ANALYSIS-InterMune drug may offer big upside to Roche if aimed at liver

Last Updated: 2014-08-27

By Ransdell Pierson and Bill Berkrot

(Reuters) - Roche Holding AG's planned $8 billion purchase of InterMune Inc is centered around hopes for blockbuster sales of its lung drug, but the smaller company's development pipeline may end up giving the Swiss drugmaker a far bigger bang for its buck.

Industry analysts have forecast annual sales of about $2 billion for the pulmonary fibrosis treatment, pirfenidone, once it gains U.S. approval, giving Roche a valuable addition to its respiratory franchise.

But the company is expected next year to begin clinical trials of ten-fold more potent next-generation drugs that could also treat similar damage to the liver and kidneys as well as lungs.

Success there could be a game-changer, given the unmet medical need to treat liver and kidney scarring that can be caused by factors such as obesity, diabetes and alcohol and drug abuse.

"Liver fibrosis is a huge, multibillion-dollar market that's far bigger than the lung fibrosis market," said Katherine Xu, an analyst with William Blair & Co. "It involves millions of patients in the United States, versus 100,000."

Pirfenidone, a pill with annual sales of about $150 million in Europe and Canada, treats a progressive scarring condition of the lungs called idiopathic pulmonary fibrosis that typically kills patients within a few years.

Roche announced its proposed $8.3 billion cash purchase of InterMune on Sunday.

The two companies have barely mentioned the liver potential of the newer formulations as they focus on unlocking the value of pirfenidone by winning U.S. approval of the drug for lung fibrosis. The Food and Drug Administration awarded the medicine its "breakthrough" designation - a signal the agency sees it as a potentially important new therapy.

The FDA approval is expected this year following large trials that showed it prolonged patient lives. A rival drug from privately held Boehringer Ingelheim is also expected to gain U.S. approval this year.

While the focus has been on the potential of pirfenidone to treat lung damage, Dr Talmadge King, chairman of the Department of Medicine at the University of California, San Francisco, said fibrosis is believed to occur in a similar way throughout the body, including the heart.

"If you can get the drug to the site and slow or prevent the process from occurring ... it has the potential to have a positive effect in a number of organ systems, so I would assume that that's where it's going to head in time," said King, a lung specialist who led the large late-stage trial of pirfenidone upon which InterMune based its U.S. marketing application.

InterMune's research chief, Scott Seiwert, said animal studies suggest that the newer formulations of pirfenidone have "a much milder side-effect profile."

InterMune has said trials of its potent next-generation pirfenidone analogues could involve patients with lung, liver or kidney fibrosis. Seiwert declined to predict what the Roche strategy will be.

Many analysts have yet to delve into the InterMune pipeline's potential of treating liver and kidney fibrosis.

"It's not something we've included in our valuation" of InterMune, said Morningstar analyst Karen Andersen, given the many failures of other drugs that have attempted to treat liver fibrosis, and InterMune's focus on preparing for the U.S. launch of pirfenidone.

She noted that huge sales of new drugs for hepatitis C, especially Gilead Sciences Inc's Sovaldi, "have drawn a lot more attention to liver-related diseases."

Gilead and Biogen Idec Inc are developing injectable drugs against pulmonary fibrosis, with Gilead also testing its drug against liver fibrosis. But they are a few years away from seeking approval, and Andersen predicted InterMune will be the entrenched leader.