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LIFE SCIENCES AND HEALTH CARE

Liana Moussatos, Ph.D.
(415) 263-6626
liana.moussatos@wedbush.com

David M. Nierengarten, Ph.D.

(415) 274-6862
david.nierengarten@wedbush.com

Tao Levy
(212) 938-9948
tao.levy@wedbush.com

Sarah James
(213) 688-4503
sarah.james@wedbush.com

Heather Behanna, Ph.D.

(415) 274-6874
heather.behanna@wedbush.com

Zarak Khurshid
(415) 274-6823
zarak.khurshid@wedbush.com

2015 Health Care Sector Outlooks

LIFE SCIENCES AND HEALTH CARE

Health Care beat the broader market (up 19% YTD vs 11% S&P) and was the best performing sector in the S&P. As we
wrap up 2014, our healthcare analysts have compiled in this report their general perspectives and Top Picks for 2015,
focusing on each of their respective subsectors.

Managed Care: We see the Medicaid and Medicare sectors as undervalued growth stories
o We continue to favor names exposed to the fast growing Medicaid and Medicare sectors and reiterate our top
pick as Molina.
o We are watching cost trend development closely, insurers are predicting the largest increase (50-150bps) since
the economic downturn, claims data does not yet support the increase.
Top OUTPERFORM Pick: Molina (MOH)

Medical Devices: Expecting recent growth to continue through 2015

o MedTech has delivered another year of outperformance, driven by improving procedure volumes and M&A
activity.
o We expect EPS growth in 2015 to be driven by new product launches, improved operating leverage and
increased procedure volumes, with the latter supported by demographic trends and an expansion in health
insurance coverage.
Top OUTPERFORM Pick: Masimo (MASI)

Medical Diagnostics and Life Science Tools: Neutral on the group heading into 2015
o A better US business environment and stronger end user demand helped support expansion in the diagnostics
sector in 2014, while greater-than-expected uptake in new clinical applications in the genomics sector and M&A
activity aided the life sciences tools group. However, continued reimbursement uncertainties and a more
challenging stock market sentiment makes it difficult for us to make the case for meaningful multiple expansion
in 2015
o Over the long term, we continue to like the groups favorable secular trends, which are driven by new product
development and improvement in disease diagnosis and patient management.
Top OUTPERFORM Pick: Cerus (CERS)

Emerging Pharmaceuticals : Expecting material catalysts in 2015

o In our view, 2015 continues to have material clinical, regulatory, and commercial catalysts for Emerging
Pharmaceutical companies
o After record financings in 2014, we look for companies to put their extra cash to good uses.
o We are aware of potential new drug launches, important clinical data releases, and regulatory approvals in 2015.
Top OUTPERFORM Picks: Omeros (OMER) and Intercept (ICPT)

Biotechnology/Biopharmaceuticals/BioDefense: Expecting growth, but at a more subdued pace

o 2014 was a record year for biotech in terms of the number of companies going public and the number of drugs
approved by the FDA. Biotech delivered one of the best returns of any industry this year, and we expect that
growth to moderate. but continue in 2015.
o We expect the cancer immunotherapy and gene therapy fields to gain increased investor focus in 2015. Data
readouts and high-profile IPOs should highlight both the opportunity and significant advancements that have
recently been made in treating cancer and genetic disorders.
o Reimbursement risk will act as a headwind in 2015, with increasing drug prices potentially bringing about
renewed calls for price controls.
Top OUTPERFORM Picks: Hyperion (HPTX) and bluebird bio (BLUE); Pick for Most Likely to
UNDERPERFORM: Raptor (RPTP)

Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision. Please see page 19 of this
report for analyst certification and important disclosure information.

2015 Managed Care Outlook

Sarah James (213) 688-4503

We continue to view the Medicaid sector as an undervalued growth story. The Medicaid sector is undergoing unprecedented
growth that will take the market from $124B in 2013, according to Kaiser, to as high as $400B over the next decade, in our opinion.
While multiples have recovered, we believe investor concern over the initial profitability of the new business has kept Medicaid
multiple from reflecting the true run-rate earnings growth. We estimate $49B in new and re-bid contracts and Medicaid expansion
came to market in 2014 and 2015. We continue to see potential for further contracts to be announced or awarded in the next few
years, we estimate a $25B+ pipeline of new and re-bid contracts through 2017, but view revenue growth as cyclical in that states
will be in a wait-and-see period before bidding out the remainder of the contracts. During this time, we see potential for meaningful
margin improvement. As new contracts hit the 12-18 month mark, we believe MLR could decline from mid-90% range to 87-88%.
Additionally, we believe Medicaid insurers such as Molina and Centene could leverage overhead expenses to bring down SG&A as
much as 50bps+ over time.
Sentiment has improved on Medicare, but we still see consensus growth expectations as conservative. We believe
consensus estimates underestimate the pace of penetration increase for Managed care within the Medicare market. Based on
Wedbush consumer surveys, we believe penetration will increase 3-4% annually through 2020, above consensus 0-2%
expectations. When adding this to eligible growth of 3%, and market share gains from top performers like United and Humana, we
see the potential for 10-15% MA revenue growth through 2020.
Commercial plans expecting the largest cost trend uptick in 12 years, insurers are pricing to trend, but historical patterns
point to potential risk of 1-year spread compression. Commercial insurers are guiding to a 50-150bps cost trend increase in
2015, up from 0-50bps in 2014, and a 50bps decline in 2013. Historically, when cost trends have turned, pricing trends lag, causing
spread compression. This length and size of spread compression has significantly declined with the onset of electronic claims and
more advanced analytics and underwriting, but as recent as the last cost trend turn in the mid-late 2000s, we still see evidence of
a lagging price cycle. We believe insurers will continue to value margins over growth and price to cost trends, but we are closely
monitoring 2015 for the risk of spread compression.

Top Pick: Molina Healthcare (MOH)

Molina Healthcare (MOH, OUTPERFORM) 12-Month Price Target $58
Consensus Opinion
Market Cap (MM)

$2,460

Buy

Price (as of 12/09/14)

$50.89

Hold

11

690k

Sell

Avg Volume (3m)

Current Qtr Estimates

Next Fiscal Year Estimates

Revenue (MM)

EPS

Wedbush

$2,718

$0.20

Street

$1,812

$0.01

Revenue (MM)

EPS

Wedbush

$13,109

$2.94

Street

$13,393

$2.64

Source: Company reports, Thomson First Call, Wedbush Research

th

We believe run rate revenue guidance is likely to be raised to at least $13.5B at the February 12 investor day, consensus is
$13.4B, and we see run rate revenue as being in the $14-16B range. Current guidance of $12.5B was set prior to the companys
winning a $750M contract in Puerto Rico and acquiring $250M in annual revenue via a FL plan. We continue to see the potential for
run rate revenue based on already awarded contracts to be in the $14-16B range, with the primary drivers of upside being: 1) up to
$1B from opt-out decreasing over time, 2) $0.4-1.4B higher than current TX duals enrollment as implied by demo size and current
share, 3) up to $600M in further expansion enrollment gains.
We believe 2016 and 2017 will be characterized by strong earnings growth as the company moves to run rate 2% margins
from the current 0.5-1%. The margin improvement will be driven by MLR and SG&A improvements as new contracts hit the 1-year
mark. As these move through the sometimes volatile first year of operations, the company will implement medical management and
seek corrective rate action, if needed, leading to run rate margins generally around the 12-18 month mark. Six contracts representing
$1.5-2B in annualized revenue started in 2014 and five contracts representing $2.4-4.2B in revenue in 2015. We estimate an
additional $4-6B in revenue growth from 2014-2016 could drive overhead leverage, moving SG&A down from 8% to 7.5% or better.
We updated our model to reflect 7.6% SG&A in 2015 and 2016 leaving 10bps room for upside of $0.13. We also estimate the
maturing of new contracts past their first year could help bring down MLR by 25-100bps in 2015. A 25bp decrease in 2015 MLR has
an upside of $0.31.
LIFE SCIENCES AND HEALTH CARE| 2

 Capital deployment strategy could drive earnings upside. Molina currently has $300M in free cash and the ability to fund revenue
growth up to $18B. We believe this could increase if they are successful in ongoing negotiations with the NAIC to exclude the HIF
and premium taxes from the premium base used in RBC calculations. Additionally, we believe the company could see a nice return
should they decide to sell the MMIS asset which is currently generating $226M in revenue and a 15% margin. United recently entered
the market and we believe would be a natural acquirer, given the similar strategy of up-selling medical management on top of the
claims processing capabilities. We also believe Care 1st is up for sale. The plan won duals contracts in San Diego and LA, both of
which MOH also won, and currently have 5.3K duals and 52K GMC members in San Diego where Molina has 137K or 28.6% share.
We believe the GMC enrollment would not be an issue as combined share would be less than Community Health Group is currently
permitted. Typically, market acquisitions are accretive as duplicate overhead can be removed. We believe Molina may be in a
position to return capital to investors via dividends or share repurchases as early as 2017 or 2018, depending on the pipeline of
contract wins as new contracts require upfront capital.
We reiterate our price target of $58 and OUTPERFORM rating. Our price target represents a 12.6x multiple of our 2016E EPS of
$4.19.
Risks to the attainment of our PT include inadequate rates and higher utilization.

