JPM 2018 Biotech Outlook

Completed 13 Dec 2017 11:50 PM EST
Disseminated 14 Dec 2017 12:36 AM EST

North America Equity Research
14 December 2017
2018 US Biotech Outlook

The Force Is Strong with Biotech: A New Hope for
M&A; Conference Call @ 11am ET TODAY
We’re generally optimistic about the Biotech sector for 2018. Looking back, despite
US Biotechnology
some meaningful pockets of outperformance, the group looks poised to finish 2017 AC
roughly in-line with the broader market (NBI +20% YTD vs. S&P +18%). For the Cory Kasimov
(1-212) 622-5266
year ahead, we belive key fundamental drivers are solidly in place, highlighted by
cory.w.kasimov@jpmorgan.com
impressive innovation, a constructive FDA, and healthy capital markets. That said,
J.P. Morgan Securities LLC
M&A may be an increasingly important lever for a restoration of positive fund flows
and broad upside; the possibility of repatriation could be yet another trigger on that Carmen Augustine, CFA
front. Whatever the ultimate impetus, we believe it will be important for generalists to (1-212) 622-8527
return to the space for the group as a whole to work. Otherwise, the Dark Side may carmen.augustine@jpmorgan.com
reign. Please join us for a CC today at 11am ET to discuss our sector outlook and J.P. Morgan Securities LLC
favorite names (US dial in: 800-369-2174; OUS: 517-308-9407; Passcode: Shawn Fu, M.D.
BIOTECH). Please see ~90-page slide deck within. (1-212) 622-2529
shawn.fu@jpmorgan.com
 Large caps look well positioned overall with relatively depressed multiples for the
big 4 following a turbulent 3Q17 earnings season (13x 2018e cons EPS vs. 15x for
pharma and 18x for the S&P). With some product-specific exceptions, we believe Arun Kiran Pasumarthy
(91-22) 6157-5013
consensus estimates are broadly achievable thanks to upcoming new product cycles.
arunkiran.pasumarthy@jpmorgan.com
There are also plenty of clinical catalysts on the near-to-intermediate-term horizon.
J.P. Morgan India Private Limited
M&A could prove to be an important lever for the large caps as well, as they
attempt to backfill pipelines and find new sources of growth. Companies have stated US SMid Biotechnology
that tax reform is not necessarily a gating factor for deals…however, we suspect the Jessica Fye
AC
proposed repatriation could nevertheless provide enhanced BD flexibility (for the (1-212) 622-4165
big 4, ~78% of cash on average or ~$83B is OUS). jessica.m.fye@jpmorgan.com
Bloomberg JPMA FYE <GO>
 SMID caps remain largely clinical/regulatory catalyst-driven. On the whole, we
expect the group will continue to benefit from impressive innovation and an
increasingly constructive regulatory environment. Moreover, as noted above, Ryan Tochihara
repatriation included in the recent tax reform proposal could heighten anticipation (1-212) 622-7059
for M&A and potentially buoy the sector in 2018. If M&A fails to materialize, ryan.tochihara@jpmorgan.com
selectivity may again become increasingly important. J.P. Morgan Securities LLC
Yuko Oku
 Buyside survey takeaways: Our buyside survey (n=130) indicates 66% of
(1-212) 622-5374
respondents anticipate biotech to outperform the broader markets (vs. 71% in our
yuko.oku@jpmorgan.com
2016 survey) and 11% to underperform (vs. 10%). Not surprisingly, 84% of survey
responders expect an uptick in M&A in 2018. Top long ideas include CELG (large) AC
& PBYI (SMID); top shorts include AMGN (large) & TSRO (SMID). Anupam Rama
(1-212) 622-0900
 Key sector tailwinds: Innovation and the continued commitment by the anupam.rama@jpmorgan.com
FDA/Congress to expedite drug development will both be key tailwinds for the J.P. Morgan Securities LLC
space. M&A has obviously yet to come to fruition in any meaningful way but
Eric W Joseph
nevertheless remains a potential core driver in 2018 given a perfect storm of plush
(1-212) 622-0659
balance sheets (further bolstered by repatriation), attractive targets, and need. eric.w.joseph@jpmorgan.com
 Key sector headwinds: Despite a slowdown in drug pricing headlines in 2017, we J.P. Morgan Securities LLC
and surveyed buysiders continue to see payer/pricing pressure as a potential 2018 Tessa T Romero
headwind. While a clear-cut proposal has yet to surface, we acknowledge the risk of (1-212) 622-4484
government intervention remains an open question. Negative clinical catalysts are of tessa.t.romero@jpmorgan.com
course an omnipresent risk to biotech; throughout 2017, the downside on negative J.P. Morgan Securities LLC
events was significantly larger than the upside on positive events.
 Favorite Names: Kasimov: BIIB (large cap), BMRN (emerging large cap) and
PBYI (SMid); Fye: JAZZ and ASND; Rama: ALXN and FOLD; Joseph: KPTI.
See page 89 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, 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.
www.jpmorganmarkets.com
tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
2018 Global Biotech Outlook: Key Takeaways
Core sector fundamentals remain strong…

Innovation remains at the center of biotech and is still functioning at a very high level
 Advances in first-in-class and/or disruptive therapies are increasingly frequent (e.g., immuno-oncology, gene therapy/editing, etc.), with plenty of activity
on the horizon over the next 12-24 months; biotech companies across the cap spectrum are involved
“New FDA” providing many more opportunities for accelerated approval
 Even more so than expected, the FDA remains committed to accelerated development where appropriate
 2017 saw the early pull-through from the new FDA, and this is trend we expect will continue in 2018 and likely beyond
…and pricing fears have (at least temporarily) eased…

Industry-driven changes (and lack of campaign rhetoric) appear to be keeping the media focus on pricing well below its peaks…
 We expect the industry will be increasingly self-policed and the broader focus on drug prices to continue; still, watch for impact of high-priced therapies
…but is the risk of government intervention really lower? That remains an open question
 With a Republican White House and Congress, the likelihood of government intervention appears lower on the surface. However, rhetoric around pricing
has been unpredictable at times
…but M&A really does need to materialize

