1. Andrey Antov Dario Englot Adam Kaye Evaluating Biogen/IDEC An Acquisition in Multiple Sclerosis Pharmaceuticals

2.  Biogen Idec  formed in 2003, merger of Biogen Inc., founded in 1978, and IDEC Pharmaceuticals, founded in 1985  3,900 employees, $3 mil revenue 2006  Leader in the MS treatment industry, holding largest MS drug, a strong pipeline, large R&D emphasis  Pfizer is without significant holding in MS market  Biogen Auction: Opportunity for Pfizer? source: 2006 Biogen Idec financial statements Evaluating Biogen Idec

3.  What  MS is a chronic, progressive autoimmune illness that affects the brain and spinal cord  Who  400,000 in US, 2.5 million worldwide, 2:1 females  Symptoms  visual, sensory, and motor disturbances  Major Subtypes  Relapsing-remitting  Secondary progressive  Primary progressive sources: eMedicine, UpToDate Multiple Sclerosis (MS): Overview

4. blood brain barrier IFN  /  auto-antibodies inflammatory cytokines IL2 T B BG 12 Tysabri Daclizumab CDP 323 Rituxam anti-LINGO NgR-Fc discovery phase 1phase 2phase 3 market Cladribine (Sonoma) Fingolimod (Novartis) sources: Access Medicine by McGraw Hill, Biogen MS Brochure Mechanism of Biogen MS Drugs Copaxone (Teva) Avonex Betaseron (Bayer) Rebif (EMD Serano)

5. treated patients untreated patients (lost revenue) 0% 20% 40% 60% 80% 100% 20072012*2017 Percentage of MS treated patients** *entry of oral medications, adding 5% more treated patients **increase due to oral medications entry and increase in prescriptions made by doctors sources: Factiva, ISI Emerging Markets, Curr Opin Investig Drugs MS Market in US 0 4 8 12 20072012*2017 Cumulative loss=$4.8BLN Cumulative gain=$4.5BLN Gross MS Market Revenue ($BLN)

6. 0 10 20 30 40 50 200720122017 Market share of MS drugs (%) *cumulative total market revenue in $BLN adjusted to ‘07 current value if prescription price is $2,200 per month per patient source: Case Exhibit 3 and DSW Data report, Investext plus, Wall Street Transcript, Drug Researcher, Biomarket Group 0 200 400 600 800 200720122017 RRMS SPMS other Number of MS affected people (000’s) 28* 63* opportunity for Pfizer Avonex BG12 generics Rebif Copaxone Betaserone Tysabri MS Market in US 0 10 20 30 40 50 200720122017 Market share of MS drugs (%) Avonex BG12 generics Rebif Copaxone Betaserone Tysabri

7. Assumptions **BG-12 will be the first oral MS drug on the market** Revenue/Patient is 2/3 that of Avonex Costs of Drug are 75% of Revenues (25% Profit Margin) Cost of Capital is 13% 3 orals in Phase III: BG12 (Biogen), Fingolimod (Novartis), Cladribine (Sonoma) - Project oral MS drugs will occupy 44% of the market by 2017 (valued at $1.4 bil) - Assume 1 st drug will occupy 50% of oral market; other two will occupy 25% each - Assume all three drugs have equal chance (33%) of coming to market first Value of BG-12 if it come to market first => $1.4 bil x 0.50 = $702 mil Value of BG-12 if it is not first on market => $1.4 bil x 0.25 = $351 mil Risk-adjusted value of BG-12 => $702 mil(0.33) + $35 mil (0.67) = Sources: Current Opinion in Chemical Biology, Medical News Today, Nature Biotechnology, ISI Emerging Markets Valuing BG-12 - pipeline

8. Assumptions 10% Growth Rate Tax Rate 34% Capex is 4% of Revenues Operating costs 75% of Revenues Cost of Capital is 13% Sources: Biogen Idec Annual Report Valuing Biogen Idec (all values in 000’s)

9. + Entering new market with many opportunities + Progressive disease-consistent revenues + Immature market, new oral drugs becoming available  However, other large players in the market  One of company ’ s most revenue-generating drugs is coming off patent soon [Avonex] Biogen Acquisition: Benefits & Riscks

