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Executives

Jim Goff - VP, Corporate Communications & IR

Dan Welch - Chairman, CEO and President

Giacomo Di Nepi - SVP and Managing Director, Europe

Analysts

Brian Abrahams - Wells Fargo Securities

Ritu Baral - Canaccord

Katherine Xu - William Blair

Michael Yee - RBC Capital Markets

Geoff Meacham - JPMorgan

Terence Flynn - Goldman Sachs

Matthew Harrison - UBS

Liisa Bayko - JMP Securities

InterMune Inc. (ITMN) France's Economic Committee (CEPS) Authorizes Reimbursement of Esbriet September 11, 2012 8:00 AM ET

Operator

Ladies and gentlemen thank you for standing by. Welcome to the Esbriet Reimbursement in France conference call. During the presentation all participants will be in a listen-only mode. Afterwards will conduct a question-and-answer session. (Operator Instructions) As a remainder this conference is being recorded today Tuesday September 11, 2012. I will now like to turn the conference over to Jim Goff VP Investor Relations for InterMune. Please go ahead, sir.

Jim Goff

Thank you operator. Good morning everyone and welcome to this InterMune conference call. This morning we issued a press release that discusses the pricing, the reimbursement and launch timing of Esbriet in France. That 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 and wish to caution you that such statements or predictions and expectations and actual events are results that 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 including those discussed in our Form 10-K filed with the SEC on February 29 2012 and Form 10-Q filed with the SEC on august 8 2012.

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, pricing and reimbursement, intellectual property, clinical development and capital resourcing and other risks relating to our business. On the call today is Dan Welch InterMune's Chairman and Chief Executive Officer and President. Joining us for questions and answers will be Giacomo Di Nepi our Senior Vice President and Managing Director for Europe.

During today's call we'll discuss the pricing and reimbursement conditions for Esbriet in France, we will share with you additional details of our commercial organization in France and are ready just to make Esbriet available to the estimated 8000 patients with mild to moderate IPF in that country.

We also will review our progress in preparing to launch Esbriet in France and in other countries in the European Union, I will now turn the call over to Dan Welch.

Dan Welch

Thank you, Jim and good morning all. We are very pleased to announce today that we have reached agreement on pricing and reimbursement conditions for Esbriet in France with the French Pricing Committee or CEPS and we are very pleased to announce that Esbriet will be available to patients in France in the fourth quarter of this year consistent with the timetable that we have previously shared with you.

In early April of this year we announced that the French Transparency Commission had granted SMR and ASMR ratings that allowed InterMune to proceed to the next step in the process which was the negotiation of price and reimbursement conditions with the economic committee or CEPS.

During the past several months we've been involved in discussions with CEPS and are very pleased to report today that the committee has authorized an ex-factory reimbursed price of €25000 per patients per year. This is approximately $32000 at current exchange rates. The French healthcare system requires no mandatory discounts or rebases at the national or regional level, so the gross ex-factory price is also the net price to InterMune.

We are very pleased with this price. In particular for comparison with what we view as relevant analogs in France, the Esbriet price is similar to the current price of Tracleer, an oral drug for pulmonary arterial hypertension and that is priced at €25750 and the prices for the treatments of lung cancer such as Tarceva or Iressa are in the same -- very much in the same range at the price granted for Esbriet in France.

In addition the Esbriet price is above those of the multiple sclerosis drugs Tysabri and Gilenya which are priced in France at €23500 and €22700 respectively. So within this context we are very, very pleased with the Esbriet price. Esbriet will be reimbursable after it is published in the French Journal Officiel year which we expect to happen in the fourth quarter of this year. We are planning to launch Esbriet as soon as possible after this publication of the Esbriet price in French Journal Officiel. And when our commercial team is fully recruited and trained to promote Esbriet.

We therefore currently expect the launch to be in December of this year. Esbriet will be reimbursed by the French National Health Insurance System for the treatment of mild to moderate forms of IPF in adults. Esbriet will be reimbursed as a [medicamom dexepsion] which means that it will be reimbursed for the labeled indication defined previously by the Transparency Commission or CT as IPF patients with forced vital capacity greater than or equal to 50% and DLCO greater than or equal to 35%.

You may recall that these metrics correspond to the lung function entry criteria, the bottom end of those criteria for our capacity Phase III program. In terms of post marketing commitments we have committed to conduct a patient registry to capture information regarding the use of Esbriet in everyday clinical practice.

With regard to reimbursement, medicines for IPF patients are expected to be reimbursed at a 100% level as the treating physician would ensure that the patient's medicine is covered through a specific plan for patients who suffer from long-term illnesses. This plan is called Affection de Longue Duree or ALD, more than 8 million French citizens are currently treated under the ALD program.

