InterMune: Chronology of a Near Death

By bmartin on March 24, 2008 2:25 PM | Permalink | Comments (0) | TrackBacks (0)

Prompted by the DoJ's indictment of former InterMune CEO Scott Harkonen, the Pathophilia blog correlates the chronology of events in the company's history with the firm's volatile share price. Specifically Pathophilia highlights the period from 2002 to 2006 (see graph below, in which numbered circles correspond to events in the provided chronology), when shareholders' highs and lows were informed respectively by InterMune's initial spin of Actimmune's survival data in idiopathic pulmonary fibrosis (IPF) and the follow-up peer review of the same data.

The exercise provides several lessons:

First, if at all possible, a drug company's financial welfare should not rest solely on the sale of one product.
Second, if at all possible, a drug company's financial welfare should not rest solely on the sale of one product for an off-label use.
Third, if at all possible, a drug company's financial welfare should not rest solely on the sale of one product for an off-label use, for which the data are preliminary or insufficient.
Fourth, the favorable spin of a phase 3 trial that fails to meet its primary endpoint cannot be sustained—particularly in the current press climate.
Fifth, leading academic investigators can get fully sucked into a company's press spin.
Sixth, when high-level execs abruptly leave a company to "pursue other opportunities," get the hell out (of the company and/or your investment in it).
Last, we're all a bunch of schnooks who invest in markets that are likely routinely manipulated by inside information.

InterMune Chronology

February 1998: Wesley Scott Harkonen, MD,* founds InterMune, a spin-off of biotech firm Connetics, in California. Harkonen will serve as president and CEO of the company, which will market and sell Actimmune (interferon γ-1b) through a licensing agreement with Genentech. Actimmune was FDA approved in 1991 for the treatment of chronic granulomatous disease.

August 1999: InterMune submits a biologic license application (BLA) to the FDA for the fast-track approval of Actimmune for osteopetrosis.

October 1999: The NEJM publishes a 12-month, open, randomized trial of Actimmune vs prednisolone alone in 18 patients with medically refractory IPF. Use of Actimmune is associated with improved pulmonary function (eg, increased total lung capacity, pO2) in the 9 patients who received it, suggesting that further study is warranted.

November 1999: Harvard Business School grad Timothy P. Lynch is hired as CFO of InterMune.

January 2000: Harkonen is named Chairman of the Board of InterMune.

February 2000: Actimmune is approved by the FDA to delay the time to disease progression in patients with severe, malignant osteopetrosis. David Cory joins InterMune as VP of sales.

March 2000: InterMune is incorporated in Delaware in conjunction with its IPO, at which time InterMune share price rises 25% from the initial offer of $20.

April 2000: GIPF-001, a randomized, double-blind phase 3 study of Actimmune vs placebo in 330 patients with corticosteroid-refractory IPF, is initiated.

December 2000: The share price of InterMune has risen 136% since its March IPO. InterMune's only revenue comes from sales of Actimmune, which amounted to $11 million for the year 2000. The "vast majority" (>90%) of Actimmune sales are for the off-label treatment of IPF.

August 2001: Shares of InterMune are up 12% from the previous year and up 50% during the last 6 months.

December 2001: Revenues from the sale of Actimmune for the year 2001 total $36 million and make up 91% of InterMune's total revenues. Joan Gallagher joins InterMune as a sales rep.

January 2002: Biotech stocks fall sharply, including InterMune's share price. The WSJ blames the free fall on profit taking after the previous month's gains. David Cory is promoted to senior VP of sales.

May 2002: CFO Lynch resigns for reasons unexplained in the press (1). Sharon Surrey-Barbari, a former Gilead exec, is hired as InterMune's new CFO.

08/16/02: Initial results from the GIPF-001 trial indicate that Actimmune fails to improve progression-free survival (the primary endpoint) in patients with IPF. Harkonen directs a post-hoc subgroup analysis of the GIPF-001 data, which produces a statistical trend toward a survival benefit in those patients with mild-moderate disease.

08/27/02: Harkonen and other InterMune employees meet with the FDA's medical review staff, who advise that the current Actimmune data are insufficient to garner approval of the drug for IPF.

08/28/02: InterMune releases a press document touting the results of GIPF-001 (2): "InterMune Announces Phase III Data Demonstrating Survival Benefit of Actimmune in IPF." The subtitle reads, "Reduces Mortality by 70% in Patients with Mild to Moderate Disease." Lead investigator Ganesh Raghu, MD, of the University of Washington, is quoted in the press release, "The mortality benefit is very compelling and represents a major breakthrough..."

08/29/02: The WSJ questions the validity of InterMune's data dredging of GIPF-001. Harkonen projects $100 million in annual sales of Actimmune.

