ANN M. THAYER
For most biotechnology companies, the endgame after a decade or more of R&D is the launch of a major product and then profitability. InterMune, only three-and-a-half years old, already has three biopharmaceuticals on the market and anticipates over $100 million in revenues this year. If events continue to fall in place, the company could have nearly $400 million in revenues and be profitable by 2005.
InterMune was founded on a unique strategy to increase shareholder value through the acquisition and commercialization of marketed products. It has in-licensed products that were not strategic fits at larger biotech or drug firms and is using the revenues from these to build its operations. Partners provide manufacturing capabilities.
"We wanted to build a company starting in the commercial areas, such as sales and medical support for sales," explains W. Scott Harkonen, president, chief executive officer, and chairman. "Next we added a clinical pipeline and then--and only then--more research functions and early-stage development components.
"In some ways, we've built the company in reverse order," Harkonen notes. "For example, we just conducted our first in-house experiment about two months ago."
InterMune's pedigree links it to biotech industry leader Genentech. In 1998, Connetics, itself a Genentech spin-off that focuses on dermatology, got the rights to a minor Genentech drug, a form of interferon gamma-1b called Actimmune. Connetics soon realized that Actimmune didn't fit its strategy and created a subsidiary to develop it. In April 1999, Connetics spun off the subsidiary as InterMune.
Besides Actimmune, InterMune has licensed Amgen's Infergen (interferon alfacon-1), which is used to treat hepatitis C, and the antibiotic Amphotec (amphotericin B cholesteryl sulfate complex) from Alza. In an unusual twist on the typical biotech deal with a larger company, the smaller InterMune paid up-front licensing fees and now makes, rather than receives, payments for development milestones and royalties.
ALONG WITH steadily growing revenues, InterMune had about $343 million in cash and short-term assets as of Sept. 30. It took advantage of the surge in biotech stocks in 2000 and went public after only 11 months of operation. Recently, InterMune's stock has been trading around $37 per share, giving it a market capitalization of $1.17 billion.
PHASE III InterMune is testing oritavancin, a second-generation glycopeptide antibiotic, against gram-positive infections. INTERMUNE PHOTO
With the available capital, InterMune has been supporting its drug development efforts, in-licensing more products, and funding drug discovery collaborations. It has partnerships with Maxygen, Protein Design Labs, MoliChem Medicines, Mondobiotech, Inhale Therapeutics, and Array BioPharma to develop new drugs or next-generation versions of its existing products.
Harkonen believes InterMune has a strong late-stage pipeline. It includes oritavancin, a second-generation version of the antibiotic vancomycin licensed from Eli Lilly and now in Phase III trials. The company also is studying Actimmune against idiopathic pulmonary fibrosis (IPF), ovarian cancer, and liver fibrosis; oritavancin against gram-positive infections; and a PEGylated form of Infergen for chronic hepatitis C infections.
InterMune now is primarily interested in finding earlier stage drug candidates, Harkonen says. These are less expensive to acquire, and the market for them is less competitive than it is for more advanced products.
"Our five-year goal is to have $1 billion in revenues," Harkonen explains. "But during that five years we also want to be bringing in new products, getting them into the clinic, and keeping our pipeline full for the years to come."
Actimmune has been the key to InterMune's rapid growth. Approved for treating two very rare diseases, it contributed only about $4 million in annual sales at Genentech. However, the late-1999 results of an independent study on IPF--a deadly lung condition that affects about 50,000 people in the U.S.--suggested that the drug might help. Since it was already approved, physicians began writing "off-label" prescriptions; sales jumped to $11.2 million in 2000 and $36.3 million in 2001, and they are expected to approach $100 million this year.
Infergen and Amphotec together will bring in only another $8 million to $10 million this year, analysts predict. InterMune actually relaunched Infergen in January. Amgen had stopped selling it because Schering AG had come to dominate the hepatitis C market with its ribavirin/interferon-alpha combination. InterMune is now testing what it believes may be a more effective combination of Infergen and ribavirin.
Thus InterMune's Infergen sales could rise to nearly $60 million by 2005 and possibly reach a maximum of $100 million, according to Morgan Stanley analysts. By 2005, the company also is expected to launch oritavancin, with peak sales of about $500 million.
However, Actimmune has the potential to be a $1 billion product, depending on the success of recent clinical trials, additional studies, and the Food & Drug Administration's reaction. Recently, the company has been presenting Phase III data on Actimmune against IPF. While the study did not meet the primary endpoint of disease-progression-free survival, a 70% decrease in mortality was seen in a subset of mild to moderately ill patients.
It's uncertain whether these results will be enough to convince FDA to approve the drug; InterMune is scheduled to meet with the agency in December. If Actimmune is approved, InterMune would be able to market it as the only available IPF treatment. Even if it's not approved, the results may be encouraging enough to boost off-label sales to $400 million to $500 million per year.
"Regardless of the success of Actimmune in IPF," write analysts Martin D. Auster and Kelly E. Stoehs at SunTrust Robinson Humphrey, "we believe InterMune possesses the financial wherewithal to continue financing the sales efforts of its existing products and to pursue its pipeline projects to completion."