Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

Commission File Number 0-29801

InterMune, Inc.
(Exact name of registrant as specified in its charter)

3280 Bayshore Blvd., Brisbane, California 94005
(Address of principal executive offices)

(415) 466-2200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes ý No o

        As of July 29, 2002, there were 31,560,040 outstanding shares of Common Stock, par value $.001 per share, of InterMune, Inc.

        This report on Form 10-Q contains 20 pages.

INTERMUNE, INC.

INDEX

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERMUNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share data)

See accompanying notes to Condensed Consolidated Financial Statements.

3

INTERMUNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

See accompanying notes to Condensed Consolidated Financial Statements.

4

INTERMUNE, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

See accompanying notes to Condensed Consolidated Financial Statements.

5

INTERMUNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

        In the opinion of the management of InterMune, Inc. ("InterMune," "we," "our," or "us"), the accompanying unaudited financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        Certain information and footnote disclosures usually included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with our annual report filed on Form 10-K for the year ended December 31, 2001 and our filings of periodic reports on Form 10-K, 10-Q and 8-K. The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Principles of consolidation

        The consolidated financial statements include the accounts of InterMune and its wholly owned subsidiaries, (InterMune Canada Inc., and InterMune Ltd). All intercompany accounts and transactions have been eliminated. To date, the operations of InterMune Canada Inc. and InterMune Ltd. have been immaterial.

Use of estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue recognition and revenue reserves

        Revenue on product sales is recognized when persuasive evidence of an arrangement exists, the price is fixed and final, delivery has occurred and there is a reasonable assurance of collection of the sales proceeds. We obtain written purchase authorizations from our customers for a specified amount of product at a specified price and consider delivery to have occurred at the time of shipment. Revenue is recognized at shipment and reserves are recorded for estimated returns, rebates and chargebacks. We are obligated to accept from customers the return of pharmaceuticals that have reached their expiration date. We have demonstrated the ability to make reasonable and reliable estimates of product returns based on significant historical experience. We review all sales transactions for potential chargebacks each month and believe that our reserves are adequate. Shipping and handling costs are included in cost of good sold.

6

Cash, cash equivalents and available-for-sale securities

        Cash and cash equivalents consist of highly liquid investments with original maturities when purchased of less than three months. We classify all debt securities as available for sale. Cash equivalents and available-for-sale securities are carried at fair value, with unrealized gains and losses, reported as a separate component of stockholders' equity. We have estimated the fair value amounts by using available market information. The cost of securities sold is based on the specific identification method.

Concentration of risks

        Cash equivalents and investments are financial instruments that potentially subject us to concentration of risk to the extent recorded on the balance sheet. We have established guidelines for investing excess cash relative to diversification and maturities that maintain safety and liquidity. We invest our excess cash in debt instruments of the U.S. Government and its agencies and high-quality corporate issuers, and, by policy, restrict our exposure to any single corporate issuer by imposing concentration limits. To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than two years.

        We rely on a single-source manufacturer for each of our products. Actimmune® is produced solely by Boehringer Ingleheim GmBH, for all clinical and commercial supplies. Amphotec® is produced solely by Ben Venue Laboratories Inc., and Infergen® is produced solely by Amgen Inc. Any extended interruption in the supply of any products could result in the failure to meet clinical or customer demand.

        We purchase some commercial and clinical products from Boehringer Ingleheim GmBH in a foreign currency. This exposes us to foreign currency exchange rate risk, which is monitored by us as part of our overall risk management program. There are no other significant sources of foreign currency exchange risk. We do not currently hedge this risk.

Inventories

        Inventories consist principally of raw material and finished good products and are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.

Other accrued liabilities

        Other accrued liabilities consist of the following:

7

Comprehensive income (loss)

        The only component of other comprehensive income is unrealized gains on available-for-sale securities. Comprehensive loss amounted to $29.1 million and $18.3 million for the three months ended June 30, 2002 and 2001, respectively. Comprehensive loss was $74.6 million and $28.9 million for the six months ended June 30, 2002 and 2001, respectively.

