BRISBANE, Calif. ( TheStreet) -- InterMune ( ITMN) is making an all-or-nothing bet on the eventual approval of its lung drug pirfenidone now that the company has decided to shed the only other late-stage drug in its pipeline.

On Wednesday, InterMune announced the sale of the experimental hepatitis C drug danoprevir to partner Roche for $175 million in cash. The sale ends the partnership signed between the two companies in 2006 to jointly develop danoprevir.

With danoprevir off the table, InterMune future is almost entirely dependent on efforts to get pirfenidone approved as treatment for idiopathic pulmonary fibrosis (IPF), a fatal lung disease.

That quest has already seen its shares of ups and downs. In April, InterMune's fortunes soared along with its stock to as high as $48 a share after a U.S. Food and Drug Administration advisory panel voted to recommend pirfenidone's approval.

InterMune's stock crashed below $10 just a month later, however, after FDA rejected pirfenidone. The agency refused not only refused to go along with the advisory panel vote but told InterMune that another clinical trial would be required before the agency reconsidered the pirfenidone approval decision.

With the U.S. pirfenidone approval in limbo, InterMune is betting on Europe. Pirfenidone is currently be reviewed there by European drug regulators. On Wednesday, InterMune said it would submit responses before the end of October to questions posed by European drug reviewers as a regular part of the European drug review process.

If the pirfenidone review in Europe remains on course, InterMune said Wednesday that European authorities would announce an opinion on the drug's approval in the first quarter 2011.

The European approval decision for pirfenidone expected in the first quarter is now a make-or-break event for InterMune.

If the EU approves pirfenidone, InterMune's stock price could rise easily into the mid-to-high $20s. (Some analysts forecast peak sales of pirfenidone in Europe alone reaching $1 billion.)

If the EU rejects pirfenidone, InterMune shares are likely to drop into the single digits, valuing the company for little more than its cash on hand. Reviving pirfenidone would likely require a lengthy and expensive (2-3 years, $40 million) clinical trial.

The European Medicine Agency's Committee for Medicinal Products for Human Use (CHMP), the committee in charge of the pirfenidone review, meets Jan. 17-20, 2011, Feb 14-17, 2011 and March 14-17, 2011.

InterMune shares closed Wednesday at $13.45 and were up another 8% to $14.50 in the after-hours trading session following the announcement of the danoprevir sale.

Danoprevir was once touted as a potential blockbuster drug for hepatitis C but dosing problems and side effects have slowed development and raised significant concerns about the drug's commercial potential. Danoprevir is well behind leading hepatitis C drugs like Vertex Pharmaceuticals' ( VRTX) telaprevir while earlier-stage drugs from Merck ( MRK), Bristol-Myers Squibb ( BMY), Johnson & Johnson ( JNJ) and others are seen as more promising.

The 2006 partnership between Roche and InterMune for danoprevir required both companies to invest in the drug's clinical development. On Wednesday, InterMune justified the sale of danoprevir for $175 million as a prudent financial move that locked in gains while shedding clinical and regulatory risk.

If European regulators join FDA in rejecting pirfenidone, the $175 million will also come in handy to help pay for a new clinical trial.

InterMune said Wednesday that it met with FDA in August to discuss the agency's decision to reject pirfenidone, although the company was not willing to discuss future plans for resubmitting the drug for U.S. approval until the end of the year or early next year.

More than likely, InterMune is waiting for the pirfenidone approval decision in Europe to determine next steps in the U.S.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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