Bahrami-2015-interMune case_5838

Date: June 10, 2015

HOM A BA HR AM I

Resilience at InterMune: A Journey Through the Valley of the Shadow of Death

We are a values-based company and this has always been an important part of our story. Our values are not a

plaque on the wall or a Lucite paperweight on our desks—they are actually in our hearts, minds, spirits, and souls.

—DAN WELCH, CEO INTERMUNE: 2003-2014

A few minutes after 9 a.m. on February 25, 2014, InterMune CEO, Dan Welch convened the company’s San Francisco Bay headquarters staff (approximately 450 people) for an impromptu meeting. Just hours earlier, the small biotech firm had announced the initial results of a Phase 3 clinical trial called ASCEND. The trial was designed to evaluate its drug, Esbriet (pirfenidone) in patients with a rare and rapidly fatal lung-scarring disease called idiopathic pulmonary fibrosis (IPF). IPF causes shortness of breath, coughing, and difficulty participating in normal daily activities. Roughly 70,000 to 150,000 people in the U.S. have the disease; approximately 20 percent of patients are still living within five years of their diagnosis.1 At the time, there was no approved treatment for IPF in the United States.

The three-year ASCEND trial had been a complex undertaking, studying 555 IPF patients at 127 research centers in nine countries. The trial was also expensive; approximately $100 million was spent over the three years. The results of the trial were extraordinarily positive, with the data indicating that the new drug had significantly reduced IPF disease progression and improved patient survival.

Since its founding in 1998, InterMune has had a rocky and challenging journey as an independent entity focusing on pulmonary and fibrotic diseases with research and development as its core focus (Exhibit 1). Welch told his employees that morning: “I’ve been with the company for a decade and we’ve been through a lot of ups and downs. If we had not been so tough over the years, we would not

1 Ron Leuty, “InterMune CEO: Bittersweet Ending to Biotech’s Comeback Story,” San Francisco Business Times, August 24, 2014.Senior Lecturer Homa Bahrami prepared this case study with Case Writer Victoria Chang as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2015 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored, or transmitted in any form or by any means without the express written permission of the Berkeley-Haas Case Series.

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be where we are. Every single time that we get knocked down—every single time—we get up. And we win. That’s who we are.”

In August 2014, six months after the announcement, InterMune was acquired for $8.3 billion by Roche (the Swiss parent company of Genentech). And in October 2014, the FDA granted Esbriet fast track, priority approval for use in the United States. Esbriet had already received approval and had launched in Europe and Canada. On the same day, the FDA also approved Ofev (nintedanib) for IPF, by Boehringer Ingelheim.2

Welch, who had led the company from 2003 until its sale to Roche, characterized InterMune’s journey as “The Long and Winding Road” and likened it to a Psalm of David in the Bible: “Even though I walk through the valley of the shadow of death, I will fear no evil, for you are with me; your rod and your staff, they comfort me.” Welch added: “That valley is hot, there’s lots of wind, it’s sandy, there are lots of dangerous creatures, and lots of ways to die.”

Early Years and Focus on Actimmune

Founded in 1998, InterMune began operations after it licensed from Genentech the rights to develop and commercialize a drug called Actimmune for a broad range of indications. InterMune initially focused on marketing Actimmune for chronic granulomatous disease (an inherited disorder where the immune system cells called phagocytes do not function properly and result in patients suffering from ongoing and severe infections) and developing it for serious infectious diseases and congenital disorders. Actimmune was called an orphan drug (one that focused on an orphan disease or a condition that affects fewer than 200,000 people nationwide).

In October 1999, The New England Journal of Medicine published a small Austrian study of a dozen patients that suggested Actimmune, also known as interferon gamma-1b, kept IPF patients alive longer. Based on that initial study, doctors started using Actimmune off-label in the United States, which was legal as long as InterMune did not actively promote the drug for IPF. Within a few years, off-label use of Actimmune for IPF shot up to $150 million. As a result, InterMune expanded its development and commercialization plans to include IPF for other life-threatening pulmonary diseases. Bill Bradford, Vice President of Clinical Science at the time, said: “This small study made interferon gamma-1b look like a miracle drug and that started the commercialization activity around interferon. This ended up being very problematic in retrospect.”

In 2000, InterMune went public and was listed on the NASDAQ. At the time, the team was working on four different disease areas: hepatology, pulmonology, infectious disease, and oncology. According to a company brochure: “With so many concurrent undertakings, the pendulum of success had a tendency to swing wildly with each new compound InterMune developed….Each [of the company’s products] ushered in alternating periods of great optimism and considerable frustration.”3 Bradford added: “Our prior CEO Scott Harkonen was a big believer in putting as many horses on the track as you could get and interferon gamma-1b was being considered for multiple indications such as liver fibrosis, ovarian cancer, and IPF.”

Sharpening the Focus on IPF and Hepatitis C

In 2002, InterMune launched an IPF study for Actimmune called GIPF-001, “and the primary endpoint, which was survival, was missed,” said Welch. But at the time, as part of the study, there was also a sub-group analysis that suggested that “patients with mild-to-moderate form of the disease

2 According to Bill Bradford, a long-standing member of InterMune’s R&D team, Ofev had risks for higher side effects and general consensus was that Esbriet was going to be the more standard drug.

3 The InterMune Story, InterMune.

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actually got a lot of benefit from Actimmune,” said Welch. Based on those results, the company launched a trial in 2003 with “great fanfare and enthusiasm.”

It was around this time that Dan Welch joined InterMune in late 2003, bringing in a new management team over the period of a year and retaining only one person from the original team. He made important strategic changes as well, such as narrowing InterMune’s focus on two areas, Hepatitis C (viral disease that leads to swelling and inflammation of the liver) and IPF. “We got smarter under Dan’s tenure and focused more,” said Bradford.

Early IPF Efforts: “A Hard Disease to Focus On”

Although Actimmune proved ineffective for treating IPF, new hope emerged. With some 15,000 to 20,000 U.S. patients diagnosed every year with IPF, the unmet need remained greater than ever. There were still no available treatments, but the InterMune team envisioned a day that would no longer be the case. They set out to hasten that day with a successful new compound called pirfenidone.4

Pirfenidone was first discovered in the 1960s5: “In the 1990s, Marnac, an American company, had conducted several small, uncontrolled studies of the compound. The results were inconclusive but potentially promising.” In 1997, a Japanese company, Shionogi, licensed pirfenidone and conducted a small limited Phase 2 study: “That data came out in 2001 and was very difficult to interpret,” said Bradford. “Based on our own research, we felt there was a reasonable chance this drug was efficacious and reasonably safe.”

In 2002, InterMune had licensed from Marnac the rights to develop and market pirfenidone for anti-fibrotic and anti-inflammatory indications.”6 Bradford added: “We wanted to control the asset because we wanted to control the field of IPF and develop promising drugs in the best way possible.” As InterMune’s own pirfenidone research continued to show promise, Welch made “the decision to focus the company’s resources more narrowly” and InterMune set its sights on becoming the “Leader in IPF.”7

Bradford commented on the difficult path for the company, however: “Pirfenidone does not have a known molecular target; the fact that IPF’s biology also isn’t well understood and the goal was to slow the progression of the disease versus reversing the disease, requiring big long clinical studies, made everything difficult. We never would have touched pirfenidone if the positive Japanese Phase 2 data on the compound hadn’t come out. We picked a hard disease—and a hard drug—to focus on.”