With today’s announcement Esbriet becomes the first medicine to be reimbursed for the treatment of IPF in France. We currently estimate that there are approximately 10,000 to 14,000 IPF patients in France. Of these we estimate that approximately 6600 to 10000 have mild to moderate IPF and of these mild to moderate IPF patients, we currently estimate that approximately 6000 to 8000 meet the reimbursement criteria defined by the French Committee de Transparence which I just shared with you a moment ago.

Our estimate in fact is very consistent with that made by the Committee de Transparence.

On commercial strategy, the delivery of care to IPF patients in France is concentrated in a relatively small number of centers and physicians across France, but in comparison to Germany it is somewhat less concentrated at this time.

There are approximately 30 academic centers in France, the so called CHUs or centre hospitalier universitaire that care for patients with rare diseases among other things. These 30 centers are what we identify as Tier 1 centers. Now among these 30 tier 1 centers, there is one national reference center and there are nine nationally designated competent centers where most of the IPF research is done.

We estimate that these 30 tier 1 centers treat about 20% of the French IPF patients, but have a very strong influence in terms of the establishing the practices and guidelines for the diagnosis and management of IPF patients throughout France.

There are another 100 to 120 hospitals with a sizeable pulmonology department and we designate these as Tier 2 centers. We estimate that these Tier 2 centers treat about 40% of the IPF patients in France. The remaining 40% of patients that are not in Tier 1 or Tier 2 is currently dispersed in smaller hospitals and private practices in the country.

Our Esbriet long strategy in commercial infrastructure follow the above market structure and we'll discuss that in a moment. We expect a number of patients treated by the Tier 1 and Tier 2 centers and the number patients referred from the community to these centers will significantly increase after the launch of Esbriet when the first approved drug for IPF will be available in France.

In fact this evolution was seen in the case of the launch of Tracleer in France as well as for many other products for orphan or specialty diseases, when previously there has been no approved therapies. Regardless of whether a hospital is a Tier 1 or a Tier center the diagnosis and treatment negotiation will be made through hospital multi-disciplinary validation committees.

These committees are comprised of a pulmonologist, radiologist and when necessary a pathologist. Now to the commercial organization, as you may recall in Germany IPF patients are more concentrated in a larger number of Tier 1 centers when compared to France.

For this reason we focused our efforts in Germany during the first year of launch on the Tier 1 centers and when we established a foundation in those centers we expanded this month in fact our sales force to more effectively manage and cover the tier 2 centers. Given the relatively lower concentration of IPF patients in the Tier I centers in France, we plan to launch Esbriet with our complete sales force from launch as opposed to the two staged or two step sales force deployment as we did in Germany.

We also plan to launch with a somewhat larger medical science liaison team than we had at launch in Germany. This field based deployment strategy will allow us to begin the development of referral networks to move IPF patients from the community to the tier 1 and tier two centers and to help establish the appropriate use of Esbriet in both tier I and two tier centers. This strategy has proven successful in France for many specialty medicines such as those for PAH and multiple sclerosis.

Overtime the networks get built and substantial revenues develop. Specifically we expect that our commercial organization in France will include approximately 20 field based personnel consisting of 2 district sales managers, 12 key account managers who are otherwise known as sales representatives and six medical scientific liaisons. To support the 20 field based personnel in France we also plan to have about 10 staff members in the Paris headquarters in areas of medical affairs, marketing, customer relation, sales management and finance.

Therefore our French team will at the time of launch number approximately 30 members. Of course the French operation will also be supported by our Basel headquarters staff in the areas of marketing, medical affairs, finance, human resources et cetera. Given the administrative time necessary for the publication of the Esbriet prize in the Journal Officiel and the relatively lengthy notice periods that French employees must give to their employers when leaving their jobs. We expect to launch Esbriet in France in December of this year. We will of course do everything we can to launch Esbriet earlier than that.

A few comments on our Name Patient Program. As you know, the Esbriet NPP is accessible by specialized pulmonologists in Europe and we have enrolled nearly 1,500 patients in Esbriet NPP program in Germany, Italy, Spain, UK and many other countries underscoring the strong interest by pulmonologists.

As we have explained on previous investor calls, in most countries the country’s central or sometimes local administration must approve the NPP before doctor can enroll a patient in the NPP in that country.

In France, there are two processes for making a drug available to patients before it has been granted reimbursement by the country. The most common process is called the ATU which is a temporary authorization to purchase which applies only to drugs that have not yet received marketing authorization.

So drugs before approval may go through this ATU process. The Esbriet NPP was launched in Europe in April of 2011 which was two months after the European approval of Esbriet therefore the ATU process was not available for Esbriet NPP.