10/24/02: During the Q3 earnings call, InterMune's head of medical affairs indicates that the phase 3 data from GIPF-001 will be submitted for peer review "within the next 4 to 8 weeks."

11/05/02: Follow-up data from the small NEJM study, presented at the annual CHEST conference, suggest that Actimmune favorably affects long-term survival. However, the presentation of the GIPF-001 data at the same meeting is "ambiguous and difficult to interpret," according to a later quote from Harkonen, and the reaction to the presentation is "largely mixed," according to a follow-up Wachovia Securities analyst report (3).

December 2002: Revenue from the sale of Actimmune for the year 2002 totals $106 million and makes up 94% of InterMune's total revenue.

01/02/03: InterMune releases follow-up data from the GIPF-001 trial, which now show that the relative survival benefit with Actimmune is less apparent than initially presented (4). InterMune initiates the INSPIRE trial, a randomized, double-blind, placebo-controlled trial of Actimmune in patients with mild-moderate IPF.

01/30/03: David Cory, who was largely responsible for pushing the sales of Actimmune, abruptly resigns from InterMune to "pursue other opportunities," writes Adam Feuerstein of thestreet.com.

04/01/03: Four case reports of acute respiratory failure are associated with Actimmune treatment of IPF in the American Journal of Respiratory and Critical Care Medicine. An editorial accompanying the report, "A dark side of interferon-gamma in the treatment of idiopathic pulmonary fibrosis?" questions the safety of the agent (5).

04/27/03: The NYT prints "Talking up a Drug for This (and That)," which highlights the off-label sales of Actimmune, the controversy surrounding the drug's efficacy for IPF, and the annual cost of the drug (~$50,000) for an individual patient (5). In the article, Harkonen denies that InterMune markets the drug for IPF.

06/11/03: InterMune issues a revenue warning owing to lower-than-expected sales of Actimmune (6).

06/12/03: In response to the revenue warning, Adam Feuerstein writes "Credibility Crisis at InterMune," which reveals that InterMune "admits that demand for Actimmune is flat because doctors have concerns about the equivocal nature of the data supporting Actimmune use in IPF patients." In addition, it is revealed that "InterMune has done a lousy job of managing Actimmune inventory" (6).

06/13/03: Gallagher is fired from InterMune (6).

06/30/03: Harkonen resigns as president and CEO of InterMune (6). William Ringo takes over as interim CEO.

09/25/03: Daniel Welch is named new CEO of InterMune (7). Harkonen resigns from the Board.

01/08/04: The NEJM publishes the results of GIPF-001, in which Actimmune did not significantly affect progression-free survival, pulmonary function, or quality of life, when compared with placebo (8). Ganesh Raghu, who was quoted in the August 2002 InterMune press release, is the lead author of the article.

01/22/04: James Pennington, MD, executive VP of medical and scientific affairs leaves InterMune to "pursue other opportunities." CEO Welch acts as head of R&D until a replacement can be found.

03/12/04: Ex-rep Gallagher files a wrongful-termination suit against InterMune, former CEO Harkonen, James Shaffer (national sales director), and Chad Patton (regional sales director). Gallagher alleges that she was fired after refusing to promote Actimmune off label (9).

08/23/04: Shareholders file a class-action lawsuit against InterMune, former CEO Harkonen, and CFO Surrey-Barbari, who "knowingly, or with deliberately reckless ignorance, made false and misleading statements regarding...Actimmune." Consequently it is alleged that the share price of InterMune stock was artificially inflated during the class-action period.

11/09/04: InterMune receives a DoJ subpoena to investigate the promotion and marketing of Actimmune (10).

12/31/05: For the year, Actimmune accounts for 100% of the company's product revenue.

05/09/05: InterMune reaches a preliminary settlement with shareholders for $10.4 million (11).

04/18/06: InterMune completes enrollment of the phase 3 INSPIRE trial of Actimmune in mild-moderate IPF.

10/01/06: InterMune pays $37 million to the government to settle the probe of its promotional activities related to Actimmune (12). The wrongful-termination suit filed by Gallagher is settled for an undisclosed amount.

03/09/07: InterMune terminates the INSPIRE trial, after an interim analysis shows no survival benefit with Actimmune. Further clinical study of Actimmune in IPF is abandoned.

*From September 1995 to April 1999, Harkonen served as senior VP of product development and operations at Connetics. Harkonen graduated from the University of Minnesota medical school in 1977 and has held a valid California medical license since June 1981. According to the AMA web site, Harkonen has received board certifications in internal medicine and allergy and immunology. He is also reported to have received an MBA from the Haas School of Business at the University of California at Berkeley. Harkonen is currently president and CEO of CoMentis.