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                                  EXHIBIT 10.24

                         ASSIGNMENT AND OPTION AGREEMENT

                                 BY AND BETWEEN

                         INTERMUNE PHARMACEUTICALS, INC.

                                       AND


CONNETICS CORPORATION


                                  JUNE 23, 2000

   (SUPERSEDING AND REPLACING THE AMENDED AND RESTATED EXCLUSIVE SUBLICENSE
                         AGREEMENT OF APRIL 27, 1999)

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                         ASSIGNMENT AND OPTION AGREEMENT

         THIS ASSIGNMENT AND OPTION AGREEMENT (the "Agreement") is made
effective and entered into as of June 23, 2000 (the "Effective Date") by and
between CONNETICS CORPORATION, a Delaware corporation, with a principal place of
business at 3400 West Bayshore Road, Palo Alto, CA 94303 ("Connetics"), and
INTERMUNE PHARMACEUTICALS, INC., a Delaware corporation, with a principal place
of business at 1710 Gilbreth Road, Suite 301, Burlingame, CA 94010
("InterMune"). Connetics and InterMune may be referred to herein as a "Party" or
collectively as the "Parties."

                                    RECITALS

A.       WHEREAS, InterMune is a corporation formed for the purpose of research
and development of biopharmaceutical products for the treatment of infectious
and autoimmune diseases; and

B.       WHEREAS, Connetics has licensed the rights to certain immunology-based
products and to the technology relating thereto from Genentech, Inc.
("Genentech") pursuant to that certain License Agreement for Interferon Gamma by
and between Connetics and Genentech, dated May 5, 1998, as amended (the
"Genentech License"); and

C.       WHEREAS, InterMune and Connetics have entered into that certain Amended
and Restated Exclusive Sublicense Agreement, dated April 27, 1999 (the "Original
Agreement"), pursuant to which (a) Connetics granted an exclusive sublicense to
InterMune under the Genentech License to develop, make, have made, import, offer
for sale and sell therapeutic products containing or derived from such
immunology-based products and technology for use for certain specific
indications, and (b) InterMune granted to Connetics the exclusive option to
practice such sublicensed rights in the dermatology field; and

D.       WHEREAS, InterMune and Connetics now desire to supersede and replace
the Original Agreement as further set forth herein in order to assign to
InterMune Connetics' entire right, title and interest in, to and under the
Genentech License.

         NOW, THEREFORE, the Parties agree as follows:

1.       DEFINITIONS

              1.1 "Affiliate" means any company or entity controlled by,
                  controlling or under common control with a Party. As used in
                  this Section, "control" means (a) that an entity or company
                  owns, directly or indirectly, fifty percent (50%) or more of
                  the voting stock of another entity, or (b) that an entity,
                  person or group has the actual ability to control and direct
                  the management of the entity, whether by contract or
                  otherwise, but excluding, for all purposes of this Agreement,
                  Connetics, as to InterMune, and InterMune, as to Connetics.

              1.2 "Amendment No. 3" means that certain Amendment No. Three to
                  License Agreement entered into between Connetics and
                  Genentech, effective April 27, 1999. For clarity, the phrase
                  "as amended by Amendment No. 3" as used herein is intended
                  only for ease of reference and not as a limitation.

              1.3 "Best Efforts" means every necessary and prudent effort of a
                  Party applied in a prompt, commercially reasonable manner, to
                  the maximum extent reasonably allowed by such Party's
                  available financial resources, taking into account all of such
                  Party's business commitments for such financial resources.

              1.4 "BLA" means a Biologics License Application.

              1.5 "Connetics Know-How" means all Know-How in the areas of
                  quality assurance/ quality control (QA/QC), pharmaceutical
                  science, process development or regulatory affairs that (a) is
                  Controlled by Connetics during the term of this Agreement, and
                  (b) is necessary or useful to the discovery, development, use
                  or

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                  manufacture of Products, but excluding all Know-How that is
                  part of the Genentech License Rights.

              1.6 "Controlled" means with respect to any material, Know-How or
                  intellectual property right, that the Party owns or has a
                  license to such material, Know-How or intellectual property
                  right and has the ability to grant access, a license, or a
                  sublicense to such material, Know-How or intellectual property
                  right to the other Party as provided for herein without
                  violating an agreement with a Third Party as of the time the
                  Party would be first required hereunder to grant the other
                  Party such access, license or sublicense.

              1.7 "Dermatology Field" means the administration to humans of
                  therapeutic products for the treatment, prevention or
                  diagnosis of any dermatological disease or condition,
                  including, without limitation, atopic dermatitis,
                  keloids/hypertrophic scars, pustular psoriasis and
                  scleroderma, but excluding (a) any cancer disease or
                  condition, (b) any infectious disease or condition, and (c)
                  any indication outside of the IG Field.

              1.8 "Dermatology Sublicensee" means a Third Party to which
                  Connetics has granted a sublicense under the sublicense rights
                  to be granted by InterMune to Connetics following Connetics'
                  exercise of its option pursuant to Section 4.1.

              1.9 "FDA" means the U.S. Food and Drug Administration, or any
                  successor agency.

              1.10         "Gene Therapy" means the therapeutic or prophylactic
                  treatment of a human being with: (a) one or more
                  oligonucleotides or nucleotide sequences, in native form or
                  chemically modified, which are introduced into the body in
                  free form, bound to a carrier molecule, contained in any
                  molecular vesicle (e.g. a liposome), incorporated into or
                  attached to a vector of any type, contained in any cellular
                  construct and/or contained in any mechanical device or (b)
                  cells which have been manipulated EX VIVO using one or more
                  oligonucleotides or nucleotide sequences.

              1.11         "Gene Therapy Field" means the administration to
                  humans of Licensed Gene Product for Gene Therapy for the
                  treatment or prevention of any human disease or condition,
                  provided however, that "Gene Therapy Field" shall not include
                  any treatment or prevention of any type of cardiac or
                  cardiovascular disease or condition.

              1.12         "Genentech" means Genentech, Inc., a Delaware
                  corporation, with its principal office at 1 DNA Way, South San
                  Francisco, CA 94080.

              1.13         "Genentech License" means the License Agreement for
                  Interferon Gamma between Genentech and Connetics, dated May 4,
                  1998; as amended by: Amendment No. 1 to License Agreement,
                  effective December 28, 1998; Amendment No. 2 to License
                  Agreement, effective January 15, 1999; Amendment No. 3; and
                  that certain Consent to Assignment Agreement, dated as of the
                  date hereof.

              1.14         "Genentech License Rights" means all rights under
                  Patents, Know-How and trademarks granted to Connetics by
                  Genentech under the Genentech License, but only to the extent
                  the Genentech License permits the practice of such rights

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                  for the uses set forth in Article 3 herein. "Genentech License
                  Rights" shall not include any Third Party Product Rights.

              1.15         "Genentech Patents" means all the Patent rights which
                  are granted to Connetics under the Genentech License.