The second process that could be used to make a drug available to citizens before reimbursement is something called the (inaudible) which requires a central authorization by the (inaudible) for each patient so it’s a one-by-one approval process.

At the beginning of 2011, the direction generated out (inaudible) decided to terminate this (inaudible) process. Therefore unlike in other EU countries there was no process in France to make available Esbriet before reimbursement in that country by way of NPP.

A very small number of patients were given exceptional access to Esbriet in France, but for practical purposes we have no NPP patients in France at this time. Regarding the NPP program in general since we plan to complete the reimbursement processes for Esbriet in the fourth quarter of this year excluding the UK, we have announced that as of September 30 no new patients will be enrolled outside of the United Kingdom in the NPP program.

Of course patients in the NPP program will continue to receive Esbriet until the drug is commercially available in their country. While we effectively have very few NPP patients in France, we've been very pleased with the awareness of an interest Esbriet by French KOLs as a result of many efforts.

During the last several quarters, our French and European management team puts our field based MSOs have visited and established relationships with all of the 30 Tier 1 centers and the highest volume Tier 2 centers.

This has helped us understand the current patient population, treatment practices as well as in some cases to launch some specific projects. At the annual meetings of the French Pulmonology Society for example InterMune has conducted two medical educations symposium on IPF and Esbriet with more than 300 pulmonologists attending each one of them.

A third such symposium is planned for the same conference in January of 2013 in (inaudible) France and this is conveniently timed shortly after the official launch of Esbriet in France.

We’ve spoken on previous calls about the medical education program call AIR which stands for Advances in IPF Research, a program sponsored by an educational grant by InterMune and it is a medical education program fully dedicated to diagnosis and management of IPF. This program involves an annual Trans European AIR meeting the first of which was held last year in Berlin and also involves national level AIR meetings for the major countries in Europe and regions of Europe.

The national AIR meeting for France will convene in Paris in the fourth quarter of this year. The meeting’s content will cover over one full day new developments, findings and (inaudible) diagnosis and treatment of IPF and the factor two will comprise all of the national key opinion leaders in IPF and the audience will consist of a 150 pulmonologists from the Tier 1 and key Tier 2 centers.

Esbriet today is commercially available in a total of seen countries Germany, Austria, Sweden, Norway, Denmark, Iceland, Luxemburg and soon France. When launched in France in December, Esbriet will be marketed in the two largest EU nations Germany and France representing a combined population of nearly a 150 million people.

With regard to our launch preparation in the major countries other than France, we maintain our guidance that we expect to complete pricing and reimbursement discussions from Spain and Italy in the fourth quarter of 2012 and in UK in the first quarter of 2013 and launch in those countries as soon as possible after successful outcomes of the pricing and reimbursement processes in each countries.

Regarding our so called mid-size countries, we expect to conclude our pricing and reimbursement negotiations in Belgium and the Netherlands in Q4 of this year and then Ireland and Finland in the first half of next year and to launch in these countries as soon as practical after gaining pricing and reimbursement approvals.

Collectively, the countries we have targeted and on which we expect to complete the pricing and reimbursement process over the next six months cover approximately 380 million inhabitants and approximately 75% of the European Union population and about 80% to 85% of the European pharmaceutical market.

In summary, we are recruiting an experienced, well motivated, well trained commercial organization in France and our field based team of reps and MSOs is sized and scaled to effectively and efficiently address the French market. Successfully launch Esbriet and build the IPF market overtime.

Our Esbriet price of $32,000 in France is very attractive and is consistent with other analogue orphan drugs in France including the closest analogue Tracleer and other specialty drugs such as Gilenya prices in France.

As we shared with you over a year ago, we expect the launch of Esbriet to proceed as other specialized product launches due in Europe with steady, consistent growth overtime and this is what we are seeing in Germany and expect to see across Europe.

In Germany, Esbriet is among the top five best launches of orphan or specialty products including oncology products in terms of patient on medicine or revenues after nine months of launch. We are well prepared to begin in December the launch of Esbriet in France, the second largest pharmaceutical market in the European Union.

As it was in Germany, we expect Esbriet revenues to develop in a steady consistent way as we develop the market and build the brand into an important product in France.

We look forward to sharing with you our continued progress with our business. We are now ready to take your questions and operator you can please open the lines for those questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Brian Abrahams with Wells Fargo Securities. Please proceed.

Brian Abrahams - Wells Fargo Securities

Thanks for taking my question and congratulations on the reimbursement progress. A question on the process this on the ALD process and exactly how this works and what you guys need to do to facilitate physicians and patients using this ALD program. Is there any waiting period when you need before I guess IPF is recognized is an official disease in that program and are there any out-of-pocket cost for patients through this and I have one quick follow-up. Thanks.

