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InterMune Reports Memorandum of Understanding in Connection with Consolidated Delaware Action

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BRISBANE, Calif., Sept. 19, 2014 /PRNewswire/ -- InterMune, Inc. (Nasdaq: ITMN) today announced that it entered into a Memorandum of Understanding to settle the litigation in the Delaware Court of Chancery relating to the Agreement and Plan of Merger dated as of August 22, 2014, among Roche Holdings, Inc., Klee Acquisition Corporation and InterMune, Inc.  As one term of the Memorandum of Understanding, the Company agreed to make certain supplemental disclosures set forth in the attached exhibit reflecting the amendment to the Company's Schedule 14D-9 to be filed with the Securities and Exchange Commission on the morning of Monday, September 22, 2014.

About InterMune

InterMune is a biotechnology company focused on the research, development and commercialization of innovative therapies in pulmonology and orphan fibrotic diseases.  In pulmonology, InterMune is focused on therapies for the treatment of idiopathic pulmonary fibrosis (IPF), a progressive and fatal lung disease.  Pirfenidone is approved for marketing by InterMune in the EU and Canada as Esbriet®.  Pirfenidone is not approved for marketing in the United States.  InterMune resubmitted the pirfenidone New Drug Application (NDA) to the U.S. FDA on May 23, 2014, to support regulatory registration in the United States.  The resubmission has been accepted by the FDA and assigned a target PDUFA date of November 23, 2014.  The FDA has granted pirfenidone Breakthrough Therapy Designation.  InterMune's research programs are focused on the discovery of targeted, small-molecule therapeutics and biomarkers to treat and monitor serious pulmonary and fibrotic diseases.  For additional information about InterMune and its R&D pipeline, please visit http://www.intermune.com.

Forward-Looking Statements

Some of the statements contained in this announcement are forward-looking statements, including statements regarding the expected consummation of the acquisition, which involves a number of risks and uncertainties, including the satisfaction of closing conditions for the acquisition, such as regulatory approval for the transaction, the tender of a majority of the outstanding shares of common stock of InterMune, the possibility that the transaction will not be completed and other risks and uncertainties discussed in InterMune's public filings with the SEC, including the "Risk Factors" section of InterMune's annual report on Form 10-K for the year ended December 31, 2013 and subsequent quarterly reports on Form 10-Q, as well as the tender offer documents  filed by Klee Acquisition Corporation and the Solicitation/Recommendation Statement filed by InterMune.  These statements are based on current expectations, assumptions, estimates and projections, and involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, performance or achievements to be materially different from any future statements.  These statements are generally identified by words or phrases such as "believe", "anticipate", "expect", "intend", "plan", "will", "may", "should", "estimate", "predict", "potential", "continue" or the negative of such terms or other similar expressions.  If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results and the timing of events may differ materially from the results and/or timing discussed in the forward-looking statements, and you should not place undue reliance on these statements. InterMune disclaims any intent or obligation to update any forward-looking statements as a result of developments occurring after the date of this announcement or otherwise.

Notice to Investors

This announcement is for informational purposes only and does not constitute an offer to purchase or a solicitation of an offer to sell InterMune common stock.  On August 29, 2014, Roche Holdings, Inc. ("Roche") and Klee Acquisition Corporation, a wholly owned subsidiary of Roche, filed a tender offer statement on Schedule TO with the SEC and InterMune filed a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the offer.  Investors and security holders are urged to read these materials carefully since they contain important information, including the terms and conditions of the offer.  The tender offer statement on Schedule TO, Solicitation/Recommendation Statement and related materials have been filed by Roche and InterMune with the SEC, and investors and security holders may obtain a free copy of these materials and other documents filed by Roche and InterMune with the SEC at the website maintained by the SEC at www.sec.gov.  Investors and security holders may also obtain free copies of the Solicitation/Recommendation Statement and other documents filed with the SEC by InterMune at www.intermune.com.

Esbriet® is a registered trademark of InterMune, Inc.  

