Morningstar Equity Research

InterMune, Inc. ITMN (NAS)

Last Close Industry Sector
36.91 USD Biotechnology Health Care

Profile
Pricing data through 30 Dec 2010 InterMune, Inc. is a biotech company focused on developing
and commercializing innovative therapies in pulmonology
and hepatology. The company’s sole approved product is
In addition to this comprehensive
company profile, Morningstar Actimmune which is approved by the FDA only for the
offers in-depth analyst research and
ratings on selected companies.
treatment of two rare congenital disorders: CGD and severe,
malignant osteopetrosis. Actimmune is also approved for
For information about our full analyst
coverage, please contact: these indications by the health authorities in numerous
Morningstar Equity Research other countries. CGD is a life-threatening congenital
+1 (312) 696-6869
nasdaqrequest@morningstar.com
disorder that causes patients, mainly children, to be
vulnerable to severe, recurrent bacterial and fungal
Contents infections. This results in frequent and prolonged
hospitalizations and commonly results in death. Severe,
Company Profile 1
malignant osteopetrosis is a life-threatening, congenital
Company Data 2
disorder that mainly affects children. This disease results
Management & Ownership 3
in increased susceptibility to infection and an overgrowth
Industry Focus 4
of bony structures that might lead to blindness and/or
deafness. It has an advanced-stage development pipeline
in the pulmonology area and a research and development-
stage pipeline in the hepatology area. In pulmonology, it is
developing a single therapy for the treatment of IPF. IPF is
a fatal disease characterized by progressive scarring, or
fibrosis, of the lungs, which leads to the deterioration and
destruction of lung function. In hepatology, it is developing
product candidates to provide expanded treatment options
for patients suffering from HCV infection.

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 1 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
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Morningstar StockResearch
Morningstar®Equity Data Sheet Pricing data thru Dec. 30, 2010 Rating updated as of Dec. 30, 2010 Fiscal year-end: December

InterMune, Inc. ITMN Sales USD Mil Mkt Cap USD Mil Industry
24 2,068 Biotechnology
Sector
Health Care