              1.16         "Genentech Supply Agreement" means the Supply
                  Agreement entered into between Genentech and Connetics dated
                  May 4, 1998.

              1.17         "IG Field" means the administration to humans of
                  Licensed Protein Product for the treatment or prevention of
                  any human disease or condition, provided however, that "IG
                  Field" shall not include: (a) the administration to humans of
                  Licensed Protein Product for the treatment or prevention of
                  any type of arthritis or cardiac or cardiovascular disease or
                  condition or (b) use of Licensed Protein Product for Gene
                  Therapy.

1.18
                  "Interferon Gamma" or "IG" means the polypeptide described as
                  "Interferon Gamma" in Section 1.20 of the Genentech License.


                  1.19 "InterMune Net Sales" means "Net Sales" of Licensed
                  Protein Products in the Territory for use in the IG Field by
                  InterMune and its sublicensees hereunder other than Connetics
                  and its Affiliates and Dermatology Sublicensees.

              1.20         "Know-How" means all information, data, know-how,
                  trade secrets, inventions, developments, results, techniques
                  and materials, whether or not patentable.

              1.21         "Licensed Product," "Licensed Gene Product" and
                  "Licensed Protein Product" shall each have the same meaning as
                  defined in Section 1.22 of the Genentech License.

              1.22         "Licensed Technology" means the Genentech License
                  Rights and the Connetics Know-How.

              1.23         "Net Sales" means "Net Sales" (as defined in Section
                  1.25 of the Genentech License) of Licensed Protein Products in
                  the Territory for use in the IG Field by InterMune and any of
                  its sublicensees hereunder (including without limitation
                  Connetics, its Affiliates and its Dermatology Sublicensees).

              1.24         "Original Agreement Effective Date" means April 27,
                  1999.


              1.25         "Patents" means any and all issued or pending patents
                  and patent applications, both foreign and domestic, and
                  including without limitation (a) all divisionals,
                  continuations and continuations-in-part of any such
                  applications, (b) any patents that issue from any of the
                  foregoing, and (c) all substitutions, extensions, reissues,
                  renewals, supplementary protection certificates and inventors'
                  certificates with respect to any of the foregoing issued
                  patents.

             1.26          "Territory" shall have the meaning set forth in
                  Section 1.28 of the Genentech License.

             1.27          "Third Party" means any party besides the Parties and
                  their respective Affiliates.

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             1.28          "Third Party Product Rights" shall have the meaning
                  set forth in Section 1.37 of the Genentech License.

             1.29          United States" means the United States and its
                  territories and possessions.

2.       ORIGINAL AGREEMENT SUPERSEDED

         The Parties agree that the Original Agreement is hereby replaced and
superseded in all respects by this Agreement as of the Effective Date, except as
expressly set forth in Section 3.3.

3.       ASSIGNMENT OF RIGHTS; LICENSE GRANT; RELATED COVENANTS

              3.1 Assignment of Rights. Connetics agrees to assign and hereby
                  does assign to InterMune Connetics' entire right, title and
                  interest in, to and under the Genentech License. Upon each
                  request by InterMune, without additional consideration,
                  Connetics agrees to promptly execute all documents and take
                  all such acts as InterMune deems necessary or desirable to
                  procure, maintain, perfect, and enforce the full benefits,
                  enjoyment, rights, title and interest in, to and under the
                  Genentech License assigned hereunder. In the event InterMune
                  is unable for any reason, after reasonable effort, to secure
                  Connetics' signature on any document needed in connection with
                  the actions specified herein, Connetics hereby irrevocably
                  designates and appoints InterMune and its duly authorized
                  officers and agents as its agent and attorney in fact, which
                  appointment is coupled with an interest, to act for and on its
                  behalf to execute, verify and file any such documents and to
                  do all other lawfully permitted acts to further the purposes
                  of this Section 3.1 with the same legal force and effect as if
                  executed by Connetics. Connetics agrees that as of the
                  Effective Date, InterMune shall be deemed a party to and sole
                  licensee under the Genentech License, and that Connetics shall
                  have no further rights nor obligations thereunder, except as
                  set forth in Section 4.1 of this Agreement and those
                  obligations that accrued prior to the Effective Date,
                  including without limitation, Connetics' remaining
                  obligations, if any, under Section 8.1 of the Genentech
                  License. Connetics hereby covenants that it shall take no
                  action inconsistent with InterMune's rights as party to and
                  licensee under the Genentech License.

              3.2 Connetics Know-How. Connetics hereby grants to InterMune a
                  non-exclusive license under the Connetics Know-How to develop,
                  use, make, have made, import, offer for sale and sell (a)
                  Licensed Products in the Territory, and (b) any products
                  covered by Third Party Product Rights to which Connetics or
                  InterMune acquires rights under the Genentech License in the
                  applicable territory.

              3.3 Genentech Supply Agreement. Pursuant to the Original
                  Agreement, Connetics assigned to InterMune Connetics' entire
                  right, title and interest to the Genentech Supply Agreement,
                  which assignment shall remain in full force and effect.
                  InterMune hereby covenants that it shall maintain the
                  Genentech Supply Agreement effective and in good standing. To
                  the extent Connetics exercises its option pursuant to Section
                  4.1 below, InterMune shall procure for and supply to Connetics
                  (and its Dermatology Sublicensees, if any) its requirements
                  for Bulk Product and Finished Product (as such terms are
                  defined in the Genentech Supply Agreement) for use in the
                  Dermatology Field from Genentech pursuant to the Genentech
                  Supply Agreement or from any Third Party manufacturer(s)
                  contracted by InterMune to manufacture Finished Product and
                  Bulk Product, provided that

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                  Connetics shall pay to InterMune InterMune's cost, without
                  markup, for procuring and supplying such Finished Product and
                  Bulk Product to Connetics.

              3.4 Transfer of Data and Materials. Promptly following the
                  Effective Date, Connetics and InterMune shall work
                  cooperatively together to transfer to InterMune all documents
                  or materials in Connetics' possession comprising or containing
                  the Licensed Technology, including without limitation,
                  biological and chemical materials, regulatory filings, and
                  data, and Connetics shall transfer any and all additions or
                  improvements to the Licensed Technology to InterMune as soon
                  as is reasonably practicable after the creation, development
                  or acquisition of such addition or improvements.

