Pharmaceutical Case Competition 2007Pharmaceutical Case Competition 2007

Biogen Idec: A Good Buy? Biogen Idec: A Good Buy?

November 30, 2007November 30, 2007

Team 7: Rachel Dexter, PhD Chemistry

Han Lee, MBA/PhD Genetics

James Park, MD/PhD Neuroscience

Johanna Rodriguez, PhD Chemistry

Pauline Wyrembak, PhD Chemistry

Infectious and Respiratory Diseases

Urology

Oncology

EndocrineDisorders

Opthamology

All Other

AllianceRevenue

20%

22%

15%12%

7%

11%

13%

Distribution of Pfizer’s Interests

Possible Initiatives

Cardiovascular DiseaseBiologicsVaccinesAlzheimer’s DiseaseMultiple Sclerosis

Pfizer as a CompanyPfizer as a Company

Multiple Sclerosis (MS) OverviewMultiple Sclerosis (MS) Overview

Disease Profile U.S Market Sales for RRMS Drugs

Total U.S. Sales $2.5 Billion

Rodman and Renshaw Report, Sep 2006

• 493,600 patients in the U.S

• 85% of all patients - relapsing-remitting or secondary progressive MS Avonex

Copaxone

Rebif

Betaseron

Tysabri

Unmet Needs in MS:Mechanics - Compliance - Efficacy

FDA Approved MS DrugsFDA Approved MS Drugs Biogen:

– Avonex: Immunomodulator, Interferon– Tysabri (Elan): Immunosuppressant, Monoclonal antibody

Competition:– Betaseron: Bayer Schering Pharma AG– Copaxone: Teva– Rebif: Merck Serono Sanofi-Aventis– Novantrone: EMD Serono, Inc. and OSI Pharmaceuticals, Inc.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Patent Expiration AVONEX

LIPITOR VIAGRAPfizer Drugs:

TYSABRI

CELEBREX

Pipeline MS DrugsPipeline MS Drugs Biogen:

– Rituxan (Genentech): Phase II/III, Immunosuppressant, Monoclonal antibody – BG-12 (Oral): Phase III, Immunomodulator, Fumarate

Competition:– IV: MBP8298 (BioMS), ABT-874 (Abbott), CAMPATH (Genzyme)…

– Orals: FTY720 (Novartis), Mylinax (Serono/Merck), Teriflunomide (Sanofi-

Aventis), Laquinimod (Teva)…

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Enter Market

Patent Expiration

BG-12

AVONEX TYSABRI & RITUXAN

ORALS?

LIPITOR VIAGRAPfizer Drugs: CELEBREX

Positives Negatives- Diversification into MS market

- $5 Billion global market

- Access to Biogen’s pipeline

- Patent expiration of Avonex

- Biogen’s existing partnerships

- Tysabri side effects

(Litigation)

- Market saturation

- Exacerbation of pipeline issues

Should Pfizer acquire Biogen?Should Pfizer acquire Biogen?

0

50

100

150

200

250

300

350

400

450

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Year

$US

(in

mil)

AvonexTysabriRituxanBG-12Total

Projected Profits for Biogen’s Projected Profits for Biogen’s MS Drugs In US MarketMS Drugs In US Market

Assumptions: Cost of Capital (COC) = 13 %Inflation = 3 % g = 4 % (Long-term GDP growth rate)

Patent Expires: 80% drop in Revenue

Orals Compete for Market Share

Added Competition

from Generics

Bottom Line: $2 Billion

Pfizer’s OptionsPfizer’s Options

Scenario 1: Acquire Biogen

Scenario 2: Pass on Biogen

Scenario 3: License from Biogen

Scenario 4: Alternative acquisition

Scenario 3: License from Biogen

Scenario 4: Alternative acquisition

RecommendationsRecommendations

Scenario 3: License BG-12 from Biogen

- $25 Million for BG-12 (50% profit share)

Scenario 4: Alternative Acquisition

- Acquire BioMS Medical Corp. for MBP8298

- Market cap $238 Million (Toronto Stock Ex.)

