131220 Biotechnology Positioning and What Matters in 2014

8/9/2019 131220 Biotechnology Positioning and What Matters in 2014

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EQUITY

RESEARCH

RBC Capital Markets, LLC

Michael J. Yee (Analyst)(415) 633-8522

[email protected]

Charmaine Chan (Associate)(415) 633-8621

[email protected]

John Chung (Associate)(415) 633-8620

[email protected]

Adnan Butt (Analyst)(415) 633-8588

[email protected]

December 20, 2013

Biotechnology: Positioning and what matters in

2014

EventIn 2014 we anticipate 20% upside to large cap biotech (2013 was +82%). This is based on expecting

20-25% EPS growth for the group and for a reasonable forward P/E of 18-20x to remain stable we

dont anticipate any real P/E expansion next year vs. 2012-13, which saw significant "re-rating" due to

so much pipeline success and innovation. 2014 doesn't have as much major clinical news and is more an

execution year on recent big biotech products, where investors should get rewarded for strong secular

fundamentals, commercial execution, and flowthrough to operating leverage and earnings upside. We

raised our PT on GILD to $90 which remains our best large cap idea asoutperformance should be led by

large earnings upside coming and we want to buy major upside consensus earnings revisions, followed

by BIIB/CELG and then lower-return/lower risk AMGN. VRTX is our top mid-cap on positive CF data in

summer and stock should start to go up from here into the data.

The report details key questions for each company and our views. We're hosting a conf call 12/20 @

10am ET with a separate extra detailed 185-pg slide deck reviewing these key issues on each stock

for 2014 and tidbits to know (800-602-4090).

Estimates still need to rise:Biotech is set to beat, in our view, and estimates should increase, so PEs

should remain at least the same, which would imply upside to stocks. We believe we are in a multi-year

period of innovation, with new product cycles coming to market, which has helped support a strong

secular biotech market. We believe commercial success of these new products will drive significant

earnings upside and continue to push stocks higher.

There are fewer catalysts in 2014 than 2013.As a result, to keep up high enthusiasm for the group, weneed to find the next leg of the story for each stock when we go into 2015. Recent pipeline successes are

appreciated already and driving near-term EPS in 2014-16 (Tecfidera, Sovaldi, Revlimid, Abraxane etc).

But this success needs to continue, particularly with Phase II/III programs (LINGO, SMA, Tysabri, GILD

cancer or Hep B, CELG partnered programs, AMGN Kyprolis, etc.) as these drive the out years (2016-18)

when recent blockbusters may decelerate. We like the theme that a large cap company needs at least

one big drug coming every three years.

Sentiment and risks?Valuation is viewed as very attractive, especially given growth rates expected in

out years: 16x 2015 EPS and 13x 2016 EPS versus 3-year CAGR of 20-25% for GILD, CELG, and BIIB. This

makes these names look cheap or at least like growth at a reasonable price (GARP). The risks to the

sector are: 1) rotation trade where this outperforming sector is a relative source of funds if economy

picks up faster, 2) success of GILD which needs to meet high expectations for the overall sentiment of the

sector, 3) perception of managed care sensitivity to pricing including orphan drugs, 4) access to capitalmarkets for smid cap biotech

For smid-caps:We need to be much more selective in 2014. In 2013, unusually high deal flow and strong

IPO performance drove up almost all smid-caps. However, given current valuations, even higher-quality

names need strong data to sustain stock performance. In the smid-cap space, we like PRTA, AUXL, SGEN,

CBST and AERI.

Priced as of prior trading day's market close, EST (unless otherwise noted).

All values in USD unless otherwise notedFor Required Conflicts Disclosures, see Page 194.


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Table of contentsBiotech for 2014: Tough act to follow, expect more moderated performance next year. ..... 3

Company ProfilesLarge Caps ........................................................................................... 10

Amgen (AMGN) ........................................................................................................................ 11

Biogen Idec(BIIB) ...................................................................................................................... 24

Celgene (CELG) ......................................................................................................................... 36

Gilead Sciences (GILD) .............................................................................................................. 44

Company ProfilesMid Caps (YEE) .................................................................................... 54

Acorda Therapeutics (ACOR) .................................................................................................... 55

ARIA Pharmaceuticals (ARIA) ................................................................................................... 60

Auxilium Pharmaceuticals (AUXL) ............................................................................................ 66

BioMarin (BMRN) ..................................................................................................................... 70

Infinity Pharmaceuticals (INFI) ................................................................................................. 82

InterMune (ITMN) .................................................................................................................... 86

Myriad Genetics (MYGN) ......................................................................................................... 91

Pharmacyclics (PCYC) ............................................................................................................... 94

Prothena Corporation (PRTA)................................................................................................. 101

United Therapeutics (UTHR) .................................................................................................. 106

Vertex Pharmaceuticals (VRTX) .............................................................................................. 110

Xenoport (XNPT)..................................................................................................................... 117

Company ProfilesSMid Caps (Butt) ............................................................................... 116

Aerie Pharmaceuticals (AERI) ................................................................................................. 122

ArQule (ARQL) ........................................................................................................................ 126

AVEO Pharmaceuticals, Inc. (AVEO) ....................................................................................... 131

Cubist Pharmaceuticals (CBST) ............................................................................................... 134

Curis, Inc. (CRIS) ..................................................................................................................... 138

Durata Therapeutics, Inc. (DRTX) ........................................................................................... 143

Endocyte, Inc. (ECYT) .............................................................................................................. 147

ImmunoGen, Inc. (IMGN) ....................................................................................................... 152

Kamada Ltd. (KMDA) .............................................................................................................. 157

The Medicines Company (MDCO) .......................................................................................... 162

PDL BioPharma Inc. (PDLI) ...................................................................................................... 167

Regeneron Pharmaceuticals, Inc. (REGN) ................................................................................. 171

Seattle Genetics Inc. (SGEN)................................................................................................... 176

Sunesis Pharmaceuticals, Inc. (SNSS) ..................................................................................... 181

Spectrum Pharmaceuticals (SPPI) .......................................................................................... 185

XOMA Corporation (XOMA) ................................................................................................... 190

Biotechnology: Positioning and what matters in 2014

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Biotech for 2014: Tough act to follow, expect more moderated

performance next year.In 2014 we anticipate more modest 15-20% upside to large cap (2013 was +82%) . This is based

on our expecting 20-25% EPS growth for the group and for a reasonable forward P/E of 18-20x toremain stable we dont anticipate any real P/E expansion next year vs. 2012 -13, which had

significant re-rating due to so much pipeline success and innovation. 2014 becomes an

execution year on these big products. Expected performance of top large-caps in order for 2014

is: GILD > BIIB > CELG > AMGN.In the smid-cap space, we like VRTX, PRTA, AUXL, SGEN, CBST and

AERI

Our two part thesis is:

1. Estimates still need to rise: Biotech is still set to beat and estimates need to increase so PEs

should remain at least the same and still imply upside to stocks.

2. There are FEWER big catalysts in 2014 than 2013 . Thus we need to find the next upside leg

in the pipeline: To keep up high enthusiasm for the group, we need to find the next leg of

the story for each stock. Recent pipeline successes are appreciated already and driving near-

term EPS in 2014-16 (Tecfidera, SOF, Revlimid, Abraxane, etc). But this momentum needs

to continue particularly with Phase II/III programs (LINGO, SMA, Tysabri, GILD cancer or Hep

B, CELG partnered programs, AMGN Kyprolis, etc) as these drive the outer years (2016+)

when recent successes may decelerate. We like the theme that a large cap company needs

at least one big drug coming every 3 yearswill we find that in 2014-15?

Overall investor feedback is still positively biased in large cap biotech. We expect very attractive

growth rates, especially in outer years: 16x 2015 EPS and 13x 2016 EPS versus 3-year CAGR of 20-

25% for GILD, CELG, and BIIB. This makes these names look cheap or at least like growth at a

reasonable price (GARP). We especially see upside earnings bias for GILD, which is coming up on a

potential big launch that we think will exceed expectations.

We believe we are still in the midst of a multi -year period of innovationwith new product

cycles coming to market, which has helped support a strong secular biotech market. We are now

entering a period where large cap biotech is going from pipeline success to having multiple new

products that are expected to drive significant earnings upside, which should continue to push

stock prices higher.

For smid-caps, we need to be significantly more selective in 2014 . In 2013, unusual deal flow and

strong IPO performance drove up almost all the smid-caps as well as any derivatives. However,

given current valuations, even the higher-quality names will need strong data to sustain stock

performance.

Risks to watch out for the biotech sector include:

The rotation tradewhich takes investors out of winners like biotech and into sectors that

underperformed in 2013 (e.g. energy, telecom) on the basis that the economy picks up

and/or growth and cyclical sectors become more overweight

As goes GILD, as goes the group. Success of Gileads sofosbuvir will drive sentiment and

enthusiasm higher for the group. Disappointment will suggest biotech cannot deliver on so-

called blockbusters and will lead the group much lower (this is a well-loved and well-owned

name).


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Major pipeline disappointmentscould shift sentiment from todays general enthusiasm for

innovation to a reminder that drug development is indeed risky. Biotech is inherently risky

and clinical trials can disappoint, which can cause sentiment to turn negative on stocks or the

whole sector.

Access to capital marketswill be key for smid-cap biotechs. 2013 saw 43 IPOs (!) and over

$2.9B in capital raised for the biotech sector vs. an average of 9 IPOs and $0.9B each year in

the past 5 years. A decline in appetite to keep financing more companies with higher risk can

drive increasing volatility for small cap biotechs.