Figure 1: Revenue Growth through 2015

$2B

$0.5B

$12.5B

ACA

Acquisitions

2015
Guidance

$0.6B

$1B

$0.4-1.4B

$0.25B

$0.75B

$14B-$16B

$2B
$8B

2015 Current
Health Plan
Business

Duals

Higher
Opt-out
Expansion Levels Hold
Enrollment

TX Duals

FL
PR Contract
Acquisition

Run Rate
Revenue
Exiting 2015

Source: Wedbush Securities, Inc.

Our recent note: Raising PT to $58

LIFE SCIENCES AND HEALTH CARE| 3

2015 Medical Devices Outlook

Tao Levy 212-938-9948

We believe MedTech is poised to continue its recent outperformance as we move through 2015, driven by relative
strength in EPS growth, stable-to-improving procedure volumes, and an expansion in the number of Americans with
health insurance. Thus far in 2014, MedTech is beating the broader market by 13 percentage points. Importantly, the group has
performed better in the second half of the year compared to the first half, in part driven by the effect of M&A activity
(Medtronic/Covidien; Zimmer/Biomet; Becton Dickinson/CareFusion), but also a general improvement in procedure volumes, which
we believe bodes well heading into 2015.

With many of the MedTech stocks at multi-year highs, valuation metrics similarly have risen; however, while the MedTech
group trades at a relative forward P/E multiple that is at 5-year highs, it remains 15% below the levels seen prior to the
2008 Presidential election, which coincided with early discussions of healthcare reform/Affordable Care Act.

In addition, we would expect share prices to follow a more seasonally-driven pattern of performance. In other words, we
believe positive financial results of 4Q14 should spur MedTech stocks to perform well in 1Q15; on the flipside, the seasonally softer
1Q15 results could negatively affect the group in 2Q15. Eventually, this should culminate with a healthy performance in the back
half of 2015.

We expect the key drivers behind EPS growth in 2015 to be procedure volume improvements, new product
development/launches, and operational/financial leverage; partially offset by foreign currency and increasing pressure
from hospitals and insurance companies to reduce costs.
New products abound. Some of the emerging technologies we expect to garner investor attention include drug-coated
balloons for the treatment of peripheral artery disease (BCR, BSX, MDT), patient monitoring/diagnostic devices (STJ, MASI,
MDT), new diabetes pumps integrated with continuous glucose monitoring data (DXCM, JNJ, PODD, TNDM), catheter-based
left atrial appendage occluders for the prevention of strokes (BSX, STJ), new devices to map and treat atrial fibrillation (ABT,
BSX, STJ), and new percutaneous heart valves (BSX, EW, MDT, STJ).
Improvement in operating leverage. In 2015, we expect to see the benefit of the cost-reduction and restructuring programs
that several of the MedTech companies embarked on over the last few years. In addition, with the heightened M&A activity in
2014, we would anticipate that potential redundancies of the combined companies (e.g., back office infrastructure) could begin
to be addressed. However, some of these operating improvements initially may not be appreciable given the impact from
foreign currency on several of the companies financial results.
Procedure volumes on the rise. With a growing number of Americans with health insurance, an expanding Medicare
population (driven by aging baby boomers), an increase in life expectancy, and a large number of patients with chronic
diseases (heart disease, diabetes), we expect demographics to represent a tailwind for MedTech over the next decade.
Headwinds from payor/provider cost controls and foreign currency. With the need to lower the cost of healthcare,
insurance companies and hospitals are using various means to reduce waste and improve efficiency and patient outcomes.
While in some cases, this may reduce procedure volumes or average sales prices, we also believe it provides an opportunity
for medical technologies that can demonstrate superior economic value for the payor/provider/patient. Lastly, MedTech
companies will have to contend with a significant impact from foreign currency, which at current rates is expected to negatively
impact 2015 revenue, on average, by 3% (primarily during the first three quarters of the year); however, we would note that
despite FX being a headwind in 4Q14, it has not had a long-lasting impact on the groups stock performance.

Top Pick: Masimo (MASI)

Masimo (MASI, OUTPERFORM) 12-Month Price Target $31
Consensus Opinion
Market Cap (MM)

$1,390

Buy

Price (as of 12/9/14)

$26.48

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

600k
Sell
1
Street
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$160

$0.36

Wedbush

$621

$1.35

$1,377

$0.96

Street

$629

$1.42

LIFE SCIENCES AND HEALTH CARE| 4

 We believe Masimo is well positioned to benefit from improving hospital volume trends, the demographics of an aging
population, and hospitals/payor's interest to lower the cost of patient care while improving outcomes. In addition, following a
rise in operating expenses over the past year related to an expansion of its commercial infrastructure and a rise in legal costs, we
believe Masimo is committed to generating operating leverage. Overall, we view Masimo as a compelling small-cap growth story with
a profitable and growing core business, accentuated with additional emerging technologies/products that can take advantage of the
companys large installed base of monitors and customer relationships.
Recent healthy product sales trends bode well. MASI reported a marked improvement in its core pulse oximetry business
(represents approximately 90% of product sales), which grew 10% yr/yr growth in 3Q14 after only growing 2% in 1H14. The better
result was due to the anniversary of a large number of long-term contract renewals last year (which included a price reduction), as
well as a pickup in hospital patient volumes that we believe should continue going forward.
Reasonable likelihood of a favorable settlement in Masimos favor. In early October, a jury awarded Masimo $467 million after
finding that Philips infringed its patents. Because the amount and decision will be appealed and potentially revised, we have not
factored it into our valuation analysis. We also believe that Masimos positive track record in defending its intellectual property, in
addition to another, potentially more damaging patent trial that is ongoing, could nudge Philips to the negotiating table. We would
view a settlement as a positive.
Investor expectations for Masimos rainbow platform are now more conservative/realistic, which could allow for upside
surprises should the companys specialized hemoglobin sales force gain traction in 2015. In addition, Masimos OEM
partners, GE and Philips, are expected to introduce rainbow-enabled monitors in 2015, which should improve rainbows growth profile
in 2016. We should note that Philips received FDA approval of a low-acuity rainbow-enabled monitor this past summer. Lastly, we
also view Masimos recently FDA-approved Root Monitoring System as an underappreciated technology. Briefly, Root is a
multifunctional device, which connects and displays on a color, touchscreen tablet, various types of patient monitoring data obtained
from different devices (modules). Root can also network this data to a central system at the hospital. Initially, Root will support
Masimos parameters, but the idea is that measurement technologies not available from Masimo could also connect to Root.
Valuation and Risks: Our $31 PT is based on a 20x multiple on 2016 EPS estimate of $1.52. This multiple represents a P/E-togrowth of 1.6x, which is in line with the 3-year average of the MedTech sector.
Risks to the attainment of our price target include slower market share gains in pulse ox, limited adoption of new products, and
litigation losses.
Our most recent report: Healthier Trends Support Renewed Optimism; Reiterate OUTPERFORM

LIFE SCIENCES AND HEALTH CARE| 5

2015 Medical Diagnostics & Life Science Tools Outlook

Zarak Khurshid 415-274-6823

We are neutral on the diagnostics and life science tools groups heading into 2015. The diagnostics sectors median
forward P/E of 17x (versus 23.3x last year) is below the six year average of 20.6x, while the forward EV/Sales multiple is 3.0x
(vs 3.1x last year), roughly in-line with the 6-year average of 3.1. The life science tools groups median forward (ex-ILMN) P/E
of 19.7x (vs 17x last year) is above the 7-year average high and the year average of 17x and up roughly 11% y/y while the
groups ex-ILMN EV/sales multiple is 3.3x (vs 3.1x last year), well above the 6-year average of 2.7x. We believe a relatively
better US business environment, stronger end user demand helped diagnostics sector EV/Sales multiple expansion in 2014.
For the life science tools group we believe healthy multiple expansion was partially driven by acceleration in the genomics
subsector driven by greater than expected uptake in new clinical applications and well as M&A activity. With continued
reimbursement uncertainties remaining and more challenging stock market sentiment it is difficult for us to make the case for
meaningful multiple expansion in 2015. That said, we believe the positive long term secular trends involving robust product
innovation helping to improve disease diagnosis and patient management (with net cost savings to the system) remains intact.

