InterMune Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biopharmaceutical company InterMune (NAS: ITMN) have dropped as much as 10% today after the company announced a common stock and convertible debt offering.

So what: The offering will include 4 million shares of common stock and $100 million in convertible senior notes due in 2018 and include options for the underwriters to purchase up to 600,000 additional shares and an additional $15 million in notes. The company currently has about 60 million shares outstanding and $85 million in long-term convertible notes, so the completion of this offer will notably dilute existing shareholders while also increasing InterMune's debt and leverage.

Now what: InterMune's coffers have been running a little dry lately with cash and equivalents down to $62.5 million last quarter compared to $110.6 million at the end of 2010. The offering will give the company some much-needed cash while it plans to launch its lung disease drug Esbriet in Germany later this week and subsequently throughout Europe early next year. This offering isn't a game changer, even though it has negative implications. It has a lot riding on Esbriet, and the real test will be how the drug performs across the Atlantic and whether it can get the FDA's blessing.

Interested in more info on InterMune? Add it to your watchlist here byclicking here.

At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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