Exhibit 1: 2014 was an exceptional year for biotech IPOs with record number of offerings

Source: Company reports, NASDAQ


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Exhibit 2: Healthcare was a top performing sector in 2014, led particularly by the strength in the biotech sector

Source: Bloomberg


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Exhibit 3: Most important catalysts and expected stock movements for stocks in our universe

Source: Company reports, RBC Capital Markets estimates


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Exhibit 4: Upcoming FDA/EMA regulatory events

Ticker Company Drug Indication Timing Comment

Regulatory Decision Dates:

SNY Sanofi/Genzyme Lemtrada sBLA RMS Q4:13 sBLA accepted Jan 28, 2013

PCYC Pharmacyclics Ibrutinib NDA CLL Early 2014 PDUFA 2/28/14; MCL approved but not CLL

yet

AUXL Competitor Upsher

Smith

Testim/Vogelxo NDA low testosterone Q1:14 likely final approval of competitor Upsher

Smith's Vogelxo; AB-rating designation

negative for AUXL

CELG Celgene Revlimid Legal Myeloma Q1 - Q2:14 potential Markman hearing

BMRN BioMarin Vimizim (GALNS) MAA Morquio IVA 1H:14 assuming standard 210 day CHMP review

ACOR Acorda Ampyra Para IV MS walking Jan 22, 2014 potential first day of paragraph IV filing by

competitors

UTHR United Therapeutics Oral Remodulin NDA PAH Feb 16, 2014 PDUFA for 2nd resubmission

BMRN BioMarin Vimizim (GALNS) BLA Morquio IVA Feb 28, 2014 PDUFA date, granted priority review

CELG Celgene Apremilast NDA psoriatic arthritis Mar 31, 2014 1st apremilast indication

BIIB Biogen rFIXFc BLA hemophilia B Apr 4, 2014 Delayed due to manufacturing Qs, standard

review

VRTX Vertex Kalydeco sNDA CF May 30, 2014 sNDA to include patients w/ 1 non-G551D

GILD Gilead Sovaldi Legal HCV Jun 2014 NCA memo on screening adults for HCV

BIIB Biogen rFVIIIFc BLA hemophilia A Jun 12, 2014 standard review

AZN AstraZeneca Olaparib MAA ovarian cancer May-Jun, 2014 first potential PARP approval

CELG Celgene Revlimid Legal Myeloma Mid 2014 potential outcome of Markman hearing

GILD Gilead Idelalisib NDA refractory iNHL Jul 11, 2014 likely PDUFA date for Idelalisib in refractory

iNHL

GILD Gilead Idelalisib MAA chemo unfit CLL Q3:14 first CLL approval for idelalisib; in previously

treated, chemo unfit CLL

PCYC Pharmacyclics Imbruvica MAA R/R MCL and R/R CLL Q3:14 European approval for 2 indications

CELG Celgene Apremilast NDA psorarsis YE:14 yet to file sNDA

SGEN Seattle Genetics Adcetris sBLA HL, sALCL YE:13 / early 2014 Label extension for extended duration

AVEO Aveo Pharma Tivopath MAA kidney cancer YE:13 / early 2014

ECYT Endocyte EC145 / EC20 MAA Platinum resistant ovarian YE:13 / early 2014 CHMP decision expected

CELG Celgene Revlimid Legal Myeloma Dec 2014 Expiration of 30-month stay w/ Natco



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Exhibit 5: Upcoming key clinical trial data

Ticker Trial Drug Indication Stage Timing Comments

Potentially Pivotal

BIIB/ISIS SMN-Rx SMA Phase Ib/2a Q1:14 multiple ascending dose data for SMN-Rx

PCYC RESONATE Ibrutinib relapsed/refractory CLL Phase III Q1:14 Interim analysis expected from ibrutinib-mono vs. ofatumumab

BI BIBF-1120 IPF Phase III Q1:14 pivotal trial for BIBF-1120 in IPF; potential competitor to ITMN

AMGN AMG-145 hypercholesterolemia Phase III Q1:14 Results from 4 Phase III (mono, combo, HEFH, statin-intolerant)

REGN REGN-727 hypercholesterolemia Phase III Q1:14 Results from 9 Phase III

KMDA Inh. AAT AATD Phase II/III Q2:14 Pivotal Phase II/III (EU); partner Chiesi

ACOR Ampyra Post-stroke Phase IIb/III Q2:14 Phase IIb start of post-stroke trial

BIIB/ABBV DECIDE Daclizumab RRMS Phase III Q2:14 Phase III pivotal trial in RRMS vs Avonex

ITMN ASCEND Esbriet IPF Phase III Q2:14 Pivotal trial for potential US approval

AMGN FOCUS CF vs. BSC Salvage Myeloma Phase III H1:14 Pivotal trial for full approval in US and EU application

AMGN ASPIRE Rd+CFx vs Rd R/R Myeloma Phase III H1:14 Pivotal controlled study w/ SPA (PFS of CRd vs Rd)

AMGN T-Vec melanoma Phase III H1:14 Final OS analysis (2nd endpoint) critical to BLA filing

VRTX Kalydeco pediatric gating CFresidual CFTR

Phase I I/II I H1:14 pivotal for approval in agt 2-5yrs CF pts with CFTR gating mutation+ PhII data from (N+1) study of CF pts with residual CFTR function

PRTA NEOD-001 AL amyloidosis Phase I May 2014 initial POC data for activity in amyloidosis

AMGN AMG-416 2nd hyperparathyroidism Phase III May/Jun 2014 Phase III readout

PCYC Imbruvica myeloma Phase II Jun 2014 potential POC of activity in myeloma w/ dex

INCY RECAP Jakafi pancreatic cancer Phase II Jun 2014 data update at ASCO

REGN Dupilumab atopic dermatitis Phase II Mid 2014 POC in this indication

LLY Ixekizumab psoriasis Phase III Mid 2014 Phase III readout

VRTX TRAFFIC/

TRANSPORT

Kalydeco/VX-809 F508del homozygous CF Phase III Summer 2014 Pivotal trials for approval in homozygous F508del CF(50% of patients)

GILD Super QUAD HIV Phase III Jun - Sep 2014 Readout of Super QUAD vs Stribild in na

AMGN TRINOVA-1 AMG-386 recurrent ovarian cancer Phase III H2:14 Phase III OS data in combo w paclitaxel vs paclitaxel

BIIB STX-100 IPF Phase II H2:14 initial POC

INCY RELIEF Jakafi polycythemia vera Phase III H2:14 Phase III readout

GILD Super Quad HIV nave Phase III Q2:14 - Q3:14 TAF has less bone and kidney effects than Viread

BIIB RENEW ANTI-LINGO MS remyelination Phase II Q3:14 first POC data in remyelination of optic nerve

MRK IMPROVE-IT Vytorin Phase III Sep 2014 DSMB recommended continuation Mar 2013; study calls for collection

of 5250 clinical endpoints to demonstrate prevent of CV events;

readthrough to MK-0653C

AMGN/AZN Brodalumab (AMG

827)

psoriasis Phase III Q4:14 Phase III readout

BMRN PEG-pal PKU Phase III Q4:14/Early 2015 Phase III readout

REGN Dupilumab uncontrolled asthma Phase II YE:14/Early2015 POC in this indication

BIIB/PRGO ASCEND Tysabri SPMS Phase III Early 2015 pivotal trial for new MS market

BIIB/ISIS SMN-Rx SMN Phase III H1:15 Phase III readout in infants Type 1



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Exhibit 6: RBC Biotech coverage universe by market capitalization

Company Ticker Rating Risk MktCap. ($ MM) Price Target Price ($) AnalystGilead Sciences GILD Outperform - $112,594 $90 $73.43 Michael Yee

Amgen AMGN Outperform - $84,915 $125 $112.60 Michael Yee

Celgene Corp. CELG Outperform - $67,588 $190 $164.02 Michael Yee

Biogen Idec BIIB Outperform - $65,481 $325 $277.21 Michael Yee

Regeneron Pharmaceuticals REGN Outperform - $26,898 $344 $270.55 Adnan Butt

Vertex Pharmaceuticals VRTX Outperform - $16,351 $95 $69.95 Michael Yee

BioMarin Pharma BMRN Outperform - $9,722 $77 $68.36 Michael Yee

Pharmacyclics PCYC Outperform Speculative $7,475 $150 $101.41 Michael Yee

Cubist Pharmaceuticals CBST Outperform - $4,846 $82 $65.43 Adnan Butt

Seattle Genetics SGEN Outperform - $4,734 $48 $38.65 Adnan Butt

United Therapeutics UTHR Sector Perform - $4,358 $68 $86.76 Michael Yee

The Medicines Company MDCO Outperform - $2,353 $50 $36.81 Adnan Butt

Myriad Genetics MYGN Sector Perform - $1,862 $32 $24.39 Michael Yee

ImmunoGen IMGN Outperform Speculative $1,230 $18 $14.40 Adnan Butt

Intermune ITMN Sector Perform Speculative $1,207 $15 $13.49 Michael Yee

Acorda Therapeutics ACOR Outperform Speculative $1,194 $42 $28.93 Michael Yee

PDL BioPharma PDLI Sector Perform - $1,154 $8 $8.24 Adnan Butt

Ariad Pharmaceuticals ARIA Sector Perform Speculative $1,025 $4 $5.52 Michael Yee

Auxilium Pharmaceuticals AUXL Outperform - $1,003 $22 $20.24 Michael Yee

XOMA Ltd. XOMA Outperform Speculative $644 $9 $6.30 Adnan Butt

Infinity Pharmaceuticals INFI Outperform Speculative $606 $35 $12.61 Michael Yee

Prothena PRTA Outperform Speculative $606 $38 $27.73 Michael Yee

Dendreon DNDN Sector Perform Speculative $532 $3 $3.38 Michael Yee

Kamada KMDA Outperform Speculative $510 $20 $14.18 Adnan Butt

Spectrum Pharmaceuticals SPPI Outperform Speculative $497 $15 $8.27 Adnan Butt

Endocyte ECYT Outperform Speculative $377 $22 $10.42 Adnan Butt

Durata Therapeutics DRTX Outperform Speculative $325 $17 $12.20 Adnan Butt

Aerie Pharmaceuticals AERI Outperform Speculative $254 $20 $15.92 Adnan Butt

AVEO Pharmaceuticals AVEO Sector Perform Speculative $254 $2 $1.61 Adnan Butt

Sunesis Pharmaceuticals SNSS Outperform Speculative $251 $9 $4.65 Adnan Butt

Xenoport Inc. XNPT Outperform - $245 $12 $5.13 Michael Yee

Curis Inc. CRIS Outperform Speculative $235 $7 $2.74 Adnan Butt

ArQule ARQL Sector Perform Speculative $135 $5 $2.16 Adnan Butt

Source: Thomson, RBC Capital Markets estimates


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Amgen (AMGN)Outperform

Price Target USD $125.00

Target/Upside/Downside ScenariosExhibit 7: Amgen

Source: RBC Capital Markets estimates

Target price/ base caseOur base case of $125/share assumes minimal erosion of base

business (-1% y/y post 2016) using an 8% discount rate and -

1.5% terminal growth rate. We also include probability adjusted

(1040%) value for seven pipeline opportunities: T-Vec,

AMG386, sclerostin, AMG-145, AMGN's early-stage neurologypipeline (AMG747, AMG334) and its immunology assets in

collaboration with AZN (AMG181, AMG827, of which AMGN

roughly has ~55% economics), as well as AMGN's biosimilar

program. Probability-adjusted pipeline value is $20/ share of our

price target.