The stars may finally be aligned for increased M&A activity
 M&A sputtered along in 2016 & 2017, but we see potential for an uptick in 2018 driven by BioPharma’s 1) need to backfill pipelines, 2) strong balance
sheets/potential for leverage, and 3) potential tax reform that could allow access to significant ex-US cash; we expect a steady stream of deals in 2018
If M&A doesn’t materialize, patience may wear thin
 Based on our investor discussions, we believe there are fairly high expectations for M&A in 2018… if we don’t see meaningful activity on that front,
frustration could build and sentiment could take a hit
Net takeaway looking to 2018 – buyside survey suggests favorable expectations

How soon could 2H17 sentiment shift and enable a rotation back into biotech?
 Outflows in 2H17 underscore shaky sentiment going into next year; in 2018, rapid rotation back to sector could be dependent on a M&A, particularly in
widely owned names; as usual, a successful 2018 JPM Healthcare Conference would set positive tone for the sector
2
Source: J.P. Morgan Research

2018 Global Biotech Outlook: Top Picks Summary
Cory Kasimov
 Biogen (BIIB) – While this call is admittedly early, we suspect that BIIB – our top large-cap idea – could begin to transition into one of the most over-
owned names in biotech over the next two years as we approach the all-important Phase 3 Alzheimer’s read-out (expected in late 2019/20, assuming no
interim). A stable base biz and increased BD activity could raise the company’s perceived floor valuation in the meantime.
 BioMarin (BMRN) – For 2018, we expect BMRN – our top emerging large-cap idea – shares to finally break out from ~2 years of stagnation as a new
product cycle drives profitability and investors (likely both existing and new) begin to better appreciate / position ahead of key pivotal readouts
anticipated in 2019 (val rox and vosoritide in particular; also potentially NAGLU).
 Puma Biotechnology (PBYI) – Following the post-3Q17 sell-off, we believe PBYI – our top SMid idea – is attractively valued and that 2018 consensus
Nerlynx expectations may be materially too low. We also see heightened scarcity value for a wholly-owned oncology asset in this environment.
Anupam Rama
 Amicus (FOLD) – We believe commercial and pipeline momentum should drive FOLD shares in 2018. On the commercial side, the OUS Galafold launch
should gain steam on the back of 2017 reimbursement progress. On the pipeline side, we believe the totality of migalastat data support approval in the
US and maintain that the Pompe program is undervalued / underappreciated (as is the company’s overall technology platform).
 Alexion (ALXN) – While earnings expectations for the year are appropriately low, 2018 is all about ALXN1210 pivotal data (data flow starting with PNH in
2Q18 ). We continue to view ALXN1210 as a long-term defense point for Alexion’s core complement business. Given the recent pull-back in ALXN shares,
we believe the reward / risk profile going into 2Q ALXN1210 data readouts is very favorable.
Jessica Fye
 Jazz Pharmaceuticals (JAZZ) – We see a nice setup for the stock in 2018 with reaccelerating Xyrem volume growth, a strong Vyxeos launch, and potential
for biz dev to add long-term growth drivers/diversification. We view valuation as compelling with shares trading at just 11x 2018E EPS and the company
poised to generate double-digit earnings growth over the next several years and see strong growth in the hem-onc franchise, as well as JZP-110,
diversifying the company’s long-term revenue mix.
 Ascendis (ASND) – We see Ascendis in the midst of a transformation from a single clinical-stage product story to a company with multiple orphan
endocrine pipeline products in the clinic. We see a high probability of success for TransCon hGH (GHD) in the phase III heiGHt trial (data early ‘19) and
over 2018 we see value creation driven by progress with the company’s early endocrinology pipeline (TransCon PTH and achondroplasia).
Eric Joseph
 Karyopharm (KPTI) – We believe near-term selinexor STORM data will support accelerated approval in late-line myeloma, and that the opportunity is
under-reflected at current levels. Assuming STORM success, a string of pivotal catalysts in 2H18 / 2019 should further add to share momentum.

A Quick Look Back at 2017
 Performance Metrics / Catalysts
 Fund Flows
 Healthcare vs. Broader Markets
 Biotech vs. Healthcare Sub-sectors

Biotech performed essentially in line with broader markets in 2017
2017 YTD Performance: NBI +20% vs. S&P 500 +18%

35%
NBI S&P 500 Approval of Yescarta (GILD /
KITE CAR-T therapy)
30% Kymriah’s CELG’s infamous 3Q

AZN’s MYSTIC approval miss / Guidance cut
failure (first CAR-T
Trump commentary
25% therapy)
on Pharma companies
YTD Change (%)
JNJ acquisition of Trump signs HC

20% Actelion for $30bn Executive order
Approval of Dupixent
Positive CVOT data for GILD acquisition of
15% JPM HC Repatha KITE for ~$11.9B
Conf +ve ARIEL3 readout for
Rubraca (PARP inhibitor) NVS acquisition of
10% AAAP for ~$3.9B
5% ASCO 2017
BIIB 1Q beat (strong
GILD lowered 2017 HCV uptake of Spinraza)
guidance significantly
0%
4Q Earnings 1Q Earnings 2Q Earnings 3Q Earnings
Legacy Large Caps Emerging Large Caps

91.1%
BIIB 22.3% VRTX
AMGN 21.2% BMRN 2.6%
GILD 5.2% REGN 1.7%
CELG -11.8% INCY -2.3%
ALXN -11%
NBI 19.6% NBI 19.6%
tbancroft@snowphipps.com
Source: J.P. Morgan Research; Bloomberg. Data as of 12/1/2017 Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Despite in-line performance vs. broader markets in 2017, Biotech significantly outperformed between 2012 and 2017 in aggregate
2012-2017 YTD Performance: NBI +206% vs. S&P 500 +110%
300% NBI S&P 500
250%
Year NBI S&P 500 ∆ (%)

200% 2012 31.9% 13.4% 18.5%
% Change
2013 65.6% 29.6% 36.0%

150%
2014 34.1% 11.4% 22.7%
2015 11.4% -0.7% 12.1%

100%
2016 -21.7% 9.5% -31.2%
2017 19.6% 18.0% 1.6%

50%
0%
While the broader markets steadily appreciated, biotech performance was characterized more by periods of volatility
There were several positives in 2017…