Establishing Culture and Core Values

In early 2004, because of activities related to the off-label use and promotion of certain drugs, undertaken before Welch joined the company, the FBI visited InterMune’s headquarters. In essence, when InterMune’s 330-patient trial for Actimmune failed (and when the company discovered that a small subset of patients with mild to moderate IPF responded well), the CEO at the time, Scott Harkonen, published a press release stating that Actimmune improved survival rates among patients with IPF. The fact that Harkonen failed to mention in the press release that the Actimmune trial missed its primary endpoint, led him to be convicted of a federal crime and he served six months under house arrest and faced multiple additional legal challenges.

4 The InterMune Story, InterMune. 5 “Pirfenidone is an orally active, anti-fibrotic agent that inhibits the synthesis of TGF-beta, a chemical mediator that controls many cell functions including proliferation and differentiation, and plays a key role in fibrosis. Pirfenidone also inhibits the synthesis of TNF-alpha, a cytokine that is known to have an active role in inflammation.” Roche Media Release, “Roche and InterMune Reach Definitive Merger Agreement,” August 24, 2014.

6 The InterMune Story, InterMune.7 The InterMune Story, InterMune.

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Welch described the consequences: “The activities of the previous leadership led to a Department of Justice investigation, endless depositions, overturning of files, a long period of wrangling with lawyers, corporate integrity agreements, deferred prosecution agreements, and a whole saga of suffering which is part of our corporate history. These activities were extraordinarily costly to the reputation and the treasury of the company.” Bradford added on the culture: “The culture before Dan’s arrival was not one that people felt good about or aspired to be a part of, and a lot of that had to do with the aggressive commercial and communication activities regarding an unproven drug.”

When Welch arrived, he was very concerned about the company’s attitude towards integrity: “I wanted to make it absolutely crystal clear that honesty and integrity were part of our core values—to do the right thing, do it properly, and to respect the laws and regulations,” said Welch. “There was already a character cloud over the company and it was a cloud I was determined to remove.”

Welch also thought that the company needed a new start: a unique culture that everyone could “get behind, embrace, and understand,” as well as one that could help address the credibility cloud and morale issues. As a result of the multiple cultural factions that existed before Welch’s arrival, morale was “very poor” and turnover was “outrageously high.” While the average biotech company was losing 15 percent of its employees per year, InterMune was losing three times that, nearly 50 percent of its employees. “It was a toxic place,” said Welch. “I came to the view that the value system was at the core of what was troubling the company.” Bradford added: “There was all kinds of bad behavior that reflected a complete lack of (core) values.”

Welch called the multiple cultures in different parts of the company “an accidental culture,” meaning that the leaders of the departments modeled, shaped, and nurtured the culture that they each wanted. “What I realized after six months working here was that there was no one set of behaviors that everyone understood and that we would reward, incentivize, hire, and fire around,” said Welch. “This was creating a lot of stress around the company because one department might have felt that it was okay to do something but the other did not. When you have different value systems, it’s hard to communicate, get things done, respect each other, and this is a perfect substrate for conflict and tension.”

Welch and his team talked to employees, the board, and conducted surveys. In early 2005, they launched a corporate values program. The program was a “grassroots program” because it brought together representatives from different parts of the company and asked them to identify the core values of a company they wanted to work for. Welch added: “I said, ‘This is your company—define it and design how you want it to be in terms of behaviors.’”

The team came up with the following values: honesty, accountability, creativity, open communication, and teamwork. The values included “open communication” to help the multiple cultures become more aligned. Importantly, Carrie Krehlik, Vice President of Organizational Development, worked on the values project in a consulting role because the company did not want the project to be viewed as an HR project, but rather a company-wide effort. “That was a key component that made it real because it wasn’t HR or the company saying that the values were important,” said Krehlik.

Welch added: “I didn’t decide what the values were or how to articulate them; assistants all the way up to senior leaders had some say about these core values. I just approved them.” The representatives were then asked to define the values and volunteers were asked to articulate and implement the values program. Even though the company only had 150 people at that time, 40 people raised their hands to volunteer. “This showed me that our program was going to work because it was a grassroots initiative and there was a sense of engagement and ownership,” said Welch.

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This Values Implementation Team was responsible for talking to colleagues to articulate the values in a simple and credible way. That led to an expansion of the Team. They had to figure out “how to make the values really live in the hearts and minds of our staff and become part of our DNA instead of a Lucite on a desk,” said Welch. He added: “We (have since) used our values to hire people, promote, train, fire, celebrate success, and learn; it’s embedded in everything we do. Our values are a differentiator for us and they are a part of our DNA.” Bradford said: “We were good at getting people to live the values.”

One area of focus was around people practices—how to inject the values into hiring decisions, promotion practices, and performance assessment; people were evaluated on how they were living the values (Exhibits 2, 3, and 4). Other areas of focus included how to communicate the values, and how to recognize publicly when people exemplified the values: “catch people doing good things.” Welch added: “We would celebrate these in team meetings, for example when a team showed accountability; we also attached modest awards such as statues or plaques; these awards were peer-nominated, and given out every few months. This recognition became a rewarding and reinforcing part of our values.” During the hiring process, recruits learned about the values and were interviewed in the context of the values. Hiring managers were also trained on how to conduct interviews based on the values.

Sean Nolan, Executive Vice President and Chief Business Officer at InterMune, said: “If you’ve invested in a common vision and have respect for your team members, you’re able to work through difficult times. You can start to blame one another and have an erosion in confidence in the team, or you can come together and unite in the face of that adversity and face the challenge together. We managed to do the latter because we built on common values and shared vision for the future.” Welch agreed: “In retrospect, investing in our vision and values turned out to be a huge differentiator and a key success factor for our company. It allowed us to recruit people who shared our vision, to integrate them very fast into our organization, to develop trust, and it gave us sustenance during those dark days in terms of what we needed to do and how we needed to do it.”

David McNinch, Senior Vice President of U.S. Commercial Operations said: “The first time I sat down with Dan [Welch] for my job interview, we spent two hours together and he said, ‘I don’t want to talk about your resume, I don’t want to talk about your technical experience, but I want to talk about how you supervise and lead—questions such as: who was your best boss, who’s your worst boss— and why were they good or bad; why are you a good boss, and why are you not a good boss?’ He asked me a lot about the things that were important to me, what motivated me, frustrated me, who I admired, how I managed conflict—questions that had nothing to do with my technical skillset.”

Further, leaders were evaluated based on the values “because if the leaders did not model these behaviors, then the whole thing loses credibility,” said Welch. Values were also part of the firing process: “If after being told that an employee isn’t living our values, he or she will not or cannot live our values, they have to be let go; otherwise, they corrode our culture and the credibility of management.”

Welch acknowledged that although InterMune’s core values were generic words, they became a part of InterMune’s fabric: “The words are the same as other people’s words, but they became internalized and owned by us because the grassroots efforts of the values implementation team and the opting-into the culture of people when they joined us, led to a sense of ownership. It’s a subtle concept of taking generic words to become our words by defining them in our own language and showcasing or celebrating examples of people demonstrating these words. We hired a head of communications and I asked him as one of his key tasks to remind me to use the values in my communications, not every communication because they can get overused, but to make sure they become part of my vocabulary. It takes a lot of work to keep the values fresh and present but not over-done.”

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Pivoting and Contingencies: Exiting the Hepatitis C Market

In 2004, the company’s Hepatitis C strategy was to grow Infergen, an interferon alpha product used to treat this disease. At the time, HCV therapy for Hepatitis C was not that effective. Existing therapy entailed a weekly injection of interferon and taking a pill for 48 weeks. Welch said: “Every week a patient would inject himself with interferon, he would feel like he had the flu for four or five days, and then for one or two days he would start to feel better. But then, guess what? He would start it all over again on the eighth day and do that for almost a year. Only about 35 percent of the patients got cured of their HCV. That was as good as it got.” In this challenging marketplace, InterMune’s revenues from Infergen continued to grow.