Upside scenarioOur upside scenario of $135/share assumes a more stable core

base business (-1% growth rate, -1% terminal growth,

$110/share) and higher probability of success for two of the

pipeline programs, namely 60% instead of 30% for AMG-145 and

50% instead of 25% for sclerostin. Pipeline accounts for

$25/share in this scenario.

Downside scenarioOur downside scenario of $105/share assumes no pipeline

contribution at all, as some investors remain skeptical of

AMGN's ability to renew growth with its current pipeline

portfolio.

Investment summaryWe view AMGN as a long-term positive based on conservative 3-

to 5-year guidance (room for upward revision), especially as

growth via geographical expansion, biosimilars (most view it as

rev erosion, not growth), and pipeline optionality are not in

consensus. AMGN is also focused on continued dividend growth

which is attractive for long-term investors. Another under-

appreciated driver is AMGN's margin expansion from reduction

in percentage of Enbrel profit shares late in 2013, reducing SG&A

by as much as 3.5% in 2014, and again by 2% + in 2017 when the

profit-sharing agreement ceases. Thus, AMGN remains a "bette

pharma" with valuation discount (14.5x vs. 15.5x) with growing

dividend and commitment for return of high percentage o

capital, potential cost-reduction levers, and an overall more

robust pipeline that could begin to be factored in estimates in

the next 12 years

Potential catalysts to our thesis

Greater pipeline enthusiasm driven by PCSK-9, T-Vec

(melanoma), AMG-386 (ovarian cancer). AMGN currently

has little pipeline value ascribed and positive data readout

and regulatory filing of these Phase III assets will increase

investor enthusiasm for revenue growth in 2015 and

beyond.

De-risking of Kyprolis asset and new product cycle)

through demonstration of impressive PFS (5 months+) in

ASPIRE and good CV safety (3-4% event rate), debunking

concerns its challenging profile will decrease its potential in

earlier lines of myeloma treatment.

Risks to our investment thesis:

Greater than expected competitive impact on various

franchises:We believe competitive products from Teva wil

have limited erosion on AMGN's base business in the next 1

2 yrs. However, inability for AMGN to meet sales estimates

can erode investor confidence of resilience of franchise and

AMGNs ability to manage competitive threats. AMGN does

has many levers at its disposal (price increases, cost cuts

share buybacks).

Clinical risk, should ASPIRE and ENDEAVOR trial results be

less robust than expected.AMGN completed acquisition o

ONXX on premise that Kyprolis could garner EU approvaand show superiority vs. Velcade (another proteasome

inhibitor to go generic in 2015/2016). Poorer than expected

clinical updates in 2014 will render this acquisition a

strategic failure leaving AMGN with greater financial risk.


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Key questions / debates for AMGN

1. What is the competitive situation with

Teva on Neupogen/Neulasta?

Teva has launched Granix (competitor to Neupogen) Nov 2013 but withdrew both

pegylated and albumin long acting versions (future competitor to Neulasta) due tolitigation and agencys request for additional data. We do not expect Neulasta (25% of

AMGNs revs) competition until after patent expiration (Dec 15).

2. How should we view AMGN vs. REGN

PCSK-9 competition?

Efficacy in Phase II looks comparable (45-50% monotherapy, 50-60% combo), so we

expect Phase III to be similar for the two compounds. Potential differentiation lies in

very low adverse events rate (myalgia, no liver enzyme abnormalities, low injection

site reactions), infrequent neutralizing antibodies and long-term follow-ups. We

continue to believe both AMGN and REGN will fill for regulatory approval by YE:14

without waiting for cardiovascular outcomes data.

3. Any updates to biosimilars regulatory

update in the US?

Sponsors have been discussing with the FDA individually on design of pivotal trials,

and recall draft guidance was published in 2012, but there have been few updates

since on erecting regulatory pathway for approval of biosimilars.

4. What are our views on ASPIRE interim

results?

We think the study is likely to stop at interim in H1:14 as KRd should give

higher/deeper responses (75%+ ORR) than Rd (65-70% ORR). We estimate CHF (CV)

events will be 3-5%+, similar to label stated 3% but higher than 1-2% for Rd.

5. Will CLARION and ENDEAVOR work? These head-to-head studies against Velcade are crucial to Kyprolis, and we think 2nd

line ENDEAVOR is likely to work as deeper CRs and VGPRs will likely drive longer PFS

in these sicker patients. Similarly in 1st

line CLARION, Kyprolis should show higher CR

but the bar is higher here as PFS in VISTA is already 20.7 months.




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Exhibit 8: Expected news flow for AMGN

Timing Expected News Flow Program

Early/H1:14 Final OS analysis (2nd endpoint) from T-Vec in melanoma T-Vec

Q1:14 Pivotal Phase II data from adult R/R B-precursor ALL Blinatumomab (AMG 103)Q1:14 Results from four Phase III trials (Mono, Combo, HeFH, Statin-intolerant) AMG-145

May/Jun 14 Phase III readout for AMG-416 in 2nd Hyperparathyroidism AMG-416 (KAI-4169)

H1:14 Phase III FOCUS final analysis (Kyprolis vs corticosteroid) Kyprolis

H1:14 Phase III ASPIRE interim analysis (KRd vs Rd - for EU approval) Kyprolis

H1:14 MRK's Odanacatib anticipated filing (after extension data) Prolia competitor

H2:14 Phase III OS data for TRINOVA-1 (AMG-386 + paclitaxel vs paclitaxel) in recurrent ovarian

cancer

Trebananib (AMG-386)

Mid 2014 Phase III for LLY's Ixekizumab for psoriasis Ixekizumab (LLY)

Oct 2014 Phase IIb (COSMIC-HF) data in AHF chronic patients Omecamtiv Mecarbil

Q4:14 Results from Phase III in psoriasis Brodalumab (AMG 827)

2014 US Filing for Ivabradine for CHF Ivabradine

2015 PFS Phase III data of TRINOVA-3 (AMG-386 +/- paclitaxel + carboplatin) in first-line ovarian

cancer


YE:15 Phase III readout from two pivotal Phase III trials in postmenopausal osteoporosis (vs.

placebo or alendronate)

Romosozumab (AMG 785)

Mid 2016 OS Phase III data of TRINOVA-3 (AMG-386 + paclitaxel + carboplatin) in first-line ovarian

cancer


2016 Phase III of Rilotumumab (blocks HGF/SF) to MET receptor in gastric cancer Rilotumumab (AMG 102)

2016 Phas III data from biosimilar Humira global trial

2017 Launch Biosimilars Portfolio (Humira, Remicade, Avastin, Herceptin, Rituxan, Erbitux)

Source: Company reports and RBC Capital Markets Estimates

We believe AMGNs guidance in Jan is likely to encompass current consensus EPS of $8.13 vs. our

$8.15. AMGN historically gives conservative initial guidance and then guides up over the year.

Consensus included a mostly neutral EPS impact from ONXX in 2014 (and accretive by ~3-5% in

2015).

1. Phase III ASPIRE interim analysis in H1-14We think it will be in Q2 and will be looking for stopping at the interim for meeting the criteria for

statistical significance. This study completed enrollment in February 2012. Thus, assuming the

median completed enrollment in Fall of 2011 then in Q2:14 we estimate median duration of PFS

could be 20+ months for CRd vs. mid to high teens for Rd.

We estimate cardiovascular safety (specifically CHF) will be 3-5%+ given much longer duration vs.

1-2% for Rd implying a delta of low single digits which is no different than Kyrpolis single-agen

3rd line which already has 3% in the label. One would expect it to be higher given longer-durationand thus longer follow-up captures more events. Notably the CV events in 3rd line were fairly

early, i.e. first cycle of drug.

We believe Phase III FOCUS data in H1-14 has a 50% chance of positive data




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Exhibit 9: Kyprolis combination regimens show deep responses in studies

Tx

SettingBackbone Regimen Stage N

Prior

TxORR >VGPR nCR/CR

AE-related

discontinuations

CRd II 53 - 98% 81% 62% 4%CCd II 58 - 90% 77% 53% 12%

CMP I/II 66 - 91% 56% 6% 11%Pi VMP III 344 - 71% 41% 30% 33%

RVd II 35 - 100% 74% 57%IRd II 56 - 95% 71% 20% 12%

MPR - 80% 45% 33% 24%Rd III 541 - 73% 43% 14% 13%

MPT III 547 - 62% 28% 9% 14%CRd II 52 3 77% 42% 6% 19%

CarPomD II 30 6 50% 13% 0%Cd II 257 5 24% 6% 0% 12%

iMid RD III 353 3 60% 14%Pi Vd III 333 2 38% 6% 25%

mAb-iMid Elo-Rd II 36 2 92% 64% 14%Highlighted yellow indicate regimens being explored in pivotal studies

Kyprolis

Kyprolis

RRMM

iMid

Pi/iMidNDMM

Source: Company reports, ASH 2012, ASCO2013




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Exhibit 10: Kyprolis Studies Planned For Patients in Various Lines of Therapy

Stage Trial Name Phase N# Prior

DrugsRegimen Dosing

Primary

EndpointData Timing Comments

K 20/27mg/mvs. corticosteroid

(optional Cytoxan)prednisone 30mgdex 6mg

KRd20/27mg/m (10min infusion)x 18 cyclesR: 25mg, d: 40mg

vs. Rd R: 25mg, d: 40mg

Kd20/56 mg/m (30mininfusion)d: 20mg

vs. Vd (SQ or IV)V: 1.3 mg/md: 20mg

I 18 1-2 Kd20 mg/m does escalation to45, 56, 70, 88 mg/m

MTDData presented at

ASH 2013

II 127 1-2 Kd 20 mg/m, then MTD ORR ~2015

KMP20/36 mg/m (30-60mininfusion) x 9 cycles

vs. VMP(SQ or IV)

1.3 mg/m x 9 cycles

KRd(followed by Rmaintenance)

20/36 mg/m (30mininfusion)x 12 cycles

vs. VRd(followed by Rmaintenance)

V: 1.3 mg/m x 12 cycles

CHAMPION 2 III 200 0K + Cytoxan + d(followed by Kmaintenance)

20 mg/m then MTD x 8cycles, then 56 mg/mmaintenance

CR rate(sCR+CR)

~2015Induction therapy of K + Cytoxan,plus K maintenance

For global registration in front-lineMM. Going head-to-head vs.Velcade in transplant-ineligiblepts

ECOG Study III 756 OS ~2018Head to head comparison of Kvs. V based on ORR and MRD

0

0 PFS ~2016-17

CHAMPION 1

CLARION III 882

Designed to show superiority vs.Velcade. Important in EU whereRev may be too expensive

In mid-13, DSMC recommendstrial to continue to final analysis

ASPIRE

(SPA)III 780 1-3 PFS

Interim analysis1H:14

To support EU approval and labelexpansion in US

3 OS Final analysis1H:14

ThirdLine

FOCUS III 302

Second

Line

Front

Line

Determined 70mg/m as the MTDin a weekly infusion (30mins).Phase II initiated to explore

weekly dosing at MTD

ENDEAVOR III 888 1-3 PFS ~2015-16


2.Sales of Teva Neupogen as a read-through to biosimilar-like competition.With Teva Neulasta now delayed for likely at least a year, sales of Tevas Neupogen (brand name

here) will be watched given 20% price discount from AMGN. We think sales will be modest for the

first year so this should give increased confidence to AMGNs ability to maintain strong market

share.