InterMune is a biopharmaceutical firm focused on

InterMune is a biopharmaceutical firm focused on Morningstar Rating Last Price Fair Value Uncertainty Economic Moat
TM
Stewardship Grade
developing therapies for the treatment of lung and liver
developing therapies for the treatment of lung and liver -QQQ 36.91 -
38.00 -
Very High -None -
D
disorders. Its sole approved product is Actimmune, designed
disorders. Its sole approved product is Actimmune, designed per share prices in USD
to combat malignant osteopetrosis and chronic
to combat malignant osteopetrosis and chronic 55.88 52.96 51.19 28.44 24.75 18.26 31.54 36.60 20.09 19.12 49.46 Annual Price High
granulomatous disease. The firm's lead orphan drug
granulomatous disease. The firm’s lead orphan drug 11.00 12.50 15.76 14.80 9.33 9.62 13.90 13.00 9.25 8.66 8.34 Low
Recent Splits
candidate, Esbriet, is awaiting approval for idiopathic
candidate, Esbriet, is awaiting approval for idiopathic
pulmonary fibrosis. Price Volatility
pulmonary fibrosis. Monthly High/Low
39.0 Rel Strength to S&P 500
52 week High/Low
19.0
49.46 - 8.34
9.0 10 Year High/Low
55.88 - 8.34
3280 Bayshore Boulevrad Employees: 107 4.0
Bear-Market Rank
3280 Bayshore
Brisbane, Boulevrad
CA 94005 5 (10=worst)
1.0
Brisbane,
Phone: CA 466-2200
1 415 94005
Trading Volume Million
Phone: 1 415
Website: 466-2200Website: http://www.intermune.com
http://www.intermune.com 3.0
1.1
Growth Rates Compound Annual 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Stock Performance
Grade: F 1 Yr 3 Yr 5 Yr 10 Yr . 10.4 -48.2 -9.2 -42.8 26.7 83.0 -56.6 -20.6 23.3 183.1 Total Return %
Revenue % 1.1 -18.8 -20.3 55.2 . 23.4 -24.8 -35.6 -51.8 23.7 69.4 -60.1 17.9 -0.1 170.3 +/- Market
Operating Income % . . . . . 47.4 -81.4 -18.5 -49.2 34.0 94.1 -43.0 -12.7 24.8 184.6 +/- Industry
Earnings/Share % . . . . . . . . . . . . . . 0.0 Dividend Yield %
Dividends % . . . . 1066 1397 807 737 425 549 1046 520 416 609 2068 Market Cap USD Mil
Book Value/Share % . . . .
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM Financials
Stock Total Return % 185.0 40.3 17.0 -12.2
11 40 112 154 151 111 91 67 48 49 24 Revenue USD Mil
+/- Industry 189.6 48.5 25.4 -5.7
39.6 61.3 78.4 76.4 72.9 69.4 73.4 78.8 81.3 85.6 73.8 Gross Margin %
+/- Market 173.3 45.5 16.9 -11.1
-33 -125 -142 -91 -50 -62 -115 -107 -96 -101 -105 Oper Income USD Mil
Profitability Analysis -290.5 -312.1 -126.7 -59.0 -33.4 -55.8 -126.7 -160.3 -198.7 -207.1 -431.9 Operating Margin %
Grade: Current 5 Yr Avg Ind Mkt -52 -118 -144 -97 -59 -5 -107 -90 -98 -116 -112 Net Income USD Mil
Return on Equity % . . . 22.1 -3.05 -4.67 -4.72 -3.06 -1.87 -0.16 -3.22 -2.52 -2.51 -2.62 -2.16 Earnings Per Share USD
Return on Assets % -74.6 -40.7 . 8.5 Dividends USD
. . . . . . . . . . .
Fixed Asset Turns 8.4 9.9 . 7.2 17 25 31 32 32 32 33 35 39 44 52 Shares Mil