Dan Welch

Thanks for your comments on the price in France Brian. I am going to ask Giacomo Di Nepi our General Manager in Europe to address your specific questions about ALD. Giacomo. Operator Giacomo connected?

Giacomo Di Nepi

Hello. Thank you Dan and thank you Brian for your question. For two parts first of all, IPF does not need to be recognized as (inaudible) because basically (inaudible) has 30 diseases that enter and then a [catch hold] category in which there are other diseases that [respect] three criteria.

One that the disease is long, second that the disease is expensive, it requires an expensive treatment and third, that it has a certain risk in terms of the either mortality or handicap of the patient. So these are the criteria. In fact, there has been debate sometime ago in France I think it was a couple of years ago, whether to make a special category for orphan disease within their (inaudible) and it was decided not to do it because there was this catch hold category that was already working for that.

So in part IPF will not be recognized a disease entering (inaudible) because it is already in this catch hold category that is explicitly also in the best debate being recognized as a natural recipient for number of our orphan track. In terms of process, it is relatively well known process in France. There are 8 million French citizens that are in the ALD program which is about 13% of the population even more if you look at the population over 65 years of this 8 million French citizens indeed are about 5 million that are aged more than 65 which divided by population over 65 in France which is about 8 million is close to 25%.

So about one French out of four is already in the scheme and as of this we imagined that already, some of the IPF patients would be already there. In terms of practicality being a process that is spurting into so many French of course the doctors have used in practice basically there is if a patient is not already in the scheme of Affection de Longue Duree or another disease, he is either the [ESGP] or the pulmonologist can make a request for the ALD in a very specific form which is quite easy and well known and usually within three to four weeks the Sécurité Sociale proves it and then the patient is enrolled. So in a way it is a scheme that is quite used in France; the doctors know it very well and IPF will fit perfectly into the categories that are pertaining to it.

Brian Abrahams - Wells Fargo Securities

Are there any co-pays?

Giacomo Di Nepi

No, there are no co-pays. This reimburses for 100% of medicines, visits, diagnostics, auxiliary equipment and so on and so forth.

Brian Abrahams - Wells Fargo Securities

Thanks Giacomo that’s very helpful and just one quick follow-up, in these initial pricing negotiations, have you established any parameters for future price volume relationship; is there a sliding scale here that we should be thinking about in future years if you hit certain set points for volume or sales? Thanks.

Dan Welch

No, there is no price volume relationship agreement at this time. In the future there could be, just because these things do come into play over a drug’s life in France, but at this time, there is no price-volume relationship whereby price decreases as volume increases.

Operator

And the next question comes from the line of Ritu Baral with Canaccord. Please proceed.

Ritu Baral - Canaccord

Hi guys, thanks for taking the question and congratulations on getting this through and the price as well. My question is on the referral network that you guys spoke off. Can you give us sort the historical timing of how the PH communities and MS communities set up these referral network and sort of what goes into them, who are the different parties and how they connect?

Dan Welch

Hi Ritu, It’s Dan, thanks for your comments on the price. I am going also move this to Giacomo to describe in broad terms how these referral networks were developed and also Giacomo you can maybe touch upon the concept that of course it takes some time to develop these and implement these; Giacomo?

Giacomo Di Nepi

Of course; thank you Ritu and thanks for your question. The referral networks are basically a sort of leading mechanism and we basically foresee three of four types of initiatives in order to create them. The first of course is going to be the responsibilization of the rep that at the beginning it would be reponsibilized, the lack in Germany for calling Tier 1 and Tier 2 centers that will be also responsible for mapping the network in his or her own territory and driving referrals.

The second mechanism would be an organization of the medical education program in the different regions and in the territory in order to spread the news of the treatment and facilitate the referral to the centers.

Third, there are already existing networks that are quite formalized, for example in the regional of Grenoble, in the region of [Lyon] and the world this network don't exist which is basically a sort of network that the doctor recognize each other and know that the patient need to be sent to certain centers, we will facilitate the support of this clinician with specific needs; it could be a common diagnostic type and so on and so forth.

And finally, I would say, although [DVC] is not allowed in France like in many European countries, we will certainly seek the support from the latest, the internet, the patient associations etcetera to increase the patients awareness of the treatment and of the sites where the treatment is provided.

Ritu Baral - Canaccord

And a quick follow up question; how is triple therapy currently used in France, was it historically used as much in Germany?

Giacomo Di Nepi

France is different, but France is by traditional it’s a bit of (inaudible) country. There has been a survey that has been recently done by the National Reference Center; it has been done between November of last year and February of this year, we sponsored it.

And it came out that it’s a bit different Germany; we have currently 27% of patients that are on corticosteroids; 18% of that either on triple therapy or double therapy, so corticosteroids and immunosuppressant; 8% on NAC monotherapy; 10% other treatments based on both (inaudible) so on and so forth; 9% are on trials and the 28% receives no-pharmacological treatment.