Neupogen/Neulasta comprises up to 33% of US sales and Teva has launched Granix (Neupogen

competitor) on November 11, 2013. We think sales will be modest off the first years so this should

give increased confidence to AMGNs ability to maintain strong market share.

Sales of Granix will be watched given 20% price discount to AMGN, but recall this is not a

biosimilar and thus would require market building. Investors are concerned Teva could signcontracts with major managed care players at large discounts to incentivize priority coverage or

utilization and gain share. AMGN could offer rebates/discounts and limit price increases on the

four other drugs it already sells to these payors (Xgeva, Aranesp, etc) to make AMGN products

more on par and economical to managed care.

Recall Teva withdrew the peg version of their Neulasta me -too due to AMGN lawsuit, and

their 2nd long-acting (albumin version) due to FDAs need for additional data. This means that

AMGNs Neulasta franchise will not see competition until after Dec 2015.




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3. Phase III PCSK-9 data during 2014We believe multiple Phase III positive studies and possible H2:14 analyst R&D meeting could push

a higher P/E multiple as investors recognize this late-stage product is possible coming to market in

2015. Currently there is no Phase III data for AMG-145 yet (Phase III readout Q1:14), and

competitor REGN will have data in the same timeframe. REGN s first Phase III MONO (REGN727

vs. ezetimibe, n=100) has readout showing 47% LDL reduction

AMGN have presented positive Phase II data showing 4066% LDL reductions and similar to

competitor REGN/SNY. One of AMG-145s differentiation is potential for once-monthly dosing

which REGN/SNY have recognized and thus recently initiated a once-monthly dosing study as well

Hypercholesterolemia affects 12M in the US and is a $10B+ opportunity with 10-20% penetration

We believe the market is enormous and can fit multiple players over time (like statin market).

Phase III data in Q1:14 (mono, combo, HeFH, statin intolerant) should bring greater enthusiasm to

this potential blockbuster for a core market of 1M+ hypercholesterolemia patents intolerant of, o

unable to reach LDL goals despite, statins. We believe anti-PCSK9 market will grow to $2- $5B+

over time and AMG-145 will garner $2B+ of peak sales, worth $10/share for AMGN (* contact us

for detailed deep dive*). AMGN is also collaborating w/ Servier (2nd largest French pharma) in

development and commercialization of Procoralan/Ivabradine (approved in Europe since 2005)

for chronic heart failure and S38844 (Phase II) for CV disease. AMGN intends to file US registration

for Procoralan in 2014, and use that as a cardiovascular launch pad prior to launch of AMG-145 in

2015.

Exhibit 11: Schematic of Hypercholesterolemia Patients, unmet need and potentially large market

opportunity for AMGN

Source: AHA, AMA and RBC Capital Markets estimates




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Exhibit 12: Our PCSK9-APP Values AMG-145 at $10+/share on very conservative market penetration assumptions

PCSK9 INTERACTIVE MODEL > You can change the assumptions in blue in the Box here.

Ph3 start Approval MarketProbability (AMGN) 100% 85% 85% AMGN-145 Peak Sales US ($M)Peak Sales WW ($M)

Probability (REGN) 100% 85% 85% Rev. Estimate for Low-Risk Patients ($M) -$ -$Probability (PFE) 90% 85% 77% Rev. Estimate for Medium-Risk Patients ($M) 190$ 319$

Rev . E st ima te for High-Risk P at ien ts ($M) 2,215$ 2,974$

REGN-727 Peak Sales US ($M)Peak Sales WW ($M)

Pricing ($) US ROW Rev. Estimate for Low-Risk Patients ($M) -$ -$NET Price of AMG-145 in US ($) per year 10,000$ 7,000$ Rev. Est imate for Medium-Risk Pat ients ($M) 133$ 263$NET Price of REGN-727 in US ( $) per year 10,000$ 7,000$ Rev . E st ima te for High-Risk P at ien ts ($M) 2,092$ 3,003$

NET Price of PFE's RN-316 in US ($) per year 10,000$ 7,000$

Price Increase Per Year 3% 0% PFE (RN-316) Peak Sales US ($M)Peak Sales WW ($M)

Rev. Estimate for Low-Risk Patients ($M) -$ -$Rev . E st ima te for Me dium-Risk Pat ien ts ($M) 95$ 160$

Volume (#) for USA Only US ROW Rev . E st ima te for High-Risk P at ien ts ($M) 1,477$ 2,084$

How Many People take Statins? 30 M 50 M

Low Medium High Total Prob. Adjusted

Risk Profile Segmentation (Low - High) 27% 40% 33% PCSK9 for AMGN ($/share) $12 $10

What % Are on Combo Therapy (Stain + x) Already? 10% 28% 48% PCSK9 for REGN ($/share) $29 $25

What % Still Can't Reach LDL Goals? 18% 23% 27% PCSK9 for SNY ($/share) $3 $2

What % Has Medical Imperative To Lower LDL? 13% 28% 50% PCSK9 for PFE ($/share) $0.6 $0.5

Theoretical Market Size (# of Patients in '000) 18 K 214 K 642 K

Likely Market Size (# of Patients in '000) 5 K 107 K 417 K2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Total REVENUE - Low -Risk Pts ($M) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$Total REVENUE - Medium Risk Pts ($M) 17$ 27$ 37$ 58$ 80$ 104$ 129$ 156$ 184$ 215$Total REVENUE - High Risk Pts ($M) 179$ 371$ 578$ 800$ 1,143$ 1,403$ 1,683$ 1,750$ 1,819$ 1,975$

Total REVENUE - USA ($M) 115$ 236$ 370$ 522$ 753$ 937$ 1,139$ 1,208$ 1,281$ 1,442$Total REVENUE - ex-US ($M) 82$ 162$ 245$ 336$ 470$ 570$ 673$ 697$ 722$ 748$

TOTAL WW REVENUE ($M) for AMG-145 196$ 398$ 615$ 858$ 1,223$ 1,507$ 1,812$ 1,905$ 2,003$ 2,189$

Total REVENUE - Low -Risk Pts ($M) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$Total REVENUE - Medium Risk Pts ($M) 13$ 23$ 33$ 53$ 75$ 93$ 112$ 132$ 154$ 176$Total REVENUE - High Risk Pts ($M) 179$ 371$ 578$ 800$ 1,247$ 1,511$ 1,683$ 1,808$ 1,940$ 2,081$

Total REVENUE - USA ($M) 110$ 232$ 366$ 517$ 812$ 995$ 1,122$ 1,222$ 1,330$ 1,445$Total REVENUE - ex-US ($M) 82$ 162$ 245$ 336$ 510$ 610$ 673$ 718$ 764$ 812$

TOTAL WW REVENUE ($M) for REGN-727 192$ 394$ 611$ 853$ 1,322$ 1,605$ 1,795$ 1,940$ 2,094$ 2,257$





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Exhibit 13: AMG-145 Phase III Studies, With First Readouts in Q1:14 in Hypercholesterolemia

Trial Readout n = Inclusion Trial Endpoints Description

OSLER-1 Q4:13 140 Fasting LDL-C>85mg/dLFasting triglycerides 85mg/dLFasting triglycerides


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Exhibit 14: Competitor REGN Will Also Have Phase III Readouts in 2014

Trial Readout n = Inclusion Trial Endpoints Description

MONO Q3:1 3 103 LDL-c between 100 - 190mg/dL(uptitrate to 150mg @ wk 8 if needed)

REGN727 vs Zetia LDL from baseline(wk 24)

REGN727 vs Zetia in hypercholesterolemia patients(2 arms, Q2W)

COMBO I

(statin add-on)Q2:1 4 306 hyp ercholesterolemia + CHD risk

not controlled on max-tolerated statins/fibratesstatins/fibrates +/- REGN727 LDL from baseline

(wk 24)REGN727 vs pbo on top of statins(2 arms, Q2W)

COMBO II

(statin add-on)Q2:1 4 660 hyp ercholesterolemia + CHD risk

not controlled on max-tolerated statins/fibratesstatins/fibrates +/- REGN727 LDL from baseline

(wk 24)REGN727 vs pbo on top of statins(2 arms, Q2W)

ALTERNATIVE(statin intolerant)

Q1:14 250 HeFH or non-FH w/ moderate, high or very high CVrisk and statin intolerance

REGN727 vs Zetia vs Statin LDL from baseline(wk 24)

REGN727 vs Zetia vs Statin(3 arms, Q2W)

OPTIONS I

(statin add-on)Q1:14 350 LDL>70mg/ dL (h is to ry of CV) bu t 100md/dL (no history of CV) but 70mg/dL (history of CV)

LDL>100md/dL (no history of CV)(REGN727 vs Zetia) + Crestor vsCrestor

LDL from baseline

(wk 24)(REGN727 vs Zetia) + Statin(6 arms, Q2W)

FH II(HeFH)

Q4:14 249 HeFHLDL>70mg/dL (history of CV)LDL>100md/dL (no history of CV)

REGN727 vs LMT (Lipitor,Crestor or Zocor)

LDL from baseline

(wk 24)REGN727 vs LMT(2 arms, Q2W)

FH I

(HeFH)YE:14 471 HeFH

LDL>70mg/dL (history of CV)LDL>100md/dL (no history of CV)

REGN727 vs pbo LDL from baseline(wk 24)

REGN727 vs pbo(2 arms, Q2W)

Long Term

(Safety)Q4:14 2100 HeFH or HC w/ CHD risk

LDL>70mg/dL (history of CV)LDL>100md/dL (no history of CV)

REGN727 vs pbo safety for 20 months(AE, lab, vital signs, ECG)

REGN727 vs pbo(2 arms, Q2W)

High FH

(High HeFH)Q1:15 105 HeFH

LDL>160mg/dLREGN727 vs pbo LDL from baseline

(wk 24)REGN727 vs pbo(2 arms, Q2W)

CHOICE I(Q4W)

Q1:15 700 HC and CVD risk REGN727 vs pbo LDL from baseline(wk 24)

REGN727 vs pbo(3 arms of 2 doses, Q4W)

OUTCOMES Mar '2018 18000 Recently hospitalized or ACS REGN727 vs pbo Time to MACE REGN727 vs pbo(2 arms, Q2W)


4. AMGNs Other Pipeline readouts in 2014

T-Vec (immunotherapy for melanoma) - Data shows that >50% of T-Vec responders (16% vs. 2%

GM-CSF) have duration of one year or more, which bodes well for final OS analysis mid 2014.Wethink it's possible T-Vec could partner with another immunotherapy checkpoint agent such as

MRK's PD-1. Expectations for the drug or its potential as combination therapy are very low. We

conservatively assign 30% probability that T-Vec will grow to be a $500M+ peak sales therapy.

