UPDATE 1-InterMune 3rd-quarter loss narrows

(Adds revenue, R&D details, background)

NEW YORK, Nov 1 (Reuters) - InterMune Inc (ITMN.O: Quote, Profile, Research, Stock Buzz) on Thursday reported a narrower third-quarter loss than a year ago, when it took a legal settlement charge and had higher research expenses.

The Brisbane, California-based biotechnology company posted a net loss of $23.1 million, or 66 cents per share, compared with a loss of $29 million, or 88 cents per share, a year earlier.

Analysts, on average, expected a loss of 65 cents per share, according to Reuters Estimates.

Revenue fell to $11.4 million from $22.5 million as sales of Actimmune, its immune system boosting drug, dropped 53 percent to $10.6 million.

Actimmune sales have dried up since a clinical trial failed to show a benefit in the lung disease, idiopathic pulmonary fibrosis. The vast majority of the drug's sales had come from off-label use for the lung disease, but most doctors stopped prescribing it for that use once the trial failed.

Third-quarter research and development expenses were down by 27 percent to $23.4 million, reflecting the halting of the late-stage clinical trial of Actimmune for pulmonary fibrosis.

The company is currently testing another experimental drug for the lung disorder.