4.       OPTION TO DERMATOLOGY RIGHTS

              4.1 Option Grant. InterMune hereby grants to Connetics the
                  exclusive option to obtain the exclusive sublicense under the
                  Genentech License Rights to develop, use, make, have made,
                  import, offer for sale and sell Licensed Protein Products for
                  use solely in the Dermatology Field in the United States,
                  subject to Genentech's rights under the Genentech License.
                  Connetics may exercise such option at any time prior to the
                  fifth anniversary of the Original Agreement Effective Date by
                  providing InterMune written notice of its desire to exercise
                  such option. Upon InterMune's receipt of such notice,
                  InterMune shall be deemed to have granted to Connetics the
                  exclusive, royalty-free (with respect to InterMune only),
                  sublicense under the Genentech License Rights to use, make,
                  have made, import, offer for sale and sell Licensed Protein
                  Products in the Dermatology Field in the United States for the
                  term of this Agreement, subject to the terms of the Genentech
                  License and of this Agreement, and Connetics shall be subject
                  to all terms and conditions of the Genentech License relating
                  to its development and commercialization of Licensed Protein
                  Products in the Dermatology Field in the United States,
                  including without limitation those obligations described in
                  Sections 4.2 and 4.5 below. Such sublicense shall be further
                  sublicenseable by Connetics to the extent permitted by the
                  Genentech License. If not exercised by the fifth anniversary
                  of the Original Agreement Effective Date, the option granted
                  in this Section 4.1 shall expire.

              4.2 MILESTONE PAYMENTS.  If Connetics exercises its option under
                  Section 4.1 then:

                         (a)      In the event that Connetics or a Dermatology
                           Sublicensee achieves one of the milestones set forth
                           in Sections 8.2(a) or (b) of the Genentech License
                           with respect to a Licensed Protein Product, Connetics
                           or such Dermatology Sublicensee shall inform
                           InterMune thereof and provide such milestone payment
                           due under the Genentech License to InterMune.

                         (b)      In the event that milestone payments to
                           Genentech as set forth in Sections 8.2(c) and (d) of
                           the Genentech License are triggered by the sale of
                           Licensed Protein Products by both Connetics and
                           InterMune (and/or their sublicensees) in the
                           Territory, the Parties shall promptly meet and in
                           good faith determine a fair apportionment between the
                           Parties of the payment to be made to Genentech for
                           such milestone based upon the relative Net Sales of
                           each Party for such calendar year or other agreed
                           upon method of apportionment. Connetics shall then
                           submit to InterMune its portion of such milestone
                           payment in accordance with the terms of the Genentech
                           License.

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              4.3 ROYALTIES.  If Connetics exercises its option under Section
                  4.1 then:

                         (a)      Connetics shall pay royalties to InterMune
                           on all Net Sales of Licensed Protein Products by
                           Connetics, its Affiliates and its Dermatology
                           Sublicensees at the applicable royalty rate set forth
                           in Section 8.3 of the Genentech License (as may be
                           reduced pursuant to Section 8.4 of the Genentech
                           License).

                         (b)      Royalty payments shall be made to InterMune
                           quarterly within sixty (60) days following the end of
                           each calendar quarter for which royalties are due.
                           Each royalty payment shall be accompanied by a report
                           summarizing the total Net Sales by Connetics, its
                           Affiliates and its Dermatology Sublicensees during
                           the relevant three-month period, and the calculation
                           of royalties, if any, due thereon pursuant to
                           subsection (a) above.

                         (c)      Connetics, its Affiliates and its
                           Dermatology Sublicensees hereunder shall keep full,
                           true and accurate books of account containing all
                           particulars which may be necessary for the purpose of
                           showing Net Sales. Said books of account shall be
                           kept at the principal place of business of Connetics,
                           its Affiliates or its Dermatology Sublicensees, as
                           the case may be. Said books and the supporting data
                           shall be open at all reasonable times, for three (3)
                           years following the end of the calendar year to which
                           they pertain (and access shall not be denied
                           thereafter, if reasonably available), to the
                           inspection of an independent public accountant
                           retained by InterMune or Genentech and reasonably
                           acceptable to Connetics (or its Affiliate or
                           Dermatology Sublicensee) for the purpose of verifying
                           Net Sales under this Agreement; subject to the
                           provisions of subsection (e) below.

                         (d)      Connetics shall, within sixty (60) days
                           after the end of each calendar quarter beginning with
                           the quarter of the first commercial sale of a
                           Licensed Protein Product in the Dermatology Field in
                           the Territory by Connetics, its Affiliates or its
                           Dermatology Sublicensees, deliver to InterMune a true
                           and accurate report, setting forth such particulars
                           of the business conducted by Connetics, its
                           Affiliates and its Dermatology Sublicensees during
                           the preceding quarter as are pertinent to an
                           accounting for Net Sales and deductible expenses as
                           permitted under the Genentech License. Such reports
                           shall include at least the following: (i) the total
                           gross sales of Licensed Protein Products occurring
                           during that calendar quarter, (ii) the allowable
                           deductions therefrom, (iii) the total Net Sales of
                           Licensed Protein Products occurring during that
                           calendar quarter and (iv) the calculation of
                           royalties, if any, due thereon pursuant to subsection
                           (a) above.

                         (d)      At InterMune's or Genentech's request and
                           expense, Connetics shall permit a certified public
                           accountant selected by InterMune or Genentech and
                           reasonably acceptable to Connetics to examine, not
                           more than once in any four consecutive calendar
                           quarters during the term of this Agreement, but
                           including one (1) post-termination audit, Connetics'
                           books of account and records of all sales of Licensed
                           Protein Products by Connetics, its Affiliates and its
                           Dermatology Sublicensees for the sole purpose of
                           determining the correctness of the reports provided
                           by Connetics under subsection (a) above. If such
                           accountant reasonably

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                           determines that the royalties owed by Connetics to
                           InterMune under subsection (a) above have been, for
                           any calendar year in total, understated by Connetics,
                           Connetics shall immediately pay to InterMune all
                           understated royalties, together with interest on such
                           royalties from the date accrued at a rate of prime
                           plus 2% and shall pay the reasonable costs of the
                           examination if Connetics has understated such
                           royalties by more than 5%.

              4.4 OFF-LABEL SALES.  If Connetics exercises the option set forth
                  in Section 4.1 then:

                         (a)      Each Party agrees and shall require its
                           sublicensees, if any, to use commercially reasonable
                           efforts to formulate all Licensed Protein Products
                           developed by such Party or sublicensee thereof in a
                           manner to reduce, to the extent reasonably
                           practicable, the possibility that such Licensed
                           Protein Product can be used in the other Party's
                           field of use as provided hereunder. If a Party cannot
                           so formulate a particular Licensed Protein Product,
                           then such Party agrees to use its Best Efforts to
                           prevent sales of such Licensed Protein Product for
                           use in the other Party's field of use, including
                           without limitation instructing its sales forces, and
                           requiring all sublicensees to instruct their sales
                           forces, that such Licensed Protein Product is not to
                           be promoted, marketed or sold for use in the other
                           Party's field of use.

                         (b)      In the event that either Party determines
                           that a Licensed Protein Product sold by a Party or
                           its sublicensees hereunder is being used in a field
                           of use other than one for which such Party has the
                           right to sell such Licensed Protein Product
                           hereunder, the Party making such determination shall
                           immediately inform the other Party. The Parties shall
                           then promptly meet and diligently and in good faith
                           determine a fair and reasonable mechanism for
                           equitable allocation of the sales of such Licensed
                           Protein Product that are used outside the field of
                           use for which the selling Party had the right to
                           sell.