AMG-386 (anti-angiogenesis peptibody targeting Ang1/Ang2/receptor Tie2) - first Phase III in

recurrent ovarian cancer was positive, with AMG-386 +paclitaxel showing stat sig improvement in

PFS (7.2 vs. 5.4 months, p


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Phase I/II pediatric and adolescent patients with r/r B-precursor ALL study will enrol 85 patients

across 48 centers in the U.S.,Canada and EU. The Phase I portion will enrol up to 48 patients who

will receive 5-60 ug/m2/day (4 wks on; 2 wks off) of blinatumomab. The Phase II portion will enro

a maximum of 40 patients. The primary endpoint is MTD (defined by


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Exhibit 15: AMGN Valuation-APP points to $125/share as base case, with modest contribution from pipeline

AMGN Valuation APP --> Change Assumptions in BlueHow Do we Value AMGN? How Do We Value AMGN's Pipeline?

Prob. of Success Sales in 2022

Per DCF Per PE T-Vec (melanoma) 30% 550$Bear Case (no pipeline) $106 Multiple 17x AMG386 (ovarian cancer) 25% 1,100$

Base Case (prob adjusted pipeline) $126 EPS in 2015 $8.62 Sclerostin (bone building) 25% 1,200$

Bull Case (higher prob. Adjusted pipeline) $134 Price $125 AMG-145 (hypercholesterolemia) 60% 2,000$

Super Bull Case (100% Pipeline Success) $150 Phase I/II pipeline - AMG747, AMG334 10% 1,200$

Collaboration pipeline - AMG181, AMG827 20% 800$

AMGN's yield 1.8% Biosimilars Venture 35% 2,000$

Discount Rate 8.0%

Terminal Growth Rate -2.0% Pipeline Value $19.11 to $43.59

Core Product Rev Growth Rate post 2016 -1.5%

What Are Consensus Estimates for 2013-2015? How Will EPS Change with Earlier Neulasta Entry/ Other Competition?

Consensus YOUR ASSUMPTIONS2012A 2013 2014 2015 2012A 2013 2014 2015

Aranesp 2,040 1,958 1,860 1,749 Aranesp 2,040 1,958 1,860 1,749

y/y change in Aranesp (%) -4% -5% -6% y/y change in Aranesp (%) -4% -5% -6%

Epogen 1,941 1,883 1,826 1,771 Epogen 1,941 1,883 1,826 1,771

y/y change in Epogen (%) -3% -3% -3% y/y change in Epogen (%) -3% -3% -3%

Neulasta 4,092 4,288 4,203 4,014 Neulasta 4,092 4,288 4,203 4,014

y/y change in Neulasta (%) 5% -2% -5% y/y change in Neulasta (%) 5% -2% -5%

Neupogen 1,260 1,229 1,093 962 Neupogen 1,260 1,229 1,093 962

y/y change in Neupogen (%) -3% -11% -12% y/y change in Neupogen (%) -3% -11% -12%

Enbrel 4,236 4,596 4,688 4,735 Enbrel 4,236 4,596 4,688 4,735

y/y change in Enbrel (%) 9% 2% 1% y/y change in Enbrel (%) 9% 2% 1%

AMG-145 (PCSK9) 0 AMG-145 (PCSK9) 0%

Prolia 472 712 877 1,010 Prolia 472 712 877 1,010

Xgeva 748 1,045 1,388 1,698 Xgeva 748 1,045 1,388 1,698

Sensipar 950 1,058 1,077 1,085 Sensipar 950 1,058 1,077 1,085

Vectibix 359 377 422 444 Vectibix 359 377 422 444

Kyprolis 70 400 680 Kyprolis 70 400 680

Nexavar 85 400 500 Nexavar 85 400 500

Stivarga 12 50 80 Stivarga 12 50 80

Other products and revenues 1,167 1,045 1,180 1,300 Other products and revenues 1,167 1,045 1,180 1,300

Total Revenues $17,265 $18,358 $19,465 $20,028 Total Revenues $17,265 $18,358 $19,465 $20,028

Rev Growth (%) 6% 6% 3% Rev Growth (%) 6% 6% 3%

COGS 2,735 2,787 2,944 2,978 COGS 2,735 2,787 2,944 2,978

% of revenues 15.8% 16.1% 16.1% 15.9% % of revenues 15.8% 16.1% 16.1% 15.9%

R&D 3,296 3,690 3,971 4,026 R&D 3,296 3,690 3,971 4,026

% of revenues 19.1% 20.1% 20.4% 20.1% % of revenues 19.1% 20.1% 20.4% 20.1%

SG&A 4,717 5,012 4,730 4,747 SG&A 4,717 5,012 4,730 4,747

% of revenues 27.3% 27.3% 24.3% 23.7% % of revenues 27.3% 27.3% 24.3% 23.7%Interests -$428 -$484 -$600 -$600 Interests -$428 -$484 -$600 -$600

Taxes 970 790 1,047 1,136 Taxes 970 790 1,047 1,136

Tax rate 15.9% 12.7% 14.9% 15.2% Tax rate 15.9% 12.7% 14.9% 15.2%

Net Income 5,119 5,595 6,173 6,542 Net Income 5,119 5,595 6,173 6,542

# shares outstanding 787 762 757 751 # shares outstanding 787 762 757 751

EPS $6.51 $7.34 $8.13 $8.71 $6.51 $7.34 $8.13 $8.71

EPS (less aggressive sharecount reduction) $7.34 $8.13 $8.71 EPS (no sharecount reduction from 2013) $7.34 $8.10 $8.59

Product Sales (in $MM) Product Sales (in $MM)





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Exhibit 16: Table of Old vs New Estimates for AMGN

FY Dec 2011A 2012A 2013E 2014E

Revenue (MM) 15582 17265 18469 19856

Prev. 18454 19732

EPS (Op) - FD 5.32 6.51 7.42 8.15Prev. 8.00

Revenue (MM) Q1 Q2 Q3 Q42012 4048 4477 4319 44212013 4238 4679 4748 4804

Prev. 47892014 4772 4976 5030 5078

EPS (Op) - FD2013 1.96 1.89 1.94 1.63Prev.

2014 2.03 2.06 2.09 1.97


Exhibit 17: Income Statement for AMGN

($ in millions, except per share) FYA FYA 1QA 2QA 3QA 4QE FYE 1QE 2QE 3QE 4QE FYE FYE

Fiscal Year Ends December 2011 2012 Mar-13 Jun-13 Sep-13 Dec-13 2013 Mar-14 Jun-14 Sep-14 Dec-14 2014 2015

Revenues:

Product sales 15,295 16,639 4,151 4,595 4,647 4,710 18,103 4,678 4,882 4,936 4,984 19,480 20,182

Aranesp 2,303 2,040 468 524 449 459 1,900 443 445 436 431 1,755 1,621

Epogen 2,040 1,941 435 502 491 492 1,920 475 483 471 460 1,889 1,840

Neulasta 3,952 4,092 1,039 1,120 1,135 1,086 4,380 1,152 1,157 1,155 1,115 4,579 4,421

Neupogen 1,260 1,260 299 324 466 300 1,389 283 297 290 283 1,153 1,027

Enbrel 3,701 4,236 1,039 1,157 1,155 1,206 4,557 1,127 1,183 1,224 1,256 4,790 4,910

Prolia 203 472 142 188 178 206 714 198 242 229 251 920 1,160

Xgeva 351 748 223 249 261 273 1,006 287 310 336 364 1,297 1,570

Sensipar 808 950 264 259 259 264 1,046 268 277 283 289 1,117 1,195

Vectibix 322 359 87 93 107 93 380 94 100 104 105 403 424

Kyprolis 69 69 119 400 680

Nexavar 87 87 107 400 500Stivarga 12 12 15 55 68

Other Products 355 541 155 179 146 163 643 169 181 183 189 722 765

Other revenues 287 626 87 84 101 94 366 94 94 94 94 376 350

Total Revenues 15,582 17,265 4,238 4,679 4,748 4,804 18,469 4,772 4,976 5,030 5,078 19,856 20,532

Operating expenses:Cost of sales 2,345 2,735 671 714 715 749 2,849 744 776 785 792 3,097 3,189

Research and development 3,116 3,296 851 944 966 1,027 3,788 917 986 1,002 1,037 3,942 4,077

Selling, general and administrative 4,434 4,717 1,144 1,237 1,218 1,394 4,993 1,123 1,181 1,185 1,296 4,785 4,844

Total expenses 9,895 10,748 2,666 2,895 2,899 3,170 11,630 2,783 2,944 2,971 3,125 11,824 12,109

Operating income 5,687 6,517 1,572 1,784 1,849 1,634 6,839 1,989 2,032 2,059 1,953 8,032 8,423

Interest and other income (expense), net (19) (428) (87) (145) (163) (183) (578) (194) (194) (194) (194) (776) (696

Income before income taxes 5,668 6,089 1,485 1,639 1,686 1,451 6,261 1,795 1,838 1,865 1,759 7,256 7,727

Provision for income taxes 810 970 (13) 195 205 189 576 233 244 248 234 960 1,028

Net income 4,858 5,119 1,498 1,444 1,481 1,263 5,686 1,561 1,594 1,617 1,525 6,297 6,699

Non-GAAP EPS - Basic $5.37 $6.60 $1.99 $1.92 $1.96 $1.67 $7.55 $2.07 $2.11 $2.13 $2.01 $8.31 $8.78

Non-GAAP EPS - Diluted $5.32 $6.51 $1.96 $1.89 $1.94 $1.64 $7.42 $2.03 $2.06 $2.09 $1.97 $8.15 $8.62

Shares outstanding - Basic 905.3 775.3 751.0 752.0 754.0 754.9 753.0 755.9 756.8 757.8 758.7 757.3 762.6

Shares outstanding - Diluted 912.5 786.5 764.0 764.0 765.0 769.9 766.0 770.9 771.8 772.8 773.7 772.3 777.6





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Biogen Idec(BIIB)Outperform

Price Target USD $325.00

Target/Upside/Downside ScenariosExhibit 18: Biogen Idec


Target price/ base caseOur $325 price target (from $275) is based on DCF analysis that

values the base business ($127/share, now higher from better

Tysabri economics, added operating leverage and tax synergies

from consolidated ex-US IP), the commercial prospects of

Tecfidera ($88/share based on certainty of EU revs post NAS

designation) and hemophilia ($15/share) programs. For various

pipeline programs. we add probability adjusted value of

$67/share. We also include adjusted value of operational

synergies should these pipeline programs be successful

($28/share).