Net loss per share

        Basic net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Shares subject to repurchase by InterMune are deducted from the outstanding shares in arriving at the weighted average shares outstanding. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period. We excluded potentially dilutive securities, composed of incremental common shares issuable upon the exercise of stock options and common shares issuable on conversion of convertible notes, from basic net loss per share because of their anti-dilutive effect.

Product acquisition costs

        Initial payments for the acquisition of products that, at the time of acquisition by us, have already been marketed or approved by the FDA for marketing are typically capitalized and amortized ratably over the estimated life cycle of the products, typically ten years. At the time of acquisition, the product life cycle is estimated based upon the term of the agreement, the patent life of the product and management's assessment of future sales and profitability of the product. This estimate is assessed regularly during the amortization period, and the asset value or useful life will be adjusted when appropriate. Accumulated amortization of these costs was $3.8 million at June 30, 2002.

New Accounting Standards

        Effective January 1, 2002, we adopted Statement of Financial Accounting Standard No. 142, "Goodwill and other Intangible Assets" and Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." There was no impact on our financial statements from the adoption of these standards.

2.    SALE OF EQUITY

        On March 13, 2002, we completed a follow-on public offering of three million shares of registered common stock, at a price of $37.00 per share, raising $111.0 million in gross proceeds. We received approximate net proceeds of $104.5 million after deducting underwriting fees of $5.8 million and estimated related expenses of $0.7 million.

3.    ACQUISITION ACTIVITY AND NEW AGREEMENTS

        On March 29, 2002, we licensed from Marnac, Inc., a privately held biopharmaceutical company, the worldwide rights, excluding Japan, Korea and Taiwan, to develop and commercialize pirfenidone for all fibrotic diseases, including renal, liver and pulmonary fibrosis. Pirfenidone is not approved by the FDA and is currently in Phase II clinical development for fibrotic diseases of the lung, kidney and liver. Under the terms of the agreement, we received an exclusive license from Marnac and from their co-licensor, KDL Gmbh (Basel, Switzerland), in exchange for an up-front cash payment of $18.8 million and future milestone and royalty payments. We expensed the $18.8 million as acquired in-process research and development in the first quarter of 2002 since pirfenidone is currently in clinical development, has not reached technological feasibility and has no foreseeable alternative future uses.

8

        In May 2002, we acquired certain interferon gamma-1b patents of Amgen Inc. in exchange for $3.5 million, of which $1.5 million was paid in the second quarter of 2002 and $2.0 million was accrued as of June 30, 2002. We expect to amortize these product rights to operations over the expected useful product life of Actimmune.

9

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The discussion in this report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this report that are not historical statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, beliefs, intentions or strategies regarding the future, such as those, without limitation, in the discussions about:

•

our strategy;



•

governmental regulation and approval;



•

sufficiency of our cash resources;



•

revenues from existing and new collaborations;



•

product and product candidate development;



•

our research and development expenses and other expenses; and



•

our operational and legal risks.

        All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those described in our forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and those discussed under the heading "Additional Risk Factors," "Business," and "Management's Discussion and Analysis of Financial Condition of Operations" in our annual report filed with the SEC on March 21, 2002 on Form 10-K for the year ended December 31, 2001.

Overview

        We are developing and commercializing innovative products for the treatment of serious pulmonary and infectious diseases and cancer. We have three marketed products, growing product revenues, and advanced-stage clinical programs addressing a range of diseases with attractive markets. Our three marketed products are Actimmune®, Infergen® and Amphotec®. Actimmune is approved in the United States for two rare congenital disorders: chronic granulomatous disease and severe, malignant osteopetrosis. We market Infergen in the United States and Canada for the treatment of chronic hepatitis C infections. We market Amphotec worldwide for the treatment of invasive aspergillosis.

