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InterMune, Inc. (NASDAQ:ITMN)

Q2 2009 Earnings Call Transcript

August 6, 2009 4:30 pm ET

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

Scott Seiwert – VP, Research

Analysts

Brian Abrahams – Oppenheimer & Co.

Terence Flynn – Lazard Capital Markets

Thomas Russo – Baird

Stephen Willey – Thomas Weisel Partners

Liisa Bayko – JMP Securities

Maged Shenouda – UBS

Adam Cutler – Canaccord Adams

Eun Yang – Jefferies & Co.

John [ph] – Leerink Swann & Company

Operator

Good afternoon, my name is Kim and I will be your conference operator today. At this time, I would like to welcome everyone to the InterMune Second Quarter 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)

Thank you. Mr. Goff, you may begin your conference.

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 second quarter and first six months ended June 30, 2009, as well as our 2009 guidance. 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 prospectus supplement filed with the SEC on February 17, 2009 and our Form 10-K, filed with the SEC on March 16, 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 and Dr. Scott Seiwert, our Vice President of Research will join us for questions and answers.

During today’s call, we will review our progress in the second quarter and first half of 2009, share our financial results for the three and six month periods ending June 30, 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 last several months have been exceptionally productive for InterMune and the coming months promise to be even more so. I will start with our progress on upcoming milestones for pirfenidone.

The results from the Phase III CAPACITY program of pirfenidone in IPF were presented in an oral late-breaker session on May 19th at ATS in San Diego. In brief, the results has already extensively detailed were as follows. CAPACITY 2 demonstrated a statistically significant effect on both the primary endpoint of change in percent predicted FVC at Week 72 and on the secondary endpoints of Progression-Free Survival and categorical change in percent predicted FVC.

While CAPACITY 1 did not achieve statistical significance on the primary endpoint at Week 72, the results were generally consistent with and very supportive of CAPACITY 2 in a number of important ways. The treatment effect them the CAPACITY studies was also generally consistent with the Phase III study of pirfenidone in IPF patients conducted by Shionogi in Japan, the same study that led to the regulatory approval of pirfenidone in Japan last October.

Pirfenidone was safe and generally well tolerated in both CAPACITY studies. There was no difference in serious adverse events and fewer debts were observed with pirfenidone compared to placebo. Adverse events were comparable to previous clinical studies of pirfenidone.

New pre-specified exploratory efficacy data from CAPACITY pertaining to the dose response relationship with pirfenidone, mean change in FVC volume and Six-Minute Walk Test distance were presented at ATS and provided valuable insight into the magnitude and breath of the treatment effect of pirfenidone.

The CAPACITY steering committee comprised with thought leaders and IPF from the United States and Europe concluded that the findings of CAPACITY coupled with the results of Phase II and Phase III studies in Japan and an urgent unmet medical need suggest that pirfenidone may provide a meaningful clinical benefit in patients with IPF.

Now, a few comments on our progress with the pirfenidone NDA and MMA. We have made excellent progress on the preparation of these files. Regarding timing, we announced today that we now expect to file our New Drug Application or NDA for pirfenidone in the fourth quarter of this year. It’s taken more time than we originally anticipated to integrate the advice of a host of external expert advisors and to take every reasonable step to develop the strongest possible file that positions us potential approval in the first review cycle. Getting our NDA absolutely right is particularly important since we anticipate that the FDA will review the pirfenidone NDA under the very demanding process of a priority review.

Our Marketing Authorization Application is also progressing very well and we had a successful pre-submission meeting with the EMEA in July and we expect to submit the MAA for pirfenidone in the first quarter of next year. In summary, we are very excited about the quality and the robustness of the NDA and the MMA, and we look forward to submitting these file into the beginning the review process for both.

Rapping up the news in milestones on pirfenidone, we reported today that an abstract relating to the CAPACITY data has been accepted for an oral presentation at the 2009 European Respiratory Society Annual Congress in Vienna, Austria. The oral presentation will be on September 14 at 3:30 p.m. local time in the Stolz Room of the Vienna Conference Center. The presentation will focus primarily on the safety profile of pirfenidone.

Now turning to our lead program and hepatology in ITMN-191, also known as R7227, we have many exciting things to talk to you about today. Not only in the progress that we and our partner Roche had made during the quarter on 191, but also several important announcements that we made in today’s press release concerning the compound. Looking back a few months at EASL meeting in late April, Dr. Stefan Zeuzem reported results from the 14-day, Phase 1b study of ITMN-191 when combined with Pegasys and ribavirin.