So in a way I would say triple therapy is less used than Germany, certainly less used to what used to be in Germany before the publication of part of the PANTHER Study that was interrupted and there is a higher portion of patients not treated.

Operator

Our next question comes from the line of Katherine Xu, [William Blair] Private Investor. Please proceed.

Katherine Xu - William Blair

Yeah, this is Katherine with William Blair. So, Giacomo you just said the survey, was that a moderate population or is the total IPF population?

Giacomo Di Nepi

Katherine hi, it was on the total population.

Katherine Xu - William Blair

And then my next question is for ASCEND, are you still confident about completing enrollments by year-end?

Dan Welch

I will take the question Giacomo, yes, we are confident to complete the enrollment; our guidance is around the year-end.

Katherine Xu - William Blair

And then Dan from last quarter’s to now and few months have passed any new observations on the discontinuation rate in Germany?

Dan Welch

Our policy is not to comment in term intra-quarter on the progress of the business particularly in a given country, so we don’t have anything more to say on that. We will of course give some color on that when we report our quarterly results probably in early November.

Katherine Xu - William Blair

And lastly with regard to the incidence as for the prevalence of IPF patients and also the moderate, a lot moderate IPF and then further to your own label IPF patients; could you just give us some color on how you came to those numbers?

Dan Welch

Yeah, maybe I will ask Giacomo to walk us through the numbers, how we developed them and how we go to the number that was coherent with the transparency committee’s numbers as well.

Giacomo Di Nepi

Sure Katherine; we calculated using the same range of prevalence 16.5 to 22 that we use also for Germany in total population of 10,000 to 14,000 IPF patients in France. Of this, we estimate that approximately 6,600 to 10,000 have might to moderate IPF.

Now when we make the moderate we do it on ABC; it’s included LCO, the LCO as you know is a parameter that’s a bit variable so we shed about 10% to 20% from this and this is how we arrived to the 6,000 to 8,000 patients that we indicated.

By the way this is also consistent we the estimate that was done by the Commission de Transparence who estimated 7,700 patients meeting that criteria. So this is a bit a way we went through the map. In terms of the incidence, we expect light to moderate incidence of patients in France roughly between 1,500 and 2,500 per year.

Operator

Our next question comes from the line of Michael Yee with RBC Capital Markets. Please proceed.

Michael Yee - RBC Capital Markets

So thinking about the sort of launch and the commercialization of France versus Germany, you noted that the distribution of patients was a little bit different and also there aren’t any NPP patients really in France, so how should we think about the sort of trajectory, the curve versus Germany should be a little bit more conservative because of those dynamics?

And the second part of that is, you previously quoted awareness statistics, precision awareness of Esbriet etcetera. I recall that I think that just broadly in Europe coming out of US conference etcetera. Can you be more specific about sort of what you think the awareness is of the drug in France is versus sort of other countries?

Dan Welch

Sure Michael I will take the first part of the question and then I will ask Giacomo to speak to the awareness figures that we may or may not have for France specifically. So a couple of things to keep in mind, when we launched in Germany we had how many NPP?

Giacomo Di Nepi

172 prior to commercialization.

Dan Welch

172 prior to commercialization so you should certainly think about that and that would be different and it will be interesting to see how the first year end unfolds in France because in Germany we mentioned in the last call that a higher percentage of what we would call severe patients were getting into Esbriet prescription and we know that those patients tend to progress and so they tend to die faster and therefore the discontinued rate would be skewed higher than what we would otherwise see.

In France with these criteria that are more precise in terms of the lower limits of prescription, we expect to and hope to see patients of better profile, patients being put on Esbriet and more appropriate group of patients which we think would translate into better outcomes and lower discontinuation rates. And so there will be kind of a plus-minus in this regard.

We wouldn’t want to give any more guidance than that; I think in general, since a year ago at our Analyst Meeting we have tried to share with the investment community that launches in Europe build consistently quarterly over time and explosive launches don’t happen in terms of trajectories in Europe, it’s almost unheard of.

But big brands are built, so in Germany, in France and Italy, Spain et cetera big brands are built, but they are built month-by-month, quarter-by-quarter over years of time and that is what we should all expect for Esbriet, it will be a very, very important brand in Europe and it will be built month-by-month, quarter-by-quarter, country-by-country, but we should not expect especially for the first product in its class to have a rocket-ship trajectory that would be unrealistic and I think we have been banging this drum now for over a year.

And again to underscore the final point, we are very confident that Esbriet will be a very important drug at peak sales.

Michael Yee - RBC Capital Markets

Okay. And with the difference in NPP as your difference and awareness, I guess may be if you have any numbers on that or thoughts on that?

