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Biotech / Medical : Biogen
BIIB 229.50-2.6%Dec 1 4:00 PM EST

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From: mopgcw12/18/2010 11:35:01 AM
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cs: Biogen Idec (BIIB) NEUTRAL [V] Industry Weighting: OVERWEIGHT R. Mehrotra
CP: US$ 67 TP: US$ 68 CAP: 16b

INITIATING Coverage with a NEUTRAL Rating and Target Price of $68 - Facing Negative Competitive Pressure Now; Potential
Upside Triggers Post 2013

! Summary: We are initiating coverage of Biogen (BIIB) with a Neutral rating and a $68 target price. The changing dynamics
of the MS market places significant medium-long term risk on BIIB's core revenue franchise that is likely to cap
fundamentally driven stock price performance. Significant pipeline readouts are unlikely to occur until 2013. However, BIIB
could benefit from our agency cost reduction hypothesis an/or further cost containment.

! Current Product Offering: Over 70% of total revenues come from its lead multiple sclerosis (MS) products Avonex and
Tysabri. We model moderately declining revenues long-term due to competition from oral agents, especially NVS Gilenya -
which launched in October.

! Pipeline: The near-term pipeline is focused on MS. We are cautious on commercial potential of BG12 (PIII), Pegylated
Avonex (PIII) and Ocrelizumab (PII). Longer term, we are excited about the hemophilia program. However, Phase III trial
readouts do not occur until 2013 so the market will likely discount this for at least the next 12 months.

! Where Do We Most Differ From the Street? We model greater declines in Avonex revenues. We model flat Tysabri growth
vs. reacceleration due to PML assay. We assume greater operating and earnings leverage than consensus; for 2015, we
are 18% and 1% lower on revenues and earnings respectively.

! Agency cost analysis/Valuation: BIIB could start a 4% dividend and accumulate $4B cash by 2015. We model BIIB 2010-15
top-line and EPS CAGR of -1% and +7% (versus +1% and +4% for the peer group). Our $68 target price is based on a
10% PE premium with peer group. PharmaValues estimates $68/share NPV. Contact your CS sales representative for a
detailed slide deck.
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