Inventory Turns 2.8 3.3 . 13.9 8.19 7.58 5.78 2.76 1.02 0.97 -1.17 -0.79 -3.17 -2.27 -1.21 Book Value Per Share USD
Revenue/Employee USD K 226.5 426.0 * . 876.1
-19 -43 -97 -81 -43 -71 -16 -65 -72 -128 -122 Oper Cash Flow USD Mil
Gross Margin % 73.8 77.7 78.0 39.7 -1 -8 -5 -1 -1 -2 -4 -2 -2 0 0 Cap Spending USD Mil
Operating Margin % -431.9 -149.7 17.8 14.3 -20 -50 -103 -83 -44 -73 -21 -68 -74 -128 -122 Free Cash Flow USD Mil
Net Margin % . -139.7 4.2 9.6
Free Cash Flow/Rev % . . 18.0 0.1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM Profitability
R&D/Rev % 234.1 1.5 . 10.0 -50.4 -40.1 -37.4 -28.8 -21.4 -2.0 -41.1 -34.5 -45.0 -80.9 -74.6 Return on Assets %
-56.9 -57.5 -72.6 -71.7 -98.7 -16.2 . . . . . Return on Equity %
Financial Position . . . -62.9 -39.4 -4.7 . . . . . Net Margin %
Grade: D 12-09 USD Mil 09-10 USD Mil
0.11 0.14 0.29 0.46 0.54 0.42 0.35 0.26 0.22 0.34 0.16 Asset Turnover
Cash 17 19 1.0 1.8 2.1 3.3 8.1 8.3 . . . . 7.0 Financial Leverage
Inventories 3 2
Receivables 4 2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09-10 Financial Health
Current Assets 97 135 195 320 286 202 170 185 202 214 97 60 10 Working Capital USD Mil
. 150 150 150 170 170 170 170 170 126 85 Long-Term Debt USD Mil
Fixed Assets 3 2
196 215 183 88 33 32 -40 -31 -125 -106 -68 Total Equity USD Mil
Intangibles 0 .
. 0.70 0.82 1.70 5.18 5.35 . . . . 5.06 Debt/Equity
Total Assets 115 144
Payables 12 14 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM Valuation
Short-Term Debt . 43 . . . . . . . . . . . Price/Earnings
Current Liabilities 37 125 . . . . . . . . . . . P/E vs. Market
Long-Term Debt 126 85 27.6 31.3 7.0 4.8 2.8 4.9 11.1 7.1 8.6 11.9 79.4 Price/Sales
Total Liabilities 221 212 5.5 6.5 4.4 8.4 12.9 17.3 . . . . . Price/Book
. . . . . . . . . . . Price/Cash Flow
Total Equity -106 -68
Valuation Analysis Quarterly Results Industry Peers by Market Cap
Current 5 Yr Avg Ind Mkt Revenue USD Mil Dec 09 Mar 10 Jun 10 Sep 10 Mkt Cap USD Mil Rev USD Mil P/E ROE%
Price/Earnings . . 44.4 15.9 Most Recent Period 6.6 6.1 5.9 5.7 InterMune, Inc. 2068 24 . .
Forward P/E . . . 14.8 Prior Year Period 7.4 6.8 7.9 27.3 Merck & Co Inc 110943 43987 13.9 20.1
Price/Cash Flow . . 19.2 8.3 Rev Growth % Dec 09 Mar 10 Jun 10 Sep 10 Vertex Pharmaceutica 7181 112 . .
Price/Free Cash Flow . . 25.4 16.6
Most Recent Period -10.7 -11.2 -25.7 -79.3
Dividend Yield % . . 0.1 1.8 Major Fund Holders
Prior Year Period -23.2 -26.4 -2.2 17.1
Price/Book . . 3.6 2.2 % of shares
Price/Sales 79.4 8.7 4.6 1.3 Earnings Per Share USD Dec 09 Mar 10 Jun 10 Sep 10 Fidelity Growth Company 9.89
PEG Ratio . . . 1.6 Most Recent Period -0.62 -0.66 -0.46 -0.44 Oppenheimer Global A 1.98
Prior Year Period -0.83 -1.03 -0.81 -0.19 Vanguard Small Cap Index Inv 1.22
*3Yr Avg data is displayed in place of 5Yr Avg TTM data based on rolling quarterly data if available; otherwise most recent annual data shown.