Exhibit I

This Exhibit I reflects the amendment to the Company's Schedule 14D-9 to be filed with the Securities and Exchange Commission on the morning of Monday, September 22, 2014.

Capitalized terms used, but not otherwise defined, in this Exhibit shall have the meanings ascribed to them in the Schedule 14D-9 filed by InterMune on August 29, 2014, as amended through the date hereof.

Item 4 of the Schedule 14D-9 under the heading "Background of the Merger Agreement; Reasons for Recommendation—Background of the Merger Agreement" is to be amended and supplemented by:

(i)     Replacing the first sentence of the eighth paragraph of such section with the following:

"In February 2014, a member of the Board ("Director A"), who is also an executive at a global life sciences company ("Company A") which was not contacted in connection with the Company's 2011 strategic transaction review, expressed to Daniel Welch, the Company's Chairman, Chief Executive Officer and President, that if the Company determined to undertake a strategic transaction process, Company A may have a potential interest in participating in such a process."

(ii)    Replacing the second sentence of the 11th paragraph of such section with the following:

"Following the ATS Conference, in May 2014, Mr. Welch was contacted by business development executives of Parent and Company B, a global life sciences company which was contacted in connection with the Company's 2011 strategic transaction review but declined to execute a confidentiality agreement to engage in due diligence of the Company, noting the favorable trial results."

(iii)   Replacing the 13th paragraph of such section with the following:

"At the end of June 2014, an executive from Company C, a global life sciences company which was contacted in connection with the Company's 2011 strategic transaction review but declined to execute a confidentiality agreement to engage in due diligence of the Company, contacted Mr. Welch noting the favorable trial results and suggesting that Company C may be in touch in the future regarding the possibility of exploring a transaction with the Company."

(iv)   Replacing the second sentence of the 28th paragraph of such section with the following:

"Over the course of August 13, 2014 through August 15, 2014, the Company received an additional inquiry from a business development executive representing Company D, a global life sciences company which executed a confidentiality agreement with the Company in connection with the Company's 2011 strategic transaction review but declined to provide a preliminary indication of interest."

(v)    Replacing the last sentence of the 29th paragraph of such section with the following:

"The Executive Committee also discussed the leak and the significant concern regarding the impact of the leak on the hiring of the U.S. sales force, and actions that might be taken to avoid losing the prospective hires, including providing them with change-in-control protection."

(vi)   Adding the following sentence after the third sentence of the 38th paragraph of such section:

"Mr. Welch noted to the Executive Committee that, as previously discussed and approved, the Company had taken certain steps to secure the hiring of the U.S. sales force, including, among other things, adding change-in-control protections for them."

(vii)  Replacing the 39th paragraph of such section with the following:

