InterMune Inc. (ITMN, Financial) filed Quarterly Report for the period ended 2009-03-31.
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 $537.3 million; its shares were traded at around $12.39 with and P/S ratio of 11.2.
Interest expense decreased to $2.7 million in the first quarter of 2009 compared with the $3.4 million for the first quarter of 2008 Each period reflects interest expense recorded in connection with our liability under the government settlement reached in October 2006. Interest expense in 2008 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.
The primary objective of our investment activities is to preserve principal while at the same time maximize yields without significantly increasing risk. To achieve this objective, we invest our excess cash in debt instruments of the U.S. federal and state governments and their agencies and high-quality corporate issuers, and, by policy, restrict our exposure by imposing concentration limits and credit worthiness requirements for all corporate issuers. At March 31, 2009, we held approximately $17.5 million of student loan auction rate securities (par value of $18.0 million), classified as long-term assets, and an additional $3.0 million valued at par and classified as current, which are substantially backed by the federal government. Beginning in February 2008, auctions failed for the entire portfolio of our auction rate securities and have continued to fail since. As a result, our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be limited or not exist. During the fourth quarter of 2008, we recorded an impairment charge of $3.5 million for the writedown of the carrying value of these securities as we believe the decline in market value is other-than-temporary in nature given the deteriorating credit and financial markets and specifically the auction rate securities market. All of our auction rate securities are currently rated AAA, the highest rating by a rating agency. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may in the future be required to record further impairment charges on these investments. Based on our expected operating cash flows, and our other sources of cash, including proceeds from our February 2009 public offering, and the recently announced results from our CAPACITY trials, we currently anticipate the need to liquidate these investments prior to maturity or estimated time to recovery in order to execute our current business plans. These investments were recorded at fair value as of March 31, 2009 based on a discounted cash flow analysis. In April 2009, one of our auction rate securities with an aggregate fair value of $3.0 million was redeemed at par value.
Cash used in operating activities was $50.6 million during the three-month period ended March 31, 2009, comprised primarily of a net loss of $42.0 million and a decrease in other accrued liabilities of $10.0 million. This use of cash was partially offset by increases in accounts payable and accrued compensation of $2.9 million. The increase in accounts payable reflects the growth in our payable to Roche under the collaboration agreement. The decrease in other accrued liabilities partially reflects an accelerated payment of $4.4 million made to the U.S. Department of Justice in March 2009. Details concerning the loss from operations can be found above in this Report under the heading Results of Operations.
As a result, we have recorded additional interest expense of $1.5 million, or $0.04 per share, in the three-months ended March 31, 2009. The adoption requires retrospective application, therefore, our previously reported net loss for the three-months ended March 31, 2008 has been adjusted to reflect additional interest expense of $2.8 million, or $0.07 per share. The decrease in interest expense for the first quarter of 2009 compared to the same period in 2008 reflects the June 2008 issuance of the 2015 Notes in exchange for the 2011 Notes. The 2015 Notes may not be settled in cash upon conversion at the option of the issuer and thus do not fall under the requirements of FSP APB 14-1. The retrospective adoption of FSP APB 14-1 decreased the debt issuance costs included in other assets by an aggregate of $0.4 million, decreased convertible senior notes included in long-term liabilities by $14.9 million, and decreased total stockholders deficit by $14.5 million after a charge of $44.0 million to accumulated deficit on our condensed consolidated balance sheet as of December 31, 2008.
At March 31, 2009, we held approximately $17.5 million of student loan auction rate securities (par value of $18.0 million), classified as long-term assets, and an additional $3.0 million valued at par and classified as current, which are substantially backed by the federal government. Beginning in February 2008, auctions failed for the entire portfolio of our auction rate securities and have continued to fail since. As a result our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be limited or not exist. An auction failure means that the parties wishing to sell securities could not. All of our auction rate securities are currently rated AAA, the highest rating by a rating agency. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may in the future be required to record further impairment charges on these investments. Based on our expected operating cash flows, and our other sources of cash, including proceeds from our February 2009 public offering, and the recently announced results from our CAPACITY trials, we currently anticipate the need to liquidate these investments prior to maturity or estimated time to recovery in order to execute our current business plans. These investments were recorded at fair value as of March 31, 2009 based on a discounted cash flow analysis. The assumptions used in preparing the discounted cash flow model include estimates of, based on data available as of March 31, 2009, interest rates, timing and amount of cash flows, credit and liquidity premiums, and expected holding periods of these securities. Given the current market environment, these assumptions are volatile and subject to change, which could result in significant changes to the fair value of these securities in future periods. We used seven years as the expected holding period. In April 2009, one of our auction rate securities with an aggregate fair value of $3.0 million was redeemed at par value.
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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 $537.3 million; its shares were traded at around $12.39 with and P/S ratio of 11.2.
