The rally in biotech is back with lots of help from InterMune (ITMN).The stock was up over 60% to 23 this am after the Company posted briefing documents for the March 9 Pulmonary-Allergy Drugs Advisory Committee(PADAC) meeting to review the NDA for pirfenidone (Esbriet) for treatment of patients with idiopathic pulmonary fibrosis(IPF). IPF is a disabling and ultimately fatal disease that affects about 200,000 people in the U.S. and Europe combined with 30,000 new cases per year in each region. The product was approved in Japan in October of 2008 with InterMune’s partner Shionogi and Co. Ltd. as marketer.Pirfenidone has been granted Orphan Drug and Fast Track Drug status by the FDA.

Despite some FDA concerns by reviewers such as unclear trial results and safety, investors took the bullish path.

ThinkEquity analyst Brian Skorney said the FDA took a milder tone than investors expected. On Tuesday the FDA will ask an advisory panel to review the data with a final FDA decision by May 4.

Leerink Swann analyst Howard Liang Ph.D. published a report on February 18 (stock at $15.17) with an outperform on the stock and a price target of 35-37.Leerink Swann also reviewed the status of ITMN’s Phase II HCV program(RG 7227). InterMune has annual revenues of about $40M primarily from its Actimmune product.

Morgan Stanley analysts raised their rating on the stock from equalweight to overweight. S even analysts currently have buys or strong buys on the stock.

Orphan and niche drugs have been a very successful category within biotech due to pricing, patents and limited competition. Companies such as BioMarin (BMRN) and Genzyme (GENZ) were built on orphan drugs.

The Rayno mid and small cap Life Science Index was up 1.25% and bellwether ETFS moved up IBB  1.3%,PBE 1.2% and XBI  1.6%. Other significant biotech movers up were: ACOR  2.4%, GERN  2.3%,ISIS  1.9%,NKTR  2.6% POZN 3.2% and SGEN 3.8%.

A more favorable FDA backdrop combined with the continuing M&A action should keep the biotech sector perking.

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