Shares of Biotechnology company InterMune Inc (NASDAQ: ITMN) are up 35% after announcing a late-stage study of its investigational treatment for a potentially fatal lung disease met the main goal, even as another late-stage trial of the same drug failed.

Investors were extremely pessimistic about the outcome of the study given that no drug succeeded in the disease before, Canaccord Adams analyst Adam Cutler said by phone.

People now think that there is a chance of the drug getting approved, when many assumed it did not have much chance before today.

ITMN 1 Year Chart

The late-stage trials, named CAPACITY 1 and CAPACITY 2, were evaluating the safety and efficacy of pirfenidone in the treatment of idiopathic pulmonary fibrosis. CAPACITY 1, which enrolled 344 patients, failed to meet the main goal of the trial, while CAPACITY 2, which enrolled 435 patients, met both the primary and key secondary targets.

Pirfenidone, which received a fast-track status from the U.S. health regulators last May, was safe and well tolerated in both the CAPACITY studies, the company said.

In addition, InterMune has moved forward with development of a new hepatitis C drug, dubbed ITMN-191, on the premise that it will be more potent and more convenient to administer than a similar drug from Vertex Pharmaceuticals (VRTX)

In a similar 14-day “triple combination” study done in 2006 by Vertex, 25% of telaprevir patients had undetectable levels of virus in their system. That number jumped to 92% when using a less stringent measure of efficacy.

Now, patients in the Vertex study had to take telaprevir every 8 hours, or three times a day, which is less convenient than the twice-daily dosing for InterMune’s ITMN-191. If InterMune wins on convenience, Vertex still appears ahead on potency.

In spite of that, InterMune may still take some market share away from Vertex.

Stockmasters, InterMune hit a peak of $20 in 2008 and looks to be recovering in 2009. Keep an eye on this one.

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