Giacomo Di Nepi

Yeah, sure Michael thanks for your question. Unfortunately we don’t have yet the awareness numbers for France. We are running -- usually we run just before the launch, a market research that gives us some parameters at let’s say zero level before the launch.

And then we measure these after the launch to see the progress that we are doing and this research is still in course, so unfortunately I have no number that I can share with you. What I can tell you from a more qualitative perspective is that over the last two years, we had every year a symposium in the French National Congress and has being I think the most attended symposium of all the one at (inaudible).

We had standing room modeling in rooms with 300 people, we had 400 attendance and another 100 that couldn't enter. So certainly there is the impression of a very significant interest and a good level of awareness. Of course those are contrary to Germany, we had a management team that has been in place since a while and of course this team has been contacting and communicating and working with the (inaudible) in France and there we had advisory boards and all the other initiatives. So I would say that qualitatively, we feel confident that there is a good level of awareness that quantitatively unfortunately I cannot give a number.

Operator

Our next question comes from the line of Geoff Meacham with JPMorgan. Please proceed.

Geoff Meacham - JPMorgan

You guys mentioned some IPF conferences in France in the fourth quarter that should raise visibility. A couple of questions, does this include academic and community pulmonologists in France and then are there similar disease specific conferences in Germany or Spain or Italy later on this year and I have one follow up.

Dan Welch

Thanks, Geoff so I'll ask Giacomo to answer the question. The way I understood Giacomo was the AIR meeting in France, the attendance and then also other similar AIR meetings in other countries during this year and next.

Giacomo Di Nepi

Yes, our AIR concept advances in IPF research as two component. One that is a pan-European initiative which is dedicated let's say to the top tier of (inaudible) which is ran once a year. Last year it was in Berlin, this year it will be in Rome. And then there are national initiatives which are more aimed at the tier 2 and partly tier 3 pulmonologists which is ran by the KOLs in the country which are of course part of the steering committee and the size of the agenda of this program.

So yes it is aimed let's say to Tier II and selected community pulmonologists. The initiative is of course similar in either countries, so basically it is a sort of modular initiative of course it is governed by the rules of CME, so there is an independent committee that finance the agenda in the topics et cetera and we replicate this also in the other (inaudible).

Geoff Meacham - JPMorgan

And then I am assuming that the 20 reps you talked about then for France and then we are looking forward to Italy and Spain, the commercial organization there is already effective in for the guidance for this year or do you feel like the 20 reps is enough to have a successful launch in France. Obviously in Germany you guys had to raise the number of reps as you progressed through the launch?

Dan Welch

Yeah in Germany we started off deliberately with the sales force that was not its ultimate complete size because we wanted to focus those reps on the fairly high concentration of patients in the so called tier I accounts. Once we felt like we had those covered and established in terms of their awareness and knowledge, we decided to pull the trigger on what was already planned a [subsequent] sales force expansion which happened this month and the reps are now trained and as of may be yesterday are on the street in Germany.

In France, we decided for the reasons we mentioned that because things are more disbursed, doing a two-step program wasn’t the best idea and that we should go with the full [compass] of sales reps from day one and that, that is the full bourse. We are not holding back on the French numbers in terms of field based personnel and we are going at it because we know that it will take some time to develop the market and we are confident that it will be developed.

The SG&A figures that we have will account for additional headcount added in the other countries. Keep in mind it would be for the small number of months that are remaining, whatever number of months that they are on board before the end of the year.

Operator

Our next question comes from the line of Terence Flynn with Goldman Sachs. Please proceed.

Terence Flynn - Goldman Sachs

Just wondering Dan if you can give us any update on your thoughts on top line guidance, given number one the pricing you received, number two, the timing of the December launch? And then the other question I had is can you just remind us of the previous size of the field force in Germany and the new size of the field force? Thanks.

Dan Welch

Sure, I will answer your question about guidance and ask Giacomo to give the numbers on Germany. So because the timing of the French launch is December and things you remember the first months of Esbriet were very pretty modest in terms of revenue. We don’t expect to be and we are not changing our guidance, revenue guidance for Esbriet at this time. It’s come too late in the year to really do that. Giacomo you want to talk about this sale force when it was reinforced.

Giacomo Di Nepi

So in Germany if you want to make a comparison, we started with one sales manager, 15 field personnel that were 13 camps and two contractors and then we don't have any sales that we have medics then travel in the country we had two. And the new size is moving from with two sales managers, 21 field personnel and three medics complementing them.

Terence Flynn - Goldman Sachs

Thank you. So plus, is it plus six or seven Giacomo as sale reps?

Giacomo Di Nepi

Plus six sales reps and one sales manager.