              4.5 PATENT COSTS. If Connetics exercises the option set forth in
                  Section 4.1, then Connetics agrees to reimburse InterMune all
                  costs paid by InterMune to Genentech under Section 5.2 of the
                  Genentech License which relate to any patent or patent
                  application the claims of which: (a) are specifically directed
                  to a Licensed Protein Product for use in the Dermatology Field
                  and (b) do not relate to a Licensed Protein Product for use in
                  any area of the IG Field other than the Dermatology Field.

              4.6 MILESTONE PAYMENTS. If Connetics exercises its option under
                  Section 4.1, then Connetics shall make the following cash
                  milestone payments to InterMune:

                         (a)      One million two hundred thousand dollars
                           ($1,200,000) within thirty (30) days following the
                           date on which the first NDA or BLA for a Licensed
                           Protein Product is filed with the FDA by Connetics,
                           its Affiliate or its Dermatology Sublicensee for an
                           indication in the Dermatology Field; and

                         (b)      Two million dollars ($2,000,000) within
                           thirty (30) days following the date Connetics, its
                           Affiliate or its Dermatology Sublicensee receives FDA
                           clearance for each new indication in the Dermatology
                           Field of a Licensed Protein Product for commercial
                           sale in the United States.

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              4.7 DERMATOLOGICAL INDICATIONS OUTSIDE OF THE DERMATOLOGY FIELD.

                         (a)      It is the intention of the Parties that
                           Connetics shall be InterMune's preferred marketing
                           partner for sales of Licensed Protein Product to
                           dermatologists in the United States during the term
                           of this Agreement. Therefore, during the term of this
                           Agreement, if either Party desires to sell Licensed
                           Protein Product to dermatologists in the United
                           States for use for indications that are outside of
                           the Dermatology Field but within the IG Field (an
                           "Outside Indication"), the provisions of this Section
                           4.7 shall apply.

                         (b)      In the event that either Party desires to
                           sell a Licensed Protein Product for an Outside
                           Indication to dermatologists in the United States
                           during the term of this Agreement, such Party shall
                           give the other Party written notice of such interest,
                           which notice shall specify the indication of
                           interest. If InterMune notifies Connetics that
                           InterMune itself desires to sell such Licensed
                           Protein Product for an Outside Indication directly to
                           dermatologists in the United States, then the
                           procedures of subsection (d) shall apply. Otherwise,
                           for ninety (90) days following receipt of such
                           notice, the Parties shall exclusively negotiate in
                           good faith for the reasonable commercial terms under
                           which Connetics shall exclusively sell such Licensed
                           Protein Product for such Outside Indication to
                           dermatologists in the United States. In the event
                           that, at the end of such ninety (90) day period, the
                           Parties have failed to enter into a written agreement
                           on such commercially reasonable terms, Connetics'
                           rights with respect to the sale of such Licensed
                           Protein Product for such Outside Indication shall
                           terminate and InterMune shall have no further
                           obligations to Connetics under this Section 4.7 with
                           respect to such Licensed Protein Product for such
                           Outside Indication except as set forth is subsections
                           (c) and (d) below.

                         (c)      If the Parties have failed to enter into an
                           agreement by the end of such ninety (90) day period,
                           as described in subsection (b) above, InterMune shall
                           then have the right during the following one hundred
                           eighty (180) day period to enter into an agreement
                           with a Third Party for the sale to dermatologists of
                           such Licensed Protein Product for such Outside
                           Indication on economic terms that, taken as a whole,
                           are substantially the same as, or more favorable to
                           InterMune than, those last offered in writing by
                           Connetics for such rights pursuant to subsection (b)
                           above. If at the end of such one hundred eighty (180)
                           day period InterMune has not entered into an
                           agreement with a Third Party to sell such Licensed
                           Protein Product for such Outside Indication to
                           dermatologists in the United States, then the
                           procedures set forth in subsection (b) above shall
                           again apply, provided that InterMune may proceed
                           alternatively under subsection (d) below.

                         (d)      If InterMune itself desires to sell such
                           Licensed Protein Product to dermatologists in the
                           United States for Outside Indications, then upon
                           written notice from InterMune, Connetics and
                           InterMune shall enter into good faith negotiations,
                           for a period of ninety (90) days from Connetics'
                           receipt of such notice, for the reasonable commercial
                           terms upon which InterMune shall grant to Connetics
                           the rights to co-promote such Licensed Protein
                           Product for such Outside Indication to dermatologists
                           in the United States. InterMune agrees that it shall
                           not unreasonably withhold its

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                           agreement to such commercially reasonable terms. In
                           the event that, at the end of such ninety (90) day
                           period, the Parties have failed to enter into a
                           written agreement for such co-promotion rights,
                           InterMune shall have no further obligations to
                           Connetics under this Section 4.7 with respect to such
                           Licensed Protein Product for such Outside Indication,
                           PROVIDED THAT InterMune may not enter into an
                           agreement with a Third Party for the rights to
                           co-promote Licensed Protein Product for such Outside
                           Indication to dermatologists in the United States on
                           economic terms that, taken as a whole, are less
                           favorable to InterMune than those last offered in
                           writing by Connetics for such rights. In the event
                           that InterMune does not enter into such a
                           co-promotion agreement with a Third Party and instead
                           solely promotes and sells such Licensed Protein
                           Product for such Outside Indication to dermatologists
                           in the United States itself, if at any time following
                           such sole promotion and sale InterMune determines in
                           its sole discretion that it desires to grant a
                           license to the rights to promote and sell, or to
                           co-promote, such Licensed Protein Product for such
                           Outside Indication to dermatologists in the United
                           States to a Third Party, then the procedures set
                           forth in subsection (b) above shall apply.

5.       CONSIDERATION

              5.1 ROYALTIES.

                         (a)      Beginning on January 1, 2002, InterMune
                           shall pay to Connetics a royalty of one-quarter of
                           one percent (0.25%) of InterMune Net Sales in the
                           United States. InterMune shall continue to pay such
                           royalties to Connetics until such time as the
                           cumulative InterMune Net Sales in United States,
                           beginning on January 1, 2000, are equal to one
                           billion dollars ($1,000,000,000). Thereafter,
                           InterMune shall pay to Connetics a royalty of
                           one-half of one percent (0.5%) of InterMune Net Sales
                           in the United States for the remainder of the term of
                           the Agreement.

                         (b)      All royalties due under this Section 5.1
                           shall be due and payable quarterly within thirty (30)
                           days following the last day of each quarter in which
                           royalties are incurred beginning with first calendar
                           quarter of 2002.

