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InterMune Inc. (NASDAQ:ITMN)

Q4 2007 Earnings Call

February 7, 2008 4:30 pm ET

Executives

Jim Goff - Senior Director of IR

Dan Welch - President and CEO

John Hodgman - SVP and CFO

Steve Porter - CMO

Analysts

Brian Abrahams - Oppenheimer

Richard Smith - JPMorgan

Terence Flynn -Lazard Capital Markets

Annabel Samimy - UBS

George Farmer - Wachovia Capital

Meg Malloy - Goldman Sachs

Tom Shrader - Rodman & Renshaw

Howard Liang - Leerink Swann

Jason Kolbert - Susquehanna Capital

Rachel McMinn - Cowen

Eun Yang - Jefferies

Operator

At this time, I would like to welcome everyone to the senior directors' investor relations InterMune fourth quarter call.

Mr. Jim Goff, Senior Relations Director of Investor, you may begin your conference.

Jim Goff

Thank you, operator. Good afternoon, everyone, 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 fourth quarter and 12 months ended December 31, 2007, as well as our 2008 guidance. This 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 and predictions are 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 30, 2007, and our prospectus supplement filed with the SEC on September 21, 2007. 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 President and Chief Executive Officer; 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 fourth quarter of 2007, including our progress advancing our two clinical development programs. We will share our financial results for the 3 and 12-month periods ending December 31, 2007, and discuss our 2008 financial guidance. We will then open the call to your questions.

I will now turn the call over to Dan Welch.

Dan Welch

Thank you, Jim, and thank you, everyone, for joining us today. We welcome you to this first InterMune conference call of 2008 and invite you to follow our progress in the coming 12 months, a period during which we expect to report important results from our clinical development programs.

Notably, in the coming 12 months, we expect to report the full Phase Ib data InterMune-191, execute a 14-day triple combination study of InterMune-191 and report the topline results of the Phase III CAPACITY program of pirfenidone.

I'll first recap the pulmonary highlights for 2007 and our upcoming events in pulmonology. 2007 was a great year of progress with our Phase III CAPACITY program of pirfenidone for the treatment of idiopathic pulmonary fibrosis or IPF. We completed enrollment in May of 2007, a full seven months ahead of our plan.

We believe the rapid rate of patient enrollment of CAPACITY is indicative of the huge unmet medical need represented by the almost 200,000 IPF patients in the United States and Europe, patients for whom there is no approved therapy for this fatal disease.

For perspective, we believe the incidence of IPF is several folds higher than that of pulmonary arterial hypertension, a market with estimated 2007 revenues in the United States of $1 billion and $1.4 billion worldwide.

We took an important step in late 2007 to improve the potential economics of pirfenidone. Specifically, on November 26th, we announced new agreements with the licensors of pirfenidone, Marnac and KDL that eliminated all future royalty and milestone payment obligations for pirfenidone under the prior license agreement completed in 2002.

Under the new agreements, we made total acquisition payments to the companies of $13.7 million. Of this total, $7.5 million expense recorded in the third quarter of 2007 relating to the 2002 license agreement was applied to the acquisition payments for the new agreements. $6.2 million balance of the acquisition payments for the new agreements was recorded in the fourth quarter of 2007.

We'll make contingent acquisitions payments associated with the new agreements of up to an additional $53.5 million only if positive Phase III data and registration in the United States and the European Union are achieved.

In addition, we acquired exclusive worldwide rights from Marnac to certain intellectual property for pirfenidone that was not licensed under the 2002 licensing agreement, including patents related to the TNF-alpha activities on the compound. We believe this additional intellectual property acquired from Marnac will help InterMune expand the exclusivity period for pirfenidone.

In terms of upcoming milestones for pirfenidone, we expect to announce topline results of our Phase III CAPACITY program in IPF in January of 2009.

Now, I'll cover our hepatology highlights and the upcoming events. We're very pleased with our progress on InterMune-191 in 2007 and in the fourth quarter in particular. On January 7th, we reported our progress with our Phase Ib multiple ascending dose or MAD clinical trial, evaluating 14 days InterMune-191 monotherapy in patients with chronic HCV infection.

We reported that we had completed the first two dosage cohorts in the study with total daily doses of InterMune-191 of up to 300 milligrams administered for 14 days. The safety and tolerability results of InterMune-191 in these first two cohorts were excellent.

We also reported that the trial had achieved its principal goals, namely the demonstration of a viral kinetic safety and tolerability profile of 191 sufficient to advance the program into a triple combination study with Pegasys and ribavirin.

We also announced on January 7th that we expected to complete the enrollment of the third dosage cohort in the MAD study in January of 2008. And we report today that we did so in the late January. Since this is a 14-day study, the results from that third cohort are of course not yet available to us.

