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InterMune Wins Positive Ruling for Esbriet Lung Drug in Germany


Shares of the company are rising today but have yet to fully recover from a negative ruling on Esbriet in December. More EU launches planned.

As InterMune (ITMN) continues to test its lung disease drug Esbriet in hopes of eventually winning US approval, the drug's launch in Europe is being carefully scrutinized by investors.

In the latest twist, InterMune says government health decision makers in Germany ruled that Esbriet does provide a benefit to adult patients with mild to moderate idiopathic pulmonary fibrosis. The decision ensures continued government reimbursement of the drug, InterMune says. The next step is for InterMune to negotiate the cost of reimbursement for the drug. (The price a company charges for a drug is reviewed during the first year of it launch in Germany. InterMune introduced Esbriet in Germany in September.)

The news is a welcome reversal from a negative review of Esbriet from a German government advisory body in December. That earlier decision caused a 40% drop in the company's stock over three days.

The stock has been on a rebound since bottoming out at $10.99 in December but has yet to trade above $18 -- the price before the initial negative news out of Germany. Shares rose 9% to $16.09 in midday trading.

Winning over German regulators is important as InterMune plans to market the drug elsewhere in Europe. Near-term, InterMune plans to introduce the drug in France, Spain and Italy. The drug was approved for sale across the EU last year.

"This relieves a sizable overhang," Robert W. Baird analyst Thomas Russo says. He has a buy recommendation and a $38 price target on the stock.

After a 2010 rejection by the Food and Drug Administration, Esbriet may be at least a couple of years away from potentially winning US approval. (The FDA asked for more studies to prove that the treatment worked.) That means all eyes are on Europe until any movement toward possible US market clearance draws closer.

After shaky drug introductions from Dendreon (DNDN) and Human Genome Sciences (HGSI) over the past couple of years, investors are particularly sensitive about a new drug performing strongly in its early months on the market. (See InterMune's German Drug Launch Gets Close Look)

Analysts have said Esbriet is a potential blockbuster product. Although it treats a rare disease, there is no effective treatment for idiopathic pulmonary fibrosis. The disease, which causes scarring of the lungs, is attributed to killing some American celebrities over the past decade including actor Marlon Brando, crooner Robert Goulet, and daredevil Evel Knievel.

InterMune plans a conference call at 4 p.m. ET today.

Twitter: @brettchase

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