Upside scenarioOur upside scenario of $358/share (from $295) is based on

prospects of core business, good Tecfidera and pending

hemophilia launches, as well as same valuation for SMN-Rx. We

assign greater prob. adjusted value for remaining pipeline as we

gain visibility on their prospects in next 12-months, which lowers

discount rate f0rm 25% to 18% or to 10% respectively.Additionally, we include $38/share of expected operational

synergies (instead of $28/share) from pipeline success..

Downside scenarioOur downside scenario of $230/share is based on similar

assumptions to our base case, except less bullish prospects for

Tecfidera, and only nominal value for pipeline given none has

shown pivotal data.

Investment summaryOur long-term positive thesis on BIIB is based the view that 1

estimates generally still need to go up for FY14-15 due to

Tecfidera doing better than expected (EU sales to come into

play) and the high margin sales flow all to the bottom line, plus

Avonex core business doing in-line to better than expected, 2)

the story is mainly focused on 2014-15 pipeline readouts which

aren't really in estimates. These pipelines are often first in class

in areas of unmet need with very large market potentials ($1

9B), where even nominal assumed probabilities put the stock in

the $250-$275M range. Our thesis is that one of more of these

six proof-of-concept or pivotal readouts in 2014-2015 will be

positive, supporting investor confidence of further re-rating for

BIIB. Compared to its large cap peers, BIIBs catalyst rich year

outperforming base business and lack of overhangs (legal

commercial, regulatory) render it likely the most attractive stock

to own for pipeline upside. We believe there is 5-35% probabilityof success for pipeline readouts (5% probability for Tysabri in

SMS, 50% for SMN, 25% for ANTI-LINGO, 20% for IP and lupus

and 5% for Alzheimers indication) which are not fully reflected

in the stocks current valuation.

Potential catalysts to our thesis

Continued Tecfidera outperformance and better than

expected leverage. Consensus estimate in 2014 still reflects

mostly only US demand, so better than expected EU sales

($200M+) could lead to further upside revision. Consensus

assumed reasonable operating leverage expansion (39% to

46-48%) but this could improve with better Tecfidera sales.

Hemophilia launch beats very modest estimates. Investors

currently do not view this as a significant leg of growth

despite this being a $3-$4B market opportunity in the US. If

the market turns out to be less sticky and more switchers

adopt BIIBs therapies, this could be an underappreciated

revenue driver leading to further upside revision and op

leverage improvement.

Pipeline credit likely to support higher value over the long

term. Anticipation of Phase II anti-LINGO antibody in H2:14

has the potential to be the next big thing at Biogen after

Tecfidera. Separately, Tysabri has a reasonable probability

of success in SPMS based on our analysis of data from

ECTRIMS, and LINGO science and mechanism make goodsense so proof-of-concept data in 2014 could usher in

another leg of upside for BIIB

Risks to our investment thesis:

Tecfidera missing cons estimates, or disappointing pipeline

readouts where none of six were successful.




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Key questions / debates for BIIB

1.

Isnt Tecfidera consensus already high

with limited room for upside revision?Tecfidera consensus is $1.9B and $2.8B for 2014-2015, and while fast growing, stil

reflects mostly US demand in our view, as it is already on a $1.3B+ run-rate in first 4quarters and this is a chronic therapy with stacking revenues. Better than expected

EU sales could still prompt upward revision in the $100-$500M range in 2014-2015,

and there is likely still upside to operating leverage the Street is not fully accounting

for.

2. What are the chances that ANTI-LINGO

will work?It is a small Phase II (n=80, 6 months) in optic neuritis where proof of concept of

activity should translate into measurable changes in optic nerve conduction velocity

from baseline. BIIB will also be measuring thickness of the retinal ganglion layer, as

well as patients visual acuity. While our expectations are modest (25%), the

scientific rationale and the setup for demonstration of activity are sound.

3. How secure are BIIBs dosing patents

going out to 2028-2029 in US/EU?We estimate Tecfidera is worth ~$38/share if patents goes out only to 2020,

$50/share for $58/share if they go out to 2023 (middle scenario) and $88/share if it

lasts to 2029, with no terminal value. It is indeed a development to watch but first

Paragraph IV filing would be in 2016, so this is a background bear scenario unlikely

to affect stock performance in 2014.

4. What are the chances Tysabri will work

in SPMS in 2015?We assume 35% probability of success anecdotally some patients who remain on

Tysabri despite transition to SPMS appear more stable. There is likely a threshold

effect of myelin destruction pass that is coupled with increased inflammation. In

Phase II, Tysabri was able to reduce MRI atrophy endpoints, CSF endpoints as well as

demonstrate improvement in EDSS. While a long shot, Tysabri is the most promising

candidate drug for SPMS currently.

5. What are consensus expectations for

hemophilia launch? Despite delays of Eloctate (FVIII) approval to June 2014 and Aprolix (FIX) to April2014, consensus expectations were sufficiently modest (


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Exhibit 19: Expected news flow for BIIB

Timing Expected News Flow Program

Commercial and Late Stage Pipeline

Apr 4, 2014 Estimated approval of rFIXFc for hemophilia B rFIXFc (Alprolix)Mid 2014 Phase III results in RRMS for Daclizumab Daclizumab

Jun 12, 2014* Estimated approval of rFVIIIFc for hemophilia A rFVIIIFc (Eloctate)

May 19, 2014 Estimated US approval of Plegridy Plegridy

2014 KIDS A-LONG and B-LONG readout + EU filing

Pipeline Readouts:

Early 2014 Phase Ib/2a multi-dose SMN-Rx data (3,6,9mg) data SMN-Rx

Mar 2014 Phase III start (safety + tolerability) multi-dose in infants SMN-Rx

H2:14 Phase II double-blind MAD of STX-100 in IPF STX-100

Sep 2014 Phase II (RENEW) data in acute optic neuritis BIIB-033

Nov 2014 Phase I data in prodromal/mild Alzheimers BIIB-037

Nov 2014 Phase II (ATLAS) data in lupus neuritis BIIB-023

Early 2015 Phase I data for DMPK DMPKRxEarly 2015 Phase III (ASCEND) data in SPMS Tysabri

H1:15 Potential Phase III readout in Type 1(infant) pts SMN-Rx

Jun 2016 Phase II (SYNERGY) dose-evaluating results of LINGO + Avonex vs BIIB-033

Competitor News

May 25, 2014 Copaxone patents expire

Expect generic launch from MYL, MNTA

Copaxone

Q4:14 Synthon study results of Copaxone biosimilar Copaxone

Q4:14 BAX Phase III data for long-acting hemophilia A BAX855

2015 Phase III results in Teva's CONCERTO Laquinimod

YE:15 Ocrelizumab Phase III in primary progressive MS Ocrelizumab (Roche)


1) Starting off in 2014, we should get conservative guidance in Jan but during H1:14, Tecfidera wil

continue to march along increasing market share on its way towards $2B+ in 2014 and $3B in

2015 (surpassing Gilenya which is doing close to $2B WW and also growing quickly) although

estimates have been catching up a bit near-term and for 2014. Early '14 has SMN-Rx "multi-dose"

data and this should look good as BIIB starts Phase III.

2) Hemophilia launch mid-year is a good set-up because if sales exceed then Street will say open-

ended $4B market is up for grabs for BIIB now. If OK launch, it won't matter much given smaller

driver for BIIB earnings/expectations.

3) Copaxone AB-rated generic possibility in mid-14? Based on comments by Teva this could

capture 25-50% share of branded after a year or more. While headline risk to BIIB, our checks

with docs is this will matter to Copaxone mostly if at all as there will unlikely be any step edits to

drive pts away from orals and docs highly prefer orals and have been swapping pts off Copaxone

for awhile due to low efficacy/injections.




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4) BIIB starts to get more exciting into H2:14 because there's going to be pipeline and we want to

be there: Phase II anti-LINGO antibody data in optic neuritis (any visual acuity improvement is

positive) in H2:14, Phase II STX-100 IPF data, and H1:15 is big Phase III Tysabri SPMS data which if

positive could add $2B to consensus. We are less interested in daclizumab due to profit split with

ABBV and niche role in MS given subQ and infection risk vs superior orals.

5) By the time we get to YE:14 going into 2015 the Street will also figure out 2015-17 consensus

EPS is too low due to leverage on Tecfidera, better Avonex (Peg-Avonex), hemophilia upside, and

margin expansion: every $300-400M in upside leads to $1 in higher EPS. Street also consistently

models expenses too high and this will be lower as a % of sales. Unlike CELG, there is no 2015-17

guidance at BIIB but if we run this through the model, we can get $1-2 higher EPS towards 2017.

Some bulls are upwards of $20/share towards 2018+ if EPS CAGR is 20%.The 4 drugs that we are

most excited about with proof of concept or pivotal data over next 12-24 months are:

Things to Note for BIIB in 2014Tecfidera US sales tracks in-line for Q4 (TRx at 24% QTD, or $338M vs. cons $334M). However, if

we proactively account for holiday impact in the remaining 3 weeks, we get a lower bound

estimate of $310M (*Contact us for our TecfiAPP*). Noting likely incremental inventory build, we

believe Tecfidera will come in line with cons estimate of $334M for Q4. TRx market penetration is

at 13.5% this week For comparison, Gilenya penetration is at 10% and Aubagio at 3%.