 The “new FDA” was a tailwind, showing continued efforts to work with sponsors on innovative therapies
 Innovation productivity remains high in the sector, highlighted by the first approvals in the CAR-T space as an example
 No major concerns related to drug pricing emerged in 2017, but this remains a hot button topic
 Capital markets supported continued funding of emerging biotechs in IPOs and secondaries
…but mixed 3Q earnings and slow M&A relative to expectations weighed on the sector
 3Q earnings were mixed (to say the least) with a number of high profile misses (CELG, GILD’s HCV franchise, etc.)
 While some M&A materialized (AAAP, ARIA, ATLN, KITE), the pace was not at the level expected at the outset of the year (was a
central thesis for many going into 2017…much like it is in 2018)
 Higher valuations and overall outperformance in many names led to profit-taking towards YE17
 There was an influx of equity issuance in the market in 2H17; while most were completed successfully, there was a trend of
increased insider buying (potentially underscoring a lower appetite for new ideas)
Source: J.P. Morgan Research tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Overall healthcare performance was the best among the so-called defensive sectors in 2017
Healthcare performance was mixed for 2017, with outperformance in 1H17 offset by underperformance in 2H17
 Biotech significantly outperformed the broader market until third quarter when a weak earnings season (particularly a weak print/guidance cut for CELG)
turned the tides and considerably reduced the lead over broader market
20% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

Total Return (%) Relative to the S&P 500
15%
10%
5%
0%
-5%
-10%
-15%
Cons Discret Industrials Materials Energy Telecom Cons Staples Info Tech Financials Utlities Health care
Serv
Biotech P/E multiples have continued to be on a downward trend over the past four years, and remain at a discount to Pharma and the S&P
30x
25x
20x
S&P 500 - 18.3x
Large Cap
15x Pharma - 15.3x
Large Cap
Biotech - 12.6x
10x
5x
Source: J.P. Morgan Research; Bloomberg. Data as of Townsend
12/1/2017; Large Cap Biotech: AMGN, Bancroft
BIIB, CELG, GILD.12/14/17
Large Cap02:02:42 PM SPG
Pharma: BMY, Partners,
MRK, PFE, LLY LLC
Fund flows were net positive for Healthcare during the year, with ETF inflows from both Growth and Value
Fund flows in 2017 favored commodity sectors (Materials ETF flows highly favored Growth / Value ETFs (inflows YTD of
+1.8%, Energy +0.6%) and Telecom (+1.6%). All the sectors saw $14.1 billion, $13.5 billion) followed by Dividend ETFs
inflows relative to S&P with healthcare (+0.3%) having the least (inflows YTD of $3.5 billion). Momentum and Low Vol ETFs
inflows followed by tech (+0.5%) have had slightly positive inflows YTD of $1.5 billion and $1.2
billion, respectively.
Cumulative flows YTD, as % of sector market cap, relative to S&P 500 Cumulative flows YTD, USD billion
YTD Last 4 Weeks +16B
+14B
Discretionary 0.7% 0.1% Growth
+12B Value
Staples 0.7% 0.0%
+10B
Energy 0.6% 0.0% +8B
Financials 1.4% 0.2% +6B
Healthcare 0.3% 0.0% +4B Dividend
Industrials 0.8% 0.0% +2B Momentum

Low Vol
Technology 0.5% - Quality
0.1%
-2B
Materials 1.8% 0.1%
-4B
Telecom 1.6% 0.1%
-6B
Utilities -
0.4% Jan-17 Apr-17 Jun-17 Sep-17
0.1%
10
Source: J.P. Morgan, US Equity Strategy team

Fund flows were mostly positive in 2017 but with high levels of variability in the back half of the year
Biotech outperformed in 1H17, as funds initially flowed into the space

 Positive clinical updates / reasonable guidance at the J.P. Morgan Healthcare Conference started the year on a positive note, which was aided by
constructive commentary from Trump’s meeting with pharma executives in late January.
 Generalist money started coming back to the sector, resulting in the strong inflows for healthcare overall compared to other defensive sectors and the
volatility has also somewhat moderated with seemingly fewer recent healthcare focused (i.e. drug pricing) political headlines.
Flow volatility picked up substantially in 2H17

 Biotech saw strong inflows during the beginning of summer, primarily driven by macro/ETF rotation of funds. Legacy biotech stocks saw solid gains on
account of real buying with majority of the flow attributable to ETFs.
 AZN’s negative MYSTIC data (as well as some individual SMID cap developments) was quickly associated with a reversal in fund flows during 2Q earnings.
 Long-awaited M&A finally arrived with the announcement of GILD’s acquisition of KITE (for ~$11.9B), sparking renewed deal optimism and driving sector
outperformance exiting the summer. New money rotating into the space continued to find its way to large-cap biotech (with more emphasis on GILD).
 During October, a week after a high-profile Phase 3 asset failure, CELG reported a big miss for Otezla and a sizable cut to overall 2020 guidance that once
again hampered generalist sentiment.
 Unspectacular/controversial prints for the remaining legacy large caps didn’t help, and most of the generalist money moved away from large-cap biotech
and into big tech co’s.
12,000 Fund Flows ( 4 Week Movg Avg In/(Out) Flow ) Market cap (IBB) 600.0
10,000 400.0
8,000 200.0
6,000 -
4,000 (200.0)
2,000 1H16 2H16 1H17 2H17 (400.0)
- (600.0)
11
Institutional investors were Neutral healthcare in 3Q17 vs. 2Q17
Institutional investors were generally Neutral healthcare in 3Q17, having retained positions in 3Q17 vs. 2Q17
 From 2Q to 3Q17, institutional investors slightly increased their exposure to Pharma/Biotech on average (except for mutual funds) with more interest coming
from private banking / WM & hedge funds. 4Q17 trends are likely to show declining Pharma/Biotech exposure following poor 3Q earnings season
12
Source: J.P. Morgan, US Equity Strategy team tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Compared to other healthcare sub-sectors, returns for Large Cap biotech lagged in 2017
EPS growth for Large-Cap biotech was healthy in 2017, though sector returns were lower than in other healthcare subsectors
 Earnings leverage continued to be key for biotech in 2017, which drove acceleration in EPS as the revenue growth from the Large Caps (AMGN, BIIB, CELG
& GILD) peaked & started trending down.
 Biotech multiples have expanded in accordance with the bottom line growth over the last year. However, they still remain at a discount to Pharma,
Managed care & Med-tech.
Return P/E EPS Growth Rev Growth
60%
51%
50%
40% 34% 36%