The results in brief were as follows. After 14 days of triple combo therapy, the median change of HCV RNA from baseline exceeded 5 log in five of the six dosage cohorts, and was 5.4 log and 5.7 log in the best performing twice daily and three times daily dosing cohorts respectively. These results have not been surpassed to date by any compound in a similar experiment. Importantly, there was no evidence of viral rebound during 191 treatment in any cohort and both the twice daily and three times daily regiments performed very well.

ITMN-191 plus standard-of-care therapy was safe and generally well tolerated. Also at the EASL meeting in late April, Roche, InterMune, and Pharmasset, reported initial results from the first of its kind Phase 1 INFORM-1 clinical trial evaluating 191 in combination with nucleoside polymerase inhibitor R7128, without interferon or ribavirin, in patients with HCV infection.

Data from the first dosage cohorts of the study demonstrated that the combination resulted in sustained viral load reductions over the dosing period in all cohorts. The combination was well tolerated over 14 days, with no treatment-related serious adverse events, dose reductions or discontinuations. There were no drug-drug interactions between the compounds.

We are also excited to announce today that our abstract covering the results of the INFORM-1 study was selected for an oral presentation during the Presidential Plenary Session at AASLD on the morning of November 3. The results of all seven cohorts of INFORM-1 will be included in this oral presentation. We also reported today that abstracts regarding the PK/PD and resistance data from INFORM-1 have also been accepted, but for poster presentations at the 2009 AASLD meeting, also on November 3.

Another important announcement that we made today is the successful completion of toxicology studies of ITMN-191 in two specific species: a six-month chronic toxicology study in rats and a nine-month chronic toxicology study in monkeys were successfully completed. There were no significant drug-related findings in either study. And of course, this is a very important news item, because it provides the necessary preclinical data required to conduct the Phase 2 and Phase 3 clinical development plan that we and our partner Roche envisioned for 191 without constraints related to duration of therapy.

Regarding our Phase 2b study of 191 in combination with standard of care, we expect that our partner Roche will enroll the first patient in this study in August. This event will trigger a $20 million milestone payment from Roche to InterMune. Complete details of this trial will be found on www.clinicaltrials.gov and in terms of the milestones for Phase 2b study, we anticipate that Rapid Viral Response or RVR data will be available from the 12-week regimen of the study in the first quarter of next year.

Adding to the many news items on 191 release today, the announcement of our plans with our partner Roche to initiate in the third quarter of this year, a Phase 1b multiple-ascending-dose or MAD study of once-daily and twice-daily 191 standard dose Pegasys and Copegus co-administered with a low dose of ritonavir in HCV patients. Ritonavir is an antiviral compound commonly used at low doses to enhance or boost the pharmacokinetic profiles of several marketed HIV protease inhibitors and at least one development stage HCV protease inhibitor.

In an initial Phase 1 study of 191 co-administered with low dose ritonavir in healthy volunteers, important PK parameters showed marked improvement. Clearance of the compound was dramatically reduced, resulting in significant increases in AUC and drug concentrations at later time points. There were no remarkable safety findings from this experiment. I will describe the potential products and patient benefits of the ritonavir boosting strategy in just a moment, but first to be clear, we and our partner are very pleased by the pharmacokinetic and dosing profile of 191 to date in the presence of absorbed to date in the presence of standard of care therapy and in the INFORM-1 study as I already outlined today, and we are developing 191 without boosting in both the Phase 2b and in INFORM-1.

That said, the ritonavir boosting approach could bring several potentially attractive benefits to patients and open new strategic opportunities for 191 such as less frequent administration and a lower dose or pill burden for 191, and looking further ahead the opportunity to co-formulate 191 with other direct antiviral agents made possible by having a pill with much smaller mass.

On the corporate side, I have a couple of brief comments. First, as John will note in his summary of our financial results, we have made and will continue to make important investments to prepare for launch of pirfenidone. As a demonstration of our attempt to be ready to launch pirfenidone, we recently hired Barrett McGrath to lead the pre-launch preparation of pirfenidone and mentioned to the newly created position of Vice President of Sales and Marketing.

Barrett has almost 30 years of industry experience, and has held leadership positions in sales, marketing and business development at Genentech, DuPont Pharmaceuticals, Baxter and Quintiles Transnational. As a consultant, Barrett has led InterMune's pirfenidone pre-launch team since the spring of last year.

