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Americas/United States

Global BioPharma Alzheimer’s Disease Call

October 19th, 2016

A Detailed Deep-dive into Alzheimer’s Disease, Key Players and Upcoming Data Readouts RESEARCH TEAM

Alethia Young

Research Analyst +1 212-538-0640 [email protected] Matthew Weston

Research Analyst +44 020-7888 -690 [email protected]

Vamil Divan, MD

Research Analyst +1 212-538-5394 [email protected]

Jo Walton

Research Analyst +44 020- 7888-0304 [email protected]

Fumiyoshi Sakai

Research Analyst +81-4550-9737 [email protected]

2

Outline for today’s call

Why is the amyloid hypothesis still under debate?

How we look at comparing the key late stage assets?

What are the lessons we have learned from prior AD studies?

How do we think about prior Sola studies and upcoming EXPEDITION3 readout?

How do we think Lilly and Merck trade around Sola Ph3 readout?

How do we think Biogen and AC Immune trade around Sola Phase 3 readout?

How do we think about potential impacts to Roche and other EU read-throughs?

Source: Company data, Credit Suisse estimates and analysis

3

Solanezumab Phase 3 Results Will Are a Big Catalyst for AD Space, With Topline Data Expected in 4Q16

LLY’s Solanezumab Phase 3 is reading out in Q4 2016. This data could provide more

confidence in the hypothesis which both ACIU and BIIB’s lead assets are developed around.

Our team did an extensive deep-dive analysis into the preclinical and clinical data behind each of

these AD assets and we believe the Phase 3 Lilly trial could be successful.


Company Drug Rating TP Analyst

Biogen Aducanumab Neutral $322 Alethia Young

AC Immune Crenezumab Outperform $18 Alethia Young

Roche Crenezumab Outperform SFr300 Matthew Weston

Eli Lilly Solanezumab Outperform $96 Vamil Divan

Merck Verubacestat Outperform $73 Vamil Divan

Eisai BAN2401 Neutral ¥5,900 Fumiyoshi Sakai

4

We Assume a 60% Chance of a Cognition Benefit, 40% Chance of a Failed Trial for EXPEDITION3

EXPEDITION3 is a major catalyst for the AD space in 4Q16

Solanezumab data will help confirm or refute the validity of the amyloid hypothesis and all key

late stage Alzheimer companies will likely have stock moves based on these results

We think there are four scenarios to consider when thinking about stock reactions

Scenario CS Case CS Biotech POS

Super-bull scenarioSola shows significant cognitive and

functional endpoints10%

Bull scenarioSola shows significant data and a trend

on functional endpoints30%

Base scenarioSola shows significant cognitive data but

NO trend on functional20%

Bear scenarioSola shows NO significant benefit on

cognition40%


5

Why is the amyloid hypothesis under debate?


6

Alzheimer’s Disease May Be Due to Misfolding of Amyloid Beta Protein

AD is a progressive neurodegenerative disease that destroys brain cells, leading to problems

with memory, thinking, and behavior.

While still under debate, it is thought that the misfolding and buildup of a protein called amyloid

beta in the brains of AD patients is at the root cause of the disease.

By stopping the buildup of amyloid beta plaques, you may be able to slow AD progression.


7

Various Neurodegenerative Drug Targets for AD

BACE inhibitor – beta-secretase inhibitor: Beta secretase is an enzyme that cleaves the amyloid

precursor protein (APP). Beta amyloid is formed from the breakdown of the APP.

Inhibiting this enzyme is hypothesized to prevent the breakdown of the APP into amyloid beta peptides, thereby preventing the buildup of amyloid beta which is implicated in Alzheimer’s.

Amyloid beta inhibitor: Binds to beta amyloid fragments directly to prevent their accumulation into

plaques.

Tau inhibitor: Inhibits tau protein, another protein whose accumulation (in tangles) is associated with

AD pathology


8

Drug Targets Have Also Focused on Tau Protein; It Remains Unclear What Role of Tau May Be in the Clinic

Tau hypothesis of AD is tested in multiple anti-Tau assets. However, most are in the early

development stage compared to amyloid beta target

Misfolded hyperphosphorylated Tau forms tangles that are extremely insoluble and may

contribute to the neurodegenerative disease


Asset Lead company Type Phase Reference

AADvac1Axon

NeuroscienceVaccine Phase 2 NCT02579252

ACI-35 ACImmune/JNJ Vaccine Phase 1

RO7105705 ACImmune/Gen

entechAntibody Phase 1 NCT02820896

BMS-

986168

Bristol-Myers

SquibbAntibody Phase 1 NCT02294851

C2N-8E12 AbbVie Antibody Preclinical

Select Pipeline Products Targeting Tau

9

Key drugs in development: what data do we have about these assets so far? Solanezumab, Aducanumab, Crenezumab


