InterMune Inc and Inhale Therapeutic Systems Inc announced an agreement for use of Inhale's technology to develop a PEGylated version of Infergen (Interferon alfacon-1) (PEG-Infergen) for the treatment of chronic hepatitis C infections. PEGylation is a technology designed to prolong or improve the effectiveness of pharmaceutical products. InterMune currently markets Infergen, the non-PEGylated version of this product, for the treatment of patients with hepatitis C.

"This agreement accelerates our ability to develop PEG-Infergen as a new treatment option for the millions of people in North America suffering from chronic hepatitis C infections," said Scott Harkonen, President and CEO of InterMune. "We believe PEG-Infergen will build on the success we are having with Infergen in this market. We expect this market will grow to $3 to $4 billion over the next five years. Based on positive data demonstrating Infergen's clinical advantage compared to other non-PEGylated alpha interferons, we believe PEG-Infergen could become a leading product in this market. We plan to initiate clinical trials with this compound in the first quarter of 2003."

The agreement calls for Inhale to provide the PEGylation expertise and exclusive manufacturing for the reagent used in the PEGylation of Infergen. InterMune will conduct pre-clinical and clinical development of the product and commercialize it in North America. Inhale will receive milestones as the product progresses through the clinic and royalties on product sales. Other deal specifics and financial terms were not disclosed.

"We are pleased to have obtained the technology from Inhale to develop PEG-Infergen, which has been shown in vitro to have improved biological potency compared to other PEGylated alpha interferons," said Peter Van Vlasselaer, Senior Vice President of Technical Operation at InterMune. "We look forward to a mutually rewarding partnership."

Hepatitis is a liver disease caused by the hepatitis C virus that is found in the blood of people with this disease. According to the National Center for Infectious Diseases, there are an estimated 3.9 million (1.8%) Americans who have been infected with hepatitis C, of whom 2.7 million are chronically infected. The current standard of care is a combination of interferon alpha and ribavirin, which has been shown to eliminate the virus in up to 40% of those infected.