We highlight Cerus as a near term top pick for 2015 among our OUTPERFORM-rated names, as it represents a scarce
play on the safety of the global blood supply with attractive near term catalysts and potentially meaningful top-line
acceleration teed up for 2016

Top Pick: Cerus

Cerus Corporation (CERS, OUTPERFORM) PT $6
Consensus Opinion
Market Cap (MM)

$355

Buy

Price (as of 12/09/14)

$4.53

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

1,500k
Sell
0
Street
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$10.5

($0.15)

Wedbush

$56

($0.51)

$10.5

($0.16)

Street

$47

($0.51)

We believe multiple paths exist for CERS investors to win in 2015 with near-term catalysts teed up. Near term
acceleration in activity around the Ebola outbreak (through Gates Foundation funded initiatives), continued stabilization of the
European sales (including rebound in southern EU), early uptake of INTERCEPT platelets in Florida and Caribbean through
investigational device exemption (IDE) and/or approval and commercial uptake of INTERCEPT platelets in the US in 1H15 (or
potentially earlier) following potential FDA approval represent some of the ways in which investors could benefit.

US story on track with FDA approval expected in late 1Q15, but could be sooner. How quick can INTERCEPT ramp in
US? The US INTERCEPT platelets market represents a large and concentrated addressable market worth roughly $250 MM.
CERS has been growing its US commercial team this past year and is ready to hit the ground running in our view.

EU business slowly returning back to growth mode. The southern EU distributor transition and related revenue
contribution has taken longer than we expected and poor visibility from management has not helped. The EU business as a
whole appears to be turning a corner with recent outperformance in France and Scandinavia offsetting lackluster Southern EU.
Additionally we remain optimistic that there is a path to substantially better southern EU performance in 2015 and the recent
Belgian (Flanders) win worth an incremental $3 MM in 2015 revenues represents a nice cushion. Meaningful German
improvement and UK inflection represent cheap call options for 2015 in our view.

Ebola involvement with Gates pilot programs and Caribbean virus IDE could drive additional positive news and
potentially generate incremental revenues. On 11/18/14 an Associated Press article mentioned (later confirmed with
CERS) that INTERCEPT will be used as part of a pilot program to treat Ebola victims with blood plasma taken from survivors.
The initial pilot program is small (~$6 MM in total), but if successful we believe could lead to much larger investments in Africa.
Additionally on 10/7/14 the FDA accepted CERS IDE submission to make INTERCEPT available in the Caribbean to address
Chikungunya and Dengue outbreaks. The company has been working with the American Red Cross in Puerto Rico to initiate
a study near term which could drive additional good news flow and potentially earlier North American sales in 2015.

Long term product expansion story into large red blood cell (RBC) opportunity still intact (likely 2017+). The company
has completed both its Phase II acute anemia trial for cardiovascular surgery patients in Europe and its US Phase II recovery
and survival study with results for each expected by year-end 2014. We believe these data could help to drive share price
appreciation as more of the RBC opportunity becomes priced in.

Reaffirming OUTPERFORM. Our $6 PT assumes a 2016E EV/sales multiple of 6.5x, negative net cash and 76 MM shares
discounted back at 15%. This framework is consistent with other early-stage diagnostics, tools, and medical device story

LIFE SCIENCES AND HEALTH CARE| 6

stocks with large out-year potential. CERS shares are trading at 5.9x on a 2015E EV/sales basis, above the peer group
median of 3.1x.

Risks to the US story involve regulatory and commercial ramp concerns, while EU risks mostly involve government
bureaucracy. Risks to attainment of our price target include potential competition and clinical adoption. Additional risks
include uncertainties in dealing with European and US regulatory bodies as well as slowing moving government run healthcare
systems.
Our most recent report: 3Q14 Top Line Edges Higher - EPS So-So - Guidance Disappoints - FDA Process & Pipelines On
Track - Calendar Still Interesting - PT to $6 - Maintain OP

LIFE SCIENCES AND HEALTH CARE| 7

2015 Emerging Pharmaceuticals Outlook

Liana Moussatos, Ph.D.

(415) 263-6626

In our view, 2015 continues to have material clinical, regulatory, and commercial catalysts for Emerging Pharmaceutical
companies. After record financings in 2014, we look for companies to put their extra cash to good uses.

We are aware of new drug launches, important clinical data releases, and regulatory approvals in 2015. These include
drugs from our emerging pharma universe such as BioMarin Pharmaceuticals (NASDAQ:BMRN; NEUTRAL) data releases for
dwarfism, Battens, Pompe, and PKU, Intercept Pharmaceuticals (NASDAQ:ICPT; OUTPERFORM;) is planning to file an NDA for
OCA in PBC in H1, Lexicon Pharmaceuticals (NASDAQ:LXRX; OUTPERFORM) is expected to release Phase 3 results for its lead
Telotristat etiprate for carcinoid syndrome, Omeros (NASDAQ:OMER; OUTPERFORM) is expected to launch OMIDRIA in the US
and Europe, Pacira (NASDAQ:PCRX; OUTPERFORM) has until March 5, 2015 to expand the EXPAREL label to include
procedures using nerve block, Receptos (NASDAQ:RCPT; OUTPERFORM) could be acquired by year-end, Regulus
(NASDAQ:RGLS; OUTPERFORM) is expected to release additional Phase 1/2 results with higher doses of RG-101 in HCV,
Relypsa (NASDAQ:RLYP; OUTPERFORM) is expected to receive FDA approval for patiromer, Sangamo (NASDAQ:SGMO;
OUTPERFORM) is expected to release additional HIV results as well as top line data from their Alzheimers Phase 2 trial, Vitae
(NASDAQ:VTAE; OUTPERFORM)s type 2 diabetes Phase 2 trial is expected to release results in H1, and Xoma
(NASDAQ:XOMA; OUTPERFORM) is expected to release initial Phase 3 results from its non-infectious uveitis (NIH) program in
2015.

Top Picks: Omeros (OMER) and Intercept (ICPT)

Omeros (OMER, OUTPERFORM) Price Target $52
Consensus Opinion
Market Cap (MM)
Price (as of 12/09/14)

$799

Buy

$23.46

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

223k
Sell
0
Street
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$0.1

($0.64)

Wedbush

$48.2

($1.56)

$0.1

($0.64)

Street

$70.7

($0.79)

Omeros is a top pick based on our view of its extensive and potentially lucrative pipeline and transforming catalysts in
2015. We believe the company is not a one-trick pony, but has an extensive pipeline including the US-approved OMIDRIA
(OMS302) which is also expected to receive EU approval and launch in both the US and EU in H1 2015. The company also hopes
to re-initiate a Phase 2 for OMS824 in Huntingtons disease. We project peak sales for OMS824 could reach over $1 billion if it is
successful in the clinic and obtains regulatory approvals. OMS721 is expected to have preliminary clinical results in TMAs at the
start of 2015 and we envision additional clinical testing in 2015 if positive. Based on its emerging profile, OMS824 may be
disruptive to Alexions Soliris, which achieved over $1.5 billion in sales for PNH and aHUS in 2013. Behind these clinical
candidates, the company has an extensive preclinical pipeline and has unlocked numerous orphan GPCRs which could attract a
lucrative partnership.

We believe the major catalysts in 2015 will be potential EMA approval of OMS302 for eye surgery in Q2:15, both US and
EU launches, and an EU commercial partnership. We project gross peak annual sales could reach over $500 million due to
FDA enforcement of sterility-based guidelines.

Figure 2: Milestones (*our estimates)

Timing
2015*
Early 2015
H1:15
2015*

Milestone
Potential partnership(s) (EU/Omidria)
Omidria US launch (early 2015)
Potential EU launches of Omidria
Potential Ph1 results for OMS527/PDE7 & OMS616/Plasmin

Source: Company data, Wedbush Securities, Inc.

We believe that OMER trades at an attractive valuationespecially for investors with a 2015 investment horizon and
reiterate our OUTPERFORM rating and $52 price target. We calculate our 12-month price target by projecting present day fair
value by 12 months. Our present day fair value is based on a sum-of-parts with each parts value calculated using a 30% annual
discount from our net peak annual sales estimate to present day for each product and indication with clinical PoC, then applying a
1-10x multiple depending on stage of development to reflect risk.