10

Many of the Drugs in Development are Targeting Amyloid Beta

Lilly: lead amyloid beta asset in development, along with BACE inhibitor and others in earlier

development

Merck expected to have data next year on BACE program

Biogen: two amyloid betas and a BACE

Roche has two an amyloid beta asset as well: our sense is that crenezumab is the higher

priority asset but Roche may begin late-stage studies with gantenerumab again


Compound Company Stage Patients MOA

Solanezumab Lilly Phase 3 Mild Anti-Abeta antibody

Aducanumab Biogen Phase 3 Mild Anti-Abeta antibody

Crenezumab Roche/AC immune Phase 3 Mild and moderate Anti-Abeta antibody

Verubecestat Merck Phase 3 Prodromal BACE inhibitor

Verubecestat Merck Phase 3 Mild to moderate BACE inhibitor

Gantenerumab Roche Phase 3 Mild Anti-Abeta antibody

AC-1204 Accera Phase 2/3 Mild to moderate metabolic

AZD-3293 Astrazeneca/Lilly Phase 2/3 Mild BACE inhibitor

BAN2401 Eisai / Biogen Phase 2 Mild Anti-Abeta antibody

E2609 Eisai / Biogen Phase 2 Prodromal or Mild BACE inhibitor

MEDI1814 Astrazeneca Phase 1 Mild to moderate Anti-Abeta antibody

Select Anti-Amyloid Therapies in Development

11

Solanezumab Could be At Least 2 Years Ahead of Next Antibodies Making it to the Market

LLY’s Solanezumab Phase 3 is reading out in Q4 2016

Phase 3 designs are notably different

Solanezumab

(Expedition 3)

Aducanumab

(Engage and Emerge)

Crenezumab

(CREAD)

Estimated Enrollment 2,100 1,350 (each) 750

Began Enrolling August 2013 June/July 2015 January 2016

MMSE at Baseline 20-26 24-30 22+

Primary Endpoint/s ADAS-Cog14 CDR-SB CDR-SB

Dosing Length 80 Weeks 78 Weeks 105 Weeks

Doses Studied

400mg versus

placebo

IV every 4 weeks

Low dose vs. placebo

High dose vs. placebo

IV every 4 weeks

60mg vs. placebo

IV every 4 weeks

Expected data readout 4Q 2016 2019 2019


12

Quick Summary of Data Presented on Key Late-Stage Assets Under Coverage


Asset Company Main Dataset CS Comments

Solanezumab Eli LillyPhase 3 Expedition 1 & 2 Trials

(~2,000 patients)

Studies failed overall population (MMSE 16-26)

Cognitive and some functional benefits seen in mild patients

Crenezumab AC Immune/RochePhase 2 ABBY Study

(~250 patients at the 15mg/kg dose)

Study failed in overall population (MMSE 18-26)

Cognitive and some functional trends in mild patients

Minimal ARIA seen

Haven't yet seen data on the Phase 3 60mg/kg dose

Aducanumab Biogen

Phase 1B PRIME Study

(~32 and ~30 patients at the 6mg/kg

and 10mg/kg doses)

Study showed solid CDR-SB and MMSE benefits (MMSE 20-30)

Small population

Some ARIA-E concerns

BAN2401 Biogen/Eisai

18 month trial Baysean design that

can enroll up to 800 patients. Trial

primary endpoint will measure a

change in a composite cognitive

endpoint

Status: 750th patient enrolled around (~September 2016), and if

no early or success criteria met, again at 800th (~December), and

again if no early success or failure met, IAs at every 3 months until

completion of trial (12 months).

13

Solanezumab, Aducanumab and Crenezumab have All Shown Statistically Significant Benefit on Cognitive Endpoints in Mild Patients

ADAS-Cog14 (EXPEDITION3 primary endpoint) was significant in the pooled mild cohorts from

EXPEDITION 1/2

Crenezumab has also shown a statistically significant benefit on ADAS Cog12.

We have seen statistically significant differences on MMSE in Aducanumab and Solanezumab but

not Crenezumab

MMSE is primarily used for screening purposes vs. as a clinical measure


14

Aducanumab is the Only Amyloid Beta to Have Shown a Stat Sig Benefit on CDR-SB

The PRIME study enrolled more mild to prodromal patients

CDR-SB is a difficult functional endpoint to hit so clinicians took notice after this data

However, we note the small sample size in the 10mg/kg arm of the PRIME study and that the

patients were slightly more mild at baseline 24.5 in PRIME vs. 22.5 in EXPEDITION 1&2 pooled

mild

Asset Trial DoseDosing

Lengthn

MMSE

Enrollment

Baseline

MMSECDR-SB

Higher is better Lower is better

Aducanumab PRIME 10mg/kg IV 54 weeks 32 20-30 24.5 -1.24*

(p<0.05)

Crenezumab ABBY 15mg/kg IV 72 weeks Plc: 39

Cren: 8222-26

-0.44

p=.423

SolanezumabExpedition 1 & 2: Pooled Mild

Subgroup400mg IV 72 weeks 1322 20-26 22.5

-0.16*

(p=.34)

* calculated based on change from baselines reported in placebo and active arms


15

There Was a Trade-Off; ARIA-E was Higher for Aducanumab Studies than Others

ARIA-E is not an ideal safety issue but likely manageable; maybe harder for community docs

Some started to debate whether inflammation was a sign of efficacy suggesting the plaque was

moving

We think the verdict is still out and agree with Biogen exploring titration


16

Crenezumab Missed its Primary Endpoints in Phase 2, but Showed Activity in Mild Patients

Roughly 346 patients dosed between ABBY (cognition) and BLAZE (biomarker on amyloid

burden)

Crenezumab did not meet its co-primary endpoints in mild-to-moderate AD (MMSE 18-26)

patients but did show activity in mild (MMSE 22 26) patients

Two co-primary endpoints, ADAS-cog12 and CDR-SOB, were not significant in the

pre-specified population and had 16.8% (p=0.19) and 3.1% (p=0.85) reduction,

respectively.

