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

Abstract

This case study is about a California-based biotechnology company that has experienced many ups and downs throughout its 17-year history. Despite many setbacks, it ultimately succeeded in developing and getting approval for an orphan drug used to treat IPF, a deadly lung disease. InterMune was acquired by Roche/Genentech for $8.3 billion in September 2014; the price represented a significant premium over InterMune’s trading price at the time. The protagonist, InterMune’s CEO, Dan Welch, joined the company in 2003 and has led InterMune through numerous strategic pivots, leadership changes, clinical trial disappointments, multiple divestitures, and ultimately the sale of the company. Resilience and the capacity to bounce back are at the core of this case study. The narrative focuses on strategic, cultural, and leadership changes and decisions made by Welch, the Board and the leadership team throughout Welch’s tenure. Specifically, Welch sharpened InterMune’s strategic focus on a few indications, evolved the Board and the leadership team, and orchestrated a grassroots initiative to re-invent InterMune’s core values and cultural pillars.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Financials

In Millions of USD (except for per share items)

12 months ending 2013-12-31

12 months ending 2012-12-31

12 months ending 2011-12-31

12 months ending 2010-12-31

Revenue

70.34

26.17

5.41

239.25

Other Revenue, Total

-

-

-

-

Total Revenue

70.34

26.17

5.41

239.25

Cost of Revenue, Total

10.41

8.92

1.41

0.00

Gross Profit

59.93

17.26

4.00

239.25

Selling/General/Admin. Expenses, Total

145.05

105.30

89.46

55.02

Research & Development

113.51

106.57

74.97

67.47

Depreciation/Amortization

-

-

-

-

Interest Expense(Income) – Net Operating

-

-

-

-

Unusual Expense (Income)

7.90

0.00

0.00

1.30

Other Operating Expenses, Total

-

-

-

-

Total Operating Expense

276.86

220.78

165.84

123.79

Operating Income

−206.52

−194.61

−160.44

115.46

Interest Income(Expense), Net Non-Operating

-

-

-

-

Gain (Loss) on Sale of Assets

-

-

-

-

Other, Net

−1.61

−0.37

−0.66

0.50

Income Before Tax

−219.89

−203.32

−166.94

109.23

Income After Tax

−220.78

−184.69

−162.35

109.15

Minority Interest

-

-

-

-

Equity In Affiliates

-

-

-

-

Net Income Before Extra. Items

−220.78

−184.69

−162.35

109.15

Accounting Change

-

-

-

-

Discontinued Operations

-

-

-

-

Extraordinary Item

-

-

-

-

Net Income

−219.57

−150.08

−154.77

122.37

Preferred 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

8.35

Diluted Weighted Average Shares

81.39

65.18

60.10

61.38

Diluted 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 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

1.94

Source: InterMune.

Exhibit 2: Recruiting Job Description

Position:

Labeling Manager

Company:

InterMune

Job Location(s):

Brisbane, CA

Start Date:

As soon as possible

Employment Term:

Regular

Employment Type:

Full Time

Starting Salary Range:

Required Education:

Bachelor’s Degree

Required Experience:

Open

Required Security Clearance:

None

Related Categories:

Biotechnology and Pharmaceutical, Management and Supervision

Position Description

Department: Manufacturing Operations and Supply Chain

Job Title: Labeling Manager

Job 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.
  • 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.

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?

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?

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.

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
  • 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%.
  • Employee completes a self-assessment of his/her performance by documenting results and major achievements for each core value, goal or key responsibility.
  • 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 Accomplishments: Results/Major Achievements Assessment

1. Goal and Accomplishments:

  • ____________

Weightings (Value) of Goal

  • ____________

Definition of success and timing

  • ____________

Result

Employee – Results/MA ____________

Manager – Results/MA ____________

2. Goal and Accomplishments:

  • ____________

Weightings (Value) of Goal

  • ____________

Definition of success and timing

  • ____________

Result

  • Employee – Results/MA ____________
  • Manager – Results/MA ____________

3. Goal and Accomplishments:

  • ____________

Weightings (Value) of Goal

  • ____________

Definition of success and timing

  • ____________

Result

  • Employee – Results/MA ____________
  • Manager – Results/MA ____________

4. Goal and Accomplishments:

  • ____________

Weightings (Value) of Goal

  • ____________

Definition of success and timing

  • ____________

Result

  • Employee – Results/MA ____________
  • Manager – Results/MA ____________

5. Goal and Accomplishments:

  • ____________

Weightings (Value) of Goal

  • ____________

Definition of success and timing

  • ____________

Result

  • Employee – Results/MA
  • Manager – Results/MA
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 example

Passion

  • 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 stakeholder

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
  • 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.

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 Committee

Protect all Confidential and Proprietary Information

  • Access to confidential business information must be on a “need-to-know” basis only

Do 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 employment

Report 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.

Opportunity for Development

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

Source: InterMune.

Exhibit 5: IPACT Values

Figure
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.

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.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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