For 2014, a new dynamic will be first EU sales likely beginning Jan after EMA confirmed Tecfidera

qualifies as new active substance, which confers 10 yrs of data protection. Consensus estimates

EU peak sales will be $1-2B+ before exclusivity expires in 2023. we note BIIB also has EU patent

for twice-daily dosing expiring 2028, which adds as another layer of patent protection

underappreciated in the model in our view

Tecfidera 2014 -2015 cons of $1.9B and $2.8B reflects mostly US demand in our opinion. It is

already on a $1.3B+ run-rate in the first 4 quarters as scripts continue to grow rapidly (24% QTD

for Q4), gaining market share. Even though EU will likely be a slower and staggered launch vs. USas a proxy, Recall Gilenya sales ex-US accounted for 31% and 46% of total Gilenya sales in its first

and second year of launch. For BIIB, if we assume EU region to contribute 10% and 20% of sales

for 2014-2015, we estimate this could add ~$216M and $600M to topline, and $0.60 and $1.90.

2. LINGO Phase II data in optic neuritis in H2-14. We think the investment thesis will start to shift

by mid-year 2014 from Tecfidera sales to big pipeline upside from multiple mid -late stage

readouts starting H2-14. We think general positive trends (visual acuity, remyelination of optic

nerve, etc) is sufficient to give investors confidence the drug is active and could lead to positive

efficacy in the much larger and more important Phase II MS study already enrolling on top of

Avonex.

3. Hemophilia launch expectations are relatively low for Biogen (stock has been moving on

Tecfidera, not really hemophilia) but bullish investors think the market opportunity is significantfor a long-acting drug and BIIB might take up to 25% (or even more) of the $4B+ worldwide

market. If sales come out greater than expected in the first years, investors will believe its likely

BIIB could take more market share than expected which would be upside to consensus.

4. Tysabri Phase III SPMS data early 2015.The primary endpoint is percentage of patients

experiencing confirmed disability progression as measured by EDSS, T25FW and 9HPT. Given the

lack of approved therapies, a strong trend but not statistically significant decrease in progression




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could induce greater use of Tysabri, especially since it is a continuum of patients transitioning

from RRMS (Tysabri currently improved indication) to SPMS.

What are the Key Pipeline Products To Watch?

SMN-RX for SMA (Phase I/II multi-dose readout late 2013; anticipated Phase III start early 2014)

Potential: The multi-dose study (n = 24) examines 3 doses in Type II/III patients, which should 1)

identify the go-forward dose to maximize responders and 2) further de-risks program by showing

durable Hammer-smith (for 9 months vs. 3 months reported in Mar, which resulted in stat sig

Hammersmith improvement of 3.1 pts).

Separately, BIIB and ISIS has also started examining 2 separate doses (3 intrathecal injections) in

infants in hopes of identifying go-forward schedule for Phase III start in the most dire, Type

patient population by early 2014.

Background: Recall in Mar, BIIB and partner ISIS reported promising Phase I single-dose data ove

85 days, where drug appears active and safe (see bull vs. bear debate below). BIIB has an option

to license this program after "multi-dose" data YE:13/early'14. This is a favorable set-up for BIIB asthe study will be telling of response across 3 doses (likely higher than todays doses) and durability

for 9 months. By 2014, a pivotal/Phase II/III single-arm study should be underway in infants and

we think drug has potential for Breakthrough Designation. Our deep dive work, combined with

today's data, leads us to believe SMN-Rx has at least 50% probability of success, $12B+ peak

sales, or $1020/share of optionality value for BIIB.

Data thus far: SMN-Rx demonstrated stat sig improvement (+3.1 pts) in Hammer-smith (function)

at the "highest dose" of 9mg after only 1 injection on the expanded (0 -66 points) scale. Mean

change of 3.1 points is promising, especially given majority (6/10) are responders, and 50% are

over age of 5 where spontaneous improvement is unlikely. SMA is a rare genetic motor neuron

disorder impacting the brain and spinal cord. It is caused by deletion/mutation of the survival

motor neuron 1 (SMN1) gene, which results in reduced levels of the Survival Motor Neuron (SMN

protein. Reduced SMN protein levels lead to dysfunction/loss of -motor neurons in the spina

cord that is responsible for muscle contraction.

ISIS SMN-Rx is an oligo-nucleotide that targets SMN2 gene to make more of the SMN protein. It

does so by preventing the spliceosome from editing out exon-7. More exon-7 containing

transcripts ("full length") gives more stable SMN proteins, which should help with motor neuron

survival

STX-100 for IPF (Phase II readout H2:14)Potential: In addition to safety and tolerability and PK/PD (serum t1/2 of antibody), this multi

dose, dose-escalation study will examine if 8 consecutive weekly doses of STX-100 (subQ) can

effect slowing of lung function decline as measured by FVC, FEV1 and DLCO, as well as

radiographically. Measurements will be taken at week 4 and 8. While preliminary and (n= 8 ineach of 4 dosing cohort) trial, this study should provide signal of efficacy, if any vs. placebo (6

treatment vs. 2 pbo in each cohort) in IPF.

Background: STX-100 is a monoclonal antibody that targets integrin v6, which activates (TGF)

complex responsible for fibroblast proliferation. Excessive fibroblast activity deposits extracellular

matrix (ECM) in injured tissue, causing fibrosis.

Integrin v6 is selectively expressed in epithelial tissues (lining of lungs) and (TGF) is highly

over-expressed in lungs of IPF patients. Inhibition of integrinv6 may allow for the isolated and




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reduction of (TGF) effects in lung tissues only, without affecting (TGF) other functions as a

cytokine in other tissues.

Data thus far: In animal models, STX-100 has shown anti-fibrotic activity even when fibrosis is

underway. BIIB has also shown good safety and tolerability in Phase I. Moreover, STX-100sactivity level of v6 inhibition could be tracked via biomarkers (e.g. M MP-12, MMP-13

cathespinK, CCL9, CCL12 for macrophage activation) and correlate to clinical measurements.

ANTI-LINGO for re-myelination in optic neuritis (Phase I readout Sep 2014)Potential: The RENEW trial in acute optic neuritis is a proof-of-concept study of ANTI-LINGOs

ability to effect remyelination of the optic nerve, which should be manifested in measurable

change in optic nerve conduction velocity from baseline of patients unaffected eye. Another

clinical attribute would be thickness of the retinal ganglion cell layer, also measurable by spectral-

domain optical coherence tomography. Clinically, patients will also be assessed for change in

visual acuity. The double blind, placebo controlled study (n=80) should prove strong proof-of

concept for possibility and degree of remyelination possible (ANTI-LINGO Q4W at 100mg/kg for

20 wks) in a 6 month time-frame (measurements at baseline and wk 24).

Background: MS is characterized by inflammation, accumulation of myelin lesions, axonal loss as

well as neuro-degeneration. Treatments available today tackle mostly inflammation only. In

earlier stages of RRMS, spontaneous remyelination occurs naturally and patients do not

accumulate disability, but this ability gradually declines.

Spontaneous Remyelination does occur naturally in some lesions of MS patients. This occurs

frequently in early stages of disease (RRMS, where patients recover and do not accumulate

disability), but infrequently in late stages disease (SPMS, where patients progressive accumulate

disability). This suggests that promoting remyelination may prevent accumulation of axonal loss

and disability.

Oligodendrocytes are cells responsible for nourishing the axons as well as for myelin production.

LINGO-1 is an integral membrane protein that prevents maturation of progenitor (OPCs) into new

oligodendrocytes. The antagonization of LINGO-1 should promote oligodendrocyte differentiation

for increased myelination.

Data thus far: In cell-cultures, the antibody ANTI-LINGO leads to dose dependent production of

myelin basic protein. ANTI-LINGO effects remyelination in de-myelinated rat brain samples, and

shows functional recovery in rodents experimentally induced to mimic MS.

BIIB-023 for Lupus Nephritis (Phase II readout: Nov 2014)Potential: The study will be first to show if BIIB-037 can induce complete or partial renal response

as well as in composite SELENA-SLEDAI and BILAG scores over 52 wks in 300 patients with lupus

nephritis. The study tests low vs. high dose of BIIB-023 (IV) vs. placebo in combination with oral

steroids (prednisone and MMF).

Background: TWEAK stands for TNF-Like Weak Inducer of apoptosis, a target discovered

internally at BIIB. TWEAK signals only through one receptor, Fn14 (FGFinducible molecule 14) and

is highly unregulated locally in target organs in inflammatory and autoimmune diseases. Lupus

nephritis patients with renal involvement have higher levels of TWEAK than those without. In

animal models, treatment with anti-TWEAK lowers cytokine production and reduces urinary

protein levels (crude measure of kidney damage)




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In lupus nephritis, there is a perpetual cycle of renal cell inflammation, injury and cell death.

TWEAK signals through Fn14, which promotes persistent NK- activation and keeps the vicious

cycle ongoing.

BIIB-037 for Prodromal/Mild Alzheimers (Phase I readout: Nov 2014)Potential: In addition to providing safety (immunogenicity, PK serum concentrations, presence of

amyloid-related edema or hemorrhage) and tolerability, this multi-dose study could provide

proof-of-concept of BIIB-037s ability to cross the blood-brain-barrier and to reduce amyloid

plaques as measured by 18F-AV-45 PET scans over 26-70 wks in 160 patients with Prodromal or

mild Alzheimers.

Background: BIIB believes Bapineuzumabs failure might be due to dosing limitation (every 3

months because of micro-hemorrhage, when t1/2 of the antibody is 2 wks) rather than inherent

flaw of the amyloid hypothesis. PET imaging reveals that Bapineuzumab does lead to decrease in

amyloid plaques. Study failure could also be due to dosing in patients too advanced in the disease

BIIB037 is reverse-engineered from aging patients who were cognitively stable over three years,

who recovered from cognitive impairment, or whose AD only minimally progressed. Recombinantversions of antibodies isolated from patients was generated and selected for affinity towards

aggregated amyloid beta (KD


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Exhibit 20: BIIBs robust and diversified pipeline in multitude of neurological and autoimmune indications

Program Stage Indication Timing Key Data Points

ISIS-SMNrx Phase Ib/IIa Spinal Muscular Atrophy YE:13 - Q1:14 The multi-dose study (n=24) examines 3 doses in Type II/IIIpatients, which should 1)identify the go-forward dose to maximizeresponders and 2) further de-risks program by showing durableHammer-smith score improvement

STX-100 Phase II Idiopathic PulmonaryFibrosis

2H:14 In addition to safety and tolerability and PK/PD (serum t1/2 ofantibody), this multi-dose escalation study will examine if 8consecutive weekly doses of STX-100 (subQ) can effect slowingof lung function decline as measured by FVC, FEV1 and DLCO

ANTI-LINGO

(BIIB 033)

Phase I/II Optic NeuritisMultiple Scelerosis

2H:14 The RENEW trial in acute optic neuritis is a proof-of-conceptstudy of ANTI-LINGO's ability to effect remyelination of the opticnerve, which should be manifested in measurable change in opticnerve transfer velocity from baseline of patient's unaffected eye

Anti-TWEAK

(BIIB 023)

Phase II Lupus Nephritis 2H:14 The study will be first to show if BIIB-037 can induce complete orpartial renal response, as well as in composite SELENA-SLEDAIand BILAG scores over 52 weeks in 300 patients with lupus

nephrtis.