Now, I will discuss the 2008 milestones for the 191 program. In conjunction with our partner, Roche, we have decided to complete a fourth cohort of the Phase Ib MAD study to further inform the planned 14-day triple therapy study and potential direct antiviral combination studies in the future.

Consequently, we have decided with Roche to announce the results from all four cohorts of the Phase Ib MAD study at or before the EASL meeting and/or the Digestive Disease Week meeting. These meetings are held in April and May respectively.

Regarding the timeline for our 14-day triple combination study of 191 combined with Pegasys and ribavirin, we expect to initiate the study in the second quarter of this year. The study design and timeline will be shared at the time of study initiation.

And finally, an investigation on new drug application or IND is expected to be filed for 191 in the second half of 2008 by our collaboration partner, Roche, to allow the compound to be studied in the United States.

I will now turn the call over to our Chief Financial Officer, John Hodgman. John will review our fourth quarter '07 financial results and also discuss our 2008 financial guidance. John?

John Hodgman

Thanks, Dan, and good afternoon, everyone. I'll focus first on our fourth quarter financial results. InterMune reported a net loss for the fourth quarter of 2007 of $25.8 million or $0.66 per share compared with a net loss of $21.5 million or $0.64 per share in the fourth quarter of 2006.

We reported total revenue in the fourth quarter of 2007 of $9.6 million compared with the total revenue of $19.8 million in the fourth quarter of 2006. Total revenue in the fourth quarter of 2007 primarily consisted of Actimmune revenue of $8.8 million compared with $19.4 million in the same quarter of 2006, a decrease of approximately 55%.

Many listeners will recall that in March 2007, we announced that our Phase III INSPIRE program for Actimmune and IPF had been discontinued and that future Actimmune revenue was expected to decline. We believe that the revenue decrease of Actimmune is due to lower off-label physician prescriptions of Actimmune for the treatment of idiopathic pulmonary fibrosis or IPF, which InterMune does not promote.

Turning to expenses, fourth quarter 2007 research and development expenses of $25 million were 2% lower than the fourth quarter of 2006 primarily due to the closure of the INSPIRE trial. General and administrative expenses were $6.6 million in the fourth quarter of 2007 compared with $10.4 million in the same period a year earlier, a decrease of 37%, reflecting reduced headcount in expenses associated with the March 2007 INSPIRE trial termination.

Fourth quarter 2007 expenses included $6.2 charge for acquired research and development in connection with our buyout of future royalties and milestones that would have been due under the 2002 license agreement with Marnac and co-licensor, KDL GmbH for the development and commercialization of pirfenidone.

Turning to financial results for the full year 2007, our net loss for the year was $89.5 million or $2.52 per share compared with a net loss of $107.2 million or $3.22 per share in 2006. Total revenue in the 2007 was $66.7 million compared with total revenue of $90.8 million in 2006, primarily reflecting lower off-label revenues of Actimmune and IPF. Actimmune revenues totaled $53.4 million in 2007 compared with $90.3 million in 2006, a decrease of 41%.

Revenue from the collaboration with Roche for the development of protease inhibitors, including InterMune-191 was $13.3 million for the full year 2007, consisting of $10 million development milestone payment and $3.3 million in amortization of the $70 million in initial milestone payments compared to $0.5 million in 2006. The Roche collaboration was initiated in October 2006.

R&D expenses were $105.8 million in 2007 or 2% higher compared to $103.8 million in 2006. The increase was primarily due to the much larger number of patients in the two Phase III CAPACITY studies during 2007 and the conduct of the Phase Ib studies of InterMune-191, partially offset by the reduced costs related to the discontinuation of the inspired program.

G&A expenses were $29.6 million in 2007 compared with $40.4 million in 2006, a decrease of 27%, reflecting the impact of the headcount and cost reduction related to the closure of the INSPIRE trial for Actimmune. We also recorded income from discontinued operations in 2007 of $5 million, reflecting the clinical-related milestone received from Valeant Pharmaceuticals related to Infergen, which Valeant acquired from InterMune in December 2005.

In 2007, InterMune recorded approximately $10.2 million in charges for restructuring-related expenses associated with the termination of the INSPIRE program in March. Approximately $6.8 million of the restructuring charges were related to the termination of the supply agreement with Boehringer Ingelheim Austria for their commercial and clinical supply of Actimmune.

As of December 31, 2007, InterMune had cash, cash equivalents and available-for-sale securities of approximately $235.3 million compared with $214.5 million at December 31, 2006. In October 2007, Targanta Therapeutics completed an initial public offering of its common stock, which resulted in the conversion of our interest in Targanta into approximately 3 million shares of Targanta common stock.

As of December 31, 2007, we recorded an unrealized gain of $5.7 million on 630,000 of those shares. The 630,000 shares met the criteria to be classified as available-for-sale marketable equity securities as they were estimated to qualify for sale within one year.