In 2005, InterMune faced a strategic challenge—the arrival of small molecule therapeutics for HCV. This was a game-changer for InterMune as it would lead to less interferon use or perhaps eliminate interferon use all together. Welch’s view was that interferons like Infergen were in grave danger as a product class because of the efficacy and relative tolerability of the coming new small molecule drugs. He said: “So we made the judgment that Infergen would become obsolete and irrelevant and we should therefore try to divest it because over time this asset was going to become less and less valuable. But, we needed to keep our own small molecule HCV drug, a protease inhibitor, un-partnered until we successfully got through phase one of clinical testing at which point we could realize the real value for shareholders. Our strategy at that time was to get into phase one and try to partner it.” These decisions led to Infergen’s divestiture where it was sold to Valeant for $136 million in 2005, about four times revenue and an infinite multiple of profit because it wasn’t yet profitable at the time. The company retained full ownership of its HCV Protease Inhibitor Program.

Welch said: “The divestiture of Infergen represented an important step in refocusing our corporate strategy to direct resources to our three key development programs—our Phase 3 study evaluating Actimmune for idiopathic pulmonary fibrosis, our Phase 2 program evaluating pirfenidone for IPF, and our then preclinical HCV protease inhibitor.”

As part of the divestiture, the company embarked on its first layoff, a 50 percent reduction in work force (RIF), affecting the Infergen and a large part of the Actimmune commercial teams. This led to a $50 million decrease in annual cash burn, along with the injection of $136 million from the sale. On contingency planning and layoffs, Welch reflected: “We were always proactively paranoid. We created contingency plans for every realistic risk facing our company and sadly we had to implement many of them. By planning ahead, we were able to create contingency plans that were thoughtful and done when we were cool-headed and not created during times of stress immediately after a bad outcome. We were ready every time to implement our plans and do so quickly and with dignity and compassion for staff. We were always anticipating what could go wrong, partly because of the extremely risky industry that we’re in and it’s also part of my nature to be a planner and to think ahead of the different scenarios, threats, and risks, and how we might survive and thrive in the different scenarios. If you’ve thought through all of the potentially scary things that could realistically happen and figured out how you could mitigate them or survive them, it brings a certain serenity, confidence, and assurance that you will be okay.”

John Hodgman, InterMune’s Chief Financial Officer, pointed to InterMune’s flexibility and its ability to pivot as a key success driver: “Mr. Fantastic, the Marvel’s Fantastic Four character comes to mind because he can stretch and form, and go high and low, and go wide—in an instant. We at InterMune were a lot like that. We had to be able to adjust, be moldable, make sure that we could be pliable and be able to do certain duties that perhaps we—or anyone—hadn’t done before. We truly modified ourselves to be able to fit whatever the situation was at the time.” Related to this, Welch felt that InterMune “sacrificed our minor treasures (HCV) in order to keep our major treasures. In the end, HCV was crucial to our success but we had to make tough choices and that’s what we did. In essence, the divestiture of Infergen and other decisions taken in our HCV business described below, led

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InterMune out of the risky Hepatitis C market evolution, improved the company’s cash runway and allowed it to continue to invest heavily in IPF and remain an independent company.”

On October 26, 2006, InterMune signed a deal to collaborate with Genentech (which was later acquired by Roche in 2009) to work on the HCV protease inhibitor. Roche would pay two thirds of all the development costs and InterMune would pay one third, but InterMune would enjoy half the profits. “That was a very important deal for us,” said Welch.

However, the HCV market became incredibly competitive. Every major company, including Merck, BI, Pfizer, and Gilead, entered the market with competitive molecules and huge investments. In 2010, InterMune’s leadership team made another key decision—it decided to divest its HCV protease inhibitor to Roche for $175 million.

“The deal we entered in 2006 with Genentech/Roche had a very important clause: it was kind of like a marriage clause,” said Welch. “We told Roche, ‘if you want to play around outside the marriage with a different partner in HCV, you need to give us back our asset.’ In fact, over time, Roche decided that they wanted to collaborate with another company in the HCV area and to do so, decided to buy us out. We had a good contract that gave us leverage and we ended up selling that asset for $175 million at a very important time in our history. This positive outcome was also a result of our constant contingency planning. We were always realistically assessing our situation and challenging our strategy as situations changed or threatened to change. It’s always important to be current on your business and be able to imagine the future and see how your company fits into that future. Sometimes it does and sometimes it doesn’t—and if it doesn’t, you have to be prepared to make changes while you have the opportunity.”

The cash gained from InterMune’s sale of its HCV portfolio to Roche was used to fund its more promising pulmonology opportunity and it brought in much-needed cash. The Infergen divestiture brought in $136 million, the Genentech/Roche collaboration brought over $400 million, and the sale of its HCV protease inhibitor to Roche raised $175 million, according to Welch: “Almost three quarters of a billion dollars came in which really kept us away from the financial markets, avoided dilution from the sale of our equity, and kept us from partnering our precious pulmonology assets….If we hadn’t had the HCV side of the house, we would have sold more shares, partnered our pulmonology assets, and likely lost the company to an acquirer when the value of our company was depressed. So our HCV journey was a massively important strategic part of our history, and eventual success.”

The HCV journey wasn’t always peaceful. In fact, the decision in 2006 to sell Infergen and conduct a major downsizing of the organization that would eliminate the entire commercial organization and reduce annual operating expenses by $40 or $50 million wasn’t embraced by a segment of the executive leadership team. After discussing their views with Welch, they requested an opportunity to present their view to the Board. They received Welch’s blessing to do so, but in the end, the Board sided with Welch’s strategy. “It just shows you that when you make dramatic changes, they are often very traumatic, especially when people get laid off or executives’ roles get diminished,” he said. Bradford added: “The Infergen sale and commercial downsizing meant that we no longer had products we were actively marketing and promoting and this caused some dissonance with select people, but I felt this was exactly the right strategy to follow.”

In 2007, the company experienced a major setback, the failure of the INSPIRE Phase 3 clinical trial of Actimmune in IPF patients, that had begun in 2003. This news came with layoff number two, significantly reducing the company’s workforce yet again. Welch said: “It was a sad day for us as it was the end of a nearly 15-year mission involving an investment of nearly a quarter of a billion dollars trying to bring Actimmune to the market as the first new medicine for desperate and unserved patients

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with IPF. This second downsizing was necessary to conserve our cash resources and thus our survival and it is part of our history of making tough choices at challenging moments.”

A Bright Spot in IPF: FDA Advisory Committee Support

In 2006, as InterMune focused more of its attention on IPF and pirfenidone, it initiated a pair of global phase 3 clinical trials, known as “CAPACITY.” However, one trial was completely successful and one had an ambiguous outcome. Welch added: “This ambiguity created a host of challenges for us, and was the main reason for the rollercoaster that we would experience with Esbriet.” Bradford said: “IPF is a complex and incompletely understood disease and at that time we were new to designing trials for IPF and pirfenidone, so it’s not surprising that the data would be mixed.”

Based on the CAPACITY data, the company applied for marketing authorization in the United States with the FDA in January 2010. In parallel, it submitted its application for approval in the European Union. “We thought we had a shot at approval, but based on the ambiguity of the results it was a long shot,” said Bradford. In March, the company’s stock rose to around $23, when investors read the public disclosure of the FDA’s briefing documents on the agency’s views of the drug. “Wall Street was excited because pirfenidone didn’t get massacred in the FDA briefing documents,” said Welch. “That was about a week before the FDA advisory committee meeting [advisory committee meetings are public events during which representatives of the FDA, the company sponsor of the drug under review, and independent outside experts present and discuss information on new medicines under FDA review]. Then later in March 2010, the advisory committee of the FDA recommended approval of pirfenidone in a 9 to 3 vote. That was a fantastic day. While members of our team saw it live in Bathesda, Maryland, we transmitted the live feed from Washington to our corporate headquarters in Brisbane. During the six-hour hearing, our staff was biting their nails and sweating through the ups and downs of various committee votes. When the final “approval” vote was projected on the screen, there was an explosion of emotions. There were people standing on their chairs cheering, many were crying, embracing their colleagues and thinking, ‘Finally we will soon bring a new medicine to our IPF patients!’ It was a very exciting day; we were all thrilled and proud.”

