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InterMune Inc. Reports Operating Results (10-Q)

August 07, 2009 | About:
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InterMune Inc. (ITMN) filed Quarterly Report for the period ended 2009-06-30.

InterMune Pharmaceuticals Inc. develops and commercializes innovative products for the treatment of serious pulmonary and infectious diseases and congenital disorders. The company markets ACTIMMUNE for chronic granulomatous disease and osteopetrosis. The company has active development programs underway for the other disease areas several of which are in mid-or advanced-stage human testing known as clinical trials. InterMune Inc. has a market cap of $678.5 million; its shares were traded at around $14.73 with and P/S ratio of 14.1.

Highlight of Business Operations:

Total revenue was $7.9 million and $8.1 million for the three-month periods ended June 30, 2009 and 2008, respectively, representing a decrease of 2%. This decrease was attributable to a slight decline in sales of Actimmune of approximately $0.2 million. Total revenue was $14.8 million and $17.4 million for the six-month periods ended June 30, 2009 and 2008, respectively, representing a decrease of 15%. This decrease was attributable to a decrease in sales of Actimmune of approximately $2.6 million, or 17%. In early March 2007, we announced that our Phase III INSPIRE program for Actimmune in IPF had been discontinued and that future Actimmune revenue was expected to decline. For the three- and six-month periods ended June 30, 2009 and 2008, sales of Actimmune accounted for all of our net product revenue. A majority of this revenue was derived from physicians’ prescriptions for the off-label use of Actimmune in the treatment of IPF.

Cost of goods sold included product manufacturing costs, royalties and distribution costs. Cost of goods sold were $1.9 million and $2.5 million for the three-month periods ended June 30, 2009 and 2008, respectively. The gross margin percentage for our products was 74% and 66% for these periods in 2009 and 2008, respectively. During the second quarter of 2008, we recorded a $0.7 million charge for excess inventory to reflect our decision during the latter part of that quarter to ship only current dated product that had recently been received from Boehringer Ingelheim (“BI”) under the new supply agreement. For the six months ended June 30, 2009, cost of goods sold were $4.7 million compared with $5.9 million for the same period last year. The gross margin percentage for our products was 64% and 63% for these periods in 2009 and 2008, respectively. The decline in dollar value of cost of goods sold for the three- and six-months ended June 30, 2009 compared to the same periods last year reflects the declining Actimmune revenue.

Research and development expenses were $22.9 million and $25.4 million for the three-month periods ended June 30, 2009 and 2008, respectively, representing a decrease of $2.5 million or 10%. Research and development expenses were $47.4 million and $52.4 million for the six-month periods ended June 30, 2009 and 2008, respectively, representing a decrease of $5.1 million or 10%. The decreases in spending for the three- and six-month periods ended June 30, 2009 compared with the same periods in 2008 primarily reflect the completion of the CAPACITY clinical trials late in 2008 and the amendment to the Roche collaboration agreement entered into in November 2008 whereby Roche funds certain of our research activities.

General and administrative expenses were $8.5 million for the three-month period ended June 30, 2009 compared with $7.1 million for the three-month period ended June 30, 2008. For the six-month periods ended June 30, 2009 and 2008, general and administrative expenses were $17.0 million and $14.5 million, respectively, representing an increase of $2.5 million, or 17%. The increased spending for the three- and six-month periods ended June 30, 2009 compared with the same periods in 2008 can be attributed to costs related to preparation for the anticipated commercialization of pirfenidone. In 2009, including stock-based compensation under SFAS 123(R), we expect general and administrative expenses to be in a range of $35.0 million to $40.0 million, which includes up to $5.0 million for the above mentioned expenses.

Interest expense decreased to $2.5 million in the second quarter of 2009 compared with $3.7 million for the second quarter of 2008 and decreased to $5.2 million for the six-months ended June 30, 2009 compared with $7.1 million for the comparable period in 2008. Each period reflects interest expense recorded in connection with our liability under the government settlement reached in October 2006. Interest expense for each of the reported periods in 2008 also includes interest on our $170.0 million 0.25% convertible notes due in March 2011 (the “2011 Notes”), including the amortization of related debt issuance costs. On June 24, 2008, we issued $85.0 million in aggregate principal amount of 5.00% Convertible Senior Notes due 2015 (the “2015 Notes”) to certain holders of our existing 2011 Notes in exchange for $85.0 million in aggregate principal amount of their 2011 Notes.

Cash used in operating activities was $81.3 million during the six-month period ended June 30, 2009, comprised primarily of a net loss of $78.7 million. Changes in working capital consisted of an increase in accounts payable and accrued compensation of approximately $0.7 million, offset by a decrease to other accrued liabilities of $9.9 million, primarily consisting of a $4.4 million accelerated payment we made to the Department of Justice in March 2009. Other working capital changes included increases to accounts receivable and inventories of approximately $3.5 million and $2.1 million, respectively. Details concerning the loss from operations can be found above in this Report under the heading “Results of Operations.”

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