Last but not least, we strengthened the balance sheet during the quarter by exchanging approximately $32 million of our convertible notes that are due in 2011 for shares of common stock of the company. In summary, the period of the second quarter and recent months has then own a very strong progress for pirfenidone, ITMN-191, and the company.

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

John Hodgman

Thank you, Dan and good afternoon everyone. I will focus first on our quarterly financial results. Today, we reported a net loss for the second quarter of 2009 of $36.7 million or $0.81 per share compared to a loss of $29.6 million or $0.76 per share in the second quarter of 2008.

Total revenue in the second quarter of 2009 was $7.9 million compared with total revenue of $8.1 million in the second quarter of 2008. Total revenue in the second quarter of 2009 primarily consisted of Actimmune revenue of $7.1 million compared with $7.3 million in the same quarter of 2008, a decrease of approximately 2%, reflecting 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 second quarter of 2009 were $22.9 million compared with $25.4 million in the second quarter of 2008, a decrease of approximately 10%, reflecting completion of the CAPACITY clinical trials in early 2009, partially offset by the expenses associated with RECAP extension study and the preparation of the NDA and MAA for pirfenidone. General and administrative expenses were $8.5 million in the second quarter of 2009 compared with $7.1 million in the same period a year earlier, an increase of approximately 20%, primarily attributed to the cost related to preparation for the anticipated commercialization of pirfenidone.

InterMune recorded a loss on extinguishment of debt of $9.5 million, of which $8.9 million was non-cash in the second quarter of 2009 in connection with the April 2009 exchange of approximately $32.3 million of our 0.25% convertible senior notes due in 2011 held by certain of our debt holders for shares of the our common stock. A total of approximately 2.1 million shares of common stock were issued in connection with the transaction.

We will now discuss our financial results of the six months ended June 30, 2009. The total loss for the period was $78.7 million or $1.83 per share compared with a net loss of $58.7 million or $1.51 per share in the first six months of 2008. Total revenue in the first half of 2009 was $14.8 million compared with total revenue of $17.4 million in the same period of 2008, a decrease of 15%.

Actimmune revenue totaled $13.1 million in the first six months of 2009 compared with $15.8 million of Actimmune revenue in the first six months of 2008, a decrease of approximately 17%, reflecting lower off-label sales of Actimmune for the treatment of IPF, which InterMune does not promote. Revenue from the collaboration with Roche was $1.6 million in the first six months of 2009, unchanged from the same period of 2008.

R&D expenses were $47.4 million in the first six months of 2009, a 10% decrease compared to $52.4 million in the same period of 2008. This decrease was primarily due to the completion of the Phase 3 CAPACITY program in early 2009, partially offset by the expenses associated with the RECAP extension study and the NDA and MAA application processes for pirfenidone.

G&A expenses of $17 million in the first half of 2009 were approximately 17% higher than $14.5 million in the first six months of 2008, reflecting costs related to preparation for the anticipated commercialization of pirfenidone. On January 1, 2009, we adopted Financial Accounting Standards Board Staff Position APB 14-1, accounting for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement and recorded additional interest expense for the second quarter of 2009 of $1.1 million and $2.7 million for the first half of 2009.

APB 14-1 requires retrospective application upon adoption. Therefore, net losses attributable to InterMune for the second quarter and first half of 2008 were adjusted from those that were previously reported to reflect additional interest expense of $2.9 million and $5.6 million respectively. As of June 30, 2009, InterMune had cash, cash equivalents and available-for-sale securities of approximately $145.5 million compared with $154.7 million as of December 31, 2008.

Turning now to our 2009 financial guidance, which is unchanged from the guidance initially provided on February 26, 2009. Revenue for 2009, including Actimmune and anticipated milestone payments from Roche, is expected to be in the range of approximately $40 million to $50 million. Actimmune revenue represents approximately 50 % of this revenue range. The guidance includes an expected $20 million milestone payment from Roche upon initiation of Phase 2b study of ITMN-191 expected in August.

R&D expense is anticipated to be in a range of approximately $90 million to $100 million, net of development cost reimbursements under the Roche collaboration. Of this amount, approximately 60% is attributed to pirfenidone which includes 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 the company's one-third share of all development expenses incurred by the collaboration of 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 a range of approximately $35 million to $40 million. The G&A guidance range includes approximately $5 million of various pirfenidone pre-launch costs.