Welch described the events further: “On the day of the FDA meeting, our stock had been suspended in terms of trading and our plane departed the east coast before trading opened the next day. I’ll never forget landing in San Francisco and opening up our Blackberries at the time, and our stock price was at $38 and climbing. That was exciting because we had lived in the $10 range for years and years. It was an exciting time to be at InterMune and a period of rare optimism for the IPF community of doctors, industry, IPF patients, and their families. Patients in desperate need of treatment had new hope.” Welch added on IPF: “It’s a disease that moves more rapidly, that’s more deadly than most known cancers. Esbriet’s approval would be like when the first drug for colon cancer was approved, the first drug for breast cancer, the first drug for lung cancer: can you imagine what that meant? There was no drug for this disease.”8

Rollercoaster Ride

InterMune began assembling a commercial field force in the U.S. in preparation for Esbriet’s launch. However, devastating news came with “shocking swiftness” in May 2010, just two months after the good news of the FDA advisory committee—despite the positive vote of the committee, the FDA was not ultimately persuaded by the data and the drug was not approved in the U.S. InterMune would now have to conduct an additional Phase 3 clinical study, which would require four more years and $100 million.

8 Ron Leuty, “InterMune CEO: Bittersweet Ending to Biotech’s Comeback Story,” San Francisco Business Times, August 24, 2014.

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The company’s stock dropped on the news nearly instantly from $50 to below $10. “That was a devastating day in every respect, for patients, for employees, for investors—one of the darkest days of my career,” said Welch. “We needed to fund a new $100 million phase 3 study in the United States. We wondered how to do it. We also wondered if the EMA (European Medicines Agency or the equivalent of the FDA) would also say ‘no’ to our request for approval of pirfenidone. Our response to the negative FDA news and the need to fund our future was to do another very significant reduction in force, by 50 percent. What we had to do next challenged our team, our courage, our intestinal fortitude; the rollercoaster ride continued.” Bradford added: “It was a really difficult time for us—horrible and depressing. Some people left the company. There were a lot of questions at that time about how we should move forward and there were financial issues related to embarking on another long and expensive study. The people who stayed believed in the drug and believed we could somehow make it happen.”

In the wake of the FDA’s disappointing ruling, the decision was made to discontinue all R&D investment that was unrelated to Esbriet. In addition, the company’s one remaining marketed product, Actimmune, was sold off to Vidara Therapeutics in 2012 for $55 million plus royalties. The new U.S. commercial team was “painfully dismantled.”9 The clinical team then got to work and designed and initiated a new phase 3 clinical trial that applied all the learnings from the previous decade. The study was called “ASCEND.”

On the sale of Actimmune, Welch said: “Actimmune was our one other asset beyond pirfenidone and divesting Actimmune was done to help fund our pirfenidone study, ASCEND. However, if ASCEND failed, we would have been left with no other product and we were carrying $150 million in debt at that time. That outcome could have been very ugly. We had at one point, a plan to re-launch the Actimmune product with a much higher price and promote it in the drug’s FDA-approved uses, but we decided to divest the brand because Actimmune was tied to the negative legacy of our company and its prior leadership. I think it was a mistake to have divested Actimmune because the company that acquired it dramatically raised the price of Actimmune and in doing so, significantly increased the revenues [for the remaining indications that it was approved for]. If we had kept that asset, we could have implemented that plan, which would have helped keep the company solvent if our final phase 3 pirfenidone study ASCEND had failed. Thankfully, the ASCEND study was a big success and Actimmune didn’t need to save us.”

Bradford commented on interferon (Actimmune): “Interferon failed for IPF, it failed in ovarian cancer in a very large, expensive, global Phase 3 study, it failed in hepatitis, and it failed under Genentech and Connetics in many other indications. Scientifically, it could be hypothesized to have a role in a lot of different diseases, but it has been studied exhaustively and only works for chronic granulomatous disease and osteopetrosis, limited orphan diseases.”

Approval in Europe—and Knocked Down Again

In December of 2010, seven months after the FDA rejection of Esbriet for the treatment of IPF in the U.S., InterMune received a letter from the scientific committee of the EMA that approved pirfenidone for the treatment of IPF in the European Union. “It didn’t happen as planned, but InterMune was now back in action,” said Welch. According to the company: “The first approved treatment for IPF was soon hurtling toward launch at rocket speed.”10 Bradford explained: “The pulmonary division of the FDA is known to be conservative and you needed to have two positive studies where the European Union was more focused on benefit versus risk. Also, the European Union considered the positive Japanese clinical data on pirfenidone and the FDA refused to consider those data.”

9 The InterMune Story, InterMune.10 The InterMune Story, InterMune.

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However, in order to sell the drug in Europe, pricing and reimbursement had to be negotiated individually with each country. And unfortunately, “these efforts coincided with the worst economic climate in 60+ years. National Payers were extremely reluctant to take on new costs.”11

Fortunately, however, the company had an “indefatigable force” on its side, Giacomo Di Nepi, the company’s Managing Director of the European strategy and operations. Around 18 months earlier, Di Nepi had joined InterMune and had grown the European team from three people working across Giacomo’s kitchen table, to 180 staff across Europe. Di Nepi said on the team at InterMune: “I wanted to work with people that had experience and also drive because sometimes you find people that have fantastic experience and credentials but they wear the ‘white gloves’—if they don’t have five people reporting to them, they’re incapable of accomplishing anything.”

Di Nepi discussed the European approval of Esbriet: “We started to get some news, in December 2010 when the EMA gave a positive opinion. Interestingly, it was a unanimous decision, 32 to nothing. At that time, there were rumors that we were in discussions to sell the company. Those who read the public disclosures learned that in fact Roche did make a bid for us in April of 2011, a few months after European approval. They decided at the last moment not to go through with that deal. So among those rumors our stock went up to $50.”

The reimbursement agreements came “painstakingly” one country at a time. Di Nepi said on the European market: “We first focused on the top 15 countries, which would give us three quarters of the value of the market. We then announced that we were going to sell stock in order to help fund the growth in Europe and to fund the new phase 3 study in the U.S., even though we had $175 million from the Roche HCV deal.” Di Nepi said that investors were hesitant to invest in the stock due to the risks related to the phase 3 study and the fact that InterMune was a California company launching in Europe with just a few employees.

InterMune’s roller-coaster ride continued in Europe when in December 2011, the company learned that IQWIC, a health economics body in Germany, which made assessments on whether a new medicine brings benefit to the healthcare system, said they believed Esbriet offered no benefit. Bradford explained: “Due to the fiscal crisis in Europe, the countries had a limited budget and wanted to give the drug to as few people as possible and they sometimes wanted to make our drug and us look bad.” Di Nepi added: “All of a sudden, investors thought that we wouldn’t get reimbursement in Germany, which at the time was the heaven of Europe for pricing and reimbursement. If you can’t get it there, you won’t get it anywhere. Our fears and anxiety were building. That’s why I love that song by Chumbawumba ‘I get knocked down but I get up again.’ It’s very fitting for us—like our anthem.”