BIIIB037 Phase Ib Alzheimer's 2H:14 In addition to providing safety (immunogenicity, PK serumconcentrations, presence of amyloid-related edema orhemorrhage) and tolerability, this multi-dose study culd provideproof-of-concept of BIIB-037's abilit to cross the blood-brain-barrier

Tysabri Phase III SPMS 1H:15 This P3 study (n=856) examines Tysabri's ability (vs. pbo, both IVQ4W of 300mg or currently marketed dose in RRMS) to slowrelapse-independent disability progression in patients with SPMSover 96 wks. Measures such as walking speed, MRI (brainvolume)

ISIS-SMNrx Phase II/III Spinal Muscular Atrophy 1H:15 ISIS expects to start two pivotal trials (infant onset, childhoodonset) in early 2014 with data readout possible by mid-2015 fromthe infant onset study.





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Exhibit 21: Our Tecfi-APP projects that even flattish NRx of ~850/week will approximate 2014 WW consensus ($1.6B vs. $1.9B), and

EU sales should add $200-$300M in its first year of launch.

NEW RBC 2013 Weekly TECFIDERA - APP

Your RBCInput Base Case RBC Comments

Estimated Peak True NRx 1670 1670 Week 11 "true" NRx hit 1670, it's highest and have come down since as expected

NRx Growth Rate to Reach Peak 2% 2% NRx growth gradually declined from 33% to 12% to 5% to 3% (Row 52)

Rate of NRx Decline After Peak 7% 7% This depends on how rapidly we believe it will drop to its steady state levels and considering how rapid uptake was, we believe drop could b

Estimated NRx Normalization Level 880 800 For reference, Gilenya weekly NRx has been steady ~600 for the past year. Considering the superior profile of Tecfidera, we beliieve ~1.5x

Estimated 1-month Refill Rate 85% 85% Too early to tell what the on-going refill rate will be for Tecfidera (Row 57) but Gilenya and Aubagio has been steady at ~80%. If compliance

Tecfidera Annual Cost (2013) $54,900 $54,900 Reported Tecfidera annual wholesale acquisition cost (WAC) is $54,900

Tecfidera Monthly Cost $4,575 $4,575 Tecfidera WAC divided by 12 months in a year

Tecfidera Annual Cost (2014) $58,194 $57,645 This could vary but MS therapies are around 10-20%, depending on how much of government discounts

Tecfidera Monthly Cost $4,850 $4,804 This certainly varies by drug, disease, time in launch but usually larger and chronic diseases like MS enjoy higher capture rates vs. smaller

Gross To Net 12% 10%

IMS Capture Rate 78% 80%

Estimated 2013 Tecfidera Sales (US) $786 $784Consensus Es timate fo r 2013 (WW) $792 $792

Estimated Q4:13 Tecfidera Sales (US) $312 $310Consensus Es timate fo r Q4:13 (WW) $334 $334

Est imated 2014 Tecfidera Sales (US) $1,606Co ns en su s Es tim ate fo r 2013 (WW) $1,900

Real i ty Check

Combined Total Market TRx in 2012 1,745,000 1,745,000Implied Tecfidera Total TRx in 2013 132,713 132,460

Implied Tecfidera TRx Market Share 8% 8%

Gilenya TRx Market Share in First Yr 3% 3%

Gilenya TRx Market Share in 2012 8% 8%

Combined Total Market NRx in 2012 372,000 372,000Implied Tecfidera Total NRx in 2013 37,456 38,293

Implied Tecfidera NRx Market Share 10% 10%

Gilenya NRx Market Share in First Yr 4% 4%

Gilenya NRx Market Share in 2012 8% 8%

0

1000

2000

3000

4000

5000

6000

7000

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Weeks Since Launch (2013 Apr - Dec)

RxCount

TRx

TrueNRx

Week 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54Tecfidera Rx By Dose 1/3/14 1/10/14 1/17/14 1/24/14 1/31/14 2/7/14 2/14/14 2/21/14 2/28/14 3/7/14 3/14/14 3/21/14 3/28/14 4/4/14 4/11/14

Starting Packet (120 - 240mg) NRx (a)120mg BID NRx (b)240mg BID NRx (c)

IMS Reported NRx (d)=(a+b+c)Implied "True" NRx (e)=(d-c) 1336 1007 1149 1166 938 900 828 945 880 843 937 880 880 912 880

Reported NRx wk/wk growth rate

"True" NRx wk/wk growth rate 157% -25% 14% 2% -20% -4% -8% 14% -7% -4% 11% -6% 0% 4% -3%

Increase in "True" NRx wk/wk 817 -329 141 17 -227 -38 -73 117 -65 -37 95 -57 0 32 -32

Reported/ Estimated TRx (g)=(e+f) 5251 5368 5371 5108 4992 5413 5392 5398 5172 5265 5529 5465 5372 5347 5467

TRx wk/wk growth rate 23% 2% 0% -5% -2% 8% 0% 0% -4% 2% 5% -1% -2% 0% 2%

Estimated Number of 1-month Rx Refill (f)=(g-e) 3915 4361 4222 3942 4053 4513 4564 4453 4292 4422 4592 4585 4492 4436 4587Estimated 1-month Refill/ Compliance Rate 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85%





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Exhibit 22: Valuation-APP Points to $320/Share as Base Case for BIIB, Based on Relatively Low Pipeline Expectations for 2014

BIIB Valuation APP --> Change Assumptions in BlueHow Do we Value BIIB? How Do We Value BIIB's Pipeline?

Prob. of S Sales in 2022

Per DCF Per PE and PEG Tysabri (SPMS) 35% 1,300$

Bear Case (no pipeline) $230 PE Multiple 24x SMA (SMN) 50% 2,412$

Base Case (prob adjusted pipeline) $325 EPS in 2015 $13.77 ANTI-LINGO (remyelination for MS) 25% 4,000$

Bull Case (higher prob. Adjusted pipeline) $358 Price $325 STX-100 (IPF) 20% 800$

Super Bull Case (100% Pipeline Success) $788 BIIB-023 (Anti-TWEAK for lupus) 20% 600$

Other (BIIB-037 for Alzheimers) 5% 9,000$

Discount Rate 8.0% Equiv. PEG 0.9x

Terminal Growth Rate 2% EPS (CAGR) 26% Pipeline Value $95 to $558

NPV analysis of BIIB's - BASE CASE (REALISTIC probability adjusted pipeline)

Assumption 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenues (w/ 100% pipeline) $5,516 $6,844 $8,310 $9,119 $10,292 $13,154 $15,219 $17,293 $19,436 $21,474 $23,297 $25,063

Total Revenues (no pipeline) $5,516 $6,844 $8,310 $9,019 $9,809 $10,875 $10,760 $10,731 $10,704 $10,579 $10,475 $10,434

Total Revenues (prob. adjusted pipeline - Base Case) $6,844 $8,310 $9,054 $9,990 $11,502 $11,872 $12,382 $12,850 $13,186 $13,471 $13,699

Total Revenues (prob. adjusted pipeline - Bull Case) $6,844 $8,310 $9,064 $10,035 $11,671 $12,180 $12,820 $13,412 $13,869 $14,262 $14,591Core Revenues (Avonex, Rituxan, GA-101, Royalties) $4,503 $4,516 $4,256 $4,092 $4,010 $3,930 $3,851 $3,774 $3,699 $3,625 $3,552

Hemophilia Revs $55 $113 $187 $265 $330 $380 $430 $480 $550 $600

Tysabri Revs Base Case Bull Case $1,552 $1,823 $1,950 $2,080 $2,500 $2,400 $2,400 $2,400 $2,300 $2,200 $2,100

Tysabri (SPMS) 35% 45% $100 $400 $850 $1,150 $1,300 $1,300 $1,300 $1,300 $1,300

SMA (SMN) 50% 55% $94 $374 $749 $1,263 $1,741 $2,153 $2,412 $2,533

ANTI-LINGO (remyelination for MS) 25% 30% $400 $900 $1,600 $2,400 $3,200 $4,000 $4,500

STX-100 (IPF) 20% 30% $100 $250 $450 $600 $700 $800 $900

BIIB-023 (Anti-TWEAK for lupus) 20% 30% $100 $200 $300 $400 $500 $600 $700

Other (BIIB-037 for Alzheimers) 5% 10% $500 $1,300 $1,800 $2,500 $3,300 $4,000 $5,000

BG-12 Rev $788 $1,916 $2,700 $3,450 $4,100 $4,100 $4,100 $4,100 $4,100 $4,100 $4,182

BG-12 Royalties $0 $50 $450 $1,000 $1,500 $1,800 $0 $0 $0 $0 $0

BG-12 Royalties as percent of BG-12 Revs 0% 3% 17% 29% 37% 44% 0% 0% 0% 0% 0%

BG-12 Cannabilization $0 $200 $500 $600 $620 $750 $750 $750 $750 $750 $750

Core Growth (%) -2% 2%

COGS 10% 13% 13% 13% 12% 11% 11% 11% 11% 11% 11% 11%

R&D (%) - based on prob. Adjusted 24% 22% 19% 18% 17% 16% 15% 15% 15% 15% 14% 14%

R&D ($M) $1,480 $1,576 $1,593 $1,648 $1,806 $1,781 $1,857 $1,928 $1,978 $1,886 $1,918

SG&A (%) - based on prob. Adjusted 26% 24% 22% 22% 21% 21% 20% 19% 18% 17% 16% 16%

SG&A ($M) $1,650 $1,826 $1,956 $2,098 $2,358 $2,374 $2,353 $2,313 $2,176 $2,155 $2,192EBIT (100% pipeline) $2,206 $2,824 $3,777 $3,934 $4,310 $6,044 $7,590 $11,181 $13,058 $15,065 $16,810 $18,322

EBIT (no pipeline) $2,206 $2,824 $3,777 $3,847 $3

Documents

131220 Biotechnology Positioning and What Matters in 2014