That concludes the reported financial results and our 2009 guidance, and we are now ready to answer questions. I will remind you that Steve Porter and Scott Seiwert are here to respond to your questions as well.

Operator, please open the lines for questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from Brian Abrahams from Oppenheimer. Your line is now open.

Brian Abrahams – Oppenheimer & Co.

Hi, thanks very much for taking my questions. Can you hear me okay?

Dan Welch

Yes, Brian. We can.

Brian Abrahams – Oppenheimer & Co.

To treat by the rationale to test 191 in combo with ritonavir, you talked about potential improvements to the treatment of administration and to the dosing profile, and I just had a couple of questions about that. I guess what would be the benefit of once a day dosing just because Ribovairin is 7128 twice a day, and if you could reduce the dose, how possible is it to co formulate a boosted drug? What would this mean for patients co-infected with HIV and how confident are you on Roche that unboosted 191 is a bid drug?

Dan Welch

Yes, you have a lot of questions rapped up in there Brian. So strategically, let me start from the beginning, we did a Phase 1 study in human volunteers just to see what would happen to the PK profile of 191 when boosted with low dose of ritonavir. And we were pleased by the results and very entreat by those results. I described those on the call and in the press release. What could be – and then second of all in terms of how we are feeling about 191, you know that in the Phase 2b study, we are exploring twice a day dosing. Twice a day dosing is also being explored in the INFORM-1 study. So we and our partner Roche are very comfortable with bid both in the context of triple – or twice a day – both in the context of triple dosing with the combination of standard of care plus 191 twice daily, and also in the context of INFORM, twice daily doses of 191 are also administered.

So we look at the ritonavir boosting concept, there is an upside to the ITMN-191 case. In other words, we might be able to get even better results than we are seeing with unboosted. We could get lower mass of a pill, which could be combined with other direct antivirus. We could – we probably wouldn’t see ritonavir being part of a co-formulation. That would probably be a separate pill, but co-formulating with other direct antiviral is when you have a small mass pill opens up a lot of opportunities.

Finally, we envision ultimately that HCV will go in the direction of HIV, where small mass pills once a day with good safety profiles, good cross resistance profiles will carry the day. And now, that’s may be many, many years ahead of us, but we are gathering the data now and we are going down several path simultaneously, boosted, unboosted, twice daily, and in the context of ritonavir even once daily. So we are looking forward to the future and recollecting all of the data on many steams simultaneously and the data will show to the way.

Brian Abrahams – Oppenheimer & Co.

One more question on 191 and then I will hop back in the queue. Just wondering if you could give us a few more details on the upcoming Phase 2b in terms of like the size of the trial, which specific doses we might expect to see the RVR data from in the first quarter of next year and why we might only expect to see RVR data from the 12-week regimen at that time.

Dan Welch

Yes, we haven’t disclosed information on that yet, Brian. Our practice is that, we do that when we actually start the trial. And then, of course in this case Roche is the actual initiator of the trial. But the RVR that we will see first will be in the first quarter of next year and they will be on the 12-week regimen, but we haven’t given a great deal of detail on which doses and which regimens. But in the month of August, when first patient is expected to be initiated, that’s when you will see all the intense detail that you are looking for.

Brian Abrahams – Oppenheimer & Co.

Okay. Thanks very much.

Dan Welch

You are welcome.

Operator

Your next question comes from the line of Terence Flynn from Lazard Capital Markets. Your line is now open.

Terence Flynn – Lazard Capital Markets

Hi, thanks for taking the question. I was just wondering first if you could just comment on the pirfenidone, the way you are filing the pirfenidone NDA. Just wondering if you guys conducted any additional analyses of the data that you might have had in in-house and or could you provide us with any more color on what the getting factor might be here.

Dan Welch

Sure, Terence. I will ask Steve Porter to take that one.

Steve Porter

Yes, hi Terence. The short answer is frankly that’s taken us longer than we anticipated and the longer answer to your direct question is, yes, we’ve conducted a number of analyses on both safety and efficacy, primarily trying to make the submission as complete as possible. As you know, we anticipate that the high likelihood will get a priority review. We have gotten a lot of advice from our Board of Directors as well as external consultants that, we need to make sure that the submission is as complete as possible to give us the best chance of a hearing to a six months review clock. So we’ve done a lot of analyses and it’s just quite frankly taken us longer than we thought.

Terence Flynn – Lazard Capital Markets

And are – any of those analyses lead you to reach any different conclusions from what you presented at ATS I guess.