LIFE SCIENCES AND HEALTH CARE| 8

Risks to attainment of our fair value include: EU regulatory risk and US/EU commercial risk for OMIDRIA as the EMA may find
unforeseen deficiencies in the marketing application despite the positive Phase 3 results. There is also clinical risk to the remainder
of Omeros pipeline.

Our most recent note: Positive OMS721 Ex Vivo Results May Support Potentially Positive Phase 2 Data Release in TMAs Around
YE:14; Reiterate OUTPERFORM and $52 PT
Our most recent report: Q3 Update; Material Catalysts Expected around YE; Reiterate OUTPERFORM and $52 PT

Intercept Pharmaceuticals (ICPT, OUTPERFORM) Acquisition Value $493

Consensus Opinion
Market Cap (MM)
Price (as of 12/09/14)

$3,120

Buy

12

$146.05

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

525k
Sell
1
Street
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$0.45

($2.80)

Wedbush

$1.62

($12.22)

$0.42

($1.64)

Street

$1.72

($7.48)

Intercept Pharmaceuticals is a top pick based on our view of OCAs multi-billion dollar peak sales potential for cholestatic
liver diseases and potentially transforming 2015 regulatory catalysts for OCA in PBC. We believe the recent valuation
pullback from negative investor sentiment concerning a potentially arduous and long NASH clinical program may turn-around in
2015 when investors realize that OCA could be on the market for PBC in both the US and EU in 2016. Conclusions from the
Global PBC Study Group support Intercepts clinical design and Subpart H regulatory strategy for OCA treatment of PBC in our
view. We anticipate the company to initiate the confirmatory Phase 3 trial for OCA in PBC around year-end. The company has
guided toward filing both an NDA and MAA for OCA in PBC in H1 2015.

We believe the major catalysts in 2015 are likely to be clarity on NASH development program, regulatory submissions of
OCA in PBC in H1 and potential US approval of OCA for PBC around year-end. We project WW peak sales could reach $2.4
billion in 2022 after launch in early 2016. Of our $493 take-out value for ICPT, we calculate $180/share value for OCA peak sales
in PBC.

Figure 3: Milestones (*our estimates)

Timing
Q1:15
H1:15
H1:15
H2:15
YE:15/Q1:15
H1:16

Milestone
Complete Ph1 bioequivalence & radiolabeled matched balance trials (OCA/PBC)
Submit NDA/MAA for OCA in PBC
Potential Initiation of pivotal Phase 3 for OCA in NASH
Potential Advisory Committee Meeting for OCA in PBC approval recommendation
Potential approvals of OCA in PBC in US & EU
Potential US/EU launches of OCA in PBC

Source: Wedbush Securities, Inc.

We anticipate a turnaround of investor sentiment in 2015 with the OCA/PBC regulatory catalysts could make ICPT a top
performer and reiterate our OUTPERFORM rating and $493 acquisition value. Our acquisition value is calculated by applying
a 30% annual discount to our net peak WW revenues for each drug/indication and applying a 1-10x multiple depending on stage of
development to reflect risk. Each combination is added in a sum-of-parts to calculate an acquisition value for ICPT and projected to
the end of 2015 to include the time frame we see for potential acquisition.

Risks to the attainment of our acquisition value include: Intercepts products obtain disappointing clinical trial results and/or fail to
gain regulatory approval; Intercept is unable to pursue accelerated approval for OCA in the US or faces lengthy regulatory delays;
Intercept or a partner fails to effectively commercialize its drug products due to unenthusiastic physician response or superior
clinical results are obtained by a third-party competitor; unexpected safety problems emerge with Intercepts drug products;
Intercept is unable to raise additional capital, if necessary, at terms favorable to shareholders. We anticipate financing risk in H2
2015 will be elevated as Intercepts current cash is expected to last into mid-2016.
Our most recent report: Corporate Update: Q3 Financials, OCA NASH Development Clarity; & PBC Regulatory Submissions in
H1:15; Reiterate OUTPERFORM and $493 Acquisition Value

LIFE SCIENCES AND HEALTH CARE| 9

2015 Biotechnology/Biopharmaceuticals/BioDefense Outlook

David Nierengarten, Ph.D. 415-274-6862
Heather Behanna, Ph.D.
415-274-6874

2014 has been another banner year for the biotech sector. Public biotechnology firms advanced 35% this year, compared to an
11% rise in the S&P 500 (NBI vs S&P YTD). Key drivers behind this performance include the coming to market of promising
research products (such as Sovaldi, which had the fastest drug launch in history) and a supportive regulatory and reimbursement
environment. The three-year bull run in biotech, which has seen the sector rise 186% vs 66% for the S&P (NBI vs S&P Nov 2011
to Nov 2014), shows no signs of abating. Although there are many who say valuations in the sector could be too high (such as Fed
Chief Janet Yellen, who singled out biotech as overvalued in a statement in July), we believe returns are being driven by
fundamentals, most importantly being clinical and regulatory milestones for many companies.
There were 61 drug approvals by the FDA in 2014 (as of Dec 1), compared to 56 in all of 2013 and an average of 24
approvals per year during 2000-2010. Our view is that the increased productivity is a reflection of both the investments made in
R&D and the policy changes introduced by the FDA which has seemingly created a faster and more accommodating approval
process. Designations like Breakthrough Therapy, introduced in 2012, have helped accelerate drug development and validate
early-stage drugs in the eyes of investors. The 2012 Generating Antibiotics Incentives Now (GAIN) Act also helped spur new
interest in the once-neglected antibiotics field by offering expedited reviews and greater market exclusivity protections. We expect
the supportive regulatory environment for biotechs to continue, and note that the FDAs proposed rules for 2015 includes measures
designed to further streamline the approval process, such as the revocation of duplicative safety requirements in BLAs.
A favorable IPO environment led to a record 63 biotechs going public this year, surpassing the prior peak of 50 set in
2000. Biotech IPO issuances in 2013 stood at 36, making it the first time there has been two consecutive years with >30 biotech
companies going public. We note that many of the public biotech offerings this year were for companies in the early stages of
development, indicating a healthy financing environment for riskier assets.

Figure 4: NBI vs S&P YTD 2014

Source: Wedbush Securities, Inc.

Pricing pushback from public and private insurers remains a headwind going into 2015. In March Congressman Henry
Waxman raised concerns over the pricing of Sovaldi for HCV, and requested that Gilead provide a justification for the $84K cost
per treatment. The remarks caused a sharp sell-off in the biotech sector, with the NBI declining by 17% over the next three weeks.
Additional comments by insurers regarding standardizing oncology treatments (which likely means raising the bar for
reimbursement for off-label use, along with use of late-stage agents that provide marginal benefit) could be the beginning of more
efforts to rein in costs in oncology treatments.
LIFE SCIENCES AND HEALTH CARE| 10

Deal making for R&D reasons should continue in 2015, but the financial engineers lost out on tax inversions. The largest
M&A deals were made by Actavis, which propelled itself into the top ten largest drug makers list through its acquisitions of Forest
Labs for $25B in February and Allergan for $66B in November. The latter deal capped a seven-month hostile takeover attempt for
Allergan by Valeant, which popularized the growth through acquisitions model in the industry. Deals that fell through this year
include Pfizers hostile takeover attempt of AstraZeneca, and AbbVies deal to take over the Irish-headquartered Shire. The latter
termination was a casualty of laws enacted by the Treasury in the fall to reduce the appeal of tax inversions. Even with the loss of
the tax avoidance strategy, we expect M&A activity to continue into 2015 as large biopharma companies seek to replenish their
pipelines. R&D focused deal-making is more positive for smaller, pre-commercial biotech companies, as opposed to financially
engineered mega mergers.
Absent a recession or market collapse, we expect the biotech IPO window to remain open, although investor fatigue may
begin to set in. Despite the strong financing environment in 2014, we note that several biotechs pulled their IPOs this year citing
market conditions, including Vyrix, Dance Biopharma, ViroBay, Viamet and Ambrx. We believe any pullback in the market will
initially affect firms with early stage pipelines and who lack a validating partnership. We could also see firms go public in smaller
initial offerings, and then seek additional funds in secondary offerings soon after, due to the stronger financing environment that
exists for companies that are already public.
We expect cancer immunotherapy and gene therapy to garner even greater investor focus in 2015. We expect the IPOs of
Juno Therapeutics and Bellicum Pharmaceuticals, both expected in early 2015, to be some of the largest biotech IPOs for the new
year. Following on the heels of the Kite Pharma IPO in mid:14, the Juno and Bellicum offerings should drive additional investor
interest into the cancer immunotherapy field, and specifically for chimeric antigen receptor T-cell (CAR-T) technology. CAR-T
therapy has demonstrated remarkably high response rates in hematological malignancies, and could have potential in solid tumors
with additional technologies. Additional details about Bluebird bios CAR-T program with Celgene is also expected in 2015, as well
as initial data readouts from its gene therapy programs LentiGlobin in sickle-cell disease and Lenti-D in childhood cerebral
adrenoleukodystrophy. In addition, we expect to see data for AGTCs AAV vectors in the rare ocular disorders X-linked
retinoschisis (mid:15) and achromatopsia (late 15), and for Celladons Mydicar gene therapy for heart failure in April 2015.