- MBP8298 predicted to have sales of $10 Billion between 2012 and 2018

- Slows progression, better dosing schedule (better compliance)

- Returns: 16% (conservative estimate)

AcknowledgementsAcknowledgements

Yale Biotechnology & Pharmaceutical Society

Yale School of Management

Boehringer Ingelheim, Pfizer, Roche, Vion

Compass Strategic Consulting

BioMS: Amanda Stadler

Professor Charles Ahn, Yale University, Dept. of Applied Physics

Therapeutic Area Recent Pfizer Initiatives

Oncology Acquisition of Idun (4/2005) - Therapies to control apoptosis License agreement with Coley ( March 2005) -Toll-like receptor agonist for the potential treatment, control and prevention of cancer.Acquisition of Campto/Camptosar from Sanofi-Aventis (9/2004) -Treatment of colon cancer Potential acquisition of Biogen

Cardiovascular Disease

Acquisition of Esperion (2/2004) -Discovery and development of high-density lipoprotein (HDL)-targeted therapies

Biologics Acquisition of Rinat (5/2006) -Company with several new central-nervous system product candidates. Acquisition of Bioren (8/2005) -Technology for optimizing antibodies

Vaccines Acquisition of PowerMed (12/2006) -DNA-based vaccines for the treatment of influenza and chronic viral diseases

Alzheimer’s Disease

License/collaboration agreement with TransTech (9/2006) -Develop and commercialize small and large molecules

Multiple Sclerosis Agreement with Serono (7/2002) -Co-promote RebifPotential acquisition of Biogen

Pfizer: Potential Growth AreasPfizer: Potential Growth Areas

Clinical Patterns of MSClinical Patterns of MS

SP

PP

RR

PR

Relapsing-remitting

Secondary Progressive

PrimaryProgressive

Benign

45%197.8 40%

175.8

10% 44

5% 22

Injection Oral

DrugCopaxon

eTysabri MBP8298 FTY720

Laquinimod

Stage In Use In Use Phase III Phase III Phase III

Deliverys.c

40mg/dayi.v

300mg/28daysi.v.

500mg/6monthsoral 1.25mg/day

oral

0.3mg/day

MRI Lesion Decrease

38% 24% Univestigated Positive 44% (phase I)

Relapse Rate Decrease

75% 66% 60% (phase II) 53% (phase II)None (phase I)

8% (phase IIb)

Disease Course RR-MS RR-MSChronic

progressiveRR-MS RR-MS

Side Effects

Local injection site

reactions, naseau, anxiety,

hypertonia

Rash, arthralgia, headache, 2 instances of

PML

Local injection site reactions,

occasional flush, mild

hypotensions

Sinusitus, mild headaches,

gastrointestinal disorders,

bradycardia

Transient increases in

liver enzymes

s.c – sub cutaneouslyi.v – intra venouslyPML – progressive multifocal leukencephalopathy Kleinschnitz, et. al. J. Neurol. (2007), 254, 1473-1490

Financial FundamentalsFinancial Fundamentals

0

20

40

60

80

100

120

140

160

P/E Market Cap ($US Billions)

Amgen Genentech Genzyme Biogen Industry Average

19.7929.89

147.74

42.67

29.24

$59.5

$80.4

$19.8 $20.6

• Current global MS market = $5 Billion

• United States (US) accounts for 50% of the global MS

market

• 25,000 new cases per year in US (growth 0.5% per year)

• Biogen’s US MS drug sales represents ~40% total revenues

• Margins = 25%

• Minimal synergy

Facts and Assumptions in DCFFacts and Assumptions in DCF

Industry Average P/E Current NPV (DCF, COC = 13%)

6

70

48

Value of BiogenValue of Biogen

2

20

14

13%8%

8%13%

Industry Average P/E Current NPV (DCF, COC = 13%) NPV (DCF, COC = 8%)

Value of BiogenValue of Biogen

415

6

70

48

2

20

14

Value of BiogenValue of Biogen

Industry Average P/E Current NPV (DCF, COC = 13%) NPV (DCF, COC = 8%) NPV (DCF, COC = 8%, Optimistic

AVONEX Sales)

4

18

13%

8%

8%

61

15

8%

13%

8%

6

70

48

2

20

14

Projections Projections