Dan Welch

No, I would say that some of the information we presented at ATS, we’ve worked on fletching out more. So in particular, I would point to the Six-Minute Walk Test data that we presented at ATS which was new, and we spent time developing that as part of the submission. But in terms of new conclusion, no, it's more about just making it a more complete submission.

Terence Flynn – Lazard Capital Markets

Okay. And then, if I may, just one quick question on 191, just wondering what doses you study in the Phase 1a healthy volunteer study of 191 with ritonavir and if that was built once a day and twice a day, and that what impact the boost you might have had on Cmax and also Cmin.

Steve Porter

Yes. I will answer that. We haven’t given out any details of what we studied and we obviously haven’t given any specific results. I think what we’ve said is that we saw substantial improvement in a variety of PK parameters that lead us to believe that this might be a useful path to go down. I think as we move forward in the other studies that Dan mentioned, we would – I would anticipate that we would be given out more details, but at this point, we haven’t given out any specifics.

Terence Flynn – Lazard Capital Markets

Okay. Thanks a lot for taking the question.

Dan Welch

Sure, Terence.

Operator

Your next question comes from the line of Thomas Russo from Baird. Your line is now open.

Thomas Russo – Baird

Good afternoon. I was hoping you could, if you can, be a little bit more specific about what month in the fourth quarter you might be targeting for the submission. Then just maybe playing devil's advocate, if you had the data from this trial since January for pirfenidone, is there a chance that all these analyses and different cuts of the data could actually be perceived negatively when it comes time to filing?

Dan Welch

Hi, Tom. I will take your question and Steve can follow-up with more color if that’s necessary. So just a point of clarification that we got the data in February, and not January in terms of having the final data in our hands ready for release. From February to summer time of this year, is about – take the midpoint of summer, it’s about six months. That is as good as you can get even by multinational companies. So a six month preparation of a file from February to summer, that’s very aggressive. And then retrospect perhaps, we were two – we are very proud of the fact that we are pulling together a terrific file. Subsequent analyses we’ve shown have only substantially improved the file. And so – and answer to your question, I don’t see that subsequent analyses with a week in it to the contrary we have taken time to substantially improve particularly the efficacy portion of the file.

Steve Porter

Yes. I just add some color on that. I understand the nature of your devil's advocate question in terms of a lot of data drugs in, if you will, but in reality that’s not what we are talking about here. I mean, as you know, we had very clear pre-specified analyses. We presented essentially all of those, both the original webcast at ATS. But FDA expects much more than that in terms of exploring the data and I would say in our case, even more than usual because as you know we missed the primary on one of our studies, we saw a lot of consistent efficacy effects at earlier time points, but it's the landmark of Week 72, we missed it. And we need to integrate that foray and lay it out because again in a quick six month review period, we simply won’t be in a position to in an acceptance manner respond to request from FDA, we need to minimize those. So I understand why it is negative but I think there is an expectation from the regulators that we are going to do exactly what we are doing which is fully explain the trial as best we can. And I was concerned with what Dan said is that, I think if anything that gives us greater confidence in our submission.

Thomas Russo – Baird

Okay. Just shift gears to 191, I asked this question last quarter at after EASL, and it’s kind of a little bit may be different way. Is that something that kind of your boosting that you were looking at before sharing data at EASL just out of curiosity? And then the second question, what is the timing for the data from the new 1b trial and at what point is the decision made as far as I don’t know what deeper Phase 3 or at what point the decision made for the direction of the program?

Dan Welch

Okay. We have a few questions in there; I will try to take them as I recall them. Yes, we’ve been exploring the boosting concept from time period before sharing booster data at EASL in April. In terms of how we are prosecuting the return of boosting concept, we have constructed in such a way that the data from the Phase 1 MAD boosting study could be integrated into our clinical development program in general with very minimal delays. So if the data show us that this is the way to do, this will be the way to go in terms of inter-clinical development program in a way that does not delay the program at all or for at least not materially.

Thomas Russo – Baird

Okay. Seems like an interesting idea. Thanks a lot.

Dan Welch

Thanks, Tom.

Operator

Your next question comes from the line of Stephen Willey from Thomas Weisel Partners. Your line is now open.

Stephen Willey – Thomas Weisel Partners

Hi, thanks. Just a quick question here on 191, you made the comment previously Dan about kind of moving towards small mass pills and kind of just wondering what’s your thoughts are on the Pharmasset nuclear side inhibitor that they just showed Phase 1b data for and maybe just any thoughts you might have on kind of how that affects the 191 and 7128 relationship going forward? Thanks.

