UPDATE 3-FDA rejects InterMune lung drug, shares fall

Tue May 4, 2010 6:39pm EDT

* FDA seeks new trial to support efficacy of drug

* InterMune to meet FDA to explore options

* Shares down 80 pct in extended trade (Adds analyst's comment, background, dateline)

NEW YORK, May 4 (Reuters) - InterMune Inc ITMN.O said U.S. health regulators refused to approve its drug to treat lung scarring and asked for a new clinical trial to prove it works, sending its shares down 80 percent.

A new clinical trial could keep the drug off the market for years.

InterMune was seeking approval from the Food and Drug Administration for its experimental medicine pirfenidone to treat idiopathic pulmonary fibrosis, a rare, fatal condition in which the lungs suffer scarring due to unknown causes.

"It's pretty serious negative for the company," said ThinkEquity analyst Brian Skorney. "They're going to need to get more information from the FDA, but it looks like it will be a very significant several years delay."

Investors had been expecting approval after a U.S. panel of expert advisors to the FDA in March voted to back the drug despite some reservations about side effects, sending InterMune shares up some 60 percent at the time.

But Tuesday's setback sent the shares crashing back to $9.45 in after hours trading from their Nasdaq close at $45.44.

"After the positive FDA advisory committee meeting of March 9 at which the committee recommended the approval of the pirfenidone (new drug application) by a 9-3 margin, we are disappointed by this outcome," Chief Executive Dan Welch said in a statement.

The company said it planned to meet with the FDA as soon as possible to discuss the agency's concerns and pathways to approval.

Had it been approved, pirfenidone, which was to be sold under the proposed brand name Esbriet, would have been the first drug to treat idiopathic pulmonary fibrosis, the condition that killed actor Marlon Brando, daredevil Evel Knievel and entertainer Robert Goulet.

Without treatment, pulmonary fibrosis causes breathing difficulty and coughing that gets progressively worse over time. Patients with the disease tend to live two to five years, according to the company.

While the drug does not cure pulmonary fibrosis, experts have called it an important step in helping to slow down patients' worsening lung function.

Approval of pirfenidone is seen as critical to the small biotechnology company. Its one marketed product, Actimmune, has no meaningful sales. (Reporting by Bill Berkrot; Additional reporting by Susan Heavey in Washington and Anand Basu in Bangalore)