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Biotech / Medical : Biogen
BIIB 210.63+3.3%Jul 1 4:00 PM EDT

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From: mopgcw10/24/2009 11:16:18 AM
   of 1684
CS: Biogen Idec. Inc. (BIIB) NEUTRAL [V] M. Aberman
CP: US$ 47.23 TP: US$ 54 CAP: US$ 13.6b
PML Cases Suggest Higher Risk

• Action/Event: The CHMP of EU started a review of Tysabri in view of 23 cases of PML since the re-launch. The last official
update provided by Biogen listed 11 confirmed cases on July 24th. During ECTRIMS in September another 2 cases were
reported, suggesting 10 more cases have emerged since mid-September. Based on these cases and the number of Tysabri
patients who have been on therapy for longer than 24 months, we estimate the risk of PML could be as high as 1.4 in 1,000,
which is greater than 1 in 1,000 currently on the label.

• Investment Case: As previously communicated by the company on its 3Q conference call, Biogen is discussing label changes
with regulatory authorities. During the call, we found it curious that Biogen had changed their tune and agreed that the risk of
PML increased with duration of therapy. With this news, we now understand why. We expect the new label will highlight the
increased PML risk associated with longer duration of therapy. In addition, we think EU will institute a stricter risk
management program for Tysabri similar to the TOUCH program in US. Ultimately, we see a slowdown in new patient
additions and more drug holidays or switch to other therapies after a certain time of period. The bottom line is we will see a
deceleration in Tysabri growth worldwide. Given the declining Avonex and Rituxan revenues coupled with the slowing growth
of Tysabri, we remain cautious on Biogen shares.

• Catalysts: The next catalyst for Biogen Idec will be the ocrelizumab Phase II data in MS.

• Valuation: Our 12-month price target of $54 for Biogen is based primarily on a P/E analysis, where we apply a 12.5x multiple
on our 2010E EPS of $4.26 (including stock options) to derive a $54 fair value.
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