Top Outperform Picks: Hyperion (HPTX) and bluebird bio (BLUE)

Hyperion Therapeutics Inc (HPTX, OUTPERFORM) 12-Month Price Target $33
Consensus Opinion
Market Cap (MM)
Price (as of 12/09/14)

$469

Buy

$22.63

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

171k
Sell
0
Street
Covered by Heather Behanna, Ph.D.
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$21.83

$(0.16)

Wedbush

$109.87

$(0.01)

$24.63

$(0.24)

Street

$119.88

$(0.02)

We believe Hyperion is undervalued in the orphan space. With ~$100M in sales in its first five full quarters of launch, we believe
Hyperion and its orphan asset Ravicti are overlooked, trading at one-third of its peer group valuation in EV and EV/sales in 2017.
Ravicti is on the market for urea cycle disorders (UCD), an ultra-orphan indication effecting about 1,000 patients in the US.
Ravicti going strong, with room to grow. Two-thirds of UCD patients are treated chronically with an ammonia scavenger; Hyperion
has been successful in gaining market share in its first 18 months on the market. We believe there is room for Ravicti sales to double
from current levels as Hyperion switches patients onto Ravicti and brings more patients onto therapy.
Company should be back to earnings positive in 2015. Hyperion shares have been under pressure since the company reported
3Q14 earnings of ($1.59), reversing a trend of five quarters of profitability. The EPS loss was driven by a non-cash write off of the
type 1 diabetes asset from its acquisition of Andromeda; the asset is no longer viable. We see this as outside the base business of
Hyperion and believe the sell-off of shares is overdone. In our view, shares should appreciate as these one-time items move to the
rear-view mirror.
Development of Ravicti in hepatic encephalopathy (HE) adds optionality. Hyperion is moving Ravicti into a pivotal study for HE
in 2Q15; in our view, Phase II data suggest a high probability of success in this indication. We believe the opportunity for HE dwarfs
that of UCD; we believe this program is worth the investment.
Pipeline diversification expected in the near term. In our view, in-licensing of another asset to leverage Hyperions infrastructure
and expertise should help lift Hyperion shares by diversifying its platform and providing increased news flow. We believe the
company will focus on its expertise in metabolic diseases or orphan hepatic indications to leverage its current platform. In our view,
this should increase investor confidence post-Andromeda and act as a catalyst for the stock. We acknowledge business development
activities may change expectations for profitability in the short term; however, we see diversification as a smart long term strategy for
the company.
LIFE SCIENCES AND HEALTH CARE| 11

 We reiterate our OUTPERFORM rating and $33 price target. Our price is derived from a DCF analysis assuming launch of Ravicti
in HE in 2019; we do not account for expenses related to potential future business development activities.
The greatest risk to our price target is the inability of Hyperion to market Ravicti successfully and gain share in the UCD market.
Our initiation report: Initiating Coverage with OUTPERFORM and $33 Price Target; an Overlooked Orphan

Bluebird bio (BLUE, OUTPERFORM) 12-Month Price Target $94

Consensus Opinion
Market Cap (MM)

$2,440

Buy

Price (as of 12/09/14)

$84.64

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

414k
Sell
0
Street
Covered by David Nierengarten, Ph.D.
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$6

($0.60)

Wedbush

$25

($2.88)

$6

($0.58)

Street

$25

($2.43)

2014 was an inflection year for the LentiGlobin program in beta-thal, with promising preliminary data providing proof of a
stronger and more consistent therapeutic effect with the improved vector. Early results from the Ph 1/2 HGB-204 (Northstar)
and HGB-205 studies presented at the European Hematology Association Congress and American Society of Hematology meetings
demonstrated that LentiGlobin is able to safely and rapidly increase corrected beta-globin expression in beta-thal patients and
transition them to transfusion-independence. In 2015 we expect these patients to maintain their status, and for the studies to fully
enroll.
Preliminary LentiGlobin efficacy data in sickle-cell disease (SCD) should become available in H1:15, and based upon the
results observed in beta-thal, we expect the data to be positive. In both beta-thal and SCD, the LentiGlobin vector is delivering a
corrected beta-T87Q-globin gene, with the SCD product including an amino acid substitution that provides it with anti-sickling
properties. BLUE has begun enrolling SCD patients into the HGB-205 and HGB-206 (US Ph 1) studies, and we expect results from
the first few patients treated to be a major catalyst for the stock in H1:15.
Enrollment in the registration-directed Ph 2/3 Starbeam trial of Lenti-D in childhood cerebral adrenoleukodystrophy
(CCALD) is expected to complete in 2015, with initial results possibly released in late 15. The first boy with the ultra-rare and
fatal disorder was transplanted in Oct 2013, and we view the absence of any news from the study as a positive indication of survival.
We expect BLUE to begin providing details about its CAR-T program with Celgene in late 2015, including possible
preclinical proof-of-concept data. With high-profile public offerings and major biopharma firms entering the field, chimeric antigen
receptor T-cells (CAR-T) have attracted a considerable amount of attention recently for its potent activity in hematological
malignancies. Few details have emerged about BLUE and Celgenes collaboration since it began in March 2013, which will expire in
March 2016 unless renewed by Celgene. We expect data supportive of the collaboration to be made available in 2015, including
possible proof-of-concept data in animal models.
Positive gene-therapy related news flow should benefit BLUE. The gene therapy field is currently experiencing a resurgence of
interest, with several promising companies exploring treatments for various genetic disorders. We view BLUE as the leader of the
gene therapy space, due to its clinically advanced pipeline and well capitalized status. Success, as well as setbacks, with any gene
therapy in development would have a broad impact upon BLUE and other companies in the sector.
Reiterate OUTPERFORM and our price target of $94. Our price target is derived from applying an 8X multiple to estimated 2020
revenues for Lenti-D (discounted 35% annually) and LentiGlobin (discounted 20% annually).
Risks to the achievement of our price target include failure to gain approval for products in development, failure to achieve sales
estimates for any marketed product and failure to achieve earnings estimates.
Our most recent report: Q3:14 Financial Update, Data From Three Beta-Thalassemia Northstar Study Patients to be Presented at
ASH, Reiterate OUTPERFORM
Our analysis of the LentiGlobin ASH abstract: First Look at Beta-Thal Patient in Northstar Study; Likely on Similar Track to
Transfusion Independence, Despite Single Unit Transfusion, Reiterate OP

LIFE SCIENCES AND HEALTH CARE| 12

Most Likely to Underperform: Raptor (RPTP)

Raptors Pharmaceuticals (RPTP, UNDERPERFORM) 12-Month Price Target $7
Consensus Opinion
Market Cap (MM)

$540

Buy

Price (as of 12/09/14)

$8.49

Hold

Current Qtr Estimates

Wedbush

Avg Volume (3m)

434k
Sell
1
Street
Covered by David Nierengarten, Ph.D.
Source: Company reports, Thomson First Call, Wedbush Research

Next Fiscal Year Estimates

Revenue (MM)

EPS

Revenue (MM)

EPS

$19

($0.14)

Wedbush

$109

($0.20)

$21

($0.18)

Street

$103

($0.48)