ABBY BLAZE ADAD CREAD

Phase Ph 2 Ph 2 Ph 1 Ph 2 Ph 3

Cognition Biomarker Explore high dose Prevention Pivotal

Initiation

date6/7/2011 8/17/2011 Jan 2015 11/29/2013 1/28/2016

Number

enrolled431 91 72 300 750

Status Completed Completed Enrolling Enrolling Enrolling

Duration 73 wk 73 wk 10 mo 260 wk 105 wk

Patient

criteriaMMSE 18-26 MMSE 18-28

MMSE >/= 26

PSEN1 mutationMMSE >22

Primary

Endpoints

ADAS-cog11

CDR-SOB

Brain amyloid

change by

florbetapir-PET

Safety

Alzheimer's

Prevention Initiative

(API) Composite

Cognitive score

CDR-SB

Dosage 300mg SC q2w OR 15mg/kg IV q4w 60mg/kg IV q4w


17

Crenezumab Showed Trends on CDR-SB Based on Baseline MMSE Scores

CDR-SB, an endpoint with a functional component and the Phase 3 endpoint for both

Crenezumab and Aducanumab, was not statistically significant in MMSE 22-26 patients.

However, the data do show a trend on CDR-SB suggesting some activity the more mild the

patient cohort


18

Statistically Significant Difference was Seen Versus Placebo on ADAS-Cog12 in Mild Patients (MMSE 22-26)

The effect on ADAS-Cog12 was greater the milder the population at baseline, with the greatest

effect being seen in the 22-26 MMSE group (n= 121; Placebo 39, Crenezumab 82)


19

For Crenezumab, No Trend Yet in Functional Endpoints

Dosing is at 15mg/kg in Phase 2 but Ph3 dose is 60mg/kg. We have not seen that data

published yet; likely a smaller cohort

Data seen at 15 mg/kg on a functional basis has no effect so any info around higher dosing and

functional endpoints would be important


20

What went wrong in all these prior Alzheimer’s trials?


21

Has Dosing Been Pushed Enough to Lead to Efficacy?

We think that it is a key question for many drugs below which have failed

ARIA-E (brain inflammation) is the key safety issue that limits dosing

There are some questions around the current solanezuamab dosing as well


Drug Lead

CompanyTarget

Phase

when

failed

Type

Bapineuzumab JNJ/PfizerAmyloid

BetaPhase 3 Antibody

Idalopirdine Lundbeck 5-HT6 Phase 3 Small molecule

Gammagard BaxterAmyloid

BetaPhase 3

Immunoglobulin

s

LMTX TauRx Tau Phase 3 Small molecule

PF-04360365 PfizerAmyloid

BetaPhase 2 Antibody

22

Has Dosing Been Pushed Enough to Lead to efficacy?

In December 2014 Roche halted the Phase 3 trial of gantenerumab after a pre-planned futility

analysis in 312 patients who had reached two years of treatment (no new safety signals, so

presumably halted for efficacy)

Had enrolled a mild population (MMSE of 24+ vs. EXPEDITION3 which is in MMSE of 20-26)

However, the doses used were 105mg and 225mg vs. 400mg in Sola, 10mg/kg in

Aducanumab, and 15mg/kg for Crenezumab in ABBY (10 to 15mg/kg is equivalent to 680-

1020mg assuming average weight of 68kg)

We think the low doses could have been a cause of lack of efficacy


23

Maybe We Need to Look for Mild Prodromal Patients…

Many of the earlier trials worked in mild sub-group populations (mostly in post-hoc analyses)

Most of these studies studied mild to moderate which seemingly did not work

Biogen’s study made a splash because though small it worked in the defined cohort


Drug Trial nMMSE

population

ADAS-

Cog14

ADAS-

cog12MMSE CDR-SOB

Crenezumab ABBY 103 22-2635%

(p=0.036)

45.8%

(p=0.25)

19.6%

(p=0.42)

SolanezumabPooled

EXPEDITION1322 20-26

34.3%

(p=0.001)

33.7%

(p=0.001)

9.5%

(p=0.34)

Aducanumab PRIME 45 20-302.25

(p<0.05)

1.24

(p<0.05)

24

Is every amyloid beta created equal?

Although they are all targeting Abeta, thy have distinct molecular properties e.g. different binding sites,

epitopes and backbones

Clinically, there is no clear evidence yet to suggest that the binding sites and epitopes make a difference for

clinical efficacy

Crenezumab is the only drug on the IgG4 backbone; they think that this helps with ARIA-E profile which allows

for them to dose higher

Preclinical data (Adolfsson et al.) suggests IgG4 backbone vs. IgG1 backbone reduces inflammation by activating the microglia cells vs. IgG1 which is shown to activate complement and TNF-alpha inflammatory factors


Crenezumab Solanezumab Aducanumab Bapineuzumab Gantenerumab

IgG lgG4 lgG1 lgG1 lgG1 IgG1

Source Humanized Humanized Human Humanized Human

Binding

profile

Monomers;

Oligomers;

Fibrils

MonomersOligomers;

Fibrils

Monomers;

Oligomers;

Fibrils

Oligomers; Fibrils

Epitope Mid-domain mid-domain N-term N-term N-term + mid

MOA

Microglia-

mediated

clearance

Sequestration of

soluble

monomeric Aβ

Microglia-

mediated

clearance

Microglia-

mediated

clearance

Microglia-

mediated

clearance

25

Market opportunity for AD: What are the commercial implications?