        We have sustained losses on a quarterly and an annual basis since inception. As of June 30, 2002, we had an accumulated deficit of $230.1 million. Our net losses from operations were $74.0 million for the six-month period ended June 30, 2002, and $33.6 million for the same period in 2001. These losses resulted from significant costs incurred in the development and marketing of our products and the acquisition of new technology.

        Our expenses have consisted primarily of those incurred for research and development, sales and marketing and general and administrative costs associated with our operations. We expect that our expenses for research and development expenses will increase as we continue clinical development of our products, and other expenses will increase as we expand our operations domestically and internationally. As a result, we expect to incur losses for the foreseeable future.

        We have a limited history of operations and expect that our quarterly and annual results of operations will fluctuate for the foreseeable future due to several factors, including market acceptance

10

of current or new products, patent conflicts, the introduction of new products by our competitors, the timing and extent of our research and development efforts, and the timing of significant orders. Our limited operating history makes accurate prediction of future operating results difficult or impossible.

        Drug development in the United States is a process that includes several steps defined by the FDA. The process begins with the filing of an Initial Drug Application (or IND) which, if successful, allows opportunity for clinical study of the potential new medicine. Clinical development typically involves three phases of study: Phase I, II, and III, and we have found that it accounts for an average of seven years of a drug's total development time. The most significant costs associated with clinical development are the Phase III trials as they tend to be the longest and largest studies conducted during the drug development process. The successful development of our products is highly uncertain. An estimation of product completion dates and completion costs can vary significantly for each product and are difficult to predict. Various statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of each product. The lengthy process of seeking these approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect our business. In responding to a New Drug Application (or NDA) or a Biologic License Application (or BLA), the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval.

        We are pursuing the following product development programs:

        On March 29, 2002, we licensed from Marnac, Inc., a privately held biopharmaceutical company, the worldwide rights, excluding Japan, Korea and Taiwan, to develop and commercialize pirfenidone for

11

all fibrotic diseases, including renal, liver and pulmonary fibrosis. Pirfenidone is not approved by the FDA and is currently in Phase II clinical development for fibrotic diseases of the lung, kidney and liver. Under the terms of the agreement, we received an exclusive license from Marnac and from their co-licensor, KDL Gmbh (Basel, Switzerland), in exchange for an up-front cash payment of $18.8 million and future milestone and royalty payments. We expensed the $18.8 million as acquired in-process research and development in the first quarter of 2002 since pirfenidone is currently in clinical development, has not reached technological feasibility and has no foreseeable alternative future uses.

Results of Operations

Three Months Ended June 30, 2002 and 2001

        Revenue.    Total product revenues were $23.7 million and $8.0 million for the three-month periods ended June 30, 2002 and 2001, respectively. The product revenues in 2002 include all sales of Actimmune, Amphotec and Infergen for the period. The product revenues in 2001 represent all sales of Actimmune in the United States, worldwide sales of Amphotec and sales of Infergen in the United States for the period from June 15, 2001 (the date we acquired the marketing rights to Infergen) to June 30, 2001. Revenues from Actimmune increased 210% for the comparable periods primarily due to increased prescriptions for the treatment of idiopathic pulmonary fibrosis.

        Cost of goods sold.    Cost of goods sold were $4.7 million and $3.1 million for the three-month periods ended June 30, 2002 and 2001, respectively. Cost of goods sold includes manufacturing costs, royalties and distribution costs associated with our revenues. The gross margin percentage for our products were 80% and 62% for these periods in 2002 and 2001, respectively. The improved gross margin in 2002 reflects lower product costs of Actimmune associated with the transfer of manufacturing to Boehringer Ingelheim International GmbH.

        Amortization of acquired product rights.    We recorded amortization of acquired product rights of $0.8 million and $1.1 million for the three-month periods ended June 30, 2002 and 2001, respectively. The amount in 2002 is comprised of the amortization charges related to the acquisition of Amphotec and Infergen. The amount in 2001 is comprised of the amortization charge related to the acquisition of Amphotec, amortization for Infergen for the period from June 15, 2001 to June 30, 2001 and purchased rights to all of the Actimmune revenues and related expenses that we had previously transacted for Connetics. The amortization of the Actimmune rights was expensed based upon product units shipped under the previous contractual unit baseline for the year 2001. This amounted to $0.7 million for the second quarter in 2001. These Actimmune rights were fully amortized in 2001.

