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New Biotech Breakthrough: Buy Intermune Stock

ITMN has room to run, and I am aggresive on this stock

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The market continues to face resistance, due in part to the lingering unease in Ukraine and the possible delay or interruption of energy supplies in the region, and the disappointing economic data out of China. Those are tough overhangs to battle, and resulting profit-taking has sent stocks lower. We talked about the latest geopolitical issues and our exposure to them in last week’s update.

If you missed it, I encourage you to read it here.

Volatility continues to be the name of the game going forward, but I believe I’m positioned to weather the market storms. In fact, I have a new biotech name for today that has held its own despite the downward movement and looks able to maintain that momentum. Let’s take a look at it now.

InterMune (ITMN) has surged more than 100% so far in what can charitably be called a lackluster 2014 for the rest of the market. Almost all of that run up has occurred in the last month, when the stock vaulted onto investors’ radar screens with clinical trial news that put its drug on the path to approval. I don’t blame you if you’re scratching your head, wondering why I’m recommending ITMN now.

Let me explain.

I fully believe that this is just the beginning for InterMune and expect the momentum to stay strong. The stock has plenty of room left to run, thanks to a raft of good news as a tailwind and more expected to come. There is a lot to like about this high-flying and innovative biotech, and I want us to jump on this uptrend for the potential growth ahead.

InterMune is a $2.9 billion market cap company focused on developing drugs for pulmonology and orphan-status fibrotic diseases. Much like former GameChanger winner Intercept Pharmaceuticals (ICPT), ITMN develops drugs to treat a rare disease, which means that it targets a small domestic or global population.

InterMune’s lone drug, pirfenidone (also known as Esbriet), treats patients with idiopathic pulmonary fibrosis (IPF), which is an irreversible and fatal scarring of the lungs. There is no known cause of the disease, which afflicts around 70,000 (by InterMune’s estimates) to 200,000 Americans (according to the Pulmonary Fibrosis Association) annually and leads to death within two to five years after diagnosis.  As of yet, there is no cure. But InterMune’s drug does help slow the inevitable decline of a patient’s lung function.

Esbriet has been on the market in Europe, Canada and Japan for the past few years. It is not currently sold in the United States, but that looks more likely to change.

The drug was initially up for approval in 2010, but was denied by the Food and Drug Administration (FDA) based in part on two studies that showed conflicting effectiveness results. But late last month, the game changed. Data from a new trial showed a number of positive results that could set the stage for U.S. approval, and also further inroads abroad, which in turn bodes well for InterMune’s sales moving forward.

The study, which involved more than 550 patients in the United States and eight other nations, measured lung function and put Esbriet up against a placebo. According to the Phase III study, 22.7% of patients who took the drug saw no decline in lung function – significantly better than the 9.7% of the patients who got a placebo.  Furthermore, 16.5% of patients who got the drug had a decline of 10% or more in lung function or died. That compares favorably with the 32% via placebo that showed similar declines or fatalities.

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