32%
28% 26%24%
30%
21%
16% 17% 17%15%
20% 13%12%
12%13% 10% 12% 9%
10% 8% 8% 8% 9%
10% 6%
2% 2% 4% 3%
0% 1% 1%
0%
-2% -3%
-10% -6%-6%
-9%
-12%-11%
-20% -16%
MANAGED DIST/PBM MED TECH PHARMA BIOTECH MANAGED DIST/PBM MED TECH PHARMA BIOTECH
CARE CARE
2016 2017
13
A Quick Look Back at 2017 – Snapshot of Binary Events
On average, upside after positive events was of lower magnitude than the downside after negative events in 2017
Based on an analysis of key binary events in our universe, return post binary events was positive in 2017, on average
 On average, the magnitude of upside post positive events was marginally lower than the magnitude of downside post negative events over the year
 Upside after +ve events was higher in 2H17 (vs. 1H17) along with lower downside after –ve events, indicating increased risk appetite of investors in 2H17
despite volatility during the period
17%
20% 11% 13%
10% 7% 7%
10% 6% 5% 6%
2% 0% 3% 3% 0% 0%
0%
Return profiles of
0% 0%
-10%
Binary Events in 2017
-20%
-1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month -17%
-19% -22%
-30% -22%
All Events All +ve Events All -ve Events
20% 12%
7% 7% 8% 7% 9% 11%
10% 3% 4% 5%
2% 0% 2% 0% 2% 2%
Return profiles of 0%
0%
-10%
Binary Events in 1H17
-20% -16%
-1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month
-20%
-30% -23% -23%
20% 13% 14% 11%

5% 6% 7% 6% 7%
10% 2% 2% 4% 3%
0% 0%
Return profiles of 0%
-10% -2% -1% 0%
Binary Events in 2H17
-20%
-1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month -17% -19%
-30% -21% -21%
Some of the events 1 month performances were N/A as they happened less than a month ago for 2H17 events
14

Source: J.P. Morgan Research; Bloomberg as of 12/1/2017.
A Quick Look Back at 2017 – Snapshot of Binary Events
On average, regulatory events returned more than clinical events (with IP events trailing both)
Unexpectedly, regulatory events on average returned more than the clinical events, whereas IP events lagged the other two
 This is due to the fact that clinical –ve events had more –ve returns compared to regulatory –ve (the caveat being there are very few regulatory events
compared to clinical –ve) whereas returns remained similar for regulatory / clinical +ve events
20%
16%
16%
12%
12% 10%
Return profiles 8%
7% 7%
8%
by type of event 4% 4% 4%
4% 3% 2% 2% 2% 2%
1% 1% 1% 1%
0%
0% 0% -1%
-4%
Clinical IP Regulatory
Surprisingly, clinical +ve & regulatory +ve events’ average returns remained equivalent, whereas returns post +ve IP events trailed the other
two
 High returns post +ve clinical events is not surprising. However, higher +ve returns post regulatory +ve events is noteworthy
 This highlights the increasing investor sentiment of pumping money into late-stage de-risked assets post positive regulatory developments
24%
19%
20% 18%
16% 14%
13% 13%
Return profiles 11%
12% 8%
8% 7% 7% 8% 8%
by type of event 7%
8% 5%
3% 2%
4% 1% 1%
0%
0%
-4% -1% -1%
Clinical +ve IP +ve Regulatory +ve
15

A Quick Look Back at 2017 – 1H17 Binary Events
On average, upside after positive events was lower & downside after negative events was higher in 1H17 vs. 2H17
Based on an analysis of key binary events in our universe, the avg. upside post binary events was slightly lower in 1H17 vs. 2H17
 Downside after negative events was slightly higher in 1H vs. 2H. That said, the number of –ve events in our universe was considerably lower vs. 2016.
%Return
Ticker Event Type of Event Good / Bad Date of Event -1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month
MACK Onivyde sale to Ipsen IP + 01/06/17 5% 1% 1% 3% 6% 2% 2%
AMAG Discontinue pain study for SC Makena Clinical - 01/09/17 7% 3% 0% -36% -35% -35% -38%
BIIB Tecfidera FWP Settlement IP + 01/17/17 -1% -3% -1% -1% 0% -3% 6%
AMGN Repatha FOURIER topline outcomes data Clinical + 02/02/17 6% 2% 2% 0% 5% 4% 13%
ACOR Inbrija Phase 3 data Clinical + 02/09/17 -4% -5% -4% 21% 22% 17% 38%
EDIT No interference declared in CRISPR dispute IP + 02/15/17 1% 2% 1% 29% 31% 45% 32%
BCRX Phase 2 APEX-1 initial data in HAE Clinical + 02/27/17 -15% -16% -2% 0% 14% 42% 62%
LXRX Xermelo approval Regulatory + 02/28/17 18% 8% 5% -2% -5% 0% -11%
PTCT Translarna ACT CF Phase 3 failure Clinical - 03/02/17 1% 0% -3% -20% -26% -25% -25%
IONS Volanesorsen Phase 3 APPROACH data Clinical + 03/06/17 23% 23% 2% -8% -15% -24% -30%
AMGN Repatha FOURIER full outcomes data Clinical - 03/17/17 7% -1% -1% -6% -6% -8% -10%
ESPR FDA confirms regulatory path Regulatory + 03/19/17 13% -24% -20% 74% 65% 62% 65%
BIIB Tecfidera IPR Decision IP + 03/20/17 -6% -6% -1% 0% 0% 0% -1%
VRTX Tezacaftor/Ivacaftor Phase 3 data Clinical + 03/28/17 1% 1% -1% 20% 20% 20% 31%
ACOR U.S. district court invalidates four Ampyra patents IP - 03/31/17 1% 5% -1% -21% -31% -38% -38%
JAZZ Xyrem settlement IP + 04/05/17 8% -2% 0% -2% 7% 7% 10%
NBIX Ingrezza approval Regulatory + 04/11/17 -13% -7% -1% 3% 29% 35% 33%
INCY Baricitinib CRL in rheumatoid arthritis Regulatory - 04/16/17 -7% 1% 2% -10% -11% -12% -17%
RARE KRN23 Phase 3 data Clinical + 04/18/17 -27% 7% 2% -2% -1% 0% -5%
RXDX Q2 STARTRK-2 update for ROS1 NSCLC Clinical + 04/27/17 1% 9% 3% -5% -4% -20% -25%
BMRN Brineura U.S. approval Regulatory + 04/27/17 9% 9% 2% 0% 0% 0% -8%
RDUS Tymlos U.S. approval Regulatory + 05/01/17 0% 2% 1% -10% -9% -9% -12%
IONS Inotersen Phase 3 NEURO-TTR data Clinical + 05/15/17 11% -1% 5% -7% -5% -5% 6%
FOLD Q2 Pompe program update Clinical + 05/15/17 3% 6% 7% 5% 7% 14% 14%
ALNY Top-line NEURO-TTR (IONS) data Clinical + 05/15/17 15% 3% 3% 16% 27% 30% 28%
INCY IDO ASCO abstracts Clinical + 05/17/17 -4% 5% 2% 7% 9% 13% -2%
NBIX Ingrezza Phase 2 T-Force GREEN failure Clinical - 05/23/17 5% 1% 2% 0% -9% -19% -12%
PBYI Positive FDA ODAC vote in favor of neratinib approval Regulatory + 05/24/17 55% 50% 10% 30% 35% 33% 50%
GILD B/F/TAF Phase 3 topline data in HIV Clinical + 05/26/17 -1% 2% 0% 1% 3% 12% 13%
RDUS RAD1901 (elacestrant) Phase 1 data at ASCO Clinical + 06/04/17 -5% 0% 0% 10% 10% 11% 31%
PBYI Roche’s APHINITY full trial results at ASCO Clinical + 06/05/17 121% 3% 0% 2% 0% -3% 7%
BLUE bb2121 Updated data in r/r MM at ASCO Clinical + 06/05/17 -4% 7% 6% 8% 17% 30% 25%
RIGL Fostamatinib NDA acceptance Regulatory + 06/19/17 -2% 5% -5% 11% 10% 14% 5%
CLVS Rucaparib ARIEL3 topline data Clinical + 06/19/17 19% -1% 0% 47% 48% 58% 48%
SGEN Phase 3 ECHELON-1 data in HL Clinical + 06/26/17 -8% -4% -2% -8% -17% -15% -11%
ALDR Phase 3 PROMISE 1 data in episodic migraine Clinical + 06/27/17 16% -2% -5% -28% -36% -39% -40%
All Events 7% 2% 0% 3% 5% 6% 7%
All +ve Events 8% 2% 0% 7% 9% 11% 12%
All -ve Events 2% 2% 0% -16% -20% -23% -23%
16