        Research and development expenses.    Research and development expenses were $29.5 million and $10.5 million for the three-month periods ended June 30, 2002 and 2001, respectively, representing an increase of $19.0 million or 181%. The increase was due primarily to increased costs for clinical trial expenses for Actimmune in new disease indications, clinical trial expenses and pre-FDA approval manufacturing qualification expenses for oritavancin, increased staffing and related expenses necessary to manage the expansion of our operations. For the second quarter of 2002, our clinical research and development costs approximated 94% of our total research and development expense, and our preclinical research and development costs approximated 4% of the same total. We expect research and development expenses to increase significantly over the next several years.

        Selling, general and administrative expenses.    Selling, general and administrative expenses were $18.2 million and $8.3 million for the three-month periods ended June 30, 2002 and 2001, respectively, representing an increase of 119%. This increase is attributable primarily to increased staffing and related expenses necessary to manage the growth of our operations, expansion of our field sales force and the expansion into our new company headquarters in Brisbane, California. We believe that selling, general and administrative expenses will continue to increase in absolute dollars as a result of the

12

anticipated expansion of our administrative staff, increased marketing and selling expenses for our products in their approved diseases and the expenses associated with expansion of our operations worldwide.

        Acquired in-process research and development.    We recorded a one-time charge for acquired in-process research and development of $5.4 million for the three-month period ended June 30, 2001. In June 2001, we entered into a licensing and commercialization agreement with Amgen Inc. to obtain an exclusive license in the United States and Canada to Infergen (a therapeutic approved by the FDA for the treatment of hepatitis C infections) and the rights to an early stage program to develop a pegylated form of Infergen for a total consideration of $29 million, plus development milestones and royalties. Under the agreement, we also have the exclusive right to clinically develop Infergen for other indications in the United States and Canada. We do not expect the pegylated Infergen program, which is currently in its early stages, to reach the FDA approval stage until 2006 at the earliest, if at all. Based upon a preliminary independent appraisal, the fair value of the in-process research and development program for pegylated Infergen was $5.4 million. The remainder of the purchase price of approximately $23.6 million, was allocated to developed technology and will be amortized over ten years. We will evaluate our intangible assets for impairment on a regular basis.

        Interest income.    Interest income remained unchanged at $2.1 million for the three-month period ended June 30, 2002, compared to $2.1 million for the three-month period ended June 30, 2001. The interest income for the period in 2002 reflects declining investment yields on our cash and short-term investments resulting from substantially lower market interest rates. This effect was offset by higher average cash and investment balances.

        Interest expense.    Interest expense increased to $2.5 million for the three-month period ended June 30, 2002, compared to $0 for the three-month period ended June 30, 2001. The increase in interest expense was primarily due to the issuance of $149.5 million aggregate principal amount of 5.75% convertible subordinated notes in July 2001.

Six Months Ended June 30, 2002 and 2001

        Revenue.    Total product revenues were $42.4 million and $13.6 million for the six-month periods ended June 30, 2002 and 2001, respectively. The product revenues in 2002 include all sales of Actimmune, Amphotec and Infergen for the period. The product revenues in 2001 represent all sales of Actimmune in the United States and worldwide sales of Amphotec for the period from January 5, 2001 to June 30, 2001 and sales of Infergen in the United States for the period from June 15, 2001 (the date we acquired the marketing rights to Infergen) to June 30, 2001. Revenues from Actimmune increased 230% for the comparable periods primarily due to increased prescriptions for the treatment of idiopathic pulmonary fibrosis.

