Intermune (ITMN) new issue 9/13/11

$100m (+15m) sen unsec cb coming tonight from JPM/GS
Terms: 7yr, 3.25-3.75% up 27.5-32.1%
s/c ? 4yr @130%, pctns
Concurrent 4m stk UOP= r&d, gcp
Pulmonology/fibrotic disease specialist w/EU approval of its Esbriet (will be exclusive treatment for 2yr). Hopes to complete US Phase III within 2yr to resumbit for approval. A one-drug to riches play (sold hepatology rights for $175m in 2010 & only have one small drug in mkt). If u believe in +ve binary outcome, u buy (&will tell us our credit is wide). Model isn’t important here but for those who think it is, we’ll use L+800 & 40%. Theo = 101.9/104/106.3. Stock placement a lot harder to play given macro. Dont like 7 yr but small deak w/plenty of stk believers. Set up heavy & wait 4 +ve Esbriet outcome.

Biotech focuused on pulmonolgy and fibrotic disease
PF Cash $446m
PF Debt $185m
LTM FCF -$101m
Yrs Cash 4.4 yrs
Mkt cap 1.633m
ITMN has approval for Esbriet (IPF treatment) in EU & about to launch in Germany w/others following though 2013. No treatment exists & will be exclusive for several yrs. Have kicked off add’l pipeline. Sold hepatology rights to Roche in 2010 for $175m cash. Esbriet could be blockbuster in a few yrs, but w/any emerging biotech there are many risks
Our assigned spread L+800

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