A Quick Look Back at 2017 – 2H17 Binary Events
Upside after positive events was a tad higher in 2H17 vs. 1H17… will the trend continue?
Upside after positive events was slightly higher vs. 1H17 along and downside was lower after negative events, potentially reflecting the
increased appetite for playing binary events
 That said, some of the positive events in 2H17 erased the gains as “sell the news” theme continued affecting the performance
%Return
Good / Date of
Ticker Event Type of Event Bad Event -1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month
ARNA Ralinepag Phase 2 data in PAH Clinical + 07/10/17 38% 14% 7% -4% 35% 25% 21%
FOLD US Migalastat regulatory update Regulatory + 07/10/17 21% 4% -1% -2% 24% 24% 33%
VRTX Initial triple combo results Clinical + 07/18/17 5% 1% 2% 21% 21% 26% 12%
AGIO IDHIFA FDA approval Regulatory + 08/01/17 9% -6% -1% 5% 10% 9% 11%
ONCE SPK-8011 Phase 1/2 preliminary data in hemophilia A Clinical + 08/02/17 11% -5% -6% 20% 15% 18% 24%
JAZZ Vyxeos approval Regulatory + 08/03/17 -4% -4% 0% 3% 3% -4% -1%
RARE Ace-ER Phase 3 data in GNE myopathy Clinical - 08/22/17 -18% 2% 3% -13% -13% -10% -11%
AAAP Filing acceptance (after prior CRL) Regulatory + 08/28/17 15% 0% 0% 0% -1% 3% 15%
GILD Acquisition of KITE for $11.9B NA 08/28/17 -1% 2% 0% 1% 3% 12% 13%
BMRN Pegvaliase BLA accepted with priority review Regulatory + 08/29/17 -7% 2% 1% 0% 6% 10% 12%
OTIC Otividex Phase Meniere's disease failure Clinical - 08/30/17 11% 1% 2% -83% -83% -84% -84%
BCRX Phase 2 APEX-1 final data in HAE Clinical + 09/05/17 -2% 9% -2% -1% -1% 15% 7%
SRPT Golodirsen biomarker data update Clinical + 09/06/17 5% 8% 0% 14% 10% 9% 22%
UTHR Interim FREEDOM-EV orenitram data in PAH Clinical - 09/08/17 2% 0% -1% -10% -10% -10% -9%
IDRA IMO-2125 Phase 1/2 update at ESMO Clinical + 09/08/17 10% 6% 4% -3% 12% 5% 21%
ARRY Phase 3 BEACON CRC lead-in data at ESMO Clinical 09/08/17 19% 4% 4% 7% 3% 5% 20%
SAGE Phase 3 SRSE readout Clinical - 09/12/17 5% 2% 2% -14% -21% -29% -29%
FOLD Zorblisa EB Phase 3 failure Clinical - 09/13/17 7% -5% -3% 2% 1% 3% 7%
ASND Phase 3 VSAR VELOCITY failure Clinical + 09/21/17 7% -1% 2% -5% 17% 27% 20%
FOLD Pompe program update at World Muscle Clinical + 10/04/17 4% 1% -1% 9% 7% -3% -6%
RXDX Entrecrtinib STARTRK-2 update at World Lung Clinical + 10/18/17 17% 3% 7% 13% 16% 9% 5%
CELG Discontinues GED-0301 in Crohn's disease Clinical - 10/19/17 -5% 0% -1% -11% -10% -28% -24%
ALXN Soliris U.S. approval in MG Regulatory + 10/23/17 -3% -1% -1% -3% -2% -8% -22%
PTCT Translarna ACT DMC CRL Regulatory - 10/25/17 -17% -9% -5% 7% 1% 13% 3%
JUNO JCAR017 NHL updated data in ASH abstract Clinical + 11/01/17 -2% 3% -3% 8% 33% 26% 22%
BLUE LentiGlobin updated data in SCD in ASH abstract Clinical + 11/01/17 11% -2% -2% 3% 11% 4% 23%
ALNY Phase 3 APOLLO full data presentation at EU-ATTR Clinical + 11/02/17 -1% 1% -1% 10% 9% 7% 6%
ACAD Nuplazid full data in ADP at CTAD Clinical + 11/03/17 -10% 0% 2% 2% -7% -19% NA
NKTR NKTR-214 interim PIVOT-02 abstract Clinical + 11/07/17 -2% 3% 2% 11% 25% 53% NA
NKTR Single pivotal filing allowed for '181 Regulatory + 11/07/17 -2% 1% 2% 11% 25% 53% NA
DVAX Heplisav approval Regulatory + 11/09/17 -10% -3% -5% -4% -3% -13% NA
SAGE Phase 3 PPD data Clinical + 11/09/17 -2% -9% -2% 54% 53% 41% NA
NKTR NKTR-214 interim PIVOT-02 presentation Clinical + 11/11/17 41% 37% 2% 14% 22% 43% NA
All Events 5% 2% 0% 2% 6% 7% 4%
All +ve Events 6% 3% 0% 7% 13% 14% 11%
All -ve Events -2% -1% 0% -17% -19% -21% -21%
17