26

Diagnosis is Still Relatively Poor But We Expect This to Improve Over Time

AD is one of the most poorly diagnosed diseases in the US given the clinical difficulty of

distinguishing between natural aging vs. disease progression

Many biomarkers and diagnostics for AD are currently in development that we think will

eventually improve diagnosis

45%

27%

93% 96% 91%84%

92% 90%84% 81%

72% 72% 70%

48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


27

We Think Initial Market Opportunity is with Patients Earlier in the Disease Course

Most studies are focusing on the prodromal and or mild patient population and we think this

could be indicative of the initial market opportunity for a disease-modifying therapy

It is theorized that chronic treatment with an effective therapy could potentially be used in these

earlier patients to slow or even prevent disease progression


28

Company Prevalence Estimates


29

Current Drugs on the Market Only Address the Symptoms, But Have Still Been Blockbusters

These drugs have been blockbusters in spite of just addressing symptoms

But strong consensus that therapies to address cognition and functional deficits are needed


Product Company Drug Class WW Peak sales ($) Comments

Aricept Pfizer/Eisai AChE inhibitor 4.2BPrior market leader, nearly all scripts

converted to generics

Exelon Novartis AChE inhibitor 1.0B*Available as oral BID and transdermal

patch - oral formulation rarely used

Razadyne ER JNJ/Shire AChE inhibitor 540MNever caught on in the market, GI

side effects may have limited use

Cognex Sciele AChE inhibitor NAFirst AChEI approved; Liver enzyme

monitoring severly limits use

Namenda/Named

a XR/NamzaricAllergan/Adamas NMDA antagonist 2B

IR version discontinued in Aug 2014

to be replaced by XR to defend

against generics

30

How do we think about prior Sola studies and upcoming EXPEDITION3 readout?

31

It Has Been a Long, Winding Road for Solanezumab as we

Approach Topline EXPEDITION3 Data


Timeline Event Design/result

July, 2008

Lilly published results of a 12-week Phase 2

trial. 4 dosages are 100mg or 400mg Q1W or

Q4W.

No change in cognition and levels of brain

amyloid

Increase in amyloid beta in blood and CSF

which may suggest dissolving of amyloid plaques

May, 2009

Enrollment of Phase 3 trials, EXPEDITION1

and EXPEDITION2 started

18-month, 1000 pts each trial, 1:1 randomize

to 400mg QIW vs pbo

Primary endpoints: ADAS-Cog11 and ADCS-

ADL

Jan, 2011 Enrollment of EXP1 and 2 completed Overall safety "appear to be very good"

Aug, 2012

Lilly announced that both cognitive and

functional endpoints were not met in EXP1 and

2

Pre-specified secondary analysis of pooled data

showed stat sig slowing of cognition decline

Oct, 2012 Presented detailed results for EXP1 and 2

EXP1: pre-specified mild AD showed

42%(p=0.008) reduction of ADAS-Cog11

EXP2: pre-specified mild AD showed

20%(p=0.12) reduction in ADAS-Cog14

Dec, 2012

Lilly after talking to the regulatory agencies,

planned to do another Ph3 EXP3 and did not

have intend to submit BLA at this time

July, 2013Presented design of Phase 3 EXPEDITION3

trial

2100 pts, 18-month 400mg Q4W :Pbo

Primary: ADAD-Cog14 and ADCS-iADL

Jan, 2014NEJM published EXPEDITION 1 and 2 study

by Doody et al

July, 2015Presented EXPEDITION-EXT analysis at AAIC

and published in “Alzheimer’s and Dementia"

Stat sig reduction in ADAS-cog11, ADAS-

cog14, MMSE

Mar, 2016 Change primary endpoint for EXP 3Only has ADAS-Cog14 and removed ADCS-

iADL

32

Positive Results Seen On ADAScog14 in Pooled Mild

Population for EXPEDITION 1/2


33

Benefit Also Seen on the Function Endpoint of ADCS-iADL

in the Pooled Analysis of EXPEDITION 1/2


34

Mild Patients, Amyloid Screening and Larger Sample Size are Key Changes to EXPEDITION3

Company predicts last patient visited in Oct 2016

Discontinuations are also lower than EXP 1 & 2, increasing overall powering of the study

95% of patients have elected to continue in delayed start portion of trial at end of placebo

control


Expedition 3 Expedition 1 and 2

Phase 3 3.00

Cohort size & # of cohorts 1050 per arm 500 per arm

Dosing 400mg IV monthly 400mg IV monthly

Duration of treatment 18 months 18 months

Primary endpoint ADAS-COG14 ADAS-cog11and ADCS-ADL

Patients enrolled by MMSE MMSE 20-26 MMSE 16-26

Requirement for amyloid

pathologyAmyloid positive by PET or CSF None

Number of mild patients 2100 about 1300 (est 1000 amyloid positive)

Other notes

ADCS-iADL had been a co-

primary endpoint but this was

moved down to a key secondary

endpoint in March 2016

After analysis of data from EXPEDITION 1,

primary outcome was revised ADAS-cog14

in mild patients for EXPEDITION 2

35

Based on FDA Comments, We Think a Benefit on Cognition Alone May be Enough for Accelerated Approval

In FDA Draft Guidance published in 2013 the FDA specifically calls out accelerated approval as an

option based on an effect seen on cognition alone, although this could be only for preclinical AD

