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                                                                    EXHIBIT 10.1

                         ASSIGNMENT AND OPTION AGREEMENT
                                     BETWEEN
                                  CONNETICS AND
                         INTERMUNE PHARMACEUTICALS, INC.

         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


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                   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 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.


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             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 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,


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                   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.

             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.


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             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 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


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                           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.

             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


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                           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 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


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                           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.

             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


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                           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 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


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                           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.

                       (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


                                       10
<PAGE>   11

                           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:


                                       11
<PAGE>   12

                                        (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


                                       12
<PAGE>   13

                   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 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


                                       13
<PAGE>   14

                           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.

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


                                       14
<PAGE>   15

                   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.

             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


                                       15
<PAGE>   16

                   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 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.


                                       16
<PAGE>   17

             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.

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:


                                       17
<PAGE>   18

         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



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 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


                                       18
<PAGE>   19

                           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  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


                                       19
<PAGE>   20

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


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<PAGE>   21

         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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