Within two years, InterMune would be selling Esbriet in 13 European countries and Canada. In September 2011, InterMune signed on Germany, and in March 2013, France and approval in Canada (regulatory approval in 2012); England, Wales, and Italy followed shortly afterwards “through real creativity on the business, analytical, and reimbursement sides,” said Di Nepi. “Now we started to get some momentum. We got five of five countries priced and reimbursed. And we got 10 of 10 in the small countries as well, at a time when Europe was facing problems after the financial crisis. The results were 11 consecutive quarters of growth.” Spain was added to the list in 2014. Welch said: “Our success with Esbriet in Europe was a testimony to our perseverance, courage, creativity, and our values.”

Paul Arata, Executive Vice President Human Resources and Administration reflected on organizational changes of the leadership team at that time as well: “One of the big changes we made six months after I first joined in 2012 was to restructure the leadership organization. We went from an Executive Committee of ten people and we created a scientific leadership team that focus on the R&D details of the company, allowing us to create a new, smaller senior Leadership Team consisting of the 11 The InterMune Story, InterMune.

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CEO, the CFO, head of R&D, General Counsel, myself, and Giacomo Di Nepi. We later added a CBO (Chief Business Officer).” These changes allowed the senior leadership team, half of whom replaced executives who were deemed not up to the coming corporate challenges of rapid growth, to focus on broad, business-related topics versus solely on scientific efforts. “Trust was an important dynamic too, and we worked hard to build and retain that” Arata said. “We also changed how we functioned as a team—how often we met, what we spent our time on, and spent more time on communicating to our staff. People started to see and hear us more and that sent a different signal to the organization that we were moving our company forward and this was an exciting place to be.”

Values Refresh and Leadership Changes

Beyond developing a grassroots values program, Welch said that “surveillance and maintenance” of the program was essential for its success. Before (and through) the growth in Europe in 2011, the company embarked on a refresh of its core values as part of its strategic planning process. Welch wanted to prepare the company for a big impending growth phase, due to pirfenidone/Esbriet, that could: grow the company from 100 to 700 people; transform it from a U.S.-only company to one also operating in 15 countries in Europe, Canada, and Latin America; and from an R&D-only company to one that was also commercially focused—an evolution into a much larger and more geographically and organizationally complex organization.

“We needed to make our values crystal clear and refresh our culture to be one that worked in an international company,” said Welch. “During our strategic planning process, we projected our geographic numbers of employees, revenues, profits, and had an ‘a-ha’ moment where we saw a tsunami coming that we needed to get prepared for and the leadership, board, values, and systems were a part of our process of preparation.” The company kept the refresh simple by essentially repeating their earlier process where two employees were asked to lead the values refresh process and those leaders solicited the help of other employees into sub-teams (around 30 employees volunteered in total).

On the dangers of complacency, Welch said: “I have seen in other organizations that after a strong effort to establish and nurture a culture and when morale and turnover improve, the tendency is to think, ‘we’re okay now,’ and then not pay attention to this aspect anymore. Bad habits can emerge like starting to hire people that really don’t fit the culture by arguing that we really need that person or like tolerating behavior by someone and not firing that person because they’re valuable in some way. The resulting cultural rot is pernicious and almost imperceptible but sooner or later you realize that you’ve undermined your culture and cynicism set in. In my experience, the hardest thing about values and culture is not to establish them, it is to keep the values and culture fresh and alive over a long period of time.”

As part of the process to refresh the values before the big growth phase of the company, the grassroots team surveyed the employees about the values and how well they resonated with staff. The grassroots team changed a few values in subtle ways, but others stayed the same. One original value from 2004 was “honesty,” but the team felt that “integrity” was a broader word that transcended honesty and had a more realistic feel. They felt that one could be honest about what one said but withhold one’s concerns and thus not exhibit integrity. Another original value of “open communication” also changed to “passion” based on survey results. Welch said: “Our people wanted to change open communication to passion—passion in ourselves and for our patients because more often than not, drugs fail to get approved so one has to be passionate to be able to rebound from inevitable and crushing disappointments in drug development.”

The team branded the values, calling them “IPACT” (for Integrity, Passion, Accountability, Creativity, and Teamwork), and created a logo (Exhibit 5). “That’s when we saw things go to a whole new level,” said Welch, as the company grew from 100 to 600 people. “It was so good to see

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that the culture was sustained and even thrived although we added six times the number of people. We were afraid that the culture would get diluted by adding all these new people and the connection and the passion would likewise be diluted, but we had a whole team dedicated to making it a success and made a splashy re-launch and like the last time, all kinds of people wanted to volunteer and be a part of it.”

The grassroots employee-driven team was divided into three areas: 1) visionary leadership—how leaders communicate and exhibit the values; 2) engagement—how to engage the employees through the values; and 3) community outreach—focusing on the patient community and the employee community, in terms of how the values were threaded and reinforced. “These were our idea generators; execution followed with the support of marketing, HR, and other functions,” said Krehlik. “They worked on the important people processes—hiring, onboarding, and performance reviews.”

Krehlik reflected: “InterMune is a company that has such a clear purpose—why it exists. It exists for patients. It exists for people that are dealing with a deadly, horrible disease and that purpose was and has always been the reason that employees have been able to rally from disappointments and do such great things. Our five core values of integrity, passion, accountability, creativity, and teamwork—our IPACT Values have helped us.” Bradford agreed: “Our company increasingly focused on a singular horrible disease and everyone recognized that we were working on this nasty disease with an unmet need and this tied into the culture and the resilience of the organization”

In the U.S., for example, the company hired 200 people in three months (the company had 300 people at the time), the leadership and sales people “really embraced and cherished the values,” which became a differentiating factor in hiring people. Welch said: “I was a little surprised at how strongly people of all ranks and across departments and countries embraced our culture; it was like a cool club that allowed us to attract and keep great talent” Welch added: “I had thought our values would be important in retaining talent and having good morale, but I hadn’t anticipated how effective strong values and culture were in recruiting terrific new talent.”

In addition, the values refresh process led to an assessment of the leadership team and the board and whether certain members would be able to bring the company to the next phase of growth. Welch brought in three new board members with international business experience who had grown companies from small to large. Jonathan Leff, EVP of R&D, said: “Dan assembled a phenomenal board and they were critical to our success. We met with them all the time and had active discussions.”

In addition, several members of Welch’s leadership team were “not going to scale with the bigger, more complex organization,” said Welch. “And they weren’t entirely living the values consistently. It was hard because they had been with me right from the beginning and were also friends. In a company, everyone knows which leaders, employees, or managers are not cutting it and everyone is always wondering why are these people still here? Oftentimes, when it comes time to tell someone that they are just not cutting it, often times they are relieved because they knew they were no longer right for the position.” Welch replaced two leadership team members with fresh talent and recruited a new executive to a new position of Chief Business Officer. The leadership team was in a strong position for the upcoming dynamic growth phase of the company.

Welch admitted that he “allowed certain people to remain in their positions longer than they should have” and that this negatively affected the organization. “I admit that I was a little burnt out from having survived so many near-death experiences and having to say goodbye to so many people from our prior RIFs,” said Welch. Arata agreed: “Dan tended to give his team members chances to improve. Sometimes it worked and at other times we helped him see the need to make changes more quickly.” Krehlik also acknowledged that balancing the accountability value and giving people a chance to improve, was sometimes an issue in the early days: “Focus on accountability didn’t always

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happen as rapidly as it needed to. There was a ‘nice’ aspect to our culture so people weren’t always willing to hold other peoples’ feet to the fire, but that gradually changed as time went on and as we made it known that it was okay and even essential to hold each other accountable.”