Specifically they stated: “Assuming that these patients can be reliably identified, we can use the

accelerated approval mechanism (21 CFR149 314.510) to consider an effect on a valid and reliable

cognitive assessment used as a single primary efficacy measure as support for a marketing

approval”

FDA 2013 Draft Guidance: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM338287.pdf


http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM338287.pdf



36

The FDA’s Stated Preference is for Data on Both Cognitive and Functional Endpoints

Per FDA comments, the intent of the functional endpoints is to “ensure the clinical

meaningfulness of a cognitive benefit that may be observed”

However, they have noted that, in practice, it may be impractical to use co-primary

endpoints, especially before the onset of overt dementia

FDA has noted that they think the co-primary approach in practice may be impractical and

suggested cognition alone could be sufficient, especially for patients early in the spectrum of the

illness:

“Therefore, although the principle behind the co-primary outcome measure approach still holds,

the application of this approach in practice may be impractical in these cases and clear

evidence of an effect on delaying cognitive impairment may provide sufficient evidence of

effectiveness.”






37

We Think Regulators (Both EMA and FDA) Recognize Challenges of Existing Endpoints

We think it could be difficult to show large magnitude of differences on cognitive endpoints in

mild patients due to the low levels of impairment present in early AD

This sentiment has been echoed by the FDA and EMA and we think this could give some

flexibility in interpreting clinically meaningful differences

Some challenges broadly with endpoints

– Mild disease is hard to show a large difference versus placebo

– In a global study controlling for different cultures and languages is not a perfect science

– Cognitive scales have a ceiling effect which makes it hard to detect small changes


38

The FDA has Mentioned CDR-SB as a Single Primary Outcome Measure Suitable for Approval

This is both Biogen and Roche/AC Immune’s primary endpoint in their Phase 3s

Biogen has a special protocol assessment (SPA) with the FDA suggesting that the FDA views

this endpoint as acceptable for approval

The EMA has also mentioned the CDR-SB as useful, but they noted the pitfalls of 1) the

extensive training needed for the scoring and 2) that it is subject to variability among ethnicity

and language


EMA 2014 Draft Guideline: http://www.ema.europa.eu/docs/en_GB/document_library/Scientific_guideline/2016/02/WC500200830.pdf





http://www.ema.europa.eu/docs/en_GB/document_library/Scientific_guideline/2016/02/WC500200830.pdf

http://www.ema.europa.eu/docs/en_GB/document_library/Scientific_guideline/2016/02/WC500200830.pdf

39

US Major Pharma: Thoughts on Lilly and Merck from Vamil Divan

40

Our Recent Survey Suggested Investors are Getting a Bit More Positive on Sola


41

Lilly has Other Shots on Goal in Alzheimer’s Beyond Solanezumab


Could also support a positive stock reaction even without strong functional data

In addition, we see a lot more to the Lilly story than just Alzheimer’s

42

Expect a Significant Move in LLY Shares in Either Direction; More Modest Moves Expected in MRK


Positive, statistically significant data on both cognition and function could lead to a move of >20%

in LLY shares (we think there is a 10% probability of this)

Positive cognitive data with a trend on function would likely also result in a meaningful positive move

(~+5-8%), based on recent conversations with investors (30% probability)

Positive cognitive data with no trend of function would lead to the most debate (20% probability)

– May see initial positive stock reaction but then debate around regulatory and commercial potential

likely to heat up

Negative cognitive data would mean a failed study and could result in a 10-15% selloff in LLY

shares (40% probability)

Reaction in MRK will be more modest, but likely in the same direction as LLY

43

Large Cap Biotech: AC Immune and Biogen Stock Thoughts

44

We agree with our survey; we expect a big move on Biogen either way on Sola data


45

On BIIB, our model suggests a smaller move of 3-6% up or 3-4% down

Generally we think AC Immune is much more exposed to the Sola readout given their lead asset

and much of their pipeline is focused on AD while Biogen has other franchises

We expect all 3 stocks to be volatile come “sola” day especially as the data is likely to be

nuanced in the way that prior EXPEDITION readouts have been

We also think Biogen will likely trade higher than what our model says especially since this would

further the M&A thesis. However it probably trades more on the downside as well

We have gotten comments post launch on AC Immune that stock could move on the upside

more


46

Biogen Alzheimer’s Sensitivities

Every 10% success is worth ~$10/sh (or approximately 3%) to our valuation


0% 15% 25% 40% 50% 60% 75% 100%

$284 $298 $308 $322 $331 $341 $355 $378

DCF Valuation by POS to Aducanumab

$100 $1,074

$2,254 $3,775

$5,938

$7,792

$10,077

$12,790 $13,406 $14,056

$14,740

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

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20

21

20

22

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23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

Biogen AD Franchise Sales

47

AC Immune Alzheimer’s Sensitivities

AC Immune is highly levered to the AD space and we think the stock could move on a much

larger percentage basis relative to both Lilly and Biogen whatever the results.

We think the Phase 3 Solanezumab data could move POS 10-20% for AC Immune’s program

depending on the relative strength or weakness of the data which would be a $6-$12/sh move.

We are currently at 40% POS for Crenezumab.