Dan Welch

So first of all, we and our collaboration partners Roche and their partner Pharmasset collectively are very excited about what we are seeing in the INFORM concept. 191 and 7128 or 7128 and very soon 191 are in Phase 2b studies. We’ve completed very comprehensive chronic toxicology studies in two species, we and Pharmasset 7128, and saying that may be about their new concept or the new compound it is early with a certain amount of data which is certainly short of the data both 7128 has and 191 has. And so in terms of small mass pills, by developing a ritonavir concept, it's opened the door to many different alternatives with our partner Roche that has the broadest portfolio in HCV. So it is a concept that we think has tremendous upside and could make 191 even better, but we are really happy with 191 as it is and this is perhaps an enhancement for the future. So it’s a little premature to kind of speculate as to which molecules we would want to combine with the – we are very happy with the one we have by array of Roche and Pharmasset.

Stephen Willey – Thomas Weisel Partners

Great. Thanks.

Dan Welch

You are welcome.

Operator

Your next question comes from the line of Liisa Bayko from JMP Securities. Your line is now open.

Liisa Bayko – JMP Securities

Hi, just wanted to may be open the discussion to the financial balance sheet. You bought back some convertible debt. Will that continue – is that in your plans going forward and how comfortable are you with your current cash position going into potential launch activities.

Dan Welch

I have John Hodgman feel that one Liisa.

John Hodgman

Thanks, Liisa. Where we ended – at the end of June, we feel quite comfortable with our cash position. It should put us into a situation where we can go well pass the next major milestone, the NDA process and hopefully accrual of that. As far as timing the balance sheet, we will continue to always evaluate the strengthening of our balance sheet particularly it has to do with the convertible debt. And if we have an opportunity opportunistically to exchange or retiree that we will take that advantage as it comes.

Liisa Bayko – JMP Securities

Are you planning to do any commercial built next year ahead of an actual response from FDA?

Dan Welch

Yes, as far as pirfenidone material, you mean–

Liisa Bayko – JMP Securities

Well, also commercial sales force etc.

John Hodgman

Yes, I am sorry. Go ahead, Dan.

Dan Welch

Hi, Liisa. It’s Dan speaking.

Liisa Bayko – JMP Securities

Hi.

Dan Welch

Hi, so the answer is yes. We will do it in a typical way whereby we will build the infrastructure. In terms of hiring sales reps, we won’t hire sales reps before approval. We will also probably not hire field level managers until the advisory committee. And then but working backwards from that before the – what we expect to be an advisory committee meeting next year, we would be building some infrastructure to support what we hope will be the rapid hiring of regional sales managers and then sales reps after advisory committee and the NDA approval respectively. But we have very concrete plans to add infrastructure also to build large quantities of active pharmaceutical ingredient and final finished goods as well. So we have the plans to make the investments in a careful way as any company would heading into NDA redo process.

Liisa Bayko – JMP Securities

Okay. Great. That’s helpful. And then, can you just remind us about the emerging profile of the pirfenidone analog 520?

Dan Welch

Sure. It’s early days – have set a preclinical stage and its profile I think well you have to describe that it could offer interesting pharmacokinetic improvements over pirfenidone. Beyond that, we haven’t given a lot of description neither we describe in which indication that it would be pursued. So I will ask Scott Seiwert, Head of Research to comment.

Scott Seiwert

Yes, this is Scott Seiwert. We did present at ATS with Irwin Gelsund [ph] and the activity of ITMN-520 in a preclinical model of airway hyper-responsiveness, and it showed quite good activity in that model. The pharmacokinetics of pirfenidone are such that necessitate 3 time daily administration and this is perfectly acceptable and the indication that we are going after. Of course, we do believe that we can segregate out the side effect and efficacy profile of that compound into AUC and CMACs related events. So in 520, we have a molecule that dramatically improves the AUC but does not improve increase the CMAC. And so we believe that we will able to have a broader therapeutic index potentially affording improved therapeutic utility.

Liisa Bayko – JMP Securities

Okay. And then just one final question if I many on INFORM-1, I know that you have started the addition of three cohorts, where are – what’s the status on that? Have those additional three cohorts finish enrollment? Have the patients all been dosed? If you could just provide an update that would be helpful.