"The Executive Committee also discussed with its advisors the potential advantages, risks and considerations of the expedited timeline that Parent desired to pursue, noting that Parent's agreed risk allocation did not afford the Company any protection until a Merger Agreement is actually signed, and any negative developments prior to signing would affect Parent's willingness to proceed on the price and terms that had been negotiated. After rumors of a possible offer or transaction were publicly reported, the Executive Committee continued to conclude that lengthening the timetable to signing with Parent in order to explore other potential interest pre-signing was not cost-free, and required a balancing of the risk of losing the favorable transaction offered by Parent as a result of some new negative development against the possibility of finding another acquiror willing to assume the same risk allocation at a price higher than $74.00 per share. In this regard the Executive Committee discussed with its advisors the various interactions with Company B, Company C and Company D and the likelihood of such companies offering a more compelling value than the proposal from Parent, including, among other things, (i) the fact that Company B did not have a history of making large acquisitions and had not pursued discussions with the Company following its initial contact in May 2014 and its cancellation of a follow-up conversation with Mr. Welch, (ii) the significantly lower value of the Company C Proposal as compared with Parent's offer of $74.00 per share and Company C's indication to Mr. Welch, following the calls with Company executives and outside counsel regarding commercialization, intellectual property and other matters, that the timing for Company C to be able to discuss a potential transaction with its own board of directors in order to make a more concrete proposal would not be in August and instead at the earliest would be mid-September and (iii) Company D's indication that its preference was to pursue a transaction after approval of the Company's NDA application, and that it would need to conduct significant due diligence to consider a transaction in advance of such approval. Following discussion, the Executive Committee concluded that none of Company B, Company C or Company D was likely in a position to move on a timeline approaching that of Parent, none provided any reasonable likelihood of offering a more compelling value than the proposal from Parent, and none should be deterred from making an offer to acquire the Company following announcement of a transaction with Parent pursuant to the "fiduciary out" in the proposed Merger Agreement. Thus the Executive Committee concluded that a post-signing market check, with Parent's valuation and strong contract terms as to risk allocation relating to approval and launch matters providing the "floor" for other potential acquirors to beat, would be the best approach to seek to maximize value for the Company's stockholders, and in connection therewith and taking into consideration Parent's repeated insistence that it would be unwilling to agree to such a provision, the Executive Committee was willing to concede the go-shop in light of the favorable price and other contract terms. In addition, Mr. Welch informed the Executive Committee that Dr. Schwan had indicated that it would be beneficial to the upcoming launch for Mr. Welch to stay on to assist in the integration and transition efforts if the proposed transaction was consummated. The Executive Committee discussed with Mr. Welch that having him indicate a willingness to remain under those circumstances would be beneficial to the transaction process and, if he were willing to do so, he should discuss with Dr. Schwan the basis on which he would consider remaining for a transition period."

Item 4 of the Schedule 14D-9 under the heading "Financial Analyses and Opinions—Opinion of Centerview—Selected Comparable Public Company Analysis" is to be amended and supplemented by:

(i)     Replacing the first sentence of such section with the following:

"Centerview reviewed and compared certain financial information for InterMune to corresponding financial information for the following publicly traded biopharmaceutical companies:"

(ii)    Replacing the bullet points on page 29 of the Schedule 14D-9 with the following chart:

Company

Revenue Multiple 2016E

Acadia Pharmaceuticals Inc.

NM

Incyte Corporation

10.5x

Intercept Pharmaceuticals, Inc.

NM

Medivation, Inc.

6.8x

NPS Pharmaceuticals, Inc.

4.2x

Pharmacyclics, Inc.

5.9x

Puma Biotechnology, Inc.

NM

Seattle Genetics, Inc.

12.7x

Synageva Biopharma Corp.

23.0x

Note: Multiples greater than 25x deemed not meaningful ("NM").

(iii)   Replacing the second sentence of the third paragraph under such section with the following:

"With respect to each of the selected comparable companies, Centerview calculated enterprise value (calculated as the equity value (calculated using the treasury stock method and taking into account outstanding in-the-money options, restricted stock units, warrants and other convertible securities) plus the book value of debt less cash and cash equivalents) as a multiple of the consensus equity research analyst estimated calendar year 2016 revenues."

(iv)   Replacing the "Note" under the first table on page 30 of the Schedule 14D-9 with the following:

"Note: Multiples greater than 25x (for Acadia Pharmaceuticals Inc., Intercept Pharmaceuticals, Inc. and Puma Biotechnology, Inc.) were excluded from this analysis as not meaningful."

Item 4 of the Schedule 14D-9 under the heading "Financial Analyses and Opinions—Opinion of Centerview—Selected Precedent Transactions Analysis" is to be amended and supplemented by:

(i)     Adding the following sentence after the first sentence of the first paragraph under such section:

"The transactions below were selected, among other reasons, because their participants (i.e., biopharmaceutical companies), size (between $2 billion and $10 billion in transaction value) or other factors, for purposes of Centerview's analysis, may be considered similar to the Transaction."

(ii)    Replacing the second table on page 30 of the Schedule 14D-9 with the following:




Trans Val/

2Yr Fwd Rev.

Unaffected Premiums

Date Announced

Target

Acquiror

1-Day

52-Wk High







06/09/14

Idenix Pharmaceuticals, Inc.