On letting people go, Welch said it was essential to separate the business aspect from the people aspect and be “coldly analytical” and “honest.” “This is not to say you are cold about the people involved,” said Welch. “You have to be warmly compassionate and respectful in how you communicate a separation in order to protect their reputation. You can’t fall in love with your products, projects, or people. It’s unfortunate, but I have a personal practice of never developing a close friendship with members of my leadership team because I know that the relationship can bias performance assessment and I might have to fire one or all of them. I have had to fire many in my career. A CEO can always find a new CFO, a new General Counsel or other leader, but he or she can’t always find a new friend. The loss of a good friend is one of life’s more regrettable losses. They say it is lonely at the top and this is one reason.”

Welch “marveled” at how InterMune’s reductions in workforce “went so well” where most of the departing people spoke well of the company and the remaining people were still motivated. He credited strong human resource leadership, generous separation packages, and open communication with prospective job candidates about the risks of working at InterMune and in the biotech industry.

Finally: Success

In May 2014, the company announced the results of the phase 3 ASCEND trials at the International Conference of the American Thoratic Society (ATS). The response was “universally positive” and the “data were compelling.”12 Immediately afterwards, InterMune re-submitted the NDA to the FDA for U.S. approval. Leff said: “We launched ASCEND in 2011, we enrolled 555 patients, we got the results of primary and both secondary endpoints, wrote and published a paper in the New England Journal, presented at ATS, and submitted to the FDA all within a short period of time.”

Specifically, the study showed that “treatment with pirfenidone led to a 49 percent reduction in the proportion of patients who either died or saw the amount of air they could exhale decline 10 percent. Those who received the drug could also walk farther in a set period of time than those who were assigned a placebo.”13 Bradford said: “This was a tremendously positive study outcome. We hit the key endpoints that we needed to and the size of the benefit was much higher than what we saw in the CAPACITY studies.”

Krehlik said that the company had thought through possible contingency planning a year prior to that moment when the data came through: “We knew we either needed to ramp up by 150 people or release a large number of employees if our clinical data didn’t come through. Once we got to Phase 3 data, where the data seemed positive, our contingency planning was that the FDA might approve it early so we had multiple dates in our ramp up planning that we changed often and were constantly recalibrating. When we were approved in October 2014, we were ready with our 150 employees to go into the field, several months earlier than we had originally planned.” InterMune’s good fortune did not go unnoticed by other biotech and pharma companies. In September 2014, the Swiss drug maker Roche agreed to buy InterMune for $8.3 billion ($74 per share), strengthening Roche’s portfolio of drugs for respiratory diseases. The announcement came during a period of heavy acquisition activity in the industry. The price of $74 a share, represented a significant premium to InterMune’s most recent closing price and represented a 63 percent premium to its price in August of that year, before news reports that InterMune might be acquired began pushing the price higher.12 The InterMune Story, InterMune.13 Matthew Herper, “Roche CEO On InterMune Deal: ‘This is a Growth Story,’” Forbes, August 5, 2014.

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Daniel O’Day, who ran Roche’s pharmaceutical business said in the media: “We are obviously focused on high unmet medical needs and looking for medicines that make a significant difference clinically, and this clearly fits that bill.” O’Day noted that the ASCEND trial results earlier in the year had attracted Roche’s attention. Roche CEO, Severin Schwan, said that the deal “exemplifies the Roche strategy” of targeted acquisitions that matched up with the salespeople and research infrastructure it already had. Genentech (whose sales accounted for the majority of Roche’s sales), marketed two lung drugs, Xolair for asthma and Pulmozyme for cystic fibrosis.

On October 15, 2014, the U.S. FDA approved Esbriet for the treatment of IPF in the United States (Exhibit 6). The FDA granted Esbriet fast track, priority review, orphan product, and breakthrough designations. In fact, Esbriet was approved more than a month ahead of the date the agency was scheduled to complete the review of the drug application. The FDA breakthrough designation was reserved for relatively few drugs that are intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

By the time of Esbriet’s approval, InterMune had invested over $600 million in the battle against IPF. In a message to InterMune employees on October 15, 2014, Welch said: “This accomplishment represents the culmination of a 12-year commitment to IPF patients and their families. The path that brought us here presented many challenges, which InterMune colleagues consistently faced with determination and vision. This is a rare and precious moment in the career of one who works in the biotech industry and I encourage you to savor it.”

Reflections

Jung Choi, Senior Vice President of Corporate Development at InterMune reflected on InterMune’s success: “I think it really comes down to values and having a sense of what is the most important thing here. The principle of having patients first and thinking about what makes the most sense for them was playing out in every decision. The culture and values allowed the company to make the right set of decisions.” Arata agreed: “I’ve never been at a company where values were more than a poster on a wall. At InterMune, Dan [Welch] never missed an opportunity to talk about values and why particular accomplishments were enabled by our values. Workshops were also done internationally and that helped too. Dan definitely lived the values.” Sean Nolan, Executive Vice President, Chief Business Officer also said: “I really believe it’s the people and the emphasis we placed on values within the organization that helped us—and these values are truly a moral compass that guides the company and helps us recruit people into the organization who have a similar set of values. A lot of companies talk about values, but few actually live those values. We have always lived those values and I give full credit to Dan for setting the standards and benchmarks that lay out the expectations for everyone.”

Bradford said on the company’s contingency planning culture: “It looks like we had nine lives, but it was a lot of work. We thought through strategically everything extremely carefully, whether it’s to do a financing, what to do if this drug fails, what to do if this trial fails, how do we design the best possible trials, and let’s bring in the best consultants we could get, whatever the area was. There was always a premium on making the right decision and being prepared for downstream consequences with contingencies. You don’t have many shots with a company like InterMune and biotech, but you really have to make these decisions right when you’re dealing with big bets.”

An important catalyst was the team’s ability to raise the necessary funds for conducting the expensive clinical trials. As Andrew Powell, InterMune’s General Counsel commented: “Sometimes you have to double down and we doubled down on a lot of levels including people; also financially we were able to double down. Over 10 years, we’ve built such a relationship with financial institutions that we

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were able to pick up the phone and raise more money.”

Welch reflected on the company’s success drivers: “The three lessons we learned was to have a vision, create a value system that is real and not artificial—a place where people want to come and stay and do their very best work, and create a strong leadership team and board that you are not afraid to change as you face rapid growth and complicated situations.” He also added: “I also learned to first major in the majors, meaning know what your major is and in our case, we had always felt that pulmonology was where we needed to major, especially as the marketplace in HCV got more and more competitive.”

Rick Modi, Senior Vice President of Global Marketing reflected on InterMune’s resilience: “Leadership is about achieving something that reason says is not possible.” If you look at everything that was thrown at InterMune’s way, the type of disease, one where many companies have gone and failed, most people would have given up if you followed reason, if you followed the math, if you followed the analytics—you wouldn’t do it. But to find a group of individuals who came together, who banded together, had great chemistry and said, ‘I'm going to still get this done against all odds—that tenacity, that perseverance is a huge lesson learned.”

Jonathan Leff, Executive Vice President of Research & Development emphasized the team’s “can do attitude” as a critical success factor: “The tendency is to just say ‘no’ because there’s all these reasons that it can’t be done. But if you create a mindset where you considerer the ‘yes if,’ ‘yes it can be done if this were to happen or that were to happen,’ amazing things can be accomplished—it’s all about your mindset.”

As Welch and his team looked to the future, they were pleased about the Roche acquisition: “On the whole, (the deal is) very positive,” said Welch. “There was always this speculation that, if successful, InterMune would be owned one day by another company. It was a cloud that hovered over us. The clouds have moved away and there’s clarity now. Ours was a romantic story about a small team who with a noble mission in their hearts—to help desperate patients—kept getting up after repeatedly getting knocked down and eventually triumphed against long odds. I couldn’t be more proud of the men and women of InterMune who made this story a reality.”

