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

2. 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

3. 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

4. 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 ( K 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

5. 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

6. 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):
Yale Pharmaceutical Case Competition, 2007

7. 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:
Yale Pharmaceutical Case Competition, 2007

8. 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

9. Valuation Assumptions
Sum of the parts analysis:
x multiple on ’10 expected revenues to value each drug (based on precedent biotech acquisitions)
Pipeline valuation: Values Ph III $100M; Ph $50M; Ph $25M; Ph $15M and $5M
Facilities Valuation: Values production facility in NC and $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

10. 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

11. 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

12. Appendix