Biotech Values

[ghmm]

Nice article on the Roche/InterMune deal with some info on HCV. Don't recall what I guessed in the quiz but I don't think I expected a 90% chance of cure in HCV! Will try to update readme in the next couple days

http://www.insidebayarea.com/portlet/article/html/fragments/print_article.jsp?articleId=4535372&...

InterMune virus fighters attract Swiss drug giant
By David Morrill I Business Writer
Inside Bay Area
Article Last Updated:10/23/2006 07:22:58 AM PDT
BRISBANE

ROCHE is known for making great decisions with its investments and strategic alliances. So when executives at the Switzerland-based health care giant called executives of Brisbane-based InterMune Inc., they listened.

The biotech company has been working on a protease inhibitor program that targets hepatitis C (HCV), and Roche was interested.

More than a year later, those talks paid off last week when Roche said it would pay InterMune $60 million upfront, and potentially $470 million more to collaborate on the protease program.

"They are the world leader in drugs and clinical development, so the prospects of working with them is enormous," said Dan Welch, president and chief executive of InterMune. "It's definitely much better to work with them than have to later compete against them."

Roche conducts antiviral research at its Palo Alto campus, which is the division that will work with InterMune.

The centerpiece of the program is a candidate called ITMN-191. Even though it hasn't begun clinical trials yet, good readings of its potency at the test-tube level have given both companies confidence that it will translate well into human results. A protease inhibitor keeps the body from replicating viruses in the body.

InterMune will carry the

DRUGSIBusiness 2inhibitor through Phase I, and then Roche will help with its expertise in subsequent phases, said Nick Cammack, who heads Roche's virology group in Palo Alto.

"For me as the virology head, it's just a fantastic deal, and we can't wait to get going with them," Cammack said. "We are just going to assist where we can as it goes through Phase I, and hopefully work with them more if it comes out the other end (as an approved drug)."

It's not the first time Roche has pursued a Bay Area biotech company.

In 1990, Roche saw potential in a South San Francisco-based biotech company that made its mark in cancer studies. Roche spent $2.1 billion to have a controlling interest in it. That company was Genentech Inc., which today is the world leader in cancer product sales.

With InterMune, Roche couldn't resist the opportunity to get into a protease program because it's a complimentary fit to its other virology areas.

Because InterMune already has expertise in the protease program, Roche felt a partnership made more sense than an acquisition.

"We don't go around swallowing people up, because we're not arrogant to think we know best," Cammack said. "It would be insulting for us to tell InterMune what to do when they know this molecule in their sleep."

Said Welch: "This deal may not allow us to become the size of Genentech, but directionally I hope we will be able to advance our science like they have."

Analysts say that Roche's confidence in InterMune's protease program is clear because it is willing to share the profits 50-50 if any of the drug candidates ever make it to market.

"HCV is a huge chronic market opportunity that pharmaceutical companies like Roche are salivating to try to get at, so I'm not surprised with the deal at all," said John McCamant, editor of Berkeley-based Medical Technology Newsletter.

Although not as widespread as cancer, hepatitis C presents a solid market opportunity to Roche and InterMune.

The global hepatitis C market is expected to grow from $2.2 billion in 2005 to $4.4 billion in 2010 and $8.8 billion in 2015, according to LeadDiscovery, a U.K.-based life sciences firm.

"About 1.8 percent of the population is infected with HCV," said Larry Blatt, chief scientific officer of InterMune. "What that means is if you know 100 people, that means you probably know two that have HCV."

Worldwide, about 170 million people are infected with hepatitis C, according to the World Health Organization. Other protease inhibitors targeted at hepatitis C could reach the market before InterMune's. Vertex Pharmaceuticals Inc. has one called Telaprevir that is currently in Phase II clinical trials. In June, Vertex announced a deal with Johnson & Johnson's Janssen Pharmaceutica N.V. to collaborate on Telaprevir.

Still, even if ITMN-191 is not first to market, InterMune believes its candidate has the potential to be the "best of class." The hope is that trials will show that ITMN-191 can be effective taken in 12-hour intervals instead of eight, is more potent and has fewer side effects.

If the clinical trial process and subsequent approval process run smoothly, Cammack hopes that ITMN-191 could make it to market in six years. In the meantime, just in case it fails, Roche and InterMune will be looking for other molecules that could be effective against hepatitis C as well.

"What's exciting for this field is that if some, or any, of these molecules make it, we will one day be able to tell any patient that if you take this combination, you'll be completely cleared of the virus with a 90 percent success rate," Cammack said.

Shareholders have shown confidence as well as InterMune's stock has jumped more than 30 percent since the deal was announced.

InterMune was established by Palo Alto-based biopharmaceutical company Connetics Corp. to develop Actimmune, a stimulator of the human immune system licensed from Genentech.

Connetics spun off InterMune in 1999. Along with the spinoff, InterMune received exclusive U.S. product rights for Actimmune, which brought in $107.6 million in revenues in 2005.

When Welch joined the company as CEO in 2003, it was focused in five areas. Over the last three years, it stopped investing in the areas of cancer, autoimmune disease and infectious disease, and instead centered its attention on the two it currently targets, pulmonology (lungs) and hepatology (liver).

"We are now a fairly well integrated small biotech company at this stage with about 200 employees and a $700 million market cap on Nasdaq," Welch said. "We're excited about the opportunities we have."

Not only will the Roche deal bolster InterMune's hepatology division, but the upfront money will help push through drug candidates in the pulmonology division as well.

One development program, called Inspire, is in its Phase III clinical trial. It targets treatment of patients with a deadly lung disease called idiopathic pulmonary fibrosis and hopes to extend a person's survival.

Its second program, called Capacity, targets the same disease, but improves lung function. This program completed its Phase II trial in 2005 and started a Phase III trial in April.

Because the cause of this disease is unknown, and it only infects about 83,000 people in the United States, most pharmaceutical companies have backed away from working on products targeted at this area. The financial potential of treating other diseases could be more lucrative.

"It's not the garden variety diseases like hypertension or asthma, but rather much more focused to a smaller patient group," Welch said. "But for a biotech company like us, trying to help this huge unmet medical need is something we feel we can do."

Business Writer David Morrill can be reached at [phone] and [e-mail].