Why InterMune Shares Popped


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: Shareholders of biotech company InterMune (Nasdaq: ITMN) ushered in a welcome, and likely long overdue, up day following the approval of Esbriet in Canada for the treatment of mild-to-moderate idiopathic pulmonary fibrosis. InterMune shares rose as much as 11% earlier in the trading session.

So what: The approval in Canada opens the door to the roughly 5,000 to 8,000 diagnosed cases of IPF in Canada each year. The next step in the process of getting Esbriet to market by Jan. 1 is in getting the Canadian government to approve reimbursements of the pricey drug, which currently costs $33,000 per treatment. At the moment, Esbriet is approved for sale in seven European countries and is in the process of adding France to that list before the year is over.

Now what: Before you get too excited, contain yourself. As we've seen from InterMune's recent quarterly reports, approval means absolutely nothing if the drug doesn't sell and physicians don't get approval for reimbursement. In InterMune's most recent quarter, the company posted a measly $5.5 million in sales when Wall Street had been expecting $40 million. We're still a long way off from the $1 billion in peak sales some analysts had predicted. Until InterMune has its reimbursements firmly approved, shareholders are walking on eggshells by owning this stock.

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