Operator

Our next question comes from line of Matthew Harrison with UBS. Please proceed.

Matthew Harrison - UBS

Can help us out think about the timing of adding the sales reps and the P&L in France, I mean it sounds like we're talking you’re going to go out with offers now and they have a three month period before they can change jobs. So we should really think about P&L impact as being in December or just help us to think about timing there? Thanks and I have follow -up.

Dan Welch

You’ve got right. So if were standing more or less mid-September, the notice period is as long as that and it often is then December is where we would have the increased expense as the result of the sales force may be a little in November but I would say relatively small and the meaningful addition will be in December. Giacomo.

Giacomo Di Nepi

In fact, I mean we plan to try to have them a bit before because for three, four months we couldn’t even reach the December that the good news is that we (inaudible) about 90% of the people, we sent already conditional offers, we checked with the candidates the availability periods so that in most cases it is shorter than the three, four months that I indicated and therefore they will enter in the company have the training program and be ready to go at latest in December and if we can do it before the better.

Matthew Harrison - UBS

Thanks and then just a question on the statistics you gave around how patients are treated in France you said I think it was 29% are not treated, do you have any idea on the reasons behind that because they are too severe or they don’t see a physician or may be you could just give us a little bit more information thanks?

Giacomo Di Nepi

I think that because the reality is that no approved treatment was available and France is quite (inaudible) country. So if [not] approved they try to do but may be because they consider non-treatment is an option.

Dan Welch

In Germany we saw an interesting dynamic that the no-treatment group was quite large at launch and we have seen a steady decrease in no treatment since we launched and the biggest increase in the class of course is Esbriet so among those who are doctors who are non-treaters are now of course they have a drug available and they are using Esbriet. So we expect part of our uptick of market share growth to be from other things but also from the so called no treatment group. So we would expect this no treatment group in France to decrease with overtime as it is doing in Germany.

Operator

Our next question comes from the line of Liisa Bayko with JMP Securities. Please proceed.

Liisa Bayko - JMP Securities

I wanted to just understand a little bit more the 6,000 to 8,000 patients that have identified per the criteria how strict you think that criteria will be in terms of being implemented and might you see migration beyond those 6,000 to 8,000 patients in France?

Dan Welch

I will take the first answer and then to Giacomo. The way it’s set up and the system is very similar to that which Tracleer follows. So there is kind of a committee oversight before prescriptions are made which does put some precision and control over the types of patients that get put on Esbriet.

In many cases we see this as a good thing because we really don’t want to see what we have seen in Germany and that is patients who are too far gone essentially in their last phases of life being tried on Esbriet as sort of last pitch attempt to change the course of their future.

And then they have bad outcome and they discontinue etcetera. So this actually would help us get the right types of patients on medicine. In Germany, we are initiating a number of efforts to educate doctors on what is the right type of medicine and why the more advanced patient is not the right patient. This procedure in France while it is an extra step actually can have unintended benefit for Esbriet and its proper and appropriate use and therefore it’s more successful use and probably durations of therapies that would be longer perhaps than we're seeing in Germany.

And then to what extend where there would be migration around it, [DLCO] and FBC have their degrees of variability so that one day I could be 55% of my predicted and another day I could see 48% and so there will be some wobble around there and same on [DLCO] that's even more variable.

So I expect there will be some wobble around there based upon the variability of the measures. But I don't how much we can kind of count on that or even want that. So Giacomo do you have different view?

Giacomo Di Nepi

No, there is nothing I can add to that. Thanks. Perfect.

Liisa Bayko - JMP Securities

Okay, great. That's helpful. And then to shift gears for a minute obviously the next key country that we are looking at are Spain and Italy, you have now obviously pricing in two important countries France and Germany. How influential are the prices that you said now in sort of guiding your pricing discussion to Spain and Italy?

Dan Welch

Giacomo?

Giacomo Di Nepi

Thank you Liisa. I think that they will have a positive impact on the speed because this is what we've been missing between Spain and Italy, we'd like to see that happening soon and I think always the authorities they take the decision independently but of course the fact that we have reinforcement in two major countries and plus in Sweden which is highly scientific country and in some other mid-size countries. I think that will create, I hope at least that will create further pressure.

And in any case, we maintain our further guidance in which we expect this to proceed somewhere during the fourth quarter of this year.

Liisa Bayko - JMP Securities

And the level of pricing the amount that you have set now France and Germany does that have an impact on the other countries?

Giacomo Di Nepi

That we’ll look at it, we’ll look at the whole spread of prices.

Liisa Bayko - JMP Securities

And just finally Dan on the other countries in which you right now have reimbursements on some of the smaller countries when we can start anticipating some traction in those countries and that’s my final question thanks?