Now, the 2008 financial guidance. For the year ended December 31, 2008, R&D expenses is expected to be similar to 2007 in a range of approximately $100 million to $110 million net of development costs reimbursements under the Roche agreement. G&A expenses is anticipated to be in the range of approximately $25 million to $30 million.

That concludes the report of financial results and our 2008 guidance. I will return the call to Dan Welch.

Dan Welch

Thanks, John. Operator, we are ready to take questions. Please open the line.

Question-and-Answer Session

Operator

(Operator Instructions)

And your next question comes from Brian Abrahams with Oppenheimer.

Brian Abrahams - Oppenheimer

Hi. Thanks for taking my question and congratulations on the progress this year.

Dan Welch

Thanks, Brian.

Brian Abrahams - Oppenheimer

So, just a question on the 191 data. Can you give us a little bit more clarity on what are the factors that are going to dictate how and in what form you are planning to report the data? And I am assuming you are not going to be held to the first quarter timeline necessarily anymore.

Dan Welch

Yes, your assumption is right. The first quarter timeline is vestige now. What we announced today is that we intend to share four cohorts. And remember, it used to be three cohorts in the first quarter. Now, we plan to share four cohorts of data at or before the EASL conference and/or the DDW Conference.

And so, I'd like you to think about it in two ways. It could be a press release. It could be an abstract. It could be both at either of the conferences or both. First of all, all of the listeners know it's a dynamic process. We announced today that we just enrolled cohort three. Once that is completed, then we'll be enrolling cohort four, of course.

And so, as time goes on, we'll be evaluating it in a dynamic fashion. And because of its dynamism, we're not at this point ready to give anymore precision that we've given you in the press release and then a few elaborative comments just made.

Brian Abrahams - Oppenheimer

And then just what led your decision to necessarily commit to enrolling the fourth cohort just given that you just completed enrollment in the third cohort and you're still waiting to see the data from that?

Dan Welch

I have Dr. Steve Porter, our Chief Medical Officer, answer that, Brian.

Steve Porter

Yes, hi, Brian. As Dan said, we did just complete enrollment in that third quarter and obviously haven't seen the data yet. We have said from the first two cohorts that we've seen excellent safety and tolerability. And of course, as patients go through the third cohort, we are aware of whether the significant issues develop from a safety and tolerability standpoint. And today, we continue to be extremely pleased with what we're seeing.

So, I think in large part, that accounts for our comfort level in pushing forward and go into a fourth cohort. I've certainly said before, don't know what our eventual dose is going to end up being in combination with Pegasys and ribavirin and certainly don't know down the road what it might in terms of direct antiviral combinations.

And we are still in Phase I, and it behooves us to gain that additional data. So, we've made that decision again in collaboration with Roche to go ahead right now, not wait to see further data, but just to move forward and gain some more PK and viral activity as well as safety data.

Brian Abrahams - Oppenheimer

Thanks for taking my questions a lot. Thank you.

Unidentified Company Representative

Dan Welch

Thank you and welcome, Brian.

Operator

And your next question comes from the line of Richard Smith with JPMorgan.

Richard Smith - JPMorgan

Yes, good evening. Congratulations on your results so far. (inaudible) you can say about the 14-day trial, I know you are going to try the design later on. Can you, given the data you have in hand at the moment, give us sense if you're going to do multiple doses? I know you're going to still look at TID and BID.

Steve Porter

I am sorry. This is Steve. Were you asking about the upcoming combination study?

Richard Smith - JPMorgan

Correct.

Steve Porter

I am sorry. Volume was down a little bit. We obviously haven't gotten specific yet about the design of that study. And as Dan alluded to, we would put out those details or at least more about the study design at the time we announce initiation of it.

I think that we have felt for some time that combination therapy was the place to do dose ranging, given where the field is going and what we are seeing with other compounds and type of synergies that's being seen.

So, I would certainly anticipate that we will do dose range in that study and that we will explore different doses and likely different schedules as well. How many? We haven't gotten specific about it. And again, I think we'll give more details once we initiated it.

Richard Smith - JPMorgan

Thank you. And just one follow-up. Switching over to pirfenidone, any update from your partner, Shionogi, on the approval in Japan?

Dan Welch

This is Dan Welch speaking. Richard, they've made no public pronouncements, therefore we can't make a comment. What we have said before in various other venues was that based upon what is the traditional review time or orphan drug applications in Japan being 9 to 15 months from date of submission, we would expect an action by the Japanese regulatory authorities in the first half of this year. But that is not a Shionogi prognostication. That is just our estimate based upon (inaudible) past practice.

Richard Smith - JPMorgan

But, they haven't heard anything at the moment?

Dan Welch

I can't comment. Only to say that we've given you our best guess, but it's not based on a Shionogi official public statement.

Operator

And your next question comes from the line of Terence Flynn with Lazard Capital Markets.