        Cost of goods sold.    Cost of goods sold were $10.1 million and $6.6 million for the six-month periods ended June 30, 2002 and 2001, respectively. Cost of goods sold includes manufacturing costs, royalties and distribution costs associated with our revenues. The gross margin percentages for our products were 76% and 51% for these periods in 2002 and 2001, respectively. The improved gross margin in 2002 reflects lower product costs of Actimmune associated with the transfer of manufacturing to Boehringer Ingelheim International GmbH.

        Amortization of acquired product rights.    We recorded amortization of acquired product rights of $1.6 million and $3.2 million for the six-month periods ended June 30, 2002 and 2001, respectively. The amount in 2002 is comprised of the amortization charges related to the acquisition of Amphotec and Infergen. The amount in 2001 is comprised of the amortization charge related to the acquisition of Amphotec, Infergen and purchased rights to all of the Actimmune revenues and related expenses that we had previously transacted for Connetics. The amortization of the Actimmune rights was expensed

13

based upon product units shipped under the previous contractual unit baseline for the year 2001. This amounted to $2.6 million for the period in 2001. These Actimmune rights were fully amortized in 2001.

        Research and development expenses.    Research and development expenses were $53.1 million and $17.2 million for the six-month periods ended June 30, 2002 and 2001, respectively, representing an increase of $35.9 million or 208%. The increase was due primarily to increased costs for clinical trial expenses for Actimmune in new disease indications, clinical trial expenses and pre-FDA approval manufacturing qualification expenses for oritavancin, increased staffing and related expenses necessary to manage the expansion of our operations. For the six-month period ended June 30, 2002, our clinical research and development costs approximated 92% of our total research and development expense, and our preclinical research and development costs approximated 6% of the same total. We expect research and development expenses to increase significantly over the next several years.

        Selling, general and administrative expenses.    Selling, general and administrative expenses were $32.8 million and $14.8 million for the six-month periods ended June 30, 2002 and 2001, respectively, representing an increase of 122%. This increase is attributable primarily to increased staffing and related expenses necessary to manage the growth of our operations, expansion of our field sales force and the expansion into our new company headquarters in Brisbane, California. We believe that selling, general and administrative expenses will continue to increase in absolute dollars as a result of the anticipated expansion of our administrative staff, increased marketing and selling expenses for our products in their approved diseases and the expenses associated with expansion of our operations worldwide.

        Acquired in-process research and development.    We recorded a one-time charge for acquired in-process research and development of $18.8 million and $5.4 million for the six-month periods ended June 30, 2002, and 2001, respectively. In the 2002 period, we recorded a one-time charge related to license of the worldwide rights, excluding Japan, Korea and Taiwan, to develop and commercialize pirfenidone for all fibrotic diseases, including renal, liver and pulmonary fibrosis. Pirfenidone is not currently approved by the FDA and is in Phase II clinical development for fibrotic diseases of the lung, kidney and liver. Under the terms of the agreement, we received an exclusive license agreement from Marnac, Inc., a privately held biopharmaceutical company, and from their co-licensor, KDL Gmbh (Basel, Switzerland), in exchange for an up-front cash payment of $18.8 million and future milestone and royalty payments. We expensed the $18.8 million as acquired in-process research and development cost as pirfenidone is currently in clinical development, has not reached technical feasibility and has no foreseeable alternative future uses. In the 2001 period, we recorded a one-time charge for the rights to an early stage program from Amgen to develop a pegylated form of Infergen (discussed above).

        Interest income.    Interest income decreased to $3.7 million for the six-month period ended June 30, 2002, compared to $4.8 million for the six-month period ended June 30, 2001. This decrease is attributable primarily to declining investment yields on our cash and short-term investments resulting from substantially lower market interest rates.

        Interest expense.    Interest expense increased to $4.9 million for the six-month period ended June 30, 2002, compared to $30,000 for the six-month period ended June 30, 2001. The increase in interest expense was primarily due to the issuance of $149.5 million aggregate principal amount of 5.75% convertible subordinated notes in July 2001.

Liquidity and Capital Resources

        For the six-month period ended June 30, 2002, cash expenditures for operating activities and additions to capital equipment were $50.4 million. We anticipate that these expenditures will increase significantly in future periods.