0% 15% 25% 40% 50% 65% 75% 100%

($9) $2 $8 $18 $24 $33 $40 $56

DCF Valuation by POS to Crenezumab


48

How we model AD – BIIB and ACIU


US 2020E

Alzheimer's Prevalence (ex-prodromal) 6,144,153

% growth 3%

Diagnosed & Treated Population 3,993,699

Diagnosis Rate 65%

Mild patients treated & diagnosed 1,078,299

% of diagnosed & treated total 27%

Prodromal patient prevalence 4,405,241

% growth 3%

Prodromal patients converting to mild 440,524

% conversion rate 10%

Total Patients Elligible for AD treatment 1,518,823

Crenezumab Share 1%

Total Patients on Crenezumab 7,594

Price $25,000

% growth

Net Price $12,250

Gross to Net 30%

Compliance 70%

AD Market US EU

Alzheimer's Prevalence

(Exluding Prodromal)5.3M 8M

Diagnosed & Treated 2.4M 3.6M

Mild Treated & Diagnosed 644k 972k

Prodromal Prevalence 3.8M 3.5M

Prodromal Patients

Converting to Mild380k 350k

Total Patients Elligible for

AD treatment1M 1.3M

Gross Price $25k $15k

Gross to Net 30% 40%

Compliance 70% 70%

Net Price $12.3k $10.5k

49

Needless to say Eisai ties up with Biogen for E2609/BACE inhibitor and BAN2401/ Aβinhibitor.

E2609: Held End-of-Phase 2 meeting with FDA and a Phase III study is planned in FY3/2017

BAN2401: P2 trial enrolled 750 patients by the end of September for 3rd interim analysis but

the trial is still ongoing. The last patient in to complete 800 patient trial is expected by the of

December. Eisai should be able to report quick read out of 800 patients data early 2017. Then

decision time if Eisai will have to opt-in Biogen to co-develop aducanumab.

Lemborexant: This could be a wild card. Initiated Phase 3 for insomnia and planning P2 aiming

for dementia related for irregular sleep wake rhythm disorder (ISWRD) to target world’s first

indication. Who knows?


50

Otsuka has 4 AD assets as per below:

Lu AE58054/idalopirdine selective 5-HT3 receptor blocker, as you know failed 1 of 3 ongoing

P3 trial. This is a joint trial with Lundbeck.

brexpiprazole /Rexulti is already approved for schizophrenia. P3 is ongoing for agitation related

to AD.

APV-786/NMDA receptor antagonist, P3 trial is ongoing aiming AD related agitation. Otsuka

acquired APV-786 through Avanir acquisition.

LuAF205013, this is beta amyloid vaccine. P1 stage with Lundbeck co-developing.


51

Stock overview on AD assets

Eisai was once surrounded by speculation with outcome of BAN2401 interim analysis. We still

have to wait see 800 patients outcome to trade the stock. Risk reward is very high.

Having failed Lu AE58054/idalopirdine 1st trial, Otsuka is held back despite of relatively strong

AD assets. It is difficult to access AD assets but given some probability of success to them,

Otsuka may be undervalued.


52

EU Pharma: Thoughts on Roche from the EU Pharma team

53

Roche – major AD investment, portfolio approach

Roche is highly committed to AD with two late-stage Abeta programs in the clinic.

Crenezumab targets all 3 forms of Abeta with a focus on oligomers, gantenerumab targets plaque.

Roche was encouraged by the aducanumab data showing a nice correlation between drug and

biomarkers of AD in a prospective analysis. A retrospective analysis of Roche’s gantenerumab

studies shows a similar correlation.

Roche’s experience with the failed SCARLET ROAD P3 study is that dose is critical. Pushed

crenezumab dose in P3 to 60mg/kg. Now using gantenerumab at 220mg flat dosing. Antibody

penetration into the brain is <1%.

COGS and manufacturing going to be a meaningful element of biologics in AD. Crenezumab

patients will be receiving over 1 gram of antibody per infusion.

Dose titration is also critical in Roche’s view. The bulk of the CNS side effects are seen in the

first 6 months. Roche philosophy is to dose titrate slowly up to peak dose levels. Roche is

currently testing 4 different dose titration schedules for gantenerumab.

Functional endpoints are what payers benefit from.

MODEL: $6bn peak of ‘Alzheimer’s franchise’ sales across crenezumab & gantenerumab


54

Appendix slides: More details on the data

55

Solanezumab data from publications by endpoints

Trial DoseDosing

Lengthn

MMSE

Enrollment

Baseline

MMSE

Baseline

ADAS-Cog11

ADAS-

Cog14ADCS-iADL ADCS-ADL

Expedition 1 1012 16-26 21 22 -1.4

(p=.09)

-0.4

(p=.64)

Expedition 2 1040 21Plc: 23

Sola: 24

-1.6

(p=.04)

1.6

(p=.08)

Expedition 2: Mild

Subgroup647

Plc: 23

Sola: 22

Plc: 19

Sola: 20

-1.7

(p=.06)

2.3

(p=.04)

Expedition 1 & 2: Pooled

Mild Subgroup1322 22.5

Plc: 18.9

Sola: 19.4

-2.13*

(p=.001)

1.21*

(p=.045)

1.42*

(p=.057)

Expedition Phase 3 2100Primary

Endpoint

Previously a

Primary

Endpoint

Lower is better

BaselinesChange from Baseline (ITT) Mean

Difference from Placebo In:

Higher is better


400mg IV

Last dose at

week 76;

last

observation

at week 80

Higher is better

20-26


56

Key endpoints in AD trials


TestShort

name

Score

range

Meaning of

scoreComments

Mini-Mental State

ExamMMSE 0-30 30 is the best

The MMSE is an assessment of

cognitive function employed in both

clinical practice and clinical trials. Scores

may be impacted by a number of factors

including education, cultural background

and literacy

Clinical Dementia

Rating-Sum of

Boxes

CDR-SB 0-18 0 is the best

Interview between patients and caregiver

measuring impairment of memory,

orientation, judgement and problem

solving, etc. Tracks early stages of AD

Alzheimer's Disease

Assessment Scale

cognitive subscale

ADAS-cogDepending

on subtypesmaller is better

Dealing with memory, language,

construction and praxis orientation. Is

widely used and can be considered as a

standard tool in trials on patients with

mild to moderate Alzheimer's disease.

