In March, Intermune's shares rocketed from the low teens to the high 40s, because an outside panel of experts convened by the FDA recommended approval of Esbriet, the company's drug for idiopathic pulmonary fibrosis. But, yesterday, the FDA told Intermune that it would need to conduct a third phase III trial in order to confirm that the drug actually works. The stock went back to $10 after hours, taking down many of the most sophisticated biotech investors on Wall Street.
What does it tell us about the FDA's overall attitude toward new drug applications? Less than you think.
In the past, an endorsement by the FDA's panel of outside experts was 90% likely to result in final FDA approval for a given drug. In more recent years, the FDA has more regularly gone against the recommendations of its panels (see Dendreon circa 2007). But Esbriet was no ordinary case.
First, why the panel recommended approval: Esbriet (or pirfenidone) is clearly doing something for patients with idiopathic pulmonary fibrosis. IPF is a disease involving progressive scarring of the lung tissue. Over time, the lungs lose their ability to expand and contract due to their loss of elasticity, and patients' ability to breathe gradually declines. The average patient diagnosed with IPF survives for 3 to 4 years.
If you sum up all of Esbriet's clinical data, the drug appears to incrementally improve the ability of these patients to breathe, without causing serious toxicity. Hence, any pulmonologist treating IPF patients would want to have access to this drug: it's better than sitting around, waiting for them to die.
But there was one key problem: in the two large phase III trials that Intermune conducted, the drug showed a clear benefit vs. placebo in only one of them. Federal law requires "adequate and well-controlled studies"—emphasis on the plural—and almost never lets drugs through with just one.
Hence, the FDA was caught between two important priorities: getting a useful drug in the hands of doctors, and making sure that the pharmaceutical industry knows that two well-controlled trials are still necessary for approval. Investors bet on the former, because the FDA's comments at the March 9 panel meeting were surprisingly benign. But it's always risky betting against the bureaucratic tendencies of the FDA.
Shionogi, the Japanese drug company that owns rights to Esbriet in Japan, had conducted their own successful studies with the drug. But Intermune didn't have access to the patient-by-patient records from that trial, and those trials therefore couldn't be audited by the FDA and incorporated into their evaluation.
In retrospect, Intermune made a huge mistake by not beginning a third phase III trial right after they learned that their second trial failed. They probably worried that by starting that third trial, they would give the FDA an excuse to wait for its results. But now, the company is at least three more years from getting Esbriet in the hands of doctors and patients—not a good outcome for anyone.