10.  Biogen Idec is a profitable company in the MS market with expected revenue growth and a strong pipeline of new treatments  Competition is strong, but risk is acceptable  Acquisition of Biogen will launch Pfizer to the front the MS market and into a position to lead future MS research and therapies  Estimated NVP of Biogen is $12.7 bil. Given a competitive bidding field and the potential held by this acquisition, consider maximum bids of 20% above NVP.  If acquisition bid is unsuccessful, licensing of BG-12 to break into oral MS treatment market (if possible) would be a good business move. VISIOtech Recommendations

11. Questions

12. Drug200720122017 Avonex Total [Generic] 38 [0]27 [3]20 [14] - Biogen’s cash cow, though sales on the decline by ~2%/yr. Will accelerate when orals hit market ~2011. Patent expires in 2011, but shift to generics is slow for biological agents. Tysabri Total [Generic] 2 [0]7 [0]7 [2] - Concern over PML subsiding after large TOUCH and TYGRIS studies show monotherapy is safe. Studies in CNS Review show good efficacy, but growth will be dampened by orals. Copaxone Total [Generic] 30 [0]34 [9]28 [19] - Teva’s drug increasing in sales by 2-3%/yr, and expected to accelerate to ~4%/yr, overtaking Avonex. This increase expected to slowly reverse with emergence of orals. Patent exp. 2015. Betaseron Total [Generic] 1515 [5]15 [8] - Bayer expected 15% increase this past year, but actually saw small decrease. Will remain strong contender, given mod. Efficacy against progression. Off patent next year in 2008. Rebif 18 16 - EMD Serono and Pfizer’s drug enjoying mod. sales increases due to revamped marketing. New formulation with improved benefit/risk profile now in Phase III, will likely extend patent. BG12 0822 - Currently in Phase III since Jan 2007, excellent chance at being first oral. If so, these numbers predict it will hold half of the oral market in the coming decade. Projected 10-year market share of MS drugs * percentages in table represent “Patient Share,” and thus may not total 100% if patients take more than one drug sources: Investext plus, Wall Street Transcript, Reuter’s Business News, Drug Researcher, Biomarket Group

13. DrugCompanyIndicationClassRouteSide Effects AvonexBiogen IdecRRMSbeta interferon IM inj, 1x/w depression, flu sx, allergic reactions BetaseronBayerRRMS, PMSbeta interferon SQ inj, qod same as Avonex BG 12Biogen IdecRRMS, PMS?fumaratePO, qd GI sypmptoms, flushing CladribineSonomaRRMSpurine analogPOflu sx, aller. rxn, blood disorders CopaxoneTevaRRMSacetateSQ inj, qd short-term rxn, aller. rxn Fingolimod (FTY720) NovartisRRMS, PMS?sphingosinePOviral infections, headache, diarrhea, nausea RebifEMD Serono, Pfizer RRMSbeta interferon SQ inj, 3x/w depression, liver dis., analphylaxis TysabriBiogen IdecRRMSCAM inhibitorIV inj, q4w infections, pneumonia, appendicitis, PML? sources: Access Medicine by McGraw Hill, eMedicine MS Drugs on the Market

14. Assumptions Revenue/Patient is $28,000/patient Costs of Drug are 75% of Revenues (25% Profit Margin) Cost of Capital is 13% Valuing Tysabri

15.  Revenues: Past 2 years, about 10% growth  Operating costs: Last 3 years: 98%, 90%, 83%  Synergies from Pfizer buying, cut costs, assumed down to 75% of revenues  Capex: Taken from PPE changes without depreciation; changes in PPE were about 4% of revenues last 2 years  Accounts Payable (avg 3.9%), Inventory (6.9%), and Accounts Receivable (11.7%) taken from balance sheet  Cost of Capital was 13% (given)  Revenue/Patient per year for BG-12: assumed about 75% of that for Avonex  Oral drug is cheaper, but daily. Industry averages for oral vs. injection varied from 4:5 to 1:7  For Tysabri, price was given in case Valuation Assumptions