Biogen Idec Acquisition Thesis November 30, 2007 Umesh Baheti (MBA) Jason Chen (MD) Akshay Dhiman (MBA) Huaping Tang (PhD)

Market Trends Pharma sector under rough weather Lack of blockbuster drugs through internal R&D Concerns surrounding drug safety and patents Increased scrutiny by the FDA on new and existing products FDA approvals to R&D dollars spent has declined ($64Bn,13 approved compared to $27Bn, 24 approved in 1998)1 Increased competition from generics Possibility of control on drug prices by new Administration could further erode industry profits Pharma seeking new growth avenues Increasing focus on niche areas Alliances offer enhanced discovery capability through beefing up the pipeline and filling strategic gaps Biotech valuation multiples higher than Pharma due to higher growth potential Pressure on management to improve shareholder returns Increased shareholder activism 1 Source: Economist Oct -2007 Yale Pharmaceutical Case Competition, 2007

Pfizer under pressure! Pfizer’s lackluster financial performance Source: Capital IQ as of 11/28/07 Pfizer’s lackluster financial performance Pfizer’s stock has been the worst performer in its peer group1 over the last 5 years Pfizer stock trading at a substantial discount to peer group1 – P/E of 10.8x (median P/E of 19.3x) High potential Exubera taken off market in 3Q ’07; write-off of $2.8Bn Lipitor under competitive pressure from generics (Lipitor 3Q ’07 revenues 5% lower than ’06) 80% decline in YTD ‘07 Zoloft revenue compared to ’06 ~ $12Bn of revenue loss due to 5 patent expiration Source: Pfizer Low ROI from R&D Increasing R&D costs (>$8Bn) Limited business development success across therapeutic categories and development stages No major blockbuster expected 1 Peer group includes Astra Zeneca, Merck, Novartis, Wyeth, El Lilly, Glaxo Smithkline, Abott Laboratories

Pfizer’s rationale for acquisition Strategic Diversify portfolio of therapeutic areas Improve presence in biologics Shore up product pipeline Access to biotech R&D capability Industry undergoing shift Financial Biogen is up for sale Opportunity to deploy surplus cash Sizeable market potential (350-500K patients annually) Biogen’s pipeline complement’s Pfizer’s strategic priority to enhance revenue both in the short and the long term Yale Pharmaceutical Case Competition, 2007

Acquisition Evaluation Benefits Access to Biogen’s pipeline Product Diversification Access to Avonex and BG-12 Access to Biogen’s R&D resources Knowledge diffusion into Pfizer’s existing R&D Access to niche and profitable MS market Financial Higher valuation multiples due to biotech slant Higher gross margins on biotech Synergies Technology Leverage Pfizer’s global sales and distribution capability Risks Organizational Divert attention from internal rationalization Different R&D cultures and priorities; R&D diseconomies of scale Limited cost synergies: Geographically diverse locations Transaction Uncertainty Complications due to CoC provisions Rituxan may not end up with Pfizer Risk of overpay due to higher valuation Liability Efficacy and safety of Tysabri Revenue Erosion Flagship product Avonex under threat from generic substitution and competition Timeline may not match Yale Pharmaceutical Case Competition, 2007

MS mechanism and treatments Biogen Competitors Approved drugs Avonex Tysabri Rebif Betaseron Copaxone Novantrone Pipeline drugs (Ph III) Rituxan BG-12 (Fumarate) Laquinimod (Active Biotech) Campath MBP8298 Fingolimod (Norvatis) Minocycline (Tetracycline) Mylinax Progestin and Estradiol Reimmune Teriflunomide Trimesta Stem cells T-Cell vaccination Source: Kieseier BC et al. CNS drugs, 2007;21(6):483-502 Yale Pharmaceutical Case Competition, 2007