Dan Welch

Yes, we expect to, well, let me start at the beginning, as of about this month of September after the vacation period in Europe, we now have sales representatives and feel that medical people in those mid sized countries and notably Sweden, Austria are couple of the biggest, also some of the other Scandinavian countries, Denmark etcetera. And as of September, we now have feet on street if you will with sales reps, so before now it was mostly medical representation meetings of very top key opinion leaders gaining awareness as we hired the management, as we hired the reps etcetera.

Reps in management now hired in all those territories, the Scandinavian countries, Austria in particular, and we are now putting sales reps in front of customers. So there fore I would expect in the first half of next year we would start to get traction from those countries and the other so called mid sized countries when we reach successful pricing reimbursement the remaining mid sized countries would meaningfully be Belgium and the Netherlands and which combined start to account for meaningful numbers of patients.

Operator

Our next question is a follow-up from the line of Ritu Baral with Canaccord Genuity. Please proceed.

Ritu Baral - Canaccord Genuity

Hi guys thanks for taking the follow-up. Could you give us any more detail on the reorganization of the German effort with just the expansion of the representatives and the sales managers or have you altered how you are calling on the docs, the frequency and the message?

Dan Welch

So I'll take it high level answer; so it’s more of an expansion in Europe and the expansion was planned in fact when we launched a year ago. We planned to have this expansion around this time once we felt that the Tier 1 accounts were well taking care of and we felt that patients were being referred back to their Tier 2 doctors or routed to the community and so this was well planned, well in advance and we implemented this expansion.

Now separate from that is some work we've done on messaging that is important and we've been working on for the last few months and that is educating on the proper selection of patients to make sure that they are mild to moderate in disease and to explain why severe patients are not the best choices for Esbriet and also to describe and educate on management of side effects.

Side effects for Esbriet are quite manageable if the doctor and the patient understand what they look for how to manage them and so that has to do with then increasing the duration of therapy and which obviously has great benefits to revenue and great benefits for the patients. So those are the main message or promotional differences or point of emphasis separate and apart from, but coincident in timing with the sales force expansion. That answers your question?

Ritu Baral - Canaccord Genuity

Yes, and just going back to how that might sort of filter through to France; what do you see sort of frequency of visits that IPF patients in France might see their treating physicians whether it’s the community pulmonologist and how often they might see sort of the Tier 1 or Tier 2 doctors; (inaudible) you guys had posters or profiling to make sure the pretty high referral rate like 75% referral rate to the reference center or the [competence] care center?

Dan Welch

So Giacomo I will ask you to handle that question; I do know across Europe we have seen a remarkably consistent pattern that IPF patients see their doctors every three or four months if they are otherwise kind of “stable or not having emergency” but as of the 75% figure and such I will ask Giacomo to address that.

Giacomo Di Nepi

Yeah, I would say in terms of timing is like – I would say that France is very similar to the rest of Europe, three to four months, can you please repeat the question on the 75%?

Ritu Baral - Canaccord Genuity

On the poster that you guys had at ERS the survey on 1,244 pulmonologist in France there is a one in the chart notes that 74% of the participating pulmonologist refer their patients to the reference center or competence center; that was the figure?

Giacomo Di Nepi

Yes, now I remember; this shows that at certain point they referred the patient, so may be towards the initial diagnosis, driving the CT scan or may be to send a patient for a biopsy or having validation to meet that I mean in reality score validation committee that is in reality the implementation of what the guidelines are saying that to have a pulmonologist and radiologist and anatomopathologist whenever if necessary to make the diagnosis.

So in France there is a relative osmosis of patients and whenever the doctor feels appropriate they send them to bigger center, be it a reference center or competence centers or a large hospital to make sure that the diagnosis, the treatment is completed. That’s why we are quite confident that either there are existing network or we can build them, because we know that the territories fertile this collaboration is part of the national reference system in France.

Operator

And I am showing no further questions at this time.

Dan Welch

Thank you, operator and thank you everyone for joining us today. In summary, we are really pleased with our progress in bringing Esbriet to IPF patients across Europe. Esbriet will soon be launched in the two largest pharma markets in Europe, notably Germany and France and our pricing and reimbursement discussions remain on-track in the top five and midsized countries.

While Europe today is a very challenging environment for all pharma companies, we believe that the early and successful negotiation of a strong price in Germany, the top five status of the Esbriet launch in Germany, the favorable conclusion of discussions in France on the price of Esbriet and steady progress we are making in other European countries all reinforce our belief that Esbriet will become an important drug in the treatment of IPF in Europe.

Thank you for joining us today. We look forward to speaking with you on the next conference call. Good bye.

Operator

Ladies and gentlemen, this concludes the conference the conference call. We thank you for your participation and ask you to please disconnect your line.

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