Terence Flynn -Lazard Capital Markets

Hi, good afternoon. Thanks for taking the question. The first, I was just wondering with respect to the Phase Ib monotherapy trial, in the first two cohorts that guys have completed, can you give us any idea of whether the viral load reductions that you saw in those cohorts were comparable or if there was any linearity between the two doses?

Steve Porter

Hi, this is Steve. We haven't commented on that. We obviously have not gotten specific about what the doses in those two individual cohorts were or the dose schedules. We've only mentioned the total daily dose of 300, and thus, we also haven't given detail about the viral activity other than to say, we're pleased with it in that it was sufficient along with safety and tolerability to make the decision to move into combo.

Again, I would anticipate, as Dan alluded to, that when we give more accounting of the data at or above the EASL or DDW or around that time that we'll get into those type of details.

Operator

And your next question comes from the line of Annabel Samimy with UBS.

Annabel Samimy - UBS

Hi, thanks for taking my call. A quick question, can remind us were there any treatment-experienced patients in any of the cohorts for the Phase Ib trial?

Steve Porter

Not to date. We have said all along that the design of the study includes a single cohort of treatment-experienced patients that we would envision being enrolled after we complete the treatment-naïve experience. And so, just to be clear on that, that would be an additional cohort beyond the four that Dan was alluding to today.

Annabel Samimy - UBS

Okay. Yes, that helps. Also just curious, a number of your competing products out there exit Phase Ib into 28-day combo trials. Is there any reason why you chose 14 days versus 28 days?

Steve Porter

Yes, I think that we made that decision in combination with our partner, Roche, of course. And I think it's the joint view of InterMune and Roche that from a scientific standpoint, we can get the data we need out of a 14-day study to plan our subsequent development program.

There are operational issues to some extent between 14 and 28-day studies in terms of in-patient, out-patient et cetera. And I think if we felt we needed a 28-day study, we will conduct one, but we don't believe that's necessary.

Annabel Samimy - UBS

Is the 14 days enough to capture any temporary resistance that might develop?

Steve Porter

Well, I can't answer that question obviously, because I don't know what we'll see in that study. I think that resistance in terms of these studies is an ongoing program. It takes a lot of time to work through sequencing and isolates and really decide on what the resistance profile is.

I think that the decisions in terms of what doses we would take forward and develop would likely be based on viral kinetics and would not be dependent on necessarily the full results of resistance study.

Annabel Samimy - UBS

Okay, thank you.

Steve Porter

Thank you.

Operator

And your next question comes from the line of George Farmer with Wachovia Capital.

George Farmer - Wachovia Capital

Hi, thanks for taking my question. Just a little bit more on the fact that this Q1 data released is now a vestige as you put it, Dan. I think a lot of us were looking forward to seeing some topline data. And now that you get closer to EASL and DDW, is there some sort of embargo that you have to adhere to that prevents earlier topline data release or this is really contingent on this other fourth cohort that needs to be evaluated properly?

Dan Welch

Yes, may of those things are operative. So, we could possibly be subject to an EASL embargo. EASL is extremely strict as to publication of data before presentation for an abstract that's been accepted that may very well come into play for EASL and/or DDW. And then just the acceptance of the abstract is another variable at this time.

What we're trading off is instead of three cohorts in Q1, a fourth cohort is a more complete dataset, if you will, some number of weeks later. So, those are some of the variables that are operative, which is why we want you to think of either a press release or an abstract, either before or at one of the two meetings or even perhaps both.

So, we've kind of bracketed all the outcomes based upon the variables that I described.

George Farmer - Wachovia Capital

And do you think you can kick off the triple combo trial before the fourth dose cohort is fully enrolled?

Dan Welch

Don't want to comment on that. We've said that we expect, depending upon regulatory approvals, of course, to initiate that triple combination study in the second quarter. But I don't want to put as a final point on the timing that you're leading me to.

George Farmer - Wachovia Capital

Okay.

Operator

And your next question comes from the line of Meg Malloy with Goldman Sachs.

Meg Malloy - Goldman Sachs

Operator

Go ahead, Meg. Your line is open.

Meg Malloy - Goldman Sachs

Can you hear me?

Dan Welch

Hi, Meg.

Meg Malloy - Goldman Sachs

Hi, sorry about that. Yes, thanks. Two questions. One is on the monotherapy study. I think one of the goals has been to find the lowest effective dose, and I think you've designed the study so that you could expand it if you wanted. Can you comment as whether or not the new dose, the fourth cohort, is higher dose or lower dose than the prior three cohorts?

And then separately, on pirfenidone, I think in the past, you've said topline data late this year or early next year, but if I heard you right, Dan, I think you said January '09. Is there some reason why you might be more definitive on that time point?

Dan Welch

Hi, Meg. I'll have Steve answer those questions.

Steve Porter

Yes, that will be great. With respect to your first question, let me clarify. I don't think that we've ever said that the goal of the monotherapy study is to find the lowest effective dose, because what we've said repeatedly is that we really don't believe we can understand what the effective dose is until we get into combination therapy and start studying viral activity when 191 is administered along with Pegasys and ribavirin.