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Exhibit 1 Financials

In Millions of USD (except for per share items)

12 months ending 2013-

12-31


12-31


12-31


12-31 Revenue 70.34 26.17 5.41 239.25Other Revenue, Total - - - -Total Revenue 70.34 26.17 5.41 239.25Cost of Revenue, Total 10.41 8.92 1.41 0.00Gross Profit 59.93 17.26 4.00 239.25Selling/General/Admin. Expenses, Total 145.05 105.30 89.46 55.02

Research & Development 113.51 106.57 74.97 67.47Depreciation/Amortization - - - -Interest Expense(Income) - Net Operating - - - -

Unusual Expense (Income) 7.90 0.00 0.00 1.30Other Operating Expenses, Total - - - -Total Operating Expense 276.86 220.78 165.84 123.79Operating Income -206.52 -194.61 -160.44 115.46Interest Income(Expense), Net Non-Operating - - - -

Gain (Loss) on Sale of Assets - - - -Other, Net -1.61 -0.37 -0.66 0.50Income Before Tax -219.89 -203.32 -166.94 109.23Income After Tax -220.78 -184.69 -162.35 109.15Minority Interest - - - -Equity In Affiliates - - - -Net Income Before Extra. Items -220.78 -184.69 -162.35 109.15Accounting Change - - - -Discontinued Operations - - - -Extraordinary Item - - - -Net Income -219.57 -150.08 -154.77 122.37Preferred Dividends - - - -Income Available to Common Excl. Extra Items -220.78 -184.69 -162.35 109.15

Income Available to Common Incl. Extra Items -219.57 -150.08 -154.77 122.37

Basic Weighted Average Shares - - - -Basic EPS Excluding Extraordinary Items - - - -

Basic EPS Including Extraordinary Items - - - -

Dilution Adjustment 0.00 0.00 0.00 8.35Diluted Weighted Average Shares 81.39 65.18 60.10 61.38Diluted EPS Excluding Extraordinary Items -2.71 -2.83 -2.70 1.91

Diluted EPS Including Extraordinary Items - - - -

Dividends per Share - Common Stock Primary Issue 0.00 0.00 0.00 0.00

Gross Dividends - Common Stock - - - -Net Income after Stock Based - - - -

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In Millions of USD (except for per share items)


12-31


12-31


12-31


12-31 Comp. Expense Basic EPS after Stock Based Comp. Expense - - - -

Diluted EPS after Stock Based Comp. Expense - - - -

Depreciation, Supplemental - - - -Total Special Items - - - -Normalized Income Before Taxes - - - -Effect of Special Items on Income Taxes - - - -

Income Taxes Ex. Impact of Special Items - - - -

Normalized Income After Taxes - - - -Normalized Income Avail to Common - - - -

Basic Normalized EPS - - - -Diluted Normalized EPS -2.65 -2.83 -2.70 1.94Source: InterMune.

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Exhibit 2 Recruiting Job Description

Position: Labeling ManagerCompany: InterMuneJob Location(s): Brisbane, CAStart Date: As soon as possible Employment Term: RegularEmployment Type: Full TimeStarting Salary Range: Required Education: Bachelor's DegreeRequired Experience: OpenRequired Security Clearance: NoneRelated Categories: Biotechnology and Pharmaceutical, Management and Supervision

Position Description

Department: Manufacturing Operations and Supply ChainJob Title: Labeling ManagerJob Location: Brisbane, CA

Description:

The Labeling Manager will be responsible for ensuring all product labelling needs for InterMune are met in accordance with our IPACT values. This includes clinical and commercial products. The Labeling Manager will have strong collaboration and influence management skills as the position will be directly working with our contract label and artwork vendors. Additionally the Labeling Manager will work collaboratively with numerous internal stakeholders such as Regulatory Affairs, Commercial, Clinical Operations, Quality, Legal and other InterMune Manufacturing and Supply Chain functions.

The Labeling Manager will be proactive in their communication style and have experience building robust business processes and systems, such as change control, country launch process and label lifecycle management process. The Labeling Manager will be a subject matter resource in regulatory requirements for product labeling in the major markets around the world. The Labeling Manager will manage label inventories and the change control process for product labels.

The Labeling Manager will be expected to develop robust product label project plans with associated timing, cost and resource implications. This position will also manage and be accountable for the project deliverables and timely communication.

As part of the larger Product Management and Strategic Sourcing group, the Labeling Manager will participate in various sourcing strategy decisions such labeling and packaging vendor selection, vendor performance metrics development etc.

This position will likely require up to 20% travel time.

Job Requirements: BS/BA plus 8-12 years within Pharma/ Biotech industry with at least 4 years direct product

labeling operations experience.

http://dcjobs.com/c/77611

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Knowledge of global labeling requirements for clinical and commercial cGMPS and GCPs Expertise in working with electronic document management systems and MS Office Project Management certification is desirable.

Source: InterMune.

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Exhibit 3 InterMune Behavioral Interview Guide

IPACT VALUES

Integrity

Adhere to a strict moral, professional, and ethical code of conduct globally

Communicate appropriately, openly and honestly; listen actively

Lead by example

Questions: Have you ever faced a situation at work or in school where you believed that actions of an individual or team you were involved with were not in compliance with that institution's ethics? What actions did you take?

Have you ever faced a situation when you had to take a longer way of doing something in order to adhere to proper professional standards? Did others disagree with your assessment of the situation?

Tell me of a time when your active listening skills really paid off for you, maybe a time when other people missed the key idea being expressed. How did your ability to communicate these details to those who may have missed them affect the outcome of the discussion?

Tell me about a time when you gave a presentation where it was important to influence someone's opinion. What was the outcome?

Response: Candidate should provide examples that show an understanding of the significance of work standards, ethical standards, and regulations relating to the business, and be able to integrate these areas into their work processes. Candidate should provide examples that display an ability to both receive and relay information effectively.

Passion

Strive for excellence

Commit to the interests of patients

Work toward our common global vision

Questions: When was the last occasion you asked for direct feedback from a superior, peer, or customer? How did you then use this knowledge to improve your performance?

Describe an occasion when you had to give an explanation of what you could realistically deliver to a manager. Why was it important to articulate your capabilities?

Tell me about a time when you did something outside of the routine activities assigned to you for the benefit of the company/customer. What was the result?

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When have you been most proud of the group you belonged to/organization you worked for? What about that team/organization made you feel this way?

Response:

Candidate should show that they are able to keep balance between company and customer interests. Candidate's answer should show planning, energy, company commitment, and high personal standards for his or her work.

Accountability

Make timely decisions and take responsibility

Keep commitments on metrics and timelines

Be accountable and transparent to stakeholders

Questions: Tell me about a difficult decision you've made in the last year. How did you weigh your options?

Tell me about a time when you got results that far exceeded your own expectations. What was initially expected to be achieved vs. the actual outcome?

What is your first reaction when your senior manager assigns a task that you think is impossible? What steps do you take in developing a plan of action?

Give me an example of a time when you had to communicate a delay in a project/program outcome to others. What steps did you take?

Response: Candidate’s answer should show consistency in initiating positive actions. Candidate should be able to use various tactics to get things done.

Creativity

Proactively improve efficiency and quality

Challenge the status quo, be innovative, and take well-reasoned risks

Embrace perspectives of patients and stakeholders and drive change

Questions: Give an example of a time you identified a small problem and took action to fix it before it became a major problem. What were the potential pitfalls you were trying to avoid?

Give an example of an innovative idea that you used to overcome an obstacle you faced in completing a project. How did the idea differ from the norm?

Describe a work-related project you have completed that required creativity to accomplish to your and others’ satisfaction. What was different or unique about your ideas or processes?

Tell me about a time that you initiated contact with a customer/stakeholder to better understand their point of view. What did you do with that information? What was the end result?