© 2010 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. ®
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
ß
Morningstar Equity Research

InterMune, Inc. ITMN (NAS)

Last Close Industry Sector
36.91 USD Biotechnology Health Care

Management & Ownership

Management Activity

Name Position Shares Held Report Date* InsiderActivity

DANIEL G. WELCH CEO/Chairman of the Board/ 316,995 17 Dec 2010 507,663
Director/President,Director
ROBIN J. STEELE Divisional Senior VP/Secretary/ 81,908 06 Dec 2010 -
General Counsel
DR. WILLIAMSON Z. Senior VP, Divisional 69,874 08 Jun 2010 -
BRADFORD,M.D.,PHD
JOHN C. HODGMAN CFO/Senior VP, Divisional 64,563 08 Jun 2010 -
DR. STEVEN BRYANT Chief Medical Officer/Senior VP, 60,957 08 Jun 2010 -
PORTER,M.D.,PHD Divisional
DR. MARIANNE T. Other Executive Officer 60,874 08 Jun 2010 -
ARMSTRONG,PHD
SEIWERT SCOTT Senior VP, Divisional 58,974 06 Dec 2010 8,308

*Report date represents the date on which the owner's common shares held was audited.

Fund Ownership
Morningstar % of Shares % of Fund Change
Top Owners Rating Held Assets (k) Portfolio Date

Fidelity Growth Company QQQQ 9.87 0.21 0 31 Oct 2010

Pictet-Biotech-P dy USD QQQ 3.52 1.87 143 30 Sep 2010
Oppenheimer Global A QQQ 2.00 0.13 -133 30 Jun 2010
Vanguard Small Cap Index Inv QQQ 1.25 0.05 17 30 Sep 2010
Fidelity Select Biotechnology QQ 1.11 0.76 0 31 Oct 2010

Concentrated Holders

Danske Inv Bioteknologi QQQQQ 0.20 5.53 -31 31 Oct 2010

Pictet Biotech Mother Fund 0.03 5.12 -5 13 Apr 2010
First Trust NYSE Arca Biotech Index QQQQQ 1.05 4.54 -148 31 Oct 2010
Swiss Life (LUX) EQ Biomedical EUR QQ 0.15 2.56 -30 28 Feb 2010

Institutional Transactions
Shares
Morningstar % of Shares % of Fund Bought/
Top 5 Buyers Rating Held Assets Sold (k) Portfolio Date
T. Rowe Price Health Sciences QQQQ 0.84 0.27 168 30 Sep 2010
T. Rowe Price New Horizons QQQQ 0.66 0.08 162 30 Sep 2010
Pictet-Biotech-P dy USD QQQ 3.52 1.87 143 30 Sep 2010
TFS Market Neutral QQQQQ 0.10 0.16 55 31 Jul 2010
Managed Account Global SmallCap QQQQQ 0.04 0.21 25 31 Jul 2010

Top 5 Sellers

First Trust NYSE Arca Biotech Index QQQQQ 1.05 4.54 -148 31 Oct 2010
Oppenheimer Global A QQQ 2.00 0.13 -133 30 Jun 2010
BlackRock Global SmallCap Inv A QQQQ 0.17 0.12 -101 30 Sep 2010
Dexia Equties L Biotechnology I USD Acc 0.13 0.77 -97 31 Oct 2010

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 3 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Morningstar Equity Research

InterMune, Inc. ITMN (NAS)

Last Close Industry Sector
36.91 USD Biotechnology Health Care

Industry Focus: Biotechnology

Three Upcoming Make-or-Break Biotech Approvals Treatment

17 December 2010 Vertex VRTX is close to commercializing its hepatitis
C drug telaprevir, part of a new class of therapies that have
the potential to revolutionize the way the disease is treated.
Lauren Migliore HCV's current standard of care requires 48 weeks of
Stock Analyst
The lure of biotech has attracted droves of investors with treatment, causes terrible side effects, and is still only able
stomachs for risk ever since the industry's inception in the to cure patients 50% of the time. In contrast, telaprevir has
1970s. Biotech investors continue to funnel money into the potential to cut treatment time in half and double cure
fledgling enterprises--all the while enduring shareholder rates. The drug is widely regarded as a major advancement,
These highly dilution, enormous uncertainty, and years of net losses-- and we think telaprevir could hit the market in the first half
anticipated new hoping to catch the next Amgen AMGN or Genentech. of next year.

therapies are about The meteoric rise in the overnight share prices of modern- Vertex's chief rival, Merck MRK , is developing a protease
to face judgment day Lazuruses like Vanda Pharmaceuticals VNDA and, inhibitor of its own. We think telaprevir's slightly superior
most recently, Orexigen Therapeutics have become the stuff efficacy and convenience profile should give it an advantage
day. of biotech legends. However, it is important to remember with prescribers. However, Vertex has no commercialization
that many more biotechs crash and burn than make it big. experience, and Merck's established salesforce and ability
to package the drug with the current standard of care should
More often than not, biotech shareholders are left empty- help even the commercialization playing field. Vertex ranked
handed. Below we highlight three development-stage number 1 on our 2010 biotech takeout list, and we continue
biotechs with highly anticipated new therapies that are to believe the firm would benefit from the sales know-how
about to face judgment days of their own. of a larger pharma player like current partner Johnson
Johnson JNJ . The stock currently trades at a 25% discount
to our fair value estimate, providing an attractive entry point
for investors with a stomach for risk.
Vertex's Telaprevir Aims to Revolutionize HCV
While Vertex also has a late-stage cystic fibrosis candidate
and compounds in earlier-stage development, telaprevir
remains the focus of investor excitement and the primary
value driver of the firm. We give the drug a 70% chance of
approval, 10% higher than our average Phase III drug. If
telaprevir succeeds in clinching approval, our fair value
estimate would rise to at least $50 (not including a takeout
premium). With a drug on the market, we think Vertex could
see profitability by 2013. However, a great deal is still
unknown about telaprevir's remaining late-stage data and
commercialization plans. If telaprevir takes longer than
expected or requires more resources to get to market, our
fair value estimate would fall to under $30.