Dan Welch

Yes. What we said is that the – at the presentation on November 3, the results of all seven cohorts will be presented. We have virtually completed the enrollment of all patients.

Liisa Bayko – JMP Securities

Thank you.

Dan Welch

You are welcome.

Operator

Your next question comes from the line of Maged Shenouda from UBS. Your line is now open.

Maged Shenouda – UBS

Hi. Just – what would the potential or predicted adverse event liabilities be for adding ritonavir to 191?

Dan Welch

I will ask Steve to fill that one.

Steve Porter

If I understood your question correctly, what were the potential adverse affects? Liabilities of ritonavir?

Maged Shenouda – UBS

Yes.

Steve Porter

I think conceptually the adverse event profile or ritonavir when it is dosed at therapeutic doses of 600 twice-daily, does have some overlap with the adverse event profile of 191, namely in terms of some GI effects. But those really aren’t seen in any significant way at the boosting dose of 100 twice-daily. So as that goes, it's been very well tolerated and I really wouldn’t anticipate any problem with that and I think as Dan mentioned, we didn’t see any initial study combining the two agents.

Maged Shenouda – UBS

Thank you.

Dan Welch

You are welcome.

Operator

Your next question comes from the line of Adam Cutler from Canaccord Adams. Your line is now open.

Adam Cutler – Canaccord Adams

Hi, thanks for taking the question. I am wondering if you can discuss any progress on any business development discussions that may be occurring around pirfenidone and the possibility that that may have at all impacted your timing and filing the NDA or MAA given that I would imagine a prospective partner what might want to have something put in that process.

Dan Welch

Okay. Sure. So there is a lot of interest in partnering pirfenidone and we have said it earlier similar call as today’s that we are exploring the extent to which we might find an interested party that meets our needs and also is ready to pay the terms that we would demand for entering such a partnership. In terms of the NDA, there is really not any interaction in that regard because the only conversations we have entered into have to do with ex-US or outside of the United States, while those are conversations and discussions certainly take time, we wouldn’t necessarily associate that effort with the time – the addition of time we have decided to take to file our stronger NDA, those two are really separate. But the interest is consistent, it's strong from multiple parties and we are in an exploring process. If we find a partner ready to meet our terms, we will do that.

Adam Cutler – Canaccord Adams

Okay. And then in terms of the return of your opportunity, if you will, with 191 how do you imagine incorporating that into the broader development of 191. I imagine – depend on what you find in this next study, but I guess one stage might you included be part of Phase 2b study or Phase 2 study and or that matter would you consider adding return [ph] to the oral combination whatever the next phases of the INFORM-1 program might be.

Dan Welch

Sure. These are great questions. The timing of the MAD study of ritonavir boosting is actually quite good, because it is being performed in such a way that it will perform us in time for very important decisions down the road for the Phase 2b study and the one that is ongoing now. And also for the informal program, that we are planning with our partner Roche and their collaboration partner Pharmasset for Phase2. So the results from the MAD will be extremely important and very relevant and could be integrated into ongoing programs that are plans or assume to be ongoing in the case of the Phase 2b study. And in the way that would not materially change our developmental programs timing. So it's actually quite neat the way and tiny I would say the way that the different studies are stayed. And as we said earlier, we are going down parallel track and the data will show us the right way to go. So we like the fact of multiple angles on this. We are very pleased with 191 in its current unboosted the Phase 2b study is unboosted, the informed one study in unboosted, and it s looking great. And so I want to point out to the listeners that the return of your boost thing is how do you that great drug even better. Possibly better or more flexible and have more avenues for subsequent development like co-formulation. And be ready for what could be the next their direct antiviral combination perhaps twice a day or once a done. So I do want to reiterate for the listeners that we are very pleased with what we have. This ritonavir boosting strategy could make what we have even mutter, but the data will show us the way.

Adam Cutler – Canaccord Adams

Okay. And then one last question, I am same trend of trying to turn something that’s already great into perhaps something whether in the past, I think you’ve about ferocious formulation expertise, any idea that InterMune and Roche might be able to work on the formulation of 191 to perhaps separate from ritonavir end up with a less frequently dosed product. Is that work still ongoing or is that likely that you will end up with the current form of 191 and or ritonavir boosting.

Dan Welch

The formulation work with Roche is ongoing in a very robust way. And it kind of consistent with the whole approach that we and Roche were taking with 191, its parallel tracks to ensure a success. And there is a very robust effort simultaneously ongoing at Roche on formulation probably in the not too distant future, we will take the data from all these efforts, formulations, boosting, non-boosting and make some decisions as to what the appropriate best path for the intermediate and long term.