Looking Ahead to 2018: Views from Multiple J.P. Morgan Teams
 JPM Trading Desk Perspective
 JPM Biotech Team Overview
18

Looking Ahead to 2018 – The Trading Perspective
Perspective from our desk…what they’re seeing and what’s the vibe into 2018
 Thoughts from the J.P. Morgan Healthcare Trading Desk (conference call commentary)
19
Looking Ahead to 2018 – JPM Biotech Thoughts
We believe core fundamentals are solid; sentiment, however, remains somewhat mixed heading into the year. In
our view, selectivity could be important ex M&A, and we look to the 2018 J.P. Morgan Healthcare Conference to
better establish directionality (obviously some M&A in the early innings of 2018 would help)
We remain constructive on the sector for 2018, as fundamentals still look strong, Trump policy changes have the potential to add
to the momentum, and the stars may FINALLY be aligned for a material increase in M&A…
 We continue to expect investor risk appetite for biotechs will be driven by high-profile clinical and regulatory catalysts and commercial performance
 The pace of innovation hasn’t slowed, and first-in-class and/or disruptive technologies have drawn a significant amount of investor interest (and capital),
which we expect could continue into 2018
 Regulatory productivity continues as clarity on approval requirements increase, with robust use of accelerated approval pathways (e.g., BTD)
highlighting the FDA’s commitment to rapidly getting needed therapies to market; broader deregulation efforts coming from the new administration
may further increase FDA output (“new FDA” has become a tailwind thesis in the sector)
 While the significant M&A anticipated in 2016 and 2017 didn’t quite come to fruition, we think 2018 could (finally) be the year, facilitated by robust
BioPharma balance sheets, potential tax reform, and an increasing need for growth / pipeline assets; we are expecting a steady flow of M&A versus an
influx
 In our recent buyside survey (see slide 26), 71% of responders expect Biotech will outperform the broader markets in 2018 (only 10% predict
underperformance), with M&A as the most often cited tailwind during the year
…that said, headline risk could persist and political uncertainty remains
 Controversy around drug pricing may be less in focus but don’t think for a second that it will fully subside; we expect continued discussion from both
politicians and PBMs (not to mention biotech/pharma companies) on the issue
 While a Republican White House/Congress appears to decrease the risk of significant government intervention… we still don’t have much clarity on
Trump’s specific plans
 The strengthening economy and the potential growing attractiveness of other asset classes could also rekindle outflows during the year
 A key question is whether uncertainty/volatility will keep fund inflows at bay (and potentially accelerate outflows)
 A lot is expected of M&A; if deals don’t materialize in the early innings of 2018, there could be a negative shift in sentiment
 A capital markets influx could continue in 2018 but will have to be balanced by positive earnings momentum, clinical progress, and M&A
20
Source: J.P. Morgan Research. tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Looking Ahead to 2018
Biotech has historically outperformed the broader market during The J.P. Morgan Healthcare Conference…2017 saw mixed performance
We evaluated BTK performance relative to the S&P 500 during the week of the JPM Healthcare Conference over the past 17 years
 We observed that ~76% of the time (all but 4 years), the BTK has outperformed the S&P 500 during the week
 The BTK outperformed the S&P 500 by ~2.5%, on average, during the week of the conference over the past 17 years, while last year’s conference
performance was in many ways a tale of two halves (positive performance quickly reversed by Trump’s “getting away with murder” commentary)
Despite mixed performance at JPM17, positive fundamental developments / much-awaited M&A set the year off on an
encouraging note…
…that said, many will be looking at the 2018 Conference as a potential to re-set post 2H17 and potentially look for new ideas (M&A
announcements in conjunction with the conference , which are not uncommon, could set things in a positive direction)
3.0% 6.00%
BTK Performance Relative to the S&P 500
2.5%
4.00%
Performance During JPM HC Conf
2.0%
2.00%
Weds
Weds
Weds
Thurs
Thurs
1.5% Mon
Mon
Mon
Tue
Tue
Tue
Tue
2.5% Relative
Fri
Fri
Fri
Outperformance 0.00%
1.0% on Average from
Mon
Mon
Tue
Fri
Fri
Thurs
Thurs
Thurs
Weds
Weds
2001-2017
0.5% -2.00%
0.0%
-4.00%
-0.5%
-6.00%
-1.0%
Mon Tues Weds Thurs Fri
-8.00%
BTK S&P 500 2013 2014 2015 2016 2017
21
Looking Ahead to 2018 – The Large Caps (The Big 4)
What will it likely take for the LEGACY large caps to work – or not work – in 2018?
AMGN
 It works if… we see an inflection in Repatha sales following inclusion of CVOT data in the label, Aimovig receives FDA approval and gains market share early
in launch, mgmt can squeeze even more out of margins, concerns over erosion of legacy portfolio assets attenuate, and/or M&A adds new growth drivers
 It doesn’t work if… Enbrel pricing concerns linger, biosimilar risk intensifies, Repatha struggles to gain traction, Aimovig launch is slow, and/or clinical
catalysts don’t materialize
BIIB
 It works if… the core MS franchise remains resilient, Spinraza continues to perform well commercially and withstands competitive
developments/headwinds, and/or investors start positioning early ahead of highly anticipated Phase 3 aducanumab data (currently expected in late 19/20);
any additional near term growth prospects / boosts to perceived ex-Alzheimer’s valuation introduced by M&A would be a plus
 It doesn’t work if… ongoing competitive pressures in MS (e.g. Ocrevus) put a greater dent on the topline than currently anticipated (though BIIB does
receive some economics from Ocrevus), Spinraza sales fall short, or accrual for aducanumab trials is delayed and/or if unforeseen side effects arise
CELG
 It works if… they hit on key clinical catalysts, BD strategy adds new and later stage growth drivers (growing expectation for bigger deals post recent GED-
0301 failure and 2020 guidance cut), and/or confidence in near and longer term guidance is reinforced
 It doesn’t work if… more important clinical catalysts end up disappointing, 2020 guidance is further cut, the commercial franchise struggles, and/or
additional IP concerns surface
GILD
 It works if… HCV sales and expectations finally stabilize (i.e. find a bottom), sales in HIV are bolstered by the launch of B/F/TAF, Yescarta launch generates
excitement on the oncology front, or additional pipeline growth drivers emerge either internally (filgotinib?) and/or through additional expected M&A
 It doesn’t work if…further M&A fails to materialize, HCV sales continue to disappoint, B/F/TAF HIV launch is not as robust as expected, and/or nothing
emerges from pipeline to instill confidence in future growth
22
Looking Ahead to 2018 – The Large Caps (the Emerging 5)
What will it likely take for the EMERGING large caps to work – or not work – in 2018?
ALXN
 It works if… ALXN1210 is confirmed as a long-term defense point for Alexion’s complement franchise (first data in earl y-2Q18) and Strensiq / Kanuma growth is
re-invigorated
 It doesn’t work if… there is an ALXN1210 setback and/or potential business development is received poorly by the Street
BMRN
 It works if… clinical timelines are met and investors begin to position ahead of key upcoming catalysts (e.g., Phase 3 trials of vosoritide and Val Rox), Brineura
launch gains traction, pegvaliase is approved and early launch tracks in-line with or above expectations, and/or BMRN meets its non-GAAP profitability guidance
 It doesn’t work if… pegvaliase is not approved or approval is delayed, product sales falls short of expectations, and/or pipeline encounters surprising setbacks
INCY
 It works if… IDO inhibitor epacadostat generates positive data in the Phase 3 ECHO-301 study in melanoma and we continue to receive encouraging updates
from other tumor types, regulatory updates for baricitinib in RA proceed smoothly (resubmission by end of January), and/or INCY continues to execute on earlier
stage assets with its prolific discovery engine
 It doesn’t work if… epacadostat disappoints – either clinically or strategically, Jakafi commercial trends start to slow, and/or baricitinib encounters additional
unforeseen delays
REGN
 It works if… dupi’s strong launch continues and product exceeds expectations, Eylea growth is maintained and the PANORAMA Phase 3 study is positive,
Praluent outcomes data is positive and gets Praluent’s launch on track, Kevzara shows signs of commercial progress, and/or we get additional pipeline surprises
 It doesn’t work if… dupi fails to exceed commercial expectations or disappoints in additional late-stage indications , Eylea growth stalls, Praluent outcomes data
disappoints, and/or Praluent/Kevzara launches continue to fall short
VRTX
 It works if… the next round of updates from the triple combos continues to be encouraging and the company elucidates a clear (and potentially expedited) path
forwards for the pivotal studies, or Orkambi sales remain on track and the company continues to progress in their discussions with EU payers…setting the stage
for the launch of teza/iva, and/or company’s growth profile attracts a wider base of investors
 It doesn’t work if… initiation of the pivotal trials for the triple combo is delayed or postponed, there are any material regulatory setbacks for teza/iva, aggressive
spending limits bottom line growth, and/or competitive concerns in CF intensify
23