Comparison of existing MS drugs Name Class Side Effects Unique Characteristics Indication Dose/Admin Avonex IFNβ-1a (↓anti-inflammatory CK) Injection-site disorders, flu-like symptoms, ↑liver enzymes, CNS (depression/ fatigue) 1st drug shown in RCT to ↓MS progression ↓exacerbations. Only Rx slow permanent MS disability RMS 30mcg IM once/wk Rebif IFNβ-1a (recombinant) only IFN ready-to-use, pre-filled syringes, autoinjector (PRISM) 22-44mcg SC 3X/wk Betaseron IFNβ-1b 1st drug shown effective in RCT Tx RRMS RRMS 0.25mg SC every other day Copaxone (glatiramer acetate) Polypeptide immuno-modulator “myelin decoy” Injection-site disorders Only non-steroidal, non-interferon MS therapy (↓SE), ØNAB 20mg SC QD Novantrone Anthracenedione Immuno-modulator ↓T, B, γ Cardiotoxic Hi potency SPMS, PRMS, RRMS 12mg/m2 IV 3mo Tysabri Monoclonal Ab PML in combo w/ other immunoRx ↓annual relapse rate 67% = 2X current Rx (AFFIRM) 3mg/kg IV once/1mo Source: www.uptodateonline.com Yale Pharmaceutical Case Competition, 2007

Comparison of MS drugs in Phase III Administration Oral Injection/Infusion Names BG-12, Laquinimod,Fingolimod, Mylinax, Teriflunomide, Micocycline, Progestin and Estradiol, Trimesta. Rituxan, Campath, Reimmune Mechanism/ Indication (all relapsing) All immunomodulators Fingolimod (dual functions) Micocycline (antibiotics) Progestin, Estradiol, and Trimesta (Hormones) for women only Rituxan, Campath, (monoclonal antibodies) Revimmune ("reboot" ) Efficacy BG-12(48%) Laquinimod(40%) Fingolimod(>50%) Rituxan(91%) Campath(>80%) Approved for treating other diseases Trimestra, Estradiol, Progestin, Micocycline Rituxan Legend: Biogen drugs / Competitors’ drugs Yale Pharmaceutical Case Competition, 2007

Valuation Assumptions Sum of the parts analysis: 3.0-4.0x multiple on ’10 expected revenues to value each drug (based on precedent biotech acquisitions) Pipeline valuation: Values Ph III drugs @ $100M; Ph II/III @ $50M; Ph II @ $25M; Ph I @ $15M and Pre-clinical @ $5M Facilities Valuation: Values production facility in NC and Denmark @ $400M (based on precedent transactions) Discounted Cash Flow (DCF) analysis: Enterprise value calculated for Biogen’s worldwide operations 13% WACC (given) Terminal value calculated using 5-8% perpetuity growth rate Trading Multiples: TEV/EBITDA and TEV/Sales multiples used Peer group comprises of Abott Laboratories, Astra Zeneca, Glaxo SmithKline plc, Merck & Co. Inc., Novartis AG, Eli Lilly & Co., Sanofi-Aventis AG and Wyeth Yale Pharmaceutical Case Competition, 2007

Valuation Summary Accretion – Dilution analysis Implied Enterprise value ($ Bn) 14.7 – 28.3 20.3 – 30.2 9.4 – 34.9 18.8 – 27.8 1 1 Source: HSBC Equity research Accretion – Dilution analysis Offer price of $78/share (30% premium to pre Biogen seeking buyout) All cash offer likely to have adverse impact of Pfizer’s credit ratings Considering most likely scenario (50-50 case), merger becomes accretive in ’10 Assumed $300MM annual synergies Yale Pharmaceutical Case Competition, 2007

Strategic alternatives & key considerations Criteria Alternatives Portfolio diversification Enhance product pipeline Biotech R&D expertise Enhance valuation Cost Incurred Status-quo ✘ ✔ ✔ Acquire Biogen ? ✘✘✘ Acquire other biotech company ✔ ✘✘ License MS pipeline from Biogen Partner with Biotech Recommendation in rank order Acquisition makes strategic sense if price between $72 -$85 Build expertise in biotech through partnerships Seek other acquisitions in the biotech space Yale Pharmaceutical Case Competition, 2007

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