Highlight of Business Operations:
General and administrative expenses were $8.5 million for the three-month period ended March 31, 2009 and $7.5 million for the same period in 2008, an increase of $1.0 million, or 14%. This increase is primarily attributed to legal expenses in connection with the lawsuits filed against the company earlier in 2008 and preparation costs related to 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 $10.0 million for the above mentioned expenses.Interest expense decreased to $2.7 million in the first quarter of 2009 compared with the $3.4 million for the first quarter of 2008 Each period reflects interest expense recorded in connection with our liability under the government settlement reached in October 2006. Interest expense in 2008 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.
The primary objective of our investment activities is to preserve principal while at the same time maximize yields without significantly increasing risk. To achieve this objective, we invest our excess cash in debt instruments of the U.S. federal and state governments and their agencies and high-quality corporate issuers, and, by policy, restrict our exposure by imposing concentration limits and credit worthiness requirements for all corporate issuers. At March 31, 2009, we held approximately $17.5 million of student loan auction rate securities (par value of $18.0 million), classified as long-term assets, and an additional $3.0 million valued at par and classified as current, which are substantially backed by the federal government. Beginning in February 2008, auctions failed for the entire portfolio of our auction rate securities and have continued to fail since. As a result, our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be limited or not exist. During the fourth quarter of 2008, we recorded an impairment charge of $3.5 million for the writedown of the carrying value of these securities as we believe the decline in market value is other-than-temporary in nature given the deteriorating credit and financial markets and specifically the auction rate securities market. All of our auction rate securities are currently rated AAA, the highest rating by a rating agency. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may in the future be required to record further impairment charges on these investments. Based on our expected operating cash flows, and our other sources of cash, including proceeds from our February 2009 public offering, and the recently announced results from our CAPACITY trials, we currently anticipate the need to liquidate these investments prior to maturity or estimated time to recovery in order to execute our current business plans. These investments were recorded at fair value as of March 31, 2009 based on a discounted cash flow analysis. In April 2009, one of our auction rate securities with an aggregate fair value of $3.0 million was redeemed at par value.
Cash used in operating activities was $50.6 million during the three-month period ended March 31, 2009, comprised primarily of a net loss of $42.0 million and a decrease in other accrued liabilities of $10.0 million. This use of cash was partially offset by increases in accounts payable and accrued compensation of $2.9 million. The increase in accounts payable reflects the growth in our payable to Roche under the collaboration agreement. The decrease in other accrued liabilities partially reflects an accelerated payment of $4.4 million made to the U.S. Department of Justice in March 2009. Details concerning the loss from operations can be found above in this Report under the heading Results of Operations.
As a result, we have recorded additional interest expense of $1.5 million, or $0.04 per share, in the three-months ended March 31, 2009. The adoption requires retrospective application, therefore, our previously reported net loss for the three-months ended March 31, 2008 has been adjusted to reflect additional interest expense of $2.8 million, or $0.07 per share. The decrease in interest expense for the first quarter of 2009 compared to the same period in 2008 reflects the June 2008 issuance of the 2015 Notes in exchange for the 2011 Notes. The 2015 Notes may not be settled in cash upon conversion at the option of the issuer and thus do not fall under the requirements of FSP APB 14-1. The retrospective adoption of FSP APB 14-1 decreased the debt issuance costs included in other assets by an aggregate of $0.4 million, decreased convertible senior notes included in long-term liabilities by $14.9 million, and decreased total stockholders deficit by $14.5 million after a charge of $44.0 million to accumulated deficit on our condensed consolidated balance sheet as of December 31, 2008.
At March 31, 2009, we held approximately $17.5 million of student loan auction rate securities (par value of $18.0 million), classified as long-term assets, and an additional $3.0 million valued at par and classified as current, which are substantially backed by the federal government. Beginning in February 2008, auctions failed for the entire portfolio of our auction rate securities and have continued to fail since. As a result our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be limited or not exist. An auction failure means that the parties wishing to sell securities could not. All of our auction rate securities are currently rated AAA, the highest rating by a rating agency. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may in the future be required to record further impairment charges on these investments. Based on our expected operating cash flows, and our other sources of cash, including proceeds from our February 2009 public offering, and the recently announced results from our CAPACITY trials, we currently anticipate the need to liquidate these investments prior to maturity or estimated time to recovery in order to execute our current business plans. These investments were recorded at fair value as of March 31, 2009 based on a discounted cash flow analysis. The assumptions used in preparing the discounted cash flow model include estimates of, based on data available as of March 31, 2009, interest rates, timing and amount of cash flows, credit and liquidity premiums, and expected holding periods of these securities. Given the current market environment, these assumptions are volatile and subject to change, which could result in significant changes to the fair value of these securities in future periods. We used seven years as the expected holding period. In April 2009, one of our auction rate securities with an aggregate fair value of $3.0 million was redeemed at par value.
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