Due to ceiling and floor effects, its

sensitivity to change is limited in early

and late stages

Basic activities of

daily living BADL Varies Higher is better

Physical activities, such as toileting,

mobility, dressing and bathing

instrumental

activities of daily

living

iADL Varies Higher is better

Better to track early stage of AD.

Shopping, cooking, doing laundry,

handling finances, using transportation

57

Comparing Data

Trial DoseDosing

Lengthn

MMSE

Enrollment

Baseline

MMSE

Baseline

ADAS-Cog11ADCS-iADL ADCS-ADL MMSE

ADAS-

Cog11

ADAS-

Cog14CDR-SB

Solanezumab Lower is better

Expedition 1 1012 21 22 -0.4

(p=.64)

0.6

(p=.06)

-0.8

(p=.24)

-1.4

(p=.09)

0.1

(p=.51)

Expedition 2 1040 21Plc: 23

Sola: 24

1.6

(p=.08)

0.8

(p=.004)

-1.3

(p=.06)

-1.6

(p=.04)

-0.3

(p=.17)

Expedition 1: Mild

Subgroup675

Expedition 2: Mild

Subgroup647

Plc: 23

Sola: 22

Plc: 19

Sola: 20

2.3

(p=.04)

0.7

(p=.10)

-1.5

(p=.05)

-1.7

(p=.06)

-0.3

(p=.22)

Expedition 1 & 2: Pooled

Mild Subgroup1322 22.5

Plc: 18.9

Sola: 19.4

1.21*

(p=.045)

1.42*

(p=.057)

0.93*

(p=.001)

-1.74*

(p=.001)

-2.13*

(p=.001)

-0.16*

(p=.34)

Expedition Phase 3 2,100

Previously a

Primary

Endpoint

Primary

Endpoint

Aducanumab

10mg/kg IV 32 24.8 2.25*

(p<.05)

-1.24*

(p<0.05)

6mg/kg IV 30 24.4 0.85*

NS

-.76*

NS

3mg/kg IV 32 23.2 2.11*

(p<.05)

-.50*

NS

CrenezumabADAS-

Cog12

Plc: 84

Cren: 16318-26

Plc: 21.6

Cren: 21.9

.51

p=.77

.49

p=.46

-1.78

p=.190

-0.08

p=.85

Plc: 54

Cren: 11120-26

2.18

p=.26

.70

p=.351

-2.24

p=.128

.02

p=.964

Plc: 39

Cren: 8222-26

0.21

p=.95

1.05

p=.250

-3.44

p=.036

-0.44

p=.423


15mg/kg IV

PRIME

ABBY Trial

Last dose at

week 68;

last

observation

at week 72

400mg IV

Last dose at

week 76;

last

observation

at week 80

Change from Baseline (ITT) Mean Difference from Placebo In:

Higher is better

54 weeks

20-26

16-26

20-30

Baselines

Lower is betterHigher is better


58

Companies Mentioned (Price as of 18-Oct-2016)

AC Immune (ACIU.OQ, $15.19, OUTPERFORM[V], TP $18.0) AbbVie Inc. (ABBV.N, $61.55) AstraZeneca (AZN.L, 5002.0p) Baxter International Inc. (BAX.N, $48.06) Biogen, Inc. (BIIB.OQ, $295.05, NEUTRAL, TP $322.0) Bristol Myers Squibb Co. (BMY.N, $50.05) Eisai (4523.T, ¥6,664) Eli Lilly & Co. (LLY.N, $78.77, OUTPERFORM, TP $96.0)

Johnson & Johnson (JNJ.N, $115.41) Lundbeck (LUN.CO, Dkr218.6) Merck & Co., Inc. (MRK.N, $62.09) Novartis (NVS.N, $76.31) Pfizer (PFE.N, $32.69) Roche (ROG.S, SFr233.6, OUTPERFORM, TP SFr300.0) Shire Pharmaceuticals (SHP.L, 5146.0p)

Disclosure Appendix

Important Global Disclosures

The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for AC Immune (ACIU.OQ)

ACIU.OQ Closing Price Target Price

Date (US$) (US$) Rating

18-Oct-16 15.19 18.00 O *

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

3-Year Price and Rating History for Biogen, Inc. (BIIB.OQ)

BIIB.OQ Closing Price Target Price


28-Oct-13 254.58 290.00 O

10-Dec-13 285.23 375.00

13-Feb-14 328.62 400.00

23-Jul-14 337.60 425.00

19-Nov-14 303.61 400.00

17-Mar-15 426.12 500.00

13-May-15 390.04 NR

19-Jan-16 269.85 322.00 N *

07-Jun-16 252.86 312.00

01-Aug-16 301.83 322.00


O U T PERFO RM

N O T RA T ED

N EU T RA L

3-Year Price and Rating History for Eli Lilly & Co. (LLY.N)