Meg Malloy - Goldman Sachs

Correct me. I think the goal of these two programs is to get the lowest effective dose.

Steve Porter

Exactly. So, it's really probably better stated to find the optimal blend of tolerability in activity when given in combination. And the concept is that we wanted to do that in sort of a prospective, proactive matter as we move through the MAD monotherapy and that once we saw an acceptable profile of safety tolerability and viral activity, we wouldn't wait to complete that study, but we would start the administrative application process for the combination study, so we can get that going as we proceed it with the monotherapy study. But at the end of the day, you are correct that we want to find that optimal blend.

We have not commented specifically about cohort four in terms of where it is relative to the previous ones largely because we haven't given those type of details in the design of the study, and obviously that will be part of an announcement that we would make later.

Meg Malloy - Goldman Sachs

And I guess, if I may, I am just little confused on the need to wait for the topline data, because you've just finished the third cohort. It's going to take you some time to enroll the fourth cohort. So, I'd presume that you wouldn't have the fourth cohort data anyway for abstract submissions.

Steve Porter

Well, obviously as you know, the regular abstract submissions for both EASL and DDW are late in the fall. And obviously, at that time, we did not have enough data from this study to submit abstracts.

The late breaker abstracts are coming up, as Dan alluded to. This is very dynamic process as we attempt to enroll and move through these cohorts as quickly as possible. But given the uncertainty of when we'll actually be able to complete that, I would say that's what leads us to not be more specific right now. And it goes full circle to this idea that embargos might be relevant to us presenting the data.

But I think overall, it was decision with Roche that rather than just to parse out topline on a few cohorts, we'd like to have total data, not just viral activity, which I know everyone is interested in, but safety, which is equally important to us, to present together. And so, that's really what explains what we're seeing today, Meg.

Meg Malloy - Goldman Sachs

Okay, thanks. And then anything more definitive on the timelines for pirfenidone?

Steve Porter

Yes, with respect to pirfenidone, we've said for some time that we have expected to have data from both the concurrently running CAPACITY studies in very late '08 or early '09. I think that what you should read into this is the challenge of closing, cleaning and locking two databases around the holidays. And quite frankly, my success in making Dan understand that it's going to be very difficult for us to ensure that we can pull that in before the holidays.

And so, I think that we believe that it's likely a January occurrence and it's just not going to be possible to get it in before the holidays. And so, we are trying to be upfront and direct you to January.

And really, there has been no change in terms of study conduct, no change in any timelines. They were always going to be very stretched, which is why we always hedged when we said the end of '08 or very early '09.

Meg Malloy - Goldman Sachs

Okay, thank you.

Steve Porter

Thank you.

Operator

And your next question comes from the line of Tom Shrader with Rodman & Renshaw.

Tom Shrader - Rodman & Renshaw

Good afternoon.

Dan Welch

Hi, Tom?

Tom Shrader - Rodman & Renshaw

I am wondering your number is still remarkably robust. Do you have visibility for on-label use of that? Is that all on-label now?

Dan Welch

We don't have a lot of visibility. We aren't in the field. We aren't looking at prescription data per se. We aren't talking to doctors. So, we are kind of in the fog here and for a host of reasons. That's where we should be.

So, what we can do is estimate. And our estimate is that still even with these revenues, the strong majority of the revenues are from off-label use in IPF. I think what it says is that the need for IPF therapies is acute and it's intense, and there are patients who remain on therapy. There are doctors who keep patients on therapy. So, still the strong majority of these revenues are from IPF off-label.

Tom Shrader - Rodman & Renshaw

So the estimate for on-label use is still something like $6 million or $7 million. It's an old number. Is that still good?

Dan Welch

Yes, I think it's a decent number. It's probably between $5 million and $10 million is the on-label use. And I would encourage all the listeners to take that with a pretty strong numbers of degree, the freedom around that estimate. So, it's around $5 million or $10 million is our best guess.

Tom Shrader - Rodman & Renshaw

Okay. And then, one quick question, I'm not sure you can answer about Shionogi. You essentially have an agreement with them to see all the data they've seen from previous trials and what they filed on. Is that correct?

Dan Welch

That is correct. We have what we call a data sharing agreement between the parties, whereby we share data that each of us collects, and we also buy and sell data to each other, which we've done.

And if one party uses the data in a regulatory submission, then the party using those data makes a payment to the other party on kind of a prearranged schedule. So, we've seen all of the data, for example, at a fairly high level of detail from their Phase III study.

Tom Shrader - Rodman & Renshaw

Do you know that agreement to be unique? Can other people see that the data? Could other companies also pay them to see the data or have you agreed that you own the US visibility, if that's a term?