Human Genome's Benlysta Could Break 50-Year

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 4 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
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Morningstar Equity Research

InterMune, Inc. ITMN (NAS)

Last Close Industry Sector
36.91 USD Biotechnology Health Care

Industry Focus: Biotechnology

Dearth of New Lupus Drugs disease management to injectable insulin. In trials, Afrezza
Human Genome Sciences' HGSI lupus drug Benlysta achieved comparable levels of overall glucose control while
could become the first lupus medication to gain approval in also demonstrating a lower risk of hypoglycemia and weight
over five decades. The first-in-class drug has demonstrated gain than currently available products. Despite these
promising Phase III data in seropositive patients--those with advantages, MannKind received a complete response letter
an autoantibody present in their bloodstream. While the from the FDA asking for more data earlier this year. The good
drug has had issues demonstrating significant long-term news for MannKind was that the FDA did not require
efficacy, we think Benlysta could be a unique candidate to additional Phase III trials, which likely would have been
use in combination with the standard of care. With no direct prohibitive for the unprofitable biotech.
treatment for lupus, any improvement to the current steroid-
based treatment could make the drug very attractive, and MannKind expects to hear back from the FDA by Dec. 29,
we think Benlysta could turn into a blockbuster drug for the and we think there is a good chance Afrezza will be approved
firm. Human Genome received a favorable advisory panel (we assign Afrezza an 85% chance of approval based on
vote for Benlysta last month, with members voting 13 to 2 strong efficacy data and a clean safety record thus far).
in favor of recommending approval and 14 to 1 that the However, MannKind will face an uphill battle in its attempt
drug's safety profile was sufficient for approval. While the to turn the product into a commercial hit. Afrezza's
FDA has recently delayed its target decision date to March predecessor in the inhaled insulin class, Pfizer and Nektar's
10, 2011, we think the drug could still launch by mid-2011. Exubera, was removed from the market in 2007 after
generating disappointing sales and being linked to a
Human Genome has a robust pipeline and many drugs in potential risk of lung cancer in former smokers. Although
clinical trials. If one product fails, the firm has other Afrezza's clinical trials have yet to produce any red flags,
development options. However, much of the firm's long-term we think Exubera's failings will haunt MannKind's efforts
value remains tied to Benlysta. If the firm's share of Benlysta to win favor among prescribers. MannKind also trades at a
sales could surpass $1.5 billion by 2019, we would raise our discount to our fair value estimate, but we think Afrezza's
fair value estimate to $27 per share. If Benlysta does not fate represents more of a binary outcome for the firm, unlike
gain approval, Human Genome would be left to rely on Vertex's telaprevir or Human Genome's Benlysta. The firm
earlier-stage pipeline candidates and two Phase III carries a very high uncertainty rating and should be regarded
candidates that we believe have only modest commercial as a speculative investment.
potential. Our fair value estimate in this case would fall to
$5 per share. While we think the firm is fairly valued at
current trading levels, Human Genome represents another
key takeout opportunity, in our opinion. The company ranked
number 3 on our 2010 list of biotech takeout targets, and
we think an acquisitor like current partner GlaxoSmithKline
GSK would make strategic sense.

MannKind's Inhaled Insulin Faces High Hurdles

MannKind MNKD is developing Afrezza as an ultra-
rapid-acting inhaled insulin therapy for patients with
diabetes. In addition to allowing patients to forego the
needle, Afrezza's molecular structure may allow for superior

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 5 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.