind us of the differentiating characteristics of the next-generation pirfenidone compound?

Dan Welch

Yes and first of all it’s early days. If things stay on track, we would be filing an IND sometime in the middle of 2010 in pre-clinical experiments, similar experiments. When we expose 520 in similar experiments to those experiments we have done for pirfenidone, the profile looks like a better PK profile, higher exposure at lowered milligram doses. And so the idea as you may – as many of you know, pirfenidone the way it was dosed in CAPACITY was as many as three pills, three times a day. If we – the idea here would be fewer pills, fewer times a day.

In addition, the goal we don’t know, we would have to look and we would have to wait until we get into patients. But the goal would also perhaps to have through its PK, maybe some PD advantage meaning better tolerability, although in capacity it was quite well tolerated for deadly disease.

If we want to go look at other fibrotic anti-inflammatory diseases a side effect profile somewhat more advantageous might be interesting. We don’t know if 520 would do that. But on face value based on pre-clinical experiments, it appears to be a much better PK profile and theoretically could be a meaningful improvement over pirfenidone. But only time and patients will be able to give us that answer.

Adam Cutler – Canaccord

Okay. And then, I am just wondering on a related note, if you might consider pursuing pirfenidone in other diseases and if so, would you wait until you get a decision about approval in IPF or would you start sooner?

Dan Welch

Yes, it’s a great question. We have our hands more than full with all the many things we are doing at our company, relatively small company. So our focus right now is on pirfenidone NDA and MAA and 191 and the other programs that we’ve discussed. 520 has an additional advantage in that – if the patent is approved, it would have NCE coverage, intellectual property coverage, to the full extent of that law worldwide, so that’s another interesting aspect. For example, should we choose to prosecute 520 or pirfenidone in the – in other fibrotic diseases, 520 has that very, very important economic advantage.

Adam Cutler – Canaccord

Okay, great. Thank you very much.

Dan Welch

You’re welcome.

Operator

(Operator instructions) Your next question would come from the line of Maged Shenouda from UBS.

Maged Shenouda – UBS

You have any commentary on the competitive landscape and your positioning relative to other STAT-C compounds and development?

Dan Welch

Others in terms of the so-called direct antiviral combinations?

Maged Shenouda – UBS

Yes.

Dan Welch

Without standard of care?

Maged Shenouda – UBS

Yes or just directly other protease inhibitors.

Dan Welch

Well to our knowledge, 191 and the nucleoside polymerase inhibitor 7128 are the only two in clinical study in patients.

Maged Shenouda – UBS

Right.

Dan Welch

That’s to our knowledge. There are of course other protease inhibitors and other polymerase inhibitors out there. But we don’t have any information, reliable information or other information that suggest that there are ongoing studies at this time.

Maged Shenouda – UBS

Okay, thank you.

Dan Welch

You’re welcome.

Operator

And your last question comes from the line of Tom Russo from Baird.

Tom Russo – Baird

Thanks for taking the follow up. At EASL, Schering-Plough showed I think maybe some surprisingly good data with what was a twice failure or three times a day protease inhibitor, but with ritonavir-boosting, we are able to get to once a day and 75% RVR. I guess I am just curious what your take would be on the merits of an approach like that and if that’s something that you would consider looking at with any of your next-generation protease inhibitor? Thanks.

Dan Welch

You’re welcome. Yes, the efforts of our next-generation protease inhibitors are improved PK, improved resistance profile or activity against various resistant mutants, et cetera. Ritonavir-boosting is a theoretical option for any protease inhibitor or any compound to boost the activity. So it’s a possibility, but it’s something that we are not at liberty to disclose at this point.

Tom Russo – Baird

Okay, thanks, Dan.

Dan Welch

You’re welcome.

Operator

And at this time, there are no further questions in the queue.

Dan Welch

Thank you very much and thank you all for participating in our call. We look forward to speaking with you soon and updating you on our progress as it unfolds. Thank you and good evening.

Operator

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.

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