We expect growing investor awareness in 2015 of the limited market opportunity for RP103 (PROCYSBI). We believe
Procysbi will reach near-saturation levels in 2015 in the US cystinosis market (450 patients, 80% penetration), and view the
European opportunity as more limited (440 patients, 50% penetration). We expect US sales growth to continue to decelerate in 2015,
with non-starts and compliance increasingly acting as headwinds.
Unlike the Street, we do not foresee a path forward for RP103 in Huntingtons. RPTP is expected to provide a regulatory
update for the Huntingtons program in 2015. Given that RP103 missed the primary endpoint in its Ph 2/3 trial, we believe the current
dataset is insufficient to support approval, and expect the FDA to require an additional (and costly) Ph 3 trial to be run.
Top-line results from a Ph 2b study in pediatric NASH are expected in H1:15, and we expect RP103 to show little-to-no
clinical benefit. Given that there has historically been little correlation between liver enzyme improvements (as seen in the Ph 2a
study) and reduction of fat accumulation in the liver, along with a lower average dose than used in the Phase I study, we view the
NASH program as likely to fail.
We believe Procysbis utility will remain limited to cystinosis, and with RPTP shares currently trading above what we
estimate the value of the Procysbi franchise to be, we would be sellers of the stock.
Reiterate UNDERPERFORM and our $7 price target. We derive our $7 price target by using a NPV calculation applied to an
estimated acquirer's incremental net income, discounted 15% annually through 2027, the estimated commercial life of the
PROCYSBI franchise in cystinosis patients. We do not include revenues from other indications.
Risks to the attainment of our price target include better-than-expected sales and net income, or new additional net income from
additional products or product indications.
Our most recent report: Q3 EPS In Line, We Continue to View RPTP Shares as Overvalued in Front of High-Risk Catalysts, Reiterate
UNDERPERFORM

LIFE SCIENCES AND HEALTH CARE| 13

Supplemental Data
Figure 5: Wedbush 2014 Top Picks
2014 Top Picks

Industry

Year End 2013 Close

Dec 9, 2014 Close

Return

Omeros (OMER)

Emerging Pharma

$11.29

$23.46

108%

Molina (MOH)

Managed Care

$34.75

$50.87

46%

Humana (HUM)

Managed Care

$102.53

$143.45

40%

$514.99

25%

Intuitive Surgical (ISRG)

Medical Devices

$411.80 (close of 06/30/14;

2H14 pick)

St. Jude Medical (STJ)

Medical Devices

$61.19

$68.94 (close of 06/30/14;

1H14 pick)

13%

MacroGenics (MGNX)

Biotechnology

$27.43

$30.74

12%

1848.36

2059.82

11%

S&P
NPS (NPSP)

Biotechnology

$30.36

$33.81

11%

XOMA (XOMA)

Emerging Pharma

$6.73

$4.92

-27%

Cerus (CERS)

Medical Diagnostics

$6.45

$4.53

-30%

Curis (CRIS)

Biotechnology

$2.82

$1.80 (close of 05/20/14

when coverage dropped)

-36%

Source: Wedbush Securities, Inc.

LIFE SCIENCES AND HEALTH CARE| 14

Figure 6: Near-Term Catalysts for our Life Sciences Coverage (early 2015)
DATE

COMPANY/EVENT

CATALYST

EVENT

late '14/early '15 Biodel (BIOD)

Regulatory

Potential regulatory clarity from FDA meeting for BIOD-531

late '14/early '15 Intercept (ICPT)

Clinical

Update on Ph 2 OCA/NASH program design and timing

late '14/early '15 La Jolla (LJPC)

Clinical

Results of Ph 1/2 trial of LJPC-501 in hepatorenal syndrome

late '14/early '15 MEI (MEIP)

Clinical

Top-line data from Ph 2 trial of pracinostat plus Vidaza/Dacogen in refractory MDS

late '14/early '15 NPS (NPSP)

Clinical

Top-line Ph 3 data of Gattex in pediatric SBS and preliminary Ph 2 data of NPSP795 in ADH

late '14/early '15 Xoma (XOMA)

Clinical

Ph 3 EYEGUARD-B final flare announcement for Gevokizumab in Behcet's uveitis

early 2015

Ironwood (IRWD)

Clinical

Ph 2a data released for IW-3718 in refractory GERD

early 2015

Medivation (MDVN)

Clinical

Data from Ph 2 TERRAIN and STRIVE trials of Xtandi vs Casodex

early 2015

Mirati (MRTX)

Clinical

Initial PoC data from expansion cohorts of MGCD265 in NSCLC patients

early 2015

Mirati (MRTX)

Clinical

PoC data from Ph 2 trials of mocetinostat in bladder cancer and DLBCL

early 2015

NPS (NPSP)

Clinical

Top-line data from PoC Ph 2 study of NPSP795 in autosomal dominant hypocalcemia

early 2015

Omeros (OMER)

Commercial US launch of Omidria for cataract or other intraocular lens replacement surgery

January

Xencor (XNCR)

Clinical

Ph 1a safety study of XmAb7195 in healthy and allergic subjects

Jan 15 2015

UNH, CNC, MOH

Regulatory

Texas Senate coming back into session and voting to fund the HIF reimbursement

Jan 24 2015

NPS (NPSP)

Regulatory

PDUFA date for Natpara for hypoparathyroidism

early 15

Endocyte (ECYT)

Clinical

Mature OS data from Ph 2 TARGET study of vintafolide in NSCLC

Q1:15

Ardelyx (ARDX)

Clinical

Data from Ph 2b trial of tenapanor in ESRD patients with hyperphosphatemia

Q1:15

Cerulean (CERU)

Clinical

Data from ISTs of CRLX101 in ovarian cancer (w/ Avastin) and rectal cancer (w/ chemoradiation)

Q1:15

Dyax (DYAX)

Clinical

Results from Ph 1b dose-escalation cohorts for DX-2930

Q1:15

Dyax (DYAX)

Regulatory

FDA action on Cyramza (licensed by Eli Lilly) in second-line gastric cancer

Q1:15

Medtronic (MDT)

Regulatory

FDA approval of IN.PACT Admiral SFA DCB

Q1:15

Molina (MOH)

Regulatory

NM and WA contract repricing expected

Q1:15

Regulus (RGLS)

Clinical

Additional data from 4 and 8 mg/kg RG-101 cohorts in Ph 1 trial in HCV

Q1:15

Sunesis (SNSS)

Regulatory

Meeting with FDA to discuss possible Qinprezo approval in the US

Q1:15

Xoma (XOMA)

Clinical

Potential Ph 1 data release for XMetD/Xoma358

Q1:15

Tetraphase (TTPH)

Clinical

Pivotal data for eravacycline in abdominal infections (cIAI)

late Q1:15

Biodel (BIOD)

Clinical

Data from Ph 1 proof-of-concept study of GEM system for severe hypoglycemia

March

MEI (MEIP)

Clinical

Top-line data from Ph 2 trial of pracinostat plus azacitidine in front-line MDS

March 5

Pacira (PCRX)

Regulatory

Exparel PDUFA for peripheral nerve block

April

Celladon (CLDN)

Clinical

Unblinding of CUPID2 study of Mydicar

Q2:15

BioMarin (BMRN)

Clinical

Data from Ph 1/2 study of BMN-111 in achondroplasia

Q2:15

Medtronic (MDT)

Regulatory

CE Mark approval of Micra Transcatheter Pacemaker

Q2:15

MEI (MEIP)

Clinical

Preliminary data from Ph 1b study of ME-344 plus topotecan in SCLC and ovarian cancer

Q2:15

NPS (NPSP)

Commercial US Launch of Natpara

Q2:15

Tandem Diabetes
(TNDM)

Regulatory

FDA approval of t:flex

Source: Wedbush Securities, Inc.

LIFE SCIENCES AND HEALTH CARE| 15

Figure 7: Near-Term Catalysts for Life Sciences Coverage (mid 2015)

H1:15

bluebird (BLUE)

Clinical

Preliminary data from first sickle cell patient treated with LentiGlobin in HGB-205 study

H1:15

Boston Scientific (BSX)

Regulatory

FDA approval of WATCHMAN LAA

H1:15

Cardica (CRDC)

Commercial Relaunch of XCHANGE 30 stapler

H1:15

Celldex (CLDX)

Clinical

H1:15

Cepheid (CPHD)

Commercial Launch of HIV qualitative and HCV viral load test in EU

H1:15

Cerus (CERS)

Regulatory

FDA approval for INTERCEPT plasma and platelets

Q1:15

Dyax (DYAX)

Regulatory

FDA action on Cyramza (licensed by Eli Lilly) in second-line gastric cancer

H1:15

Dyax (DYAX)

Commercial US Launch of Cyramza

H1:15

Endocyte (ECYT)

Clinical

Data from Ph 1 trials of EC1456 in solid tumors and EC1169 in prostate cancer

H1:15

Epizyme (EPZM)

Clinical

Data from study of EPZ-5676 in pediatric MLL-r patients

H1:15

MacroGenics (MGNX)

Clinical

Top-line data from Ph 2a trial of margetuximab in metastatic breast cancer

H1:15

Medivation (MDVN)

Clinical

Data from Ph 2 STRIVE and TERRAIN trials of Xtandi vs bicalutamide

H1:15

NPS (NPSP)

