If you want to know why people continue to speculate in biotech stocks, just take a look at the stairsteppy last few days of trading in Intermune (ITMN). Last Thursday it was at $15; now it's at $38. And all you have to do to cash in on these moves is read the FDA's mind!

That's not a money-making proposition, in case anyone thinks I'm advocating it. There are just too many surprises. But Intermune's good fortune started last week, when the FDA briefing documents came out on the application on the company's pirfenidone for idiopathic pulmonary fibrosis and were characterized as "not as bad as they could have been". (The company's history of overzealous PR wasn't helping it at this point). And if you still don't think that the moves in the stock have been surprising, consider that two ITMN executives sold shares on after the first jump, missing out on the second one completely when the FDA advisory panel gave the drug a favorable recommendation.

Pirfenidone, by the way, is another structure entry in the so-simple-I-can't-believe-it drug sweepstakes. If approved, it would be the first specific therapy for IPF, which can be a nasty disease. I certainly hope it helps out the patients involved (a few hundred thousand in the US), but that small patient population means that the drug isn't going to be cheap. Intermune's investors certainly don't think so.

But as has been clear for some time, we're in a rather tricky environment for expensive health care options. If pirfenidone makes it, I'd guess that it will be picked up widely, but cautiously, by health insurance. No one knows how it'll perform in the real world, and if little benefit is seen, it'll be hard to justify reimbursing for it. (It made one Phase III trial's endpoint, but missed another one, so there's room to wonder). The more cost-conscious European regulatory agencies will be a good place to watch this argument play out. One correspondent of mine refers to the drug as the next Iressa. That's not a compliment.