14

        Cash used in operations for the six-month periods ended June 30, 2002 and 2001, was $46.1 million and $16.0 million, respectively. The increase in cash used in operations was principally due to an increase in the net loss in 2002. Significant non-cash charges for the period in 2002 included amortization of acquired product rights and a one time in-process research and development charge of $18.8 million. Significant changes in operating assets and liabilities in 2002 relates to an increase in accounts receivable due to increased product sales offset by an increase in accounts payable and accrued compensation due to the growth in our operations, higher headcounts and higher commissions payable, an increase in other accrued liabilities principally due to higher clinical trial activities and higher royalties payable as a result of increased sales volume, a decrease in inventories from higher sales volume and a decrease in other assets.

        Investing activities used $16.1 million in cash during the six-month period ended June 30, 2002, due in part to purchases of short-term investments totaling $102.2 million offset by $112.6 million of short-term investment maturities and sales, purchases of property and equipment of $4.3 million primarily for our new company headquarters, $3.5 million for the final payment to Amgen for the acquisition of product rights to Infergen, and $18.8 million to Marnac for the acquisition of product rights to pirfenidone.

        Cash provided by financing activities of $106.3 million for the six-months ended June 30, 2002 included $0.7 million received for the issuance of common shares pursuant to the employee stock purchase program, $1.1 million received from the exercise of stock options and $104.5 million received from the issuance of three million shares of common stock in an equity offering on March 13, 2002. The shares were issued at a price of $37.00 per share, raising gross proceeds of $111.0 million. Net proceeds received are after deducting underwriting fees of $5.8 million and estimated related expenses of $0.7 million.

        In May 2002, we acquired certain interferon gamma-1b patents of Amgen Inc. in exchange for $3.5 million, of which $1.5 million was paid in the second quarter of 2002 and $2.0 million was accrued as of June 30, 2002. We expect to amortize these product rights to operations over the expected useful product life of Actimmune.

        At June 30, 2002, we had available cash, cash equivalents and available-for-sale securities of $366.3 million. Our cash reserves are held in a variety of interest-bearing instruments including high-grade corporate bonds, commercial paper and money market accounts. Cash in excess of immediate requirements is invested with regard to liquidity and return and, wherever possible, we seek to minimize the potential effects of concentration and degrees of risk.

        We believe our existing cash, cash equivalents and short-term investments, together with cash flows will be sufficient to fund our operating expenses, debt obligations and capital requirements through at least the end of 2004, and, our capital requirements may increase in future periods. As a result, we may require additional funds and may attempt to raise additional funds through equity or debt financings, collaborative arrangements with corporate partners or from other sources. We have no commitments for any additional financings, additional funding may not be available to finance our operations when needed or, if available, the terms for obtaining such funds may not be favorable or may result in dilution to our stockholders.

Risk Factors

        An investment in our common stock is risky. Investors should carefully consider the following risks, as well as further description and discussion of these risks contained in the "Additional Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2001, that was filed with the SEC on March 21, 2002, which description and discussion is incorporated herein by reference:

•

We may not succeed in our development efforts or in growing product revenues.

15

•

Clinical development is a long, expensive and uncertain process, and delay or failure can occur at any stage of our clinical trials.



•

If our clinical trials fail to demonstrate to the FDA and foreign regulatory authorities that any of our products or product candidates are safe and effective for the treatment of particular diseases, the regulatory authorities will not permit us to market such products or product candidates for those diseases.



•

If the FDA limits our communications with physicians related to the use of our product candidates or products for any disease or withdraws its approval of any of our products for any disease for which they have been approved, our revenues would decline.



•

We may not be able to obtain, maintain and protect certain proprietary rights necessary for the development and commercialization of our products or product candidates.



•

Even if regulatory authorities approve our products or product candidates for the treatment of the diseases we are targeting, our products may not be marketed or commercially successful.



•

If third-party payors do not provide coverage or reimburse patients for our products, our revenues and prospects for profitability will suffer.