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Response: Candidate’s response should show they are willing to discuss innovative solutions to challenges. Their response should contain examples of unique work processes that were developed or employed to overcome problems.

Teamwork

Respect teammates’ input, diversity, and entrepreneurship

Foster a team environment that allows for fair and honest feedback

Have fun

Questions: Describe a situation in which you had to arrive at a compromise, or guide others to a compromise, as part of a team in order to accomplish a project on time. What was the outcome?

Give an example of a time you had to approach a member of another team or function within your company for assistance on a project. How did you go about making the request?

Have you ever had responsibility for leading a virtual team? What techniques did you employ to foster a cohesive, engaged team?

Tell me about a situation where you had to provide a peer with (positive/constructive) feedback regarding their performance. How did you address this? What was the eventual outcome?

Response: Candidate should value working relationships, understand how important working relationships are for the company, and be prepared to work at making relationships function well.

Source: InterMune.

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Exhibit 4 InterMune Performance Evaluation

Purpose:

The purpose of the annual Performance Review is for each employee to receive a manager assessment of overall performance for the performance review period, and for employees to have the opportunity to provide input on how they can best perform and develop. The review summarizes ongoing feedback including employee strengths, opportunities for improvement, competencies, and development areas.

Reviews should be based on facts and data and feedback provided should be specific. Facts and data should come from established performance metrics, employee self-assessment, external or internal customer or co-worker feedback and other sources. The goal is a thorough and accurate overall performance assessment.

Contact Human Resources for more information on making the review process as effective as possible.

Section A – Goals / Project Goals and Accomplishments

1. Manager and employee – recommend 4 to 5 goals (maximum 8) goals and accomplishments from the performance year. These should be specific to the employee’s position and tied to expected level of contribution. Weighting of the goals/responsibilities is required and should indicate relative importance of each objective; sum of weightings must total 100%.

2. Employee completes a self-assessment of his/her performance by documenting results and major achievements for each core value, goal or key responsibility.

3. Manager reviews the self-assessment and separately assesses the employee’s performance by documenting results and major achievements.

TIP: When documenting results against goals or major achievements in key responsibilities, provide specific results that include details of the specific situation or task, the action taken (e.g. lead, assist, manage, etc.), and the results achieved (e.g. if quantitative, did they meet, exceed, or fall short of a set responsibility or objective?).

Individual Goals, Team Goals (if applicable) and AccomplishmentsResults / Major Achievements Assessment

1. Goal and Accomplishments:

Weightings (Value) of Goal

Definition of success and timing

Result Employee – Results/MA Manager – Results/MA

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Section B – InterMune’s IPACT Values

Employee chooses at least two of our values to assess how they demonstrated the following values in their interactions with others (i.e., co-workers, managers, customers, patients, vendors, etc.) while performing their day-to-day work. Manager should respond to the assessments provided by the Employee and add any feedback on any of the other values where the employee has excelled or should focus their development:

Integrity Adhere to a strict moral, professional, and ethical

code of conduct globally Communication appropriately, openly and honestly;

listen actively Leads by examplePassion Strives for excellence Commit to the interests of patients Works towards our common global vision

Accountability Makes timely decisions and take responsibility Keep commitments on metrics and timelines Be accountable and transparent to stakeholderCreativity Proactively improve efficiency and quality Challenge the status quo, be innovative, and take well-

reasoned risks Embrace perspectives of patients and stakeholders and

drive changeTeamwork Respect teammates’ input, diversity, and

entrepreneurship Foster a team environment that allows fair and honest

feedback Has fun

Employee – Value exhibited in day to day work and Results/MA Manager – Value exhibited in day to day work and Results/MA Employee – Value exhibited in day to day work and Results/MA Manager – Value exhibited in day to day work and Results/MA Manager – Any additional feedback on Values

As summarized here below, the Company Code of Business Conduct and Ethics is an integral part of our Core values and is considered as read and understood.

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Honest and Ethical Conduct Practice the highest standards of honesty, accuracy, integrity and truthfulness Do not knowingly disseminate any false or misleading information

Compliance with Laws, Rules and Regulations Obey and comply with all laws, rules and regulations in conducting our business. Make no

misleading report, certification, claim or statement to any government agency or official Comply with all required disclosure controls and procedures established by InterMune’s

Disclosure CommitteeProtect all Confidential and Proprietary Information

Access to confidential business information must be on a “need-to-know” basis onlyDo Not Engage in Any Conflict of Interest

Do not allow a personal or outside interest to interfere with or influence the performance of your duties

Do not engage in any unauthorized and/or conflicting outside consulting or employmentReport any misconduct promptly

Report any suspected misconduct to any of: you supervisor, any member of the management team, the General Counsel or the CEO

The Anonymous Tip line is also available to at anytime

Section C – Development Planning

STRENGTHS / OPPORTUNITIES: Considering InterMune’s values and employee’s skills/competencies, the Employee identifies 2 strengths that she/he brings to their job (use specific examples) and provides examples of improvement opportunities that may support their growth and/or career development. Then the Manager comments on the employee statements and may bring one additional example of strength and/or improvement opportunity.

Strength Area Specific Examples

Opportunity for Improvement Specific Examples

DEVELOPMENT DISCUSSION: Manager and Employee discuss the employee’s personal career goals and consider organizational need to determine potential assignments to support employee development and career goals. Manager and employee document action plan to better leverage the employee’s key strengths and to provide development opportunities, including what development activity is targeted and why as well as what actions that will be taken and by when.

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Opportunity for Development Action Plan (What steps will be taken and by when?)

Source: InterMune.

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Exhibit 5 IPACT Values

Integrity Adhere to a strict moral, professional, and ethical code of conduct globally Communicate appropriately, openly and honestly; listen actively Lead by example

Passion Strive for excellence Commit to the interests of patients Work toward our common global vision

Accountability Make timely decisions and take responsibility Keep commitments on metrics and timelines Be accountable and transparent to stakeholders

Creativity Proactively improve efficiency and quality Challenge the status quo, be innovative, and take well-reasoned risks Embrace perspectives of patients and stakeholders and drive change

Teamwork Respect teammates’ input, diversity, and entrepreneurship Foster a team environment that allows fair and honest feedback Have fun

Source: InterMune.

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Exhibit 6 FDA Approval History for Esbriet

Date Article

Oct 15, 2014 FDA Approves Esbriet (pirfenidone) for Idiopathic Pulmonary Fibrosis

Jul 17, 2014 InterMune Receives FDA Breakthrough Therapy Designation for Pirfenidone, an Investigational Treatment for IPF

May 27, 2014

InterMune Announces Resubmission Of NDA For Pirfenidone For The Treatment Of Patients With IPF

May 16, 2014

InterMune Announces Expanded Access Program for Pirfenidone to Treat Idiopathic Pulmonary Fibrosis (IPF) in the United States

Feb 25, 2014 InterMune Reports Phase 3 ASCEND Trial Results of Pirfenidone in Idiopathic Pulmonary Fibrosis (IPF)

May 7, 2010 Coalition for Pulmonary Fibrosis Responds to News of Further Review of Pirfenidone By FDA

May 5, 2010 InterMune Receives FDA Complete Response Letter on Esbriet (pirfenidone) New Drug Application

Mar 10, 2010 FDA Advisory Committee Recommends Approval of InterMune's Esbriet (pirfenidone) for Idiopathic Pulmonary Fibrosis

Mar 5, 2010 InterMune Announces Posting of Briefing Documents for FDA Advisory Committee Meeting on Pirfenidone

Jan 6, 2010 FDA Grants Priority Review of Pirfenidone NDA for the Treatment of Patients With IPF

Nov 4, 2009 InterMune Announces Submission of NDA for Pirfenidone for the Treatment of Patients with IPF

Source: InterMune.