Source: J.P. Morgan Research; Bloomberg. Data as of 12/1/2017
2018 Buyside Survey
24

First, a look back at the 2017 survey predictions
Key takeaways from our 2017 outlook buyside survey (conducted in late-2016)
Top Large Cap Longs Top Large Cap Shorts

In our 2017 outlook, our buyside survey responders voted CELG, 25% 20%
22% 22% 21%
20%
GILD & BIIB as top Large Cap picks and REGN, BIIB & AMGN as top 15%
shorts 10% 5%
5% 2%
 Longs: Compared to the NBI (+20% YTD as of 12/1/17), BIIB (+22% YTD) 0%
mildly outperformed while CELG (-12% YTD) and GILD (+5% YTD) -5%
underperformed -10%
-15%
 Shorts: REGN (+2% YTD) underperformed the NBI, while AMGN (+21% YTD) -12%
NBI CELG GILD BIIB REGN BIIB AMGN
performed almost ~in-line with the market (and BIIB outperformed as
mentioned above)
Top Smid Cap Longs Top Smid Cap Shorts
250%
Responders voted BMRN, NBIX & INCY as top Smid Cap picks in 2017 177%
201%
200%
and ICPT, BLUE, JUNO & SGEN as top shorts 150%
90%
 Compared to the NBI, NBIX (+90% YTD) outperformed while BMRN (+3% YTD) 100%
and INCY (-2% YTD) underperformed 50% 20%
3% 13%
0%
 ICPT (-44% YTD) and SGEN (+13% YTD) underperformed the NBI, while BLUE
-50% -2%
(+177% YTD) JUNO (+201% YTD) outperformed -44%
-100%
NBI BMRN NBIX INCY ICPT BLUE JUNO SGEN
In the 2017 outlook buyside survey, 71% of responders expected

Biotech to outperform the market in 2017 (including 56% who
expected it to outperform by 5-15% & 16% who expected it to NBI 20%
outperform by >15%), a prediction that didn’t quite come to fruition

(Biotech +2% vs. the market) S&P 500 18%
 Year-to-date, the NBI is +20% vs. the S&P 500 +18%

0% 5% 10% 15% 20% 25%
25
Source: J.P. Morgan Research. Bloomberg. Data as of 12/1/2017 Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Looking Ahead to 2018 – Buyside Survey
Key takeaways from our latest buyside survey
We conducted a buyside survey from Nov 20th – Dec 4th