Clinical

Top-line data from study of Gattex/Revestive in pediatric SBS

H1:15

NPS (NPSP)

Commercial Finalize pricing negotiations in France and Germany for Revestive

H1:15

Omeros (OMER)

Commercial Potential EU launch of Omidria

H1:15

Raptor (RPTP)

Clinical

Top-line data from Ph 2b trial of RP103 in pediatric NASH

H1:15

Receptos (RCPT)

Clinical

Detailed results from interim (week 8) RPC1063 UC Ph 2 TOUCHSTONE trial

H1:15

Sangamo (SGMO)

Clinical

Updated Ph 2 results of SB-728-T in HIV (SB-728-T-1101-CTX)

H1:15

Sangamo (SGMO)

Clinical

Top-line Ph 1/2 data from SB-728-mR-T-1401

H1:15

St Jude Medical (STJ)

Clinical

Reinitiation of US Pivotal trial for Portico TAVR

H1:15

Vitae (VTAE)

Clinical

Top-line results from Ph 2a PoC study of VTP-34072 in diabetic patients

H1:15

Vitae (VTAE)

Clinical

Data from Ph 1 study of VTP-37948 in Alzheimer's and Ph 1 study of VTP-43742 in autoimmune disease

H1:15

Xoma (XOMA)

Clinical

Data from Ph 3 trials of Gevokizumab in acute NIU (EYEGUARD-A) and controlled NIU ( EYEGUARD-C)

Mid:15

UNH, CI, AET, HNT,

HUM, CNC

Regulatory

Supreme Court Exchange Subsidy Hearing (heard in May, ruling expected in June/July)

Mid:15

AGTC (AGTC)

Clinical

Initial data from Ph 1/2 X-linked retinoschisis trial

Mid:15

AGTC (AGTC)

Clinical

Initial data from Ph 2b AAT deficiency trial

Mid:15

Cubist (CBST)

Clinical

Top-line data from Ph 3 trial of surotomycin for CDAD and update on data timelines for VNP studies

Mid:15

Fate (FATE)

Clinical

data from Ph 2 PUMA trial of ProHema in adults with hematologic malignancies

Mid:15

Fate (FATE)

Clinical

data from Ph 1b PROMPT study of ProHema in pediatric patients with hematologic malignancies

Mid:15

Karyopharm (KPTI)

Clinical

Data presented at ASCO of Selinexor in gynecologic malignancies, glioblastoma, prostate cancer and
lung, esophageal and head-and-neck cancer

Mid:15

Lexicon (LXRX)

Clinical

Results from Ph 3 TELESTAR study of Telotristat etiprate (LX1032) in carcinoid syndrome

Mid:15

Luminex (LMNX)

Commercial Aries EU launch

Mid:15

MacroGenics (MGNX)

Clinical

Margetuximab data from Ph 1 breast cancer expansion cohorts to be presented at ASCO

Mid:15

OvaScience (OVAS)

Clinical

AUGMENT data

Mid:15

OvaScience (OVAS)

Commercial Launch of OvaPrime

Mid:15

Regulus (RGLS)

Clinical

Ph 1 data for RG-012 in Alport syndrome

Mid:15

Tetraphase (TTPH)

Clinical

Pivotal data for eravacycline in cUTI

Interim analysis of Ph 3 ACT IV trial of rindopepimut in newly diagnosed glioblastoma patients

Source: Wedbush Securities, Inc.

LIFE SCIENCES AND HEALTH CARE| 16

Figure 8: Near-Term Catalysts for Life Sciences Coverage (late 2015)

July 1

WellCare (WCG)

Regulatory

GA Medicaid contract re-procurement award date

H2:15

Achaogen (AKAO)

Clinical

First interim analysis for Ph 3 study of plazomicin

H2:15

Anacor (ANAC)

Clinical

top-line data from Ph 3 studies of AN2728 in atopic dermatitis setting

H2:15

Ardelyx (ARDX)

Clinical

Data from a Ph 2a trial to treat late-stage CKD

H2:15

arGEN-X (ARGX)

Clinical

Top-line data from expansion part of Ph 1b trial of ARGX-110 in hematologic and solid tumors

H2:15

BioMarin (BMRN)

Clinical

Top-line data from Ph 1/2 study of BMN-190 in Batten Disease

H2:15

BioMarin (BMRN)

Clinical

Data from Ph 2/3 study of BMN-701 in Pompe disease

H2:15

Cubist (CBST)

Regulatory

Potential MAA approval of Zerbaxa in cUTI/cIAI in the EU

H2:15

Fibrocell (FCSC)

Clinical

Top-line data from Ph 2 study of azficel-T in vocal cord scarring

H2:15

Ironwood (IRWD)

Clinical

Data from Ph 2 trial of Linzess in OIC

H2:15

Novavax (NVAX)

Clinical

data from Ph 2 studies of RSV-F vaccine in healthy pregnant women, children and elderly patients

H2:15

Pharmacyclics (PCYC)

Clinical

Data from Ph 2 DAWN study of Imbruvica in r/r FL

H2:15

Receptos (RCPT)

Clinical

Additional (32 week) data from Ph 2 TOUCHSTONE study of RPC1063 in ulcerative colitis

Q3:15

Biodel (BIOD)

Clinical

GEM pivotal trial results

Q3:15

DexCom (DXCM)

Regulatory

FDA approval of Gen 5 CGM system

Q4:15

Achaogen (AKAO)

Clinical

Top-line plazomicin data from supportive efficacy trial

Q4:15

Cerulean (CERU)

Clinical

Ph 1 data for CLRX301

Q4:15

Hyperion (HPTX)

Regulatory

Approval decision from EMA for Ravicti in urea cycle disorders

Q4:15

Luminex (LMNX)

Commercial Aries US launch (5 tests: c.diff, HSV 1&2, Flu, Norovirus, Group B strep)

Q4:15

Medtronic (MDT)

Regulatory

FDA approval of CoreValve Evolut R

Q4:15

St Jude Medical (STJ)

Regulatory

FDA approval of Multipoint Pacing (MPP)

Q4:15

Tandem Diabetes
(TNDM)

Regulatory

FDA approval of t:slim G4

Late 2015

AGTC (AGTC)

Clinical

Initial data from Ph 1/2 achromatopsia trial

Late 2015

Boston Scientific (BSX) Regulatory

Late 2015

Quidel (QDEL)

Commercial Launch of Savanna HIV diagnostic in Africa

Late 2015

Synageva (GEVA)

Regulatory

YE:15

Boston Scientific (BSX) Regulatory

FDA approval of Emblem S-ICD (2nd generation ICD)

YE:15

Cerulean (CERU)

Clinical

Potential data from Ph 2 trial of CRLX101 in combination with Avastin in relapsed clear cell RCC

2015

Cepheid (CPHD)

Commercial Launch of Trichomonas, Flu/RSV and CARBA-R tests in the US, and Bladder Cancer Monitor test in EU

2015

Quidel (QDEL)

Commercial Launch of Solana (batch testing of BioHelix technology)

FDA approval of Synergy DES

Expected US approval for sebelipase alfa

Source: Wedb ush Securities

Source: Wedbush Securities, Inc.

LIFE SCIENCES AND HEALTH CARE| 17

Covered public companies mentioned in this report (close 12/09/14):

Company

Ticker

Achaogen Inc
Applied Genetic Technologies Corp
Anacor Pharmaceuticals Inc
Ardelyx Inc
arGEN X BV
Biodel Inc
BioMarin Pharmaceutical Inc
bluebird bio Inc
Boston Scientific Corp
Cardica Inc
Celladon Corp
Celldex Therapeutics Inc
Centene Corp
CEPHEID
Cerulean Pharma Inc
Cerus Corp
Cubist Pharmaceuticals Inc
DexCom Inc
Dyax Corp
Endocyte Inc
Epizyme Inc
Fate Therapeutics Inc
Fibrocell Science Inc
Hyperion Therapeutics Inc
Intercept Pharmaceuticals Inc
Ironwood Pharmaceuticals Inc
Karyopharm Therapeutics Inc
La Jolla Pharmaceutical Co
Lexicon Pharmaceuticals Inc
Luminex Corp
MacroGenics Inc
Masimo Corp
Medivation Inc
Medtronic Inc
MEI Pharma Inc
Mirati Therapeutics Inc
Molina Healthcare Inc
Novavax Inc
NPS Pharmaceuticals Inc
Omeros Corp
OvaScience Inc
Pacira Pharmaceuticals Inc
Pharmacyclics Inc
Quidel Corp
Raptor Pharmaceutical Corp
Receptos Inc
Regulus Therapeutics Inc
Sangamo BioSciences Inc
St. Jude Medical Inc