Dan Welch

The only other party in the agreement is the Shionogi and InterMune, and we have confidentiality agreements between the parties. So, I don't know exactly how to answer that question. I'll have to get back to you on that, Tom. I would be surprised if there were any way for a third party to have access to those data.

We have CDAs, confidential disclosure agreements, between the parties. So, I would be quite surprised if those data were shared, at least not without our knowledge.

Tom Shrader - Rodman & Renshaw

Okay. Thanks a lot.

Dan Welch

Thank you.

Operator

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

Howard Liang - Leerink Swann

Thanks very much. For the InterMune-191, can you say whether twice-a-day dosing is used for either a third or the fourth cohort?

Steve Porter

Hi, Howard. It's Steve. We haven't given that level of detail, always said that we are investigating both in that study, but whether we've investigated one or both so far, we haven't said. By the time we finish, we will certainly have investigated both.

Howard Liang - Leerink Swann

Okay. Just on the questions whether the data will be at EASL or DDW, trying to understand what will be the determining factor. So, I think you saw the deadline for late breakers is March 3rd. So, do you need to have data from all four cohorts before you submit an abstract for the late breaker or can you submit partial data and present the four cohorts?

Steve Porter

Yes, it's always a judgment call. People do sometimes submit abstracts and then present more data at a meeting. In general, one would like to have a full understanding of your data at the time you submit the abstract. It's not an absolute requirement. But I would just say in general, in the past, my approach has been I have the greatest deal of comfort when I have all my data at the time I submit my abstract. But it's certainly not a fast and absolute requirement.

Dan Welch

The other thing, Howard, is in this particular circumstance, we have another peer review meeting coming a few weeks after EASL. It's also a good venue for liver data. So, we are fortunate to have a couple of opportunities at which to share either the data in an abstract or a press release or a combination of the two.

The other thing just to reiterate some of Steve's comments, we're loathed to dribble out the data, tens of a thousand cohorts. We don't want to do that. We'd rather put out the whole package all at once. I think it's a more complete dataset and that would important for all investors to see at the same time.

Howard Liang - Leerink Swann

Okay, that was very helpful. For Phase IIa, I guess, the combination trial, what are the gating factors for starting the trail? For example, do you need to see data from '04 cohorts or maybe '05 cohorts of the Phase Ib single-agent trial?

Steve Porter

I wouldn't comment specifically on that, given that as we've said we're in the process of preparing that clinical trial authorization and as yet are in the early stages of that and obviously have to interact with regulatory authorities.

As we've said, we've seen enough safety and tolerability activity in data upon which to design this study and move forward with the CTA. Well, I guess what I would say is I do not anticipate us being held up from a critical path standpoint by completing the current MAD study. I think these things will dovetail nicely, and we'd be able to start on the timeline that we have in mind, which is as we've said at the second quarter.

Howard Liang - Leerink Swann

Okay. Then if I can ask one last financial question for John in terms of Targanta shares, you mentioned 600,000 shares are available for sale of the 3 million. What about the other 2.4 million shares?

John Hodgman

Yes. Thanks, Howard. What we basically have stated is that the 630,000 shares are the current portion that qualifies for sale under the securities regulations within one year. And that's all that we'd be eligible to able to record in our books. So, the others would potentially come on as we met other requirements under the security regulations.

Howard Liang - Leerink Swann

Okay, thank you.

Operator

And your next question comes from the line of Jason Kolbert with Susquehanna Capital.

Jason Kolbert - Susquehanna Capital

Thanks, Dan. A couple of things: one, can you just mention and talk a little about manufacturing and where that capability is? And I just want to follow-up on something that Howard said, and Steve you answered it that the CTA is being prepared.

That kind of leads me into, if you are filing a US IND, what does the US clinical plan look like for Phase II in terms of jumping over and using the EU data and essentially just running Phase II in the US?

Steve Porter

Yes, Jason, I'll answer that second question first, and then I'll let Dan make a comment on manufacturing. As you know or I suspect you recall, we have the lead on this program as it is in Phase I. And once the transition is in the Phase II, Roche takes the lead on that.

And I think that what this means is that as Roche prepares for that Phase II program, they're going to be in the process of getting together the documents to submit in IND, so that Phase II can certainly include the United States. I think that most of these programs have been multinational and likely that's the way all of them will go.

But I think that's the way you should think about it just as we prepare for Phase II and Roche taking over to file the IND in the United States. As I believe it's been true with all these programs, we have conducted our studies in Europe at a level of rigor and compliance that we believe that will be perfectly suitable for US regulatory authorities, as is typically the case.

Dan Welch

And Jason, I'll answer your question about manufacturing of 191. Where is it? 191 is fully in the hands of Roche now. They're leading this program. And as you know, they have vast resources, human and capital resources, et cetera, plants, to bring to bear against the manufacturing of 191.

