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
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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. Read the rest of this transcript for free on seekingalpha.com