              5.2 MILESTONE PAYMENT. InterMune shall pay to Connetics a
                  milestone payment of one million five hundred thousand dollars
                  ($1,500,000), (the "Milestone Payment"), payable in a lump sum
                  or in installments based on the level of InterMune Net Sales,
                  as follows:

                         (a)      If annualized InterMune Net Sales in the
                           United States for 2001, based on InterMune Net Sales
                           in the United States for the third and fourth
                           calendar quarters of 2001, ("2001 Net Sales") are
                           equal to or greater than twenty million dollars
                           ($20,000,000), then on March 31, 2002, InterMune
                           shall, at its election, either (i) pay the full
                           Milestone Payment to Connetics, or (ii) pay to
                           Connetics three hundred seventy five thousand dollars
                           ($375,000) of the Milestone Payment and furnish to
                           Connetics a promissory note for the balance of the
                           Milestone Payment, which promissory note shall
                           provide for three (3) principal payments to Connetics
                           of three hundred seventy five thousand dollars
                           ($375,000) each due upon June 30, 2002, September 30,
                           2002 and December 31, 2002, respectively.

<PAGE>


                         (b)      If 2001 Net Sales are equal to or greater
                           than fifteen million dollars ($15,000,000) but less
                           than twenty million dollars ($20,000,000), then on
                           March 31, 2002, InterMune shall pay to Connetics
                           three hundred thousand dollars ($300,000) of the
                           Milestone Payment, and furnish to Connetics a
                           promissory note for the balance of the Milestone
                           Payment (the "Remaining Payment"), which promissory
                           note shall provide for full payment of the balance of
                           such note to Connetics on the earlier to occur of (i)
                           March 31, 2004, or (ii) the last day of the month
                           following the consecutive twelve (12) month period
                           that InterMune Net Sales in the United States are
                           equal to or greater than twenty million dollars
                           ($20,000,000), subject to subsection (d) below.

                         (c)      If 2001 Net Sales are less than fifteen
                           million dollars ($15,000,000), then on March 31,
                           2002, InterMune shall pay to Connetics a portion of
                           the Milestone Payment equal to three hundred thousand
                           dollars ($300,000) multiplied by a fraction, the
                           numerator of which is 2001 Net Sales and the
                           denominator of which is twenty million dollars
                           ($20,000,000). InterMune shall furnish to Connetics a
                           promissory note for the balance of the Milestone
                           Payment (the "Remaining Payment"), which promissory
                           note shall provide for full payment of the balance of
                           such note to Connetics on the earlier to occur of (i)
                           March 31, 2004, or (ii) the last day of the month
                           following the consecutive twelve (12) month period
                           that InterMune Net Sales in the United States are
                           equal to or greater than twenty million dollars
                           ($20,000,000), subject to subsection (d) below.

                         (d)      With respect to the promissory note for the
                           Remaining Payment described in subsection (b) or (c)
                           above, if InterMune is to pay the balance of such
                           note on March 31, 2004, and InterMune Net Sales in
                           the United States for the twelve (12) month period
                           preceding March 31, 2004 are equal to or greater than
                           ten million dollars ($10,000,000) but less than
                           twenty million dollars ($20,000,000), then:

                               (i)  InterMune may, at its election, pay fifty
                                    percent (50%) of the Remaining Payment
                                    either in cash or in Preferred Shares of
                                    InterMune stock at the fair market value of
                                    such shares, determined as the average
                                    closing price of such shares over the
                                    previous thirty (30) day period; and

                               (ii) With respect to the other fifty percent
                                    (50%) of the Remaining Payment, Connetics
                                    may, at its election, receive such fifty
                                    percent either in cash or in Preferred
                                    Shares of InterMune stock at the fair market
                                    value of such shares, determined as the
                                    average closing price of such shares over
                                    the previous thirty (30) day period,
                                    provided that Connetics shall notify
                                    InterMune of its election in writing at
                                    least thirty (30) days prior to the date
                                    that such payment is due.

                         (e)      With respect to the Remaining Payment
                           described in subsection (b) or (c) above, if
                           InterMune is to pay the balance of such note on March
                           31, 2004, and InterMune Net Sales in the United
                           States for the twelve (12) month period preceding
                           March 31, 2004 are less than ten million dollars
                           ($10,000,000), then InterMune may, at its election,
                           either:


                                       10
<PAGE>


                                        (1) Pay such Remaining Payment in cash
                                            or in Preferred Shares of InterMune
                                            stock at the fair market value of
                                            such shares, determined as the
                                            average closing price of such shares
                                            over the previous thirty (30) day
                                            period; or

                                        (2) Grant to Connetics the license to
                                            the Accounting and Revenue Rights to
                                            CGD Units (as defined below), on
                                            commercially reasonable terms to be
                                            agreed upon by the Parties, in which
                                            event InterMune shall thereafter
                                            have no further obligation to
                                            Connetics with respect to such
                                            Remaining Payment. Such license
                                            shall be fully paid-up solely with
                                            respect to InterMune but not with
                                            respect to Genentech or any other
                                            Third Party, and shall expire upon
                                            the date of expiration of the last
                                            to expire Genentech Patent covering
                                            the manufacture, use or sale of
                                            Licensed Products for the treatment
                                            of CGD in the United States and its
                                            territories and possessions. As used
                                            herein, "Accounting and Revenue
                                            Rights to CGD Units" means the right
                                            to book net revenues, expenses and
                                            net profits for the sales of
                                            Licensed Products for the treatment
                                            of chronic granulomatous disease by
                                            InterMune and its sublicensees in
                                            the United States.

                         (f)      All promissory notes referred to in this
                           Section 5.2 shall bear interest at the rate of the
                           prime rate plus two percentage points (2%).

              5.3 REPORTS; AUDIT RIGHTS. InterMune shall provide to Connetics a
                  copy of all reports submitted to Genentech by InterMune
                  pursuant to Section 8.8 of the Genentech License when
                  InterMune submits such report to Genentech. Following January
                  1, 2002, Connetics shall have the same audit rights as
                  Genentech pursuant to Section 8.8 of the Genentech License.

              5.4 THIRD PARTY ROYALTIES. Each Party shall be responsible for
                  paying all royalties due to Third Parties other than Genentech
                  under Section 8.4 of the Genentech License with respect to
                  such Party's and its sublicensees' activities hereunder.

6.       INTELLECTUAL PROPERTY

              6.1 Ownership of Inventions. Each Party shall remain the sole
                  owner of its respective technology and other intellectual
                  property that it owned as of the Effective Date. A Party shall
                  not have or acquire any rights in any inventions, Know-How or
                  intellectual property rights of the other Party, except as
                  specifically granted herein.

              6.2 Infringement of Third Party Patents. In the event that a Third
                  Party files an action against a Party alleging that such
                  Party's activities under this Agreement infringe such Third
                  Party's patent rights, such Party shall give written notice to
                  the other Party, and the Parties will consult and cooperate on
                  the best course of action. The Party that was sued shall have
                  the right to defend itself against such action, and the other
                  Party shall provide all reasonable assistance in such defense.