I can say that they've made excellent progress in terms of cost of goods reductions, volumes, quantity, process improvements, et cetera. And at this time, we are extremely comfortable with the status of our manufacturing. And I'm very comfortable that at the time of commercialization, we'll be in a very strong position in terms of cost of goods and margins, for example.

Jason Kolbert - Susquehanna Capital

Thank you, Dan. One last follow-up question, which is, can you remind me what the next Roche milestone to InterMune might look like?

Dan Welch

Yes. We actually have not commented on how the next milestones might come forward through the Roche collaboration, but we are anticipating future milestones associated with both development as well as commercialization.

Jason Kolbert - Susquehanna Capital

That's reasonable to assume that things like a Phase II trial trigger a milestone, a typical agreement?

Dan Welch

Yes. We don't comment on that, but that certainly is one of the things that you see in a typical agreement. That's for sure.

Jason Kolbert - Susquehanna Capital

Thanks, guys. I appreciate it.

Dan Welch

You're welcome.

Steve Porter

You're welcome, Jason.

Operator

And your next question comes from Rachel McMinn with Cowen.

Rachel McMinn - Cowen

Yes. Thanks very much for taking the question. I am a little bit confused what's changed between early January when you put out your first press release that you are moving forward, and you obviously still are in this triple combo therapy.

But when you thought that you would have data in the first quarter, and now you are saying that you need a fourth cohort. So what new data do you have? Is it safety data or resistance data or that'd led you to believe that you really need this fourth cohort before putting out the other data?

Steve Porter

Yes, this is Steve. So, just to be clear, I don't think you should interpret this as we need a fourth cohort. I think at the time of the release in early January, we said that we would possibly develop a fourth cohort, which really wasn't a change from what we had originally said when we designed the study.

And I think given, as I alluded to earlier how pleased we've been with safety and tolerability and other aspects of the program, we, along with Roche, decided to go ahead and in fact confirm that we are going to roll that fourth cohort.

I think what we had said before was that we anticipate a topline data by the end of Q1 on the first three cohorts, and I think it really is not a change due to the enrollment of the fourth cohort, but in discussions with Roche and making the decision about how we're going to present this data as well as potentially recognizing that we could have some of the embargo effects.

We made this decision jointly, and we recognize that it is a change or we recognize that it potentially means a few weeks prior to folks hearing the data. Dan will correct me if I am wrong, I think the way you should view this is more of a decision that we've made in terms of how we would present the data in conjunction with Roche rather than the natural change in the design or conduct of the trial.

Dan Welch

Yes, keep in mind as we said in the press release and the prepared remarks, at this time, we have not seen the results of the third cohort. So we have what we had a month ago. Since a month ago, we've had quite a number of conversations with our partner, Roche, on how to bring the program forward in combination studies, potential direct antiviral combinations in the future. And the decision was jointly made that do a fourth cohort to get more data to inform the triple combination, to inform potential future studies.

So, while the machine is running, it's far easier to add another cohort than to go back 6 or 8 or 9 or 12 months from now and get another cohort. And then we decided just from a communication standpoint that rather than do three cohorts and then a fourth cohort in different types of publications or presentation, it is much more sensible to do four cohorts all at once, and tell the whole story of 191.

And so, from a communication standpoint, development standpoint, that's the rationale for moving the announcement of results or presentation of data by what we think to be a few weeks.

Rachel McMinn - Cowen

Okay, got that. That's very clear. And then I guess just in that last statement, you're kind of indicating that the fourth cohort could inform future studies such as direct antiviral's combinations. Is that really the way we should be thinking about it or it's not critical to the design of the triple combination? You want to do dose ranging anyway in combinations. So, this is really just kind of dot the I's and cross the T's as opposed to give you any really kind path information for moving forward?

Steve Porter

Yes, that's possibly a reasonable way to think about it. I don't want to be too definitive, because while we've said that we believe that combination therapy is where we want to dose ranging, obviously when one goes into a combination therapy needs to be supported as much monotherapy safety data and et cetera.

But I do believe that the way you articulated it is correct. We don't quite frankly note down the line what doses are likely to be used, particularly when one talks about combining direct antivirals and maybe when the day comes that some element of the current standard-of-care is removed.

And if you think about it, we've got a single ascending dose study we've done too and now enrolled three cohorts in this study. There is a relatively small amount of safety data to think about down the line, exploring combinations of drugs. And what we'd like not to do is have to go back and do more Phase I type work down the line if we decide when we start doing directly antiviral combinations that we need to go higher.

So, it's taking advantage of the fact that we can do it now. We've not had any safety or tolerability issues, which cause us to need to change anything in this trial or stop. And so, we think it's the right thing to do for the future part of the program.

Rachel McMinn - Cowen

Okay, all right. Thanks very much.

Steve Porter

You are welcome.

Operator

And your next question comes from Eun Yang with Jefferies.

Eun Yang - Jefferies

Thanks very much. I just want to make sure that I understood this. So, this combination study for 191, is it going to be done in treatment-experienced patients?