AKAO
AGTC
ANAC
ARDX
ARGX
BIOD
BMRN
BLUE
BSX
CRDC
CLDN
CLDX
CNC
CPHD
CERU
CERS
CBST
DXCM
DYAX
ECYT
EPZM
FATE
FCSC
HPTX
ICPT
IRWD
KPTI
LJPC
LXRX
LMNX
MGNX
MASI
MDVN
MDT
MEIP
MRTX
MOH
NVAX
NPSP
OMER
OVAS
PCRX
PCYC
QDEL
RPTP
RCPT
RGLS
SGMO
STJ

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

Price

Sunesis Pharmaceuticals Inc

SNSS

Synageva Biopharma Corp

Tandem Diabetes Care Inc
Tetraphase Pharmaceuticals Inc
UnitedHealth Group Inc
Vitae Pharmaceuticals Inc
Wellcare Health Plans Inc
Xencor Inc
XOMA Corp

GEVA
TNDM
TTPH
UNH
VTAE
WCG
XNCR
XOMA

$
$
$
$
$
$
$
$

12.15
21.20
36.59
30.17
7.28
1.35
94.19
84.28
13.04
0.65
15.81
18.40
99.50
53.08
5.26
4.54
95.83
58.30
14.20
6.69
21.01
3.96
2.45
22.58
146.03
14.88
41.34
11.23
0.94
18.92
30.76
26.47
110.77
74.72
5.99
15.73
50.88
5.55
33.81
23.46
32.36
94.85
139.70
25.50
8.51
126.23
17.07
13.86
68.98

Rating

Fair Value/PT

N
O
O
O
O
N
N
O
N
O
O
O
O
O
O
O
N
O
O
O
O
O
O
O
O
N
O
O
O
N
O
O
O
N
O
O
O
O
O
O
N
O
O
N
U
O
O
O
O

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

9
36
36
31
11
3
96
94
14
2
17
26
100
55
12
6
102
55
16
12
52
14
7
33
493
10
50
45
3
19
52
31
118
75
12
29
58
10
42
52
22
119
225
20
7
160
23
29
77

2.31

88.70
12.71
30.96
101.02
19.99
76.63
11.54
4.93

O
O
O
O
O
N
O
O

$
$
$
$
$
$
$
$

97
20
31
115
21
60
18
14

LIFE SCIENCES AND HEALTH CARE| 18

Analyst Certification
I, Liana Moussatos, Ph.D., David M. Nierengarten, Ph.D., Heather Behanna, Ph.D., Zarak Khurshid, Tao Levy, Sarah James, certify that the
views expressed in this report accurately reflect my personal opinion and that I have not and will not, directly or indirectly, receive compensation
or other payments in connection with my specific recommendations or views contained in this report.
Disclosure information regarding historical ratings and price targets is available at http://www.wedbush.com/ResearchDisclosure/DisclosureQ314.pdf

Investment Rating System:

Outperform: Expect the total return of the stock to outperform relative to the median total return of the analysts (or the analysts team) coverage
universe over the next 6-12 months.
Neutral: Expect the total return of the stock to perform in-line with the median total return of the analysts (or the analysts team) coverage
universe over the next 6-12 months.
Underperform: Expect the total return of the stock to underperform relative to the median total return of the analysts (or the analysts team)
coverage universe over the next 6-12 months.
The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to the
other stocks in the analysts coverage universe (or the analysts team coverage).*
Rating Distribution
(as of September 30, 2014)
Outperform:54%
Neutral: 43%
Underperform: 3%

Investment Banking Relationships

(as of September 30, 2014)
Outperform:23%
Neutral: 1%
Underperform: 0%

The Distribution of Ratings is required by FINRA rules; however, WS stock ratings of Outperform, Neutral, and Underperform most closely
conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS stock ratings are on a relative
basis.
The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The
analysts receive compensation that is based upon various factors including WS total revenues, a portion of which are generated by WS
investment banking activities.
Wedbush Equity Research Disclosures as of December 19, 2014
Company

Disclosure

Achaogen
Applied Genetic Technologies
Anacor Pharmaceuticals
Ardelyx Inc.
arGEN-X N.V.
Biodel
BioMarin Pharmaceuticals
bluebird bio
Boston Scientific
Cardica Inc.
Celladon Corp.
Celldex Therapeutics
Centene
Cepheid
Cerulean Pharma
Cerus Corp.
Cubist Pharmaceuticals
DexCom
Dyax Corp.
Endocyte, Inc.
Epizyme
Fate Therapeutics
Fibrocell Science
Hyperion Therapeutics
Intercept Pharmaceuticals
Ironwood Pharmaceuticals
Karyopharm Therapeutics
La Jolla Pharmaceutical Co.
Lexicon Pharmaceuticals
Luminex Corp.

1
1,2,4,5,7
1,3,4,5,7
1,3,4,5
1,3,4,5
1
1
1,3,4,5,7
1
1,2,4,5,11
1,3,4,5,7
1,3,4,5
1
1
1,3,4,5
1
1
1
1,3,4,5
1,3,4,5
1,3,4,5
1,3,4,5,7
1,3,4,5,7
1
1,3,4,5
1
1,3,4,5
1
1
1
LIFE SCIENCES AND HEALTH CARE| 19

MacroGenics
Masimo Corp.
Medivation
Medtronic
MEI Pharma
Mirati Therapeutics
Molina Healthcare
Novavax, Inc.
NPS Pharmaceuticals Inc.
Omeros Corp.
OvaScience
Pacira Pharmaceuticals, Inc.
Pharmacyclics
Quidel Corp.
Raptor Pharmaceutical
Receptos
Regulus Therapeutics
Sangamo BioSciences
St. Jude Medical
Sunesis Pharmaceuticals
Synageva BioPharma Corp.
Tandem Diabetes Care
Tetraphase Pharmaceuticals
Unitedhealth Group
Vitae Pharmaceuticals
WellCare Health Plans
Xencor
Xoma

1,3,4,5
1
1,10
1
1,3,4,5,7
1
1
1,3,4,5,7
1
1,3,4,5
1
1,3,4,5
1
1
1
1,3,4,5,7
1,3,5,7
1
1
1
1
1
1
1
1,3,5,7
1
1,3,4,5
1

Research Disclosure Legend

1.
WS makes a market in the securities of the subject company.
2.
WS managed a public offering of securities within the last 12 months.
3.
WS co-managed a public offering of securities within the last 12 months.
4.
WS has received compensation for investment banking services within the last 12 months.
5.
WS provided investment banking services within the last 12 months.
6.
WS is acting as financial advisor.
7.
WS expects to receive compensation for investment banking services within the next 3 months.
8.
WS provided non-investment banking securities-related services within the past 12 months.
9.
WS has received compensation for products and services other than investment banking services within the past 12 months.
10. The research analyst, a member of the research analysts household, any associate of the research analyst, or any individual
directly involved in the preparation of this report has a long position in the common stocks.
11. WS or one of its affiliates beneficially own 1% or more of the common equity securities.
12. The analyst maintains Contingent Value Rights that enables him/her to receive payments of cash upon the companys meeting
certain clinical and regulatory milestones.
Price Charts
Wedbush disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA regulations. Price charts for
companies initiated upon in the current quarter, and rating and target price changes occurring in the current quarter, will not be displayed until
the following quarter. Additional information on recommended securities is available on request.

* WS changed its rating system from (Strong Buy/Buy/Hold/Sell) to (Outperform/ Neutral/Underperform) on July 14, 2009.
Please access the attached hyperlink for WS Coverage Universe: http://www.wedbush.com/services/cmg/equities-division/research/equityresearch Applicable disclosure information is also available upon request by contacting Ellen Kang in the Research Department at (213) 6884529, by email to ellen.kang@wedbush.com, or the Business Conduct Department at (213) 688-8090. You may also submit a written request
to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017.

OTHER DISCLOSURES
RESEARCH DEPT. * (213) 688-4505 * www.wedbush.com
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The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not a
representation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not intended to be
LIFE SCIENCES AND HEALTH CARE| 20

nor should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentioned
herein. This firm, Wedbush Securities, its officers, employees, and members of their families, or any one or more of them, and its discretionary and
advisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or sales
thereof in the open market or otherwise. The information and expressions of opinion contained herein are subject to change without further notice. The
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information contained herein may be obtained upon request.

LIFE SCIENCES AND HEALTH CARE| 21

EQUITY RESEARCH DEPARTMENT

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LIFE SCIENCES AND HEALTH CARE

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