Merck & Co., Inc.

NM

239%

205%

04/07/14

Questcor Pharmaceuticals, Inc.

Mallinckrodt plc

3.8x

27%

8%

12/19/13

Algeta ASA

Bayer AG

10.8x

37%

31%

11/11/13

ViroPharma Incorporated

Shire plc

5.7x

84%

63%

11/07/13

Santarus, Inc.

Salix Pharmaceuticals, Ltd.

4.5x

36%

17%

08/25/13

Onyx Pharmaceuticals, Inc.

Amgen Inc.

7.8x

44%

25%

07/16/12

Human Genome Sciences, Inc.

GlaxoSmithKline plc

6.5x

99%

(52%)

06/29/12

Amylin Pharmaceuticals, Inc.

Bristol-Myers Squibb Company

6.8x

101%

72%

01/07/12

Inhibitex, Inc.

Bristol-Myers Squibb Company

NM

163%

68%

05/02/11

Cephalon, Inc.

Teva Pharmaceutical Industries Ltd.

2.8x

39%

15%

09/17/10

Crucell N.V.

Johnson & Johnson

3.7x

58%

51%

06/30/10

Abraxis BioScience, Inc.

Celgene Corporation

5.2x

17%

14%

05/16/10

OSI Pharmaceuticals, Inc.

Astellas Pharma Inc.

5.6x

55%

45%

Note: Multiples greater than 25x deemed not meaningful ("NM")

(iii)   Replacing the first sentence of the fourth paragraph of such section with the following:

"Centerview reviewed, among other things, transaction values in the selected transactions and, in each case, calculated the enterprise value (calculated as the equity purchase price (calculated using the treasury stock method and taking into account outstanding in-the-money options, restricted stock units, warrants and other convertible securities), plus the book value of debt, less cash and cash equivalents) implied for each target company based on the consideration payable in the applicable selected transaction as a multiple of estimated two-year forward revenues."

(iv)   Replacing the table on page 31 of the Schedule 14D-9 with the following:


Trans Val/

2Yr Fwd Rev.*

Unaffected Premiums

1-Day

52-Wk High

75th Percentile

6.7x

99%

63%

Median

5.6x

55%

31%

25th Percentile

4.1x

37%

15%

* Multiples greater than 25x (for the Idenix/Merck and Inhibitex/Bristol-Myers Squibb transactions) were excluded from this analysis as not meaningful.

Item 4 of the Schedule 14D-9 under the heading "Financial Analyses and Opinions—Opinion of Centerview—Sum-of-the-Parts Discounted Cash Flow Analysis" is to be amended and supplemented by:

(i)     Replacing the second paragraph of such section with the following:

"Centerview performed a sum-of-the-parts analysis of InterMune based on a discounted cash flow analysis representing the implied present value of InterMune's projected unlevered fully-taxed free cash flows from the fourth quarter of 2014 through 2033 based on the InterMune Forecasts plus the present value of an implied terminal value in 2033 (calculated using a range of year-over-year decline in free cash flow, in perpetuity, of 15% to 35%, based on the InterMune Forecasts, and taking into account the fact that the expiry of InterMune's patents on pirfenidone would lead to increased competition from generics), in each case discounted to September 30, 2014 using a discount rate range of 10% to 12% (based on a weighted average cost of capital calculation based on considerations that Centerview deemed relevant in its professional judgment and experience) using the mid-year convention. The weighted average cost of capital was calculated using InterMune's cost of debt and tax rate and InterMune's cost of equity calculated (based on the Capital Asset Pricing Model) using the risk free rate (based on the 10-year U.S. treasury yield as of August 21, 2014), the market risk premium, and unlevered beta based on information derived from the companies listed above in "—Selected Comparable Public Company Analysis." The discounted cash flow analysis accounted for: (i) projected sales and product-related expenses of pirfenidone in the U.S., (ii) projected sales and product-related expenses of Esbriet in the EU, (iii) projected sales and product-related expenses of Esbriet in

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