Ebb & Flow

Last August, what looked like positive Phase III data for its Actimmune interferon gamma-1b to treat idiopathic pulmonary fibrosis helped InterMune(ITMN) to a four-month 42% run-up through the end of 2002. But the first two quarters of 2003 were not as kind to the company, as confusing data and missed sales numbers culminated in the resignation of President and CEO Scott Harkonen last Monday. ITMN rose 7% on the day, but to regain Wall Street's confidence, investors want the company to run a second Phase III IPF trial, while at the same time decreasing operating expenses.

In August 2002, ITMN reported that Actimmune significantly decreased mortality in a subset of patients with mild to moderate IPF in a Phase III trial. Even though the trial missed its primary endpoint of relative reduction in disease progression, investors latched onto the survival data because IPF ultimately is fatal. However, things began to unravel in January, when follow-up data showed that the mortality difference between Actimmune and control patients had narrowed (see "InterMune Chronicles").

ITMN slipped $5.41 (20%) to $22.21 on Jan. 7, when it announced

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