              6.3 Infringement of Licensed Patents. In the event that either
                  Party becomes aware that a Third Party is infringing any
                  rights in the Genentech Patents, such Party shall promptly
                  notify the other. InterMune shall have the right to enforce
                  the


                                       11
<PAGE>


                  Genentech Patents to the full extent permitted under the
                  Genentech License, and Connetics will reasonably cooperate
                  with InterMune in such enforcement actions and take all
                  reasonably necessary steps to facilitate InterMune's
                  enforcement of the Genentech Patents.

              6.4 Cooperation. Each Party agrees to cooperate with the other and
                  take all reasonable additional actions as may be reasonably
                  required to achieve the intent of this Article 6, including,
                  without limitation, the execution of all necessary and
                  appropriate instruments and documents.

7.       REPRESENTATIONS AND WARRANTIES

              7.1 Mutual Representations and Warranties. Each Party hereby
                  represents and warrants to the other Party as follows:

                         (a)      Such Party (i) is duly organized, validly
                           existing and in good standing under the laws of the
                           state in which it is organized; (ii) has the power
                           and authority and the legal right to own and operate
                           its property and assets, to lease the property and
                           assets it operates under lease, and to carry on its
                           business as it is now being conducted; and (iii) is
                           in compliance with all requirements of applicable
                           law, except to the extent that any noncompliance
                           would not materially adversely affect such Party's
                           ability to perform its obligations under the
                           Agreement.

                         (b)      Such Party (i) has the power and authority
                           and the legal right to enter into the Agreement and
                           to perform its obligations hereunder, and (ii) has
                           taken all necessary action on its part to authorize
                           the execution and delivery of the Agreement and the
                           performance of its obligations hereunder. The
                           Agreement has been duly executed and delivered on
                           behalf of such Party, and constitutes a legal, valid,
                           binding obligation, enforceable against such Party in
                           accordance with its terms.

                         (c)      All necessary consents, approvals and
                           authorizations of all governmental authorities and
                           other persons required to be obtained by such Party
                           in connection with the Agreement have been obtained.

                         (d)      The execution and delivery of the Agreement
                           and the performance of such Party's obligations
                           hereunder (i) do not conflict with or violate any
                           requirement of applicable laws or regulations or any
                           material contractual obligation of such Party, and
                           (ii) do not materially conflict with, or constitute a
                           material default or require any consent under any
                           material contractual obligation of such Party.

              7.2 Connetics Representations and Warranties.  Connetics hereby
                  represents and warrants that:

                         (a)      To Connetics' knowledge as of the Effective
                           Date, the Licensed Technology practiced as permitted
                           herein does not infringe on any intellectual property
                           rights owned by any Third Party.

                         (b)      Connetics possesses the necessary interest,
                           title and right to the Licensed Technology to grant
                           the licenses and to make the assignments to InterMune
                           hereunder.


                                       12
<PAGE>


8.       INDEMNIFICATION

              8.1 Indemnification by Connetics. Connetics agrees to indemnify,
                  hold harmless and defend InterMune and InterMune's directors,
                  officers, employees and agents, and the directors, officers,
                  employees and agents of any InterMune Affiliate from and
                  against any and all claims, suits, losses, damages, costs,
                  fees and expenses resulting from or arising out of any
                  negligent or wrongful act or omission by Connetics, its
                  Affiliates or its Dermatology Sublicensees, or any breach by
                  Connetics of its obligations under this Agreement or under the
                  Genentech License, except to the extent that such claims,
                  suits, losses, damages, costs, fees or expenses arises or
                  results from any negligent or wrongful act or omission of
                  InterMune or its Affiliates.

              8.2 Indemnification by InterMune. InterMune agrees to indemnify,
                  hold harmless and defend Connetics and its directors,
                  officers, employees and agents, and the directors, officers,
                  employees and agents of any Connetics Affiliates or its
                  Dermatology Sublicensees from and against any and all claims,
                  suits, losses, damages, costs, fees and expenses resulting
                  from or arising out of damage or injury caused by a negligent
                  or wrongful act or omission of InterMune, its Affiliates or
                  its Sublicensees, or any breach by InterMune of its
                  obligations under this Agreement or under the Genentech
                  License, except to the extent that such claims, suits, losses,
                  damages, costs, fees or expenses arises or results from any
                  negligent or wrongful act or omission of Connetics, its
                  Affiliates or its Dermatology Sublicensees.

              8.3 Indemnification Procedure. In all cases where one Party seeks
                  indemnification by the other under this Article 8, the Party
                  seeking indemnification shall promptly notify the indemnifying
                  Party of receipt of any claim or lawsuit covered by such
                  indemnification obligation and shall cooperate fully with the
                  indemnifying Party in connection with the investigation and
                  defense of such claim or lawsuit. The indemnifying Party shall
                  have the right to control the defense, with counsel of its
                  choice, provided that the non-indemnifying Party shall have
                  the right to be represented by advisory counsel at its own
                  expense. The indemnifying Party shall not settle or dispose of
                  the matter in any manner which could negatively and materially
                  affect the rights or liability of the non-indemnifying Party
                  without the non-indemnifying Party's prior written consent,
                  which shall not be unreasonably withheld.

9.       CONFIDENTIALITY

              9.1 Confidential Information Obligations. As used herein,
                  "Confidential Information" means all information that a Party
                  discloses to the other Party under this Agreement or had
                  disclosed to the other Party under the Original Agreement,
                  provided that Confidential Information shall not include such
                  information excluded under Section 9.2. Except to the extent
                  expressly authorized by this Agreement or otherwise agreed in
                  writing by the Parties, each Party agrees that, during the
                  term of this Agreement and for five (5) years after the
                  expiration or termination of this Agreement, it shall keep
                  confidential and shall not publish or otherwise disclose and
                  shall not use for any purpose other than as provided for in
                  this Agreement any Confidential Information furnished to it by
                  the other Party pursuant to this Agreement.


                                       13
<PAGE>


              9.2 Exceptions. The obligations set forth in Section 9.1 shall not
                  apply to any Information that the receiving Party can
                  demonstrate by competent evidence:

                         (a)      was already known to the receiving Party,
                           other than under an obligation of confidentiality, at
                           the time of disclosure by the other Party;

                         (b)      was generally available to the public or
                           otherwise part of the public domain at the time of
                           its disclosure to the receiving Party by the other
                           Party;

                         (c)      became generally available to the public or
                           otherwise part of the public domain after its
                           disclosure and other than through any act or omission
                           of the receiving Party in breach of this Agreement;

                         (d)      was disclosed to the receiving Party, other
                           than under an obligation of confidentiality to a
                           Third Party, by a Third Party who had no obligation
                           to the disclosing Party not to disclose such
                           information to others; or

                         (e)      is independently developed by the receiving
                           Party without using any of the other Party's
                           Confidential Information.

