InterMune Inc. (ITMN) posted third-quarter loss per share of 44 cents, wider than the year-ago loss per share of 19 cents, but narrower than the Zacks Consensus Estimate of a loss per share of 50 cents. Decreased revenues resulted in the earnings shortfall.
Quarterly Details
Third quarter total revenue of $5.7 million was slightly below the Zacks Consensus Estimate of $6 million. However, revenues plummeted 378.9% from the year-ago quarter revenue of $27.3 million. The sharp decline was mainly due to the inclusion of a $20.0 million milestone payment received during the third quarter of 2009. The payment was received from Roche Holdings Ltd. (RHHBY) for the initiation of a phase IIb trial of danoprevir in patients chronically infected with the hepatitis C virus (HCV).
During the reported quarter, research and development (R&D) expenses declined 24% to $15.6 million. The decrease was the result of the completion of CAPACITY trials of pirfenidone in 2009 and the timing of danoprevir clinical trials.
General and administrative (G&A) expenses increased 10% to $10.9 million. The increase was primarily due to commercialization costs associated with the potential launch of pirfenidone (Esbriet; for idiopathic pulmonary fibrosis).
Fiscal 2010 Outlook
For fiscal 2010, InterMune expects R&D expenses to lie between $65 million and $70 million, down from the previous guidance range of $80 million to $90 million. The company tightened its guidance for G&A expenses. The expenses are anticipated to range from $45 million to $50 million as opposed to the earlier range of $40 million to $50 million.
InterMune did not come up with a revenue outlook for 2010 as the accounting treatment of the deal through which InterMune sold the global development and commercialization rights for danoprevir to Roche, in October, has not been finalized.
Our Take
We currently have a Neutral recommendation on InterMune, which is supported by a Zacks #3 Rank (short-term Hold rating). We believe that InterMune’s decision to sell the rights to danoprevir will provide it with the much needed cash that can be utilized for the development and commercialization of pirfenidone. The candidate is currently under review in Europe, with approval expected in the first half of 2011. However, in the US, pirfenidone received a complete response letter from the US Food and Drug Administration in May 2010, asking the company to conduct an additional efficacy trial for the drug.
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