LLY.N Closing Price Target Price


28-Oct-13 50.88 52.00 N

07-Jan-14 51.19 54.00

19-Feb-14 58.09 56.00

24-Apr-14 58.68 61.00

02-Nov-14 66.33 65.00

17-Dec-14 70.28 71.00

04-May-15 73.05 72.00

08-Jun-15 78.52 75.00

03-Aug-15 84.14 89.00

08-Oct-15 83.77 105.00 O

12-Oct-15 79.44 99.00

04-Feb-16 74.28 94.00

01-May-16 75.53 91.00

28-Jul-16 82.93 96.00


N EU T RA L

O U T PERFO RM

3-Year Price and Rating History for Roche (ROG.S)

ROG.S Closing Price Target Price

Date (SFr) (SFr) Rating

18-Oct-13 242.10 280.00 O

20-Jan-14 250.00 320.00

03-Feb-14 248.20 300.00

09-Jan-15 278.10 295.00

16-Mar-15 265.30 300.00

31-Mar-15 268.10 320.00

28-Jan-16 258.10 300.00

* Asterisk signifies initiation or assumption of coverage. O U T PERFO RM

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As of December 10, 2012 Analysts’ stock rating are defined as follows:

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59

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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Rating Versus universe (%) Of which banking clients (%)

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Underperform/Sell* 18% (44% banking clients)

Restricted 0%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Target Price and Rating Valuation Methodology and Risks: (12 months) for AC Immune (ACIU.OQ)

Method: Our AC Immune $18 target price and Outperform rating are based on a probability adjusted DCF. We extend our estimates to 2030 and use a 12% discount rate and 2% terminal growth rate in line with small cap biotech peers with platform technologies.

Risk: Key risks to our AC Immune $18 target price and Outperform rating include: clinical setbacks in the AD space e.g. with Solanezumab, crenezumab fails to show significance in Phase 3, difficulty enrolling Phase 3 or a safety issue for platform.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Biogen, Inc. (BIIB.OQ)

Method: Our BIIB $322TP and Neutral rating is based on a DCF. Our DCF is $322/sh based on an 8% discount rate & 2% terminal growth in-line with peers.

Risk: Risks to our BIIB $322 TP and Neutral rating: Key upside risks: Success (meaning hitting primary endpoint) on the anti-Lingo program in mid-16, Positive data that provides greater confidence around BAN2401 (anti-amyloid Beta antibody), Tecfidera sales reaccelerate, Hemophilia assets continue to take share in spite of competition, SMA program gets to market earlier than our expectations through surprise regulatory approval. Key downside risks: Anti-Lingo1 program discontinues after failure in Ph2 Synergy study, Efficacy or safety concern with aducanumab Ph3 program, Worse than expected MS and hemophilia sales during 2016, SMA program has a surprise efficacy or safety failure in Ph3.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Eli Lilly & Co. (LLY.N)

Method: Our $96 target price is based 75/25 blend of DCF valuation ($95) and relative valuation ($98). We use a 7% WACC along with a -1.5% perpetuity growth forecast for our DCF valuation and apply 24 times our 2017 EPS estimate for relative valuation. Our rating of Outperform is based on positive outlook of its core product franchises above comparable peers.

Risk: Key risks to our $96 target price and outperform rating include (1) pipeline failures, particularly on their key diabetes phase 3 assets and autoimmune assets; and (2) inability to appropriately contain costs in keeping with long-term targets.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Roche (ROG.S)

Method: We value Roche on a PE relative basis to the European markets modulated by our PharmaValues NPV methdology. Our European Major Pharma market relative assumption is 160% and our sector PE relative for Roche is 105%, giving a price target of SFr 300 per share. Roche

‘s 3-year historical average PE sector relative is 103%. Our Outperform rating is based on material upside to mid-term sales growth

expectations as Roche's P3 pipeline matures. We believe Esbriet, ocrelizumab, PD-L1, lebrikizumab and venetoclax offer combined peak sales potential in excess of $10bn.

Risk: In addition to the typical pharmaceutical industry risks associated with potential product approvals, withdrawals and patent challenges, key risks are the competitive development of Roche's immuno-oncology pipeline relative to peers and the mid-term potential of ocrelizumab in MS. The medium-term impact of biosimilars on Roche's in-market drugs is also key. The key ris to outperform rating is lack of delivery of sufficient pipeline to drive top quartile growth

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, MRK.N, AZN.L, PFE.N, LUN.CO, SHP.L) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, MRK.N, PFE.N, SHP.L) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (BIIB.OQ) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (LLY.N, ACIU.OQ, ABBV.N, PFE.N, SHP.L) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, MRK.N, PFE.N, SHP.L) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, JNJ.N, MRK.N, AZN.L, 4523.T, PFE.N, LUN.CO, SHP.L) within the next 3 months.

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As of the date of this report, Credit Suisse makes a market in the following subject companies (LLY.N, BIIB.OQ, ABBV.N, BMY.N, JNJ.N, MRK.N, PFE.N).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SHP.L).

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (PFE.N). As of the date of this report, an analyst involved in the preparation of this report, Vamil Divan, has following material conflicts of interest with the subject company. The analyst or a member of the analyst's household has a long position in the common stock Pfizer (PFE.N). A member of the analyst's household is an employee of Pfizer (PFE.N).

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This research report is authored by:

Credit Suisse Securities (USA) LLC .................................................................................................................................................... Alethia Young

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.

When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only

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