              9.3 Terms of the Agreement. The Parties agree that the terms of
                  this Agreement will be considered Confidential Information of
                  both Parties. Notwithstanding the foregoing, a Party shall
                  have the right to disclose the material financial terms of the
                  Agreement to any bona fide potential investor, investment
                  banker, acquiror, merger partner or other potential financial
                  partner, subject to such Party obtaining the agreement of such
                  party receiving such Confidential Information to keep such
                  information confidential.

              9.4 Permitted Disclosure. Notwithstanding the limitations in this
                  Article 9, each Party may disclose Confidential Information
                  belonging to the other Party (or otherwise subject to this
                  Article 9), to the extent such disclosure is reasonably
                  necessary in the following instances, but solely for the
                  limited purpose of such necessity:

                         (a)      filing or prosecuting Patents;

                         (b)      regulatory and tax filings;

                         (c)      prosecuting or defending litigation;

                         (d)      complying with applicable governmental laws
                           or regulations or valid court orders;

                         (e)      conducting preclinical or clinical trials of
                           Licensed Products; and

                         (f)      disclosure to Affiliates, licensees,
                           sublicensees, employees, consultants or agents who
                           agree to be bound by similar terms of confidentiality
                           and non-use at least equivalent in scope to those set
                           forth in this Article 9.

         Notwithstanding the foregoing, in the event a Party is required to make
a disclosure of the other Party's Confidential Information pursuant to Section
9.4, it will give reasonable advance notice to the other Party of such
disclosure and endeavor in good faith to secure confidential treatment of such
information. In any event, the Parties


                                       14
<PAGE>


agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder. Further, the Parties agree to consult with one another
on the provisions of this Agreement to be redacted in any filings made by a
Party with the United States Securities and Exchange Commission or as
otherwise required by law.


10.      TERMINATION

              10.1         Term of Agreement. The term of this Agreement shall
                  expire, unless earlier terminated as provided by Section 10.2
                  below, upon expiration or termination of the Genentech
                  License.

              10.2         Termination for Material Breach. If either Party
                  shall default in a material manner with respect to any
                  material provision of this Agreement and the other Party shall
                  have given the defaulting Party written notice of such
                  default, the defaulting Party shall have thirty (30) days to
                  cure such default. If such default is not cured within such
                  thirty (30) day period, the non-defaulting Party shall have
                  the right, upon notice to the defaulting Party and without
                  prejudice to any other rights the non-defaulting Party may
                  have, to terminate this Agreement unless the defaulting Party
                  is in the process of attempting in good faith to remedy such
                  default, in which case, the thirty (30) day cure period shall
                  be extended by an additional thirty (30) days.

              10.3         Effect of Termination. Upon termination or expiration
                  of the Agreement, (a) all licenses granted by Connetics to
                  InterMune under Article 3 will terminate; (b) any and all
                  claims and payment obligations that accrued prior to the date
                  of such termination or expiration shall survive such
                  termination; and (c) each Party shall return all of the other
                  Party's Confidential Information.

              10.4         Surviving Rights. The obligations and rights of the
                  Parties under Sections 4.3(c), 5.3, 6.1, and Articles 8, 9, 10
                  and 11 shall survive any termination or expiration of the
                  Agreement.

              10.5         Accrued Rights and Surviving Obligations. The
                  termination or expiration of the Agreement for any reason
                  shall be without prejudice to any rights, which shall have
                  accrued to the benefit of either Party prior to such
                  termination or expiration, including any damages arising from
                  any breach hereunder. Such termination or expiration shall not
                  relieve either Party from obligations which are expressly
                  indicated to survive termination or expiration of the
                  Agreement.

              10.6         Bankruptcy Rights. In the event that this Agreement
                  is terminated or rejected by a Party or its receiver or
                  trustee under applicable bankruptcy laws due to such Party's
                  bankruptcy, then all rights and licenses granted under or
                  pursuant to this Agreement by such Party to the other Party
                  are, and shall otherwise be deemed to be, for purposes of
                  Section 365(n) of the Bankruptcy Code and any similar law or
                  regulation in any other country, licenses of rights to
                  "intellectual property" as defined under Section 101(52) of
                  the Bankruptcy Code. The Parties agree that all intellectual
                  property rights licensed hereunder, including without
                  limitation any patents or patent applications in any country
                  of a Party covered by the license grants under this Agreement,
                  are part of the "intellectual property" as defined under
                  Section 101(52) of the Bankruptcy Code subject to the
                  protections afforded the non-terminating Party under Section
                  365(n) of the Bankruptcy Code, and any similar law or
                  regulation in any other country.


                                       15
<PAGE>


11.      MISCELLANEOUS

              11.1         Waiver. No waiver by either Party hereto of any
                  breach or default of any of the covenants or agreements herein
                  set forth shall be deemed a waiver as to any subsequent or
                  similar breach or default.

              11.2         Assignment. This Agreement shall be binding upon and
                  inure to the benefit of the Parties hereto and their permitted
                  successors and assigns; provided, however, that neither Party
                  shall assign any of its rights and obligations hereunder
                  without the prior written consent of the other Party, except
                  as incident to the merger, consolidation, reorganization or
                  acquisition of stock or assets affecting substantially all of
                  the assets or actual voting control of the assigning Party.
                  Any assignment or attempted assignment by either Party in
                  violation of the terms of this Section 11.2 shall be null and
                  void and of no legal effect.

              11.3         Notices. Any notice or other communication required
                  or permitted to be given to either Party hereto shall be in
                  writing and shall be deemed to have been properly given and to
                  be effective on the date of delivery if delivered in person or
                  by facsimile or five (5) days after mailing by registered or
                  certified mail, postage paid, to the other Party at the
                  following address:

<TABLE>

<S>                                         <C>
         In the case of InterMune:          InterMune Pharmaceuticals, Inc.
                                            1710 Gilbreth Road,
                                            Suite 301
                                            Burlingame, CA 94010
                                            Fax: (650) 259-0774
                                            Attention:  General Counsel

         with a copy to:                    Cooley Godward LLP
                                            Five Palo Alto Square
                                            3000 El Camino Real
                                            Palo Alto, CA 94306
                                            Fax: (650) 849-7400
                                            Attention:  Barclay James Kamb, Esq.

         In the case of Connetics:          Connetics Corporation
                                            3400 West Bayshore Road
                                            Palo Alto, CA 94303
                                            Fax: (650) 843-2899
                                            Attention:  Chief Executive Officer

</TABLE>

Either Party may change its address for communications by a notice to the other
Party in accordance with this Section.

              11.4         Headings. The headings of the several sections are
                  inserted for convenience of reference only and are not
                  intended to be a part of or to affect the meaning or
                  interpretation of this Agreement.

              11.5         Amendment. No amendment or modification hereof shall
                  be valid or binding upon the Parties unless made in writing
                  and signed by both Parties.