Steve Porter

No. I think we have said that that study will be done in treatment-naïve patients. We've said that the current monotherapy MAD will have one cohort of treatment-experienced patients, but that the combination study, certainly as we envision it, will involve treatment-naïve patients.

Eun Yang - Jefferies

Okay.

Dan Welch

In conjunction with our partner, Roche, we are talking about treatment-experienced patients and how we would conduct studies and engross designs or what those studies might look like in treatment-experienced and further down the line, and we have only just begun the discussions with our partner to direct antiviral combinations in treatment-experienced patients. But that's somewhat down the line, and conversation has just begun.

Eun Yang - Jefferies

Okay. And then I have second question on pirfenidone. Now that we are expecting the topline data in January next year, if you are planning to commercialize the product on your own, when would you actually start that process?

Dan Welch

Yes, that's a good question, Eun. So, with data in January of 2009, our plan is to drop those data into what we would be then a very well prepared NDA package and an MAA package such that we would filing an NDA around mid-year 2009. We would expect that this package would be rapidly reviewed by the authorities. So, an NDA approval around the end of '09, early '10, is kind of the estimate that we have at this time.

We would plan to commercialize that in the United States, so that in 2008, we plan to do more of preliminary marketing, research, branding, positioning type studies, reimbursement type studies. In 2009, that would be done more robustly. And in 2009, we would be thinking about fielding sales force, management, et cetera, and then finally, around the time of approval, making the decision to hire actual sales representatives.

But that wouldn't be until well down the line into 2009. But 2008, some preparation; 2009, classical pre-launch preparation, but not a big staffing infrastructure increase until well down the line towards the end of 2009.

Eun Yang - Jefferies

Okay. Thanks very much.

Dan Welch

You're welcome.

Operator

And you have a follow-up with Meg Malloy from Goldman Sachs.

Meg Malloy - Goldman Sachs

Thanks. Sorry to put two final points on this, but just for clarity. Would it be fair to say that the delay in release of the information is due to the potential to have the data accepted at one of these medical meetings or is that really not the whole story?

Dan Welch

Well, it's one of many variables, Meg. It's a dynamic process. We've just completed enrollment of the third cohort at the end of the January. We have these two meetings coming up. There are embargo rules. There are decisions to be made about submissions to one or both of those meetings. There are opportunities for press releases at one or both of these meetings, press conferences.

So, we just want to remain flexible. What we are prepared to say at this stage is that we plan to announce the results before or at one of these meetings and/or perhaps both of these meetings, but maybe an abstract or maybe a press release or maybe both.

And I want to reiterate, we have not seen cohort three and we and our partner have just come to the conclusion that for good development reasons, we should do a fourth cohort to inform triple combination, to inform potential future direct antiviral combinations, and from a communications strategy, rather than do cohort-by-cohort press releases, which we don't think is very efficient and that it is very distracting for investors and the organization, we think it's more sensible to do it all at once.

It may be EASL. It may be DDW. It may be an abstract. It may be a press release. And we just wanted to give you all the ins and outs. There are embargo implications, which is another variable. So, I think you'll know that by the time DDW comes, you'll know the answer to the four cohorts. And it might come well before that.

Meg Malloy - Goldman Sachs

Okay, thanks. In terms of your planning of this monotherapy work, we may see other cohorts tested as well. Is that true?

Dan Welch

Well, it's always possible that we could go to higher cohorts. We'll certainly do, we plan to do a treatment-experience cohort. At this time, we've not made a decision about any cohorts for naïves beyond the fourth cohort.

Meg Malloy - Goldman Sachs

Okay. Thanks a lot.

Dan Welch

You're welcome.

Operator

And your next question comes from the line of Terence Flynn with Lazard Capital.

Terence Flynn - Lazard Capital

Hi, thanks for taking the follow-up. I am sorry to harp on this, but just wondering if you guys are unblinded to the safety data from the third cohort and if that's factored into your decision to go to a fourth cohort. Thanks.

Steve Porter

This is Steve. We are not unblinded to data from any cohort in terms of treatment assignments. But as Dan said, we have not seen cohort three data. It's being enrolled. I alluded earlier in the call and the fact that we continue to be happy with the safety and tolerability that we are seeing, what I mean by that is, of course, as any trail is ongoing, should there be concerning signals -- I mean we are watching it very closely in a blinded fashioned, we continue not to see anything there. But we remain blinded to the treatment assignment of all cohorts, and we don't have any data from cohort three other than just knowing that there is not a signal that's crossed up in the day-to-day monitoring of those patients.

Operator

And there are no further questions at this time.

Dan Welch

Okay, thank you very much. Thank you all for participating in our conference call for this evening. I wish you all a good evening.

Operator

And this concludes today's conference call. You may now disconnect.

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Source: InterMune Inc. Q4 2007 Earnings Call Transcript
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