InterMune's CEO Discusses Q2 2012 Earnings - Earnings Call Transcript

InterMune Inc. (ITMN)

Q2 2012 Earnings Call

July 23, 2012 8:30 am ET

Executives

Daniel Welch – President, Chief Executive Officer

John Hodgman – Senior Vice President, Chief Financial Officer

Giacomo Di Nepi – Managing Director, Europe

Dr. Markus Leyck Dieken – Country Manager, Germany

Jim Goff – Vice President, Investor Relations

Analysts

Michael Yee – RBC Capital Markets

Brian Abrahams – Wells Fargo

Ritu Baral – Canaccord

Geoff Meacham – JP Morgan

Brian Skorney – Brean Murray

Matthew Harrison – UBS

Terence Flynn – Goldman Sachs

Liisa Bayko – JMP Securities

Howard Liang – Leerink Swann

Ravi Mehrotra – Credit Suisse

Katherine Xu – William Blair

Stephen Willey – Stifel Nicolaus

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the InterMune Second Quarter 2012 Results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question and answer session. At that time, if you do have questions you may press the one followed by the four. If you require operator assistance at any time during the conference, you may press star, zero. As a reminder, this conference is being recorded Monday, July 23, 2012.

I would now like to turn the conference over to Jim Goff, Vice President, Investor Relations. You may begin, sir.

Jim Goff

Thank you, Operator. Good morning and welcome to the InterMune earnings conference call. This morning we issued a press release that provides details of the Company’s unaudited financial results for the second quarter and first six months ended June 30, 2012 as well as the completion of price discussions for Esbriet in Germany. The press release is available on our website at www.intermune.com.

During the course of this conference call, we will state our beliefs and make projections and other forward-looking statements regarding future events and the future financial performance of InterMune. We wish to caution you that such statements are predictions and expectations and actual events or results may differ materially. We refer you to the Company’s publicly filed SEC disclosure documents for a detailed description of the risk factors affecting our business, including those discussed in our Form 10-K filed with the SEC on February 29, 2012. These documents identify important factors that could cause our actual results to differ materially from our projections and other forward-looking statements. These risk factors include regulatory, revenue, intellectual property, clinical development, capital resources and other risks relating to our business.

On the call today are Dan Welch, InterMune’s Chairman, Chief Executive Officer and President, and John Hodgman, our Chief Financial Officer. Joining us for questions and answers will be Giacomo Di Nepi, our Managing Director for Europe, and Dr. Markus Leyck Dieken, our country manager for Germany.

I will now turn the call over to Dan Welch.

Daniel Welch

Thanks Jim, and thanks everyone for joining us today. With that, we have two important topics to share with you today: the completion of price discussions for Esbriet in Germany as well as our quarterly results. I’ll focus first on the Esbriet pricing in Germany and then cover other details related to the ongoing launch of Esbriet in Germany, including market dynamics, epidemiology, underlying demand, our efforts to educate physicians and assure proper selection of IPF patients. We’ll share some marketing research results and other important aspects of the launch. John Hodgman will then cover our financial results.

We’re very pleased to report that we have achieved a successful and early conclusion of our negotiations concerning the reimbursed price of Esbriet in Germany. As you know, Esbriet is our product market in Europe for adults with mild to moderate idiopathic pulmonary fibrosis, or IPF, a chronic and uniformly fatal disease. Since the confirmation of Esbriet’s benefit by the G-BA on March 15 of this year, we’ve been engaged in negotiating the price of Esbriet in Germany with the Umbrella Organization of the Sick-Funds, the entities that reimburse the cost of medicines in that country. Negotiations were expected to be concluded by September 15 but were completed early as we reported today.

Effective September 15 of this year, the Esbriet gross ex-factory price will be €32,142.00 or about $39,000. Net of the mandatory 16% rebate imposed upon all medicines marketed in Germany, the Esbriet price will be approximately €27,000 or about $33,000 per patient per year at current exchange rates. This represents an approximately 10% discount from the price at which Esbriet was launched in Germany in September of last year. The duration of the pricing contract with the Sick Funds is for two years until September 15, 2014 or when the total cost to the healthcare system in Germany reaches €50 million in any 12-month period, at which time the price of Esbriet will be revisited.

Importantly in the press release today, in addition to announcing the Esbriet pricing, the German authorities officially exempted Esbriet from the prescription budgets of all office-based doctors and outpatient clinics reimbursed by the Sick Funds. This means that after many months of uncertainty in the minds of many physicians concerning the future reimbursement of Esbriet, it will soon be clear to all German doctors that they can prescribe Esbriet without concern for their individual healthcare budgets.

The press release also noted that Esbriet is the first drug that the Sick Funds have approved for IPF and off-label use of other drugs for this indication is now generally not allowed. While we view this as a positive statement in respect to the market conditions for Esbriet, it’s important to recognize that the Sick Funds generally reimburse Tier 1 hospitals for so-called off-label prescriptions, especially in the case where they are relatively low price, as is the case for N-ac, Prednisone, and/or steroids used to treat IPF patients. The Esbriet price that we negotiated is very comparable to what we view as analogous products in Germany, among those oral drugs used for the treatment of pulmonary arterial hypertension. Specifically, the Esbriet net price is about 6% below the Tracleer price. Given that Tracleer was priced a decade ago in a significantly less challenging economic period, we believe the Esbriet price fairly reflects the value of Esbriet to patients and to the healthcare system.

The strength of the €27,000 price negotiated for Esbriet is even more significant when we put it into local German context. Our new price of Esbriet is at the high end of the prices of other oral specialty medicines marketed in Germany such as Tarceva, Iressa, Ticurb and Gilenya, which range between 20,000 – which is Gilenya, and €28,500 – Iressa – net per year. Of note, none of these drugs went through the AMNOG negotiation process.

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