              11.6         Governing Law. This Agreement shall be governed
                  exclusively by the laws of the State of California, U.S.A., as
                  such law applies to contracts entered


                                       16
<PAGE>


                  into between and to be performed by California residents
                  entirely in the State of California.

              11.7         DISPUTE RESOLUTION.

                         (a)        In the event of any controversy or claim
                           arising out of, relating to or in connection with any
                           provision of this Agreement, or the rights or
                           obligations of the Parties hereunder, the Parties
                           shall try to settle their differences amicably
                           between themselves by referring the disputed matter
                           to the President of InterMune and the Chief Executive
                           Officer of Connetics for discussion and resolution.
                           Either Party may initiate such informal dispute
                           resolution by sending written notice of the dispute
                           to the other Party, and within ten (10) days after
                           such notice such representatives of the Parties shall
                           meet for attempted resolution by good faith
                           negotiations. If such personnel are unable to resolve
                           such dispute within thirty (30) days of initiating
                           such negotiations, either Party may seek to have such
                           dispute resolved by binding arbitration under this
                           Section 11.7. The arbitration shall be held in Palo
                           Alto, California according to the Commercial
                           Arbitration Rules of the American Arbitration
                           Association (the "Rules"). The arbitration will be
                           conducted by a panel of three (3) arbitrators who are
                           knowledgeable in the subject matter that is at issue
                           in the dispute, are not affiliated directly or
                           indirectly with either Party, and are selected by
                           mutual agreement of the Parties. Failing such
                           agreement, the arbitrators shall be selected
                           appointed as provided in the Rules. During the
                           arbitration, the Parties shall have such discovery
                           rights as the arbitrators may allow, consistent with
                           the discovery permitted by the Federal Code of Civil
                           Procedure. In conducting the arbitration, the
                           arbitrators shall apply the rules of evidence
                           applicable in California, and shall be able to decree
                           any and all relief of an equitable nature, including
                           but not limited to such relief as a temporary
                           restraining order, a preliminary injunction, a
                           permanent injunction, or replevin of property, as
                           well as specific performance. The arbitrators shall
                           also be able to award direct and indirect damages,
                           but shall not award any other form of damage (e.g.,
                           punitive or exemplary damages). The reasonable fees
                           and expenses, of the arbitrators, along with the
                           reasonable legal fees and expenses of the prevailing
                           Party (including all expert witness fees and
                           expenses), the fees and expenses of a court reporter,
                           and any expenses for a hearing room, shall be paid as
                           follows: If the arbitrators rule in favor of one
                           Party on all disputed issues in the arbitration, the
                           losing Party shall pay one hundred percent (100%) of
                           such fees and expenses; if the arbitrators rule in
                           favor of one Party on some issues and the other Party
                           on other issues, the arbitrators shall issue with the
                           rulings a written determination as to how such fees
                           and expenses shall be allocated between the Parties.
                           The arbitrators shall allocate fees and expenses in a
                           way that bears a reasonable relationship to the
                           outcome of the arbitration, with the Party prevailing
                           on more issues, or on issues of greater value or
                           gravity, recovering a relatively larger share of its
                           legal fees and expenses. The decision of the
                           arbitrators shall be final and may be entered, sued
                           on or enforced by the Party in whose favor it runs in
                           any court of competent jurisdiction at the option of
                           such Party. Whether a claim, dispute or other matter
                           in question would be barred by the applicable statute
                           of limitations, which statute of limitations also
                           shall apply to any claim or disputes subject to
                           arbitration


                                       17
<PAGE>


                           under this Section, shall be determined by binding
                           arbitration pursuant to this Section.

                         (b)        Notwithstanding anything to the contrary in
                           this Agreement, either Party may seek immediate
                           injunctive or other interim relief without resort to
                           arbitration from any court of competent jurisdiction
                           with respect to any breach of Article 9 hereof, or as
                           necessary to enforce and prevent infringement of the
                           patent rights, copyright rights, trademarks, trade
                           secrets, or other intellectual property rights owned
                           or controlled by a Party or its Affiliates.

              11.8         Force Majeure. Any delays in performance by any Party
                  under this Agreement shall not be considered a breach of this
                  Agreement if and to the extent caused by occurrences beyond
                  the reasonable control of the Party affected, including but
                  not limited to acts of God, embargoes, governmental
                  restrictions, fire, flood, explosion, riots, wars, civil
                  disorder, rebellion or sabotage. The Party suffering such
                  occurrence shall immediately notify the other Party as soon as
                  practicable, and any time for performance hereunder shall be
                  extended by the actual time of delay caused by the occurrence.

              11.9         Independent Contractors. In making and performing
                  this Agreement, InterMune and Connetics act and shall act at
                  all times as independent contractors and nothing contained in
                  this Agreement shall be construed or implied to create an
                  agency, partnership or employer and employee relationship
                  between InterMune and Connetics. At no time shall one Party
                  make commitments or incur any charges or expenses for or in
                  the name of the other Party.

              11.10        Severability. If any part of this Agreement is
                  declared invalid by any legally governing authority having
                  jurisdiction over either Party, then such declaration shall
                  not affect the remainder of the Agreement and the Parties
                  shall revise the invalidated part in a manner that will render
                  such provision valid without impairing the Parties' original
                  interest.

              11.11        Cumulative Rights. The rights, powers and remedies
                  hereunder shall be in addition to, and not in limitation of,
                  all rights, powers and remedies provided at law or in equity,
                  or under any other agreement between the Parties. All of such
                  rights, powers and remedies shall be cumulative, and may be
                  exercised successively or cumulatively.

              11.12        Counterparts. This Agreement may be executed in two
                  or more counterparts, each of which shall be an original and
                  all of which shall constitute together the same document.

              11.13        Entire Agreement. This Agreement and any and all
                  Exhibits referred to herein, in conjunction with the other
                  "Intercompany Agreements" (as defined in that certain
                  Collaboration Agreement by and between the Parties dated April
                  27, 1999 excluding the "Amended and Restated Service
                  Agreement"), embodies the entire understanding of the Parties
                  with respect to the subject matter hereof and of the
                  "Intercompany Agreements," and supersedes and terminates all
                  previous communications, representations or understandings,
                  either oral or written, between the Parties relating to the
                  subject matter hereof and of the "Intercompany Agreements."
                  The Amended and Restated Service Agreement is hereby


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<PAGE>


                  terminated in its entirety, except for the provisions of the
                  sections set forth in Section 14 therein.








         IN WITNESS WHEREOF, both InterMune and Connetics have executed this
Agreement, as of the day and year first written above.

INTERMUNE PHARMACEUTICALS, INC.            CONNETICS CORPORATION

By:  /s/ W. SCOTT HARKONEN                 By: /s/ THOMAS G. WIGGANS
    ---------------------------------          ---------------------------------
Print Name: W. Scott Harkonen              Print Name: Thomas G. Wiggans
            -------------------------                  -------------------------
Title: Pres./CEO                           Title: Pres. & CEO
       ------------------------------             ------------------------------


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