•

The pricing and profitability of our products may be subject to control by the government and other third-party payors.



•

Even if our products or product candidates are proven to be safe and effective for particular diseases, the actual maximum market opportunity associated with the treatment of these diseases may be much lower than our current estimates.



•

Discoveries or developments of new technologies by established drug companies or others may make our products obsolete.



•

We rely on third parties to conduct clinical trials for our products and product candidates, and those third parties may not perform satisfactorily.



•

There are significant regulatory, supply, intellectual property and competitive barriers to entry that may prevent us from successfully marketing or developing Infergen or PEG-Infergen, a pegylated form of Infergen, for the chronic hepatitis C infections market.



•

Although we recently relaunched Amphotec, this product may not be commercially successful.



•

If we are unable to contract with third parties to manufacture our products in sufficient quantities, on a timely basis or at an acceptable cost, we may be unable to meet demand for our products and may lose potential revenues.



•

If we are unable to contract with third parties to manufacture Actimmune, Infergen or Amphotec in sufficient quantities, on a timely basis or at an acceptable cost, we may be unable to meet demand for Actimmune, Infergen or Amphotec and may lose potential revenues.



•

If product liability lawsuits are brought against us, we may incur substantial liabilities.



•

Failure to attract, retain and motivate skilled personnel and cultivate key academic collaborations will delay our product development programs and our business development efforts.



•

If we fail to obtain the capital necessary to fund our operations, we will be unable to successfully execute our business plan.



•

If we continue to incur net losses for a period longer than we anticipate, we may be unable to continue our business.

16

•

Our indebtedness and debt service obligations may adversely affect our cash flow.



•

If a change in control occurs, we may be required to redeem our 5.75% convertible subordinated notes due 2006.



•

If our officers, directors and certain stockholders choose to act together, they may be able to significantly influence our management and operations, acting in their best interests and not necessarily those of other stockholders.



•

We have implemented anti-takeover provisions which could discourage, prevent or delay a takeover, even if the acquisition would be beneficial to our stockholders.



•

Our stock price may be volatile, and your investment in our stock could decline in value.



•

Substantial sales of shares may impact the market price of our common stock.

Quantitative and Qualitative Disclosures about Market Risk

        We maintain an investment portfolio of depository accounts, master notes and liquidity optimized investment contracts. The securities in our investment portfolio are not leveraged, are classified as available-for-sale and are, due to their short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that a change in market rates would have a significant negative impact on the value of our investment portfolio.

        The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest our excess cash in debt instruments of the U.S. Government and its agencies and high-quality corporate issuers, and, by policy, restrict our exposure to any single corporate issuer by imposing concentration limits. To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than two years.

        The table below presents the principal amounts and weighted-average interest rates by year of maturity for our investment portfolio:

        We have some obligations in foreign currencies, principally the purchase of Actimmune inventory which is denominated in Euros. We do not currently use derivative financial instruments to mitigate this exposure.

17

PART II—OTHER INFORMATION
INTERMUNE, INC.

ITEM 4. Submission of Matters to a Vote of Securities Holders.

        We held our annual meeting of stockholders on June 19, 2002. The stockholders voted on three proposals:

1.

The stockholders elected the board of directors' nominees for director by the votes indicated:

2.

The stockholders approved the proposal to increase the number of shares reserved for issuance under our 2000 Equity Incentive Plan by a total of 2,500,000 of shares of common stock by the votes indicated:

3.

The stockholders ratified the selection of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2002 by the votes indicated:

ITEM 6. Exhibits and Reports on Form 8-K.

(a)

The following exhibits are included herein:

*

Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

(b)

Reports on Form 8-K:

        None.

18

INTERMUNE, INC.
SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

19

CERTIFICATION

        Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of InterMune, Inc. ("InterMune"), that to his knowledge: the Quarterly Report of InterMune on Form 10-Q for the period ended June 30, 2002, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of InterMune.

        Dated: August 13, 2002

20

QuickLinks