Adam Cutler – Canaccord Adams

Great. Thanks a lot.

Dan Welch

You are welcome.

Operator

Your next question comes from the line of Eun Yang with Jefferies. Your line is now open.

Eun Yang – Jefferies & Co.

Thank you. The competition for MAD patent for InterMune 191, is that 2025 patent expiry year.

Dan Welch

That would be, I should not hedge, but I don’t have it at my figure. I think 2023.

Eun Yang – Jefferies & Co.

Okay. Thanks. And then, I know Dan you mentioned that you really cannot really talk much about (inaudible) about to begin Phase 2b study Roche. Is said US, North America study or is that outside the North American study or is that ex-outside of North America.

Dan Welch

That’s both US and ex-US.

Eun Yang – Jefferies & Co.

Okay. Thank you.

Dan Welch

Actually we have – Jim, do you want to comment.

Jim Goff

Yes, this is Jim Goff. We looked up in February, we had a patent issue that claims the chemical structure, the InterMune 191 in the nominal 20 year term that will expire in October of 2024.

Eun Yang – Jefferies & Co.

Thank you.

Dan Welch

It will be patent term expansion available as well, that’s the minute.

Operator

(Operator instructions) Your next question comes from the line of Howard Liang from Leerink Swann. Your line is now open.

John – Leerink Swann & Company

Hi, this is John [ph] in for Howard. I was just going to ask, do you remind of the different requirements between the EMEA and FDA for pirfenidone filing and is there a different strategy between these two things for new.

Dan Welch

I will ask Steve to handle that one hold.

Steve Porter

Yes, in terms of requirement, they are really similar and if they are both based upon the common technical document so in terms of what into the submissions and how they are structured. They are really very comparable. I think the main way to think about the difference is that FDA does the analyses that we provide and not only interpret them, but conduct additional analyses where they feel that’s necessary and they can do it based what we provided, where as in general, EMEA doesn’t conduct analyses. They come back to the company and request if those analyses are done. So it sort of gets back to what I said earlier in that we need on both of these fronts, but in many ways its more significant for the EMEA to make sure that potentially all anticipated analyses are included in the initial submission. But in terms of what is covered and how they are structured, they are comparable. There are some differences in terms of the actual document to put the structure again its based on the common technical document.

John – Leerink Swann & Company

Great. Thanks. And additionally, are you aware of any updates from the Build 3 and what would your thoughts be on if that trial – what would be the impact on your filing o pirfenidone. That data was positive and or negative.

Dan Welch

What I know is what public, in that the Actelion has reported that they expect their final event to be in hand around – the event-driven study – around the end of the year. We suspect the study of that size and scale will take some number of months to integrate once the database is locked. So their results would probably be sometime in the early part – early few months of next year. In terms of how would it affect our file or our process, we don't think it would because it would take them – from the time we announced the data which would be sometime in some months after they get their final event. And then they have to put together an supplemental NDA. Then it has to be reviewed, so that is very much well beyond – perfectly about a couple of year beyond the timing of our expected pirfenidone if we get a priority review. So the FDA doesn’t look at the press release compared to an NDA and shouldn’t and doesn’t take into account such news. What they look at is the NDA in front of them and they make their judgment based upon the arguments made in the NDA. So in terms of commercial applications, ultimately if Tracleer is approved for IPF, of course it would be a competitor of ours. We would have a good head start on them in terms of establishing the market and the place for pirfenidone. And of course attractively it's not approved, then that would take out the nearest term competitor and make the next nearest competitor about three years behind us. So obviously that would be an important upside or a positive development not for patients of course, but for the competitive prospects of pirfenidone.

John – Leerink Swann & Company

Thank you very much.

Dan Welch

You are welcome.

Operator

There are no further questions at this time. Mr. Goff, I turn the call back over to you.

Jim Goff

Great. I will turn it over to Dan for concluding remarks.

Dan Welch

Thanks everyone for joining us. We are very pleased with our progress on so many fronts, and we are very focused many important and exciting milestones in our future. We thank you for joining us today and we look forward to our next regularly scheduled call to discuss third quarter 2009 financial results and the progress we expect to have made on these very important milestones. Good bye.

Operator

This concludes today’s conference call. You may now disconnect.

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Source: InterMune, Inc. Q2 2009 Earnings Call Transcript
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