Lung drug may make InterMune ripe for takeover

BANGALORE (Reuters) - Marketing approval for InterMune Inc's (ITMN.O) lung drug pirfenidone could make the company an attractive takeover candidate for larger biotechnology firms looking to compete in a rapidly consolidating market.

As the industry grapples with patent expirations, deteriorating research productivity and looming healthcare reforms, drug companies are increasingly scoping out acquisitions that provide reasonably certain growth opportunities.

"InterMune could be a take-out candidate if pirfenidone gets approved or at least gets a favorable FDA (U.S. Food and Drug Administration) panel opinion," Thomas Russo, an analyst with Robert W. Baird, said.

"This drug would have blockbuster sales potential of $1 billion plus, and potentially several times that, depending on the true number of patients," he added.

Pirfenidone is an experimental treatment for idiopathic pulmonary fibrosis (IPF), an often fatal disease characterized by scarring and inflammation of the lungs that currently has no approved treatment.

About 200,000 Americans suffer from the disease and about 50,000 new cases are diagnosed each year, according to the National Heart, Lung, and Blood Institute.

In February, pirfenidone had met the main goal of one late-stage study even as another late-stage trial failed, but was found to be safe and well tolerated in both studies.

InterMune expects to file for marketing approvals in Europe and the United States by the end of the year.

"I would say there would be quite a large number of companies that would find InterMune extremely attractive as an acquisition target," the company's CEO Daniel Welch told Reuters.

But he declined to comment on whether the company had received any offers.

POTENTIAL SUITORS

Leerink Swann analyst Jonathan Eckard said any takeover offer following approval would likely be at a premium such that it would be easy to justify a deal to InterMune shareholders.

Canaccord Adams analyst Adam Cutler said, "InterMune could easily market pirfenidone as its own (at least in the United States) with a small sales force."

He noted that InterMune was not run by its founders, who might conceivably have had trouble parting with their "baby."

CEO Welch had been chief executive of Triangle Pharmaceuticals Inc when that company was sold to Gilead Sciences Inc (GILD.O), he added.

Triangle Pharmaceuticals was acquired by Gilead in 2003 for about $464 million.

Baird's Russo said companies like Gilead, with IPF indications in advanced development, could be among the potential suitors for InterMune.

Gilead declined to comment on the speculation.

Gilead is studying its pulmonary arterial hypertension drug Letairis as an IPF treatment, while Europe's biggest biotech company Actelion (ATLN.VX) is also developing its heart and lung drug, Tracleer, for the same indication.

Even if more than one IPF drug is approved, there is a high likelihood of the drugs being used in combination therapy, Russo said.

Leerink Swann analyst Joshua Schimmer said given Gilead's impressive cash-flow-generating potential in the coming years, he expects continued M&A activity for that company focused on late-stage and early commercial products.

Gilead generated $1.26 billion of operating cash flow in the first half of 2009.

(Editing by Aradhana Aravindan)