 130 investors completed the survey
Responder type (N=130)
Other Long-only
 Equal participation, i.e. 48% from each of hedge funds and long-only funds, and 4% “other”
4% generalist
 Vast majority of responders (84%) are healthcare “specialists”
8%
Key takeaways include:

Hedge fund
 66% of responders expect Biotech to outperform the broader markets in 2018; specialist - Long-only
11% expect biotech to underperform Biopharma / specialist - Overall
Therapeutics Healthcare
 Not surprisingly:
28% 24%
 Increasing M&A, clinical data/Innovation, and easier regulatory environment/FDA
are the common anticipated tailwinds in 2018
 Continued payer/pricing pressure is the most common expected Hedge fund Long-only
headwind, followed by negative sentiment and clinical data/failures specialist - Overall specialist -
 Top buyside large-cap ideas…. Healthcare Biopharma /
15% Therapeutics
 Long Idea: CELG
17%
 Short Idea: AMGN
 Top buyside Smid-cap ideas….
Hedge fund
 Long Idea: PBYI generalist
 Short Idea: TSRO 4%
 84% of survey responders expect an uptick in M&A in 2018 compared to 93% in 2017; Clovis is the top pick for M&A in the year ahead
 IDO melanoma data is the most frequently cited clinical catalyst for 2018
 A third of survey participants expect that the Republican Tax Reform will be enforced in 2018 and that Democrats might get the control of Congress in
the 2018 mid-terms
26
Source: J.P. Morgan Research. tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Other
How do you expect biotech to perform relative to Long-only specialist - Biopharma / Therapeutics
the broader markets in 2018? Long-only specialist - Overall Healthcare
Long-only generalist
66% of responders expect Biotech will outperform the Hedge fund specialist - Biopharma / Therapeutics
broader markets in 2018 Hedge fund specialist - Overall Healthcare
 52% of long-only investors expect Biotech will perform “better”
Hedge fund generalist
(5-15%) and 16% expect “much better” (15%+) performance vs. 70
50% and 15%, respectively, for hedge funds
 21% of long-only investors vs. 24% of hedge funds expect biotech
to perform in line
60
 About 11% of responders in each group anticipate biotech to
underperform in 2018
50
Worse Much worse
(underperform (underperform Much better
Number of responders
by 5-15%) by 15%+) (outperform by 40
9% 2% 15%+)
15%
30
In line (+/- 5%)

23% 20
Better
(outperform by
5-15%) 10
51%
0
Much better Better In line (+/- 5%) Worse Much worse
(outperform by (outperform by (underperform (underperform
15%+) 5-15%) by 5-15%) by 15%+)
27

Other
How do you expect biotech to perform relative to Long-only specialist - Biopharma / Therapeutics
the broader Healthcare sector (Managed Care, Long-only specialist - Overall Healthcare
Dist/PBM, Med Tech/Tools, Pharma) in 2018? Long-only generalist
Hedge fund specialist - Biopharma / Therapeutics
67% of responders expect Biotech will outperform the Hedge fund specialist - Overall Healthcare
broader Healthcare sector in 2018 Hedge fund generalist
80
 53% of long-only investors expect Biotech will perform “better”
(5-15%) and 11% expect “much better” (15%+) performance vs.
56% and 13%, respectively, for hedge funds 70
 Both long-only investors and hedge funds (16%) anticipate in –
line performance with the broader healthcare sector
 19% of long-only investors expect underperformance vs. 15% of 60
hedge funds
Much worse Much better 50
Number of responders
Worse (underperform (outperform by
(underperform by 15%+) 15%+)
by 5-15%) 1% 12% 40
15%
30
In line (+/- 5%) 20

16% Better
(outperform by
5-15%)
56% 10
0
Much better Better In line (+/- 5%) Worse Much worse
(outperform by (outperform by (underperform (underperform
15%+) 5-15%) by 5-15%) by 15%+)
28

What do you see as the biggest TAILWIND in the space in 2018? (Top 5 ranked factors selected)
Not surprisingly, similar to 2017, this year increasing M&A activity is the most commonly anticipated tailwind
 Based on the top 5 ranked factors, a majority of responders cited increasing M&A as the leading tailwind for 2018, followed by clinical data/innovation and
an easier regulatory environment fostered by FDA
 Hedge funds more focused on M&A as the primary tailwind in 2018 compared with long-only funds (52% hedge fund responders cited increasing M&A as
the #1 tailwind, versus 32% long-only investors)*
 Similarly, based on the top 5 ranked factors, 44% of specialists ranked increasing M&A as their first choice versus 31% of generalists*
 For investors expecting the Biotech sector to perform better than the broader market in 2018, hedge funds ranked tax reform as the #2 tailwind whereas
long-only investors are more inclined towards clinical data/innovation*
Factor Rank Distribution Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
Increasing M&A 42% 20% 15% 8% 7%

Clinical data / Innovation 20% 20% 13% 15% 9%
Easier Regulatory Environment / FDA 12% 14% 18% 15% 12%
Repatriation / Tax reform 9% 14% 15% 14% 6%
Improving Sentiment 2% 7% 13% 12% 12%
Attractive valuation 7% 5% 8% 8% 6%
Renewed Generalist interest 3% 8% 5% 11% 19%
Less Political uncertainty / 2018 mid-term
2% 7% 3% 9% 6%
elections
Less pricing pressure 2% 4% 8% 4% 11%
There aren't any 1% 0% 0% 1% 2%
Low interest rates 0% 2% 1% 0% 5%
Easy comps / Earnings growth 0% 0% 1% 3% 4%
29
* Detailed data in Appendix
What do you see as the biggest HEADWIND in the space in 2018? (Top 5 ranked factors selected)
Payer/pricing pressure is the biggest expected headwind during the year

 Based on the top 5 ranked factors, continued payer/pricing pressure was most frequently cited as the biggest challenge to performance in 2018, followed
by negative sentiment
 Hedge funds were more focused on payer/pricing pressure as the primary headwind in 2018 versus long-only funds (49% of hedge fund responders cited
payer/pricing pressure as the #1 headwind, compared to 26% of long-only investors)*
 Specialists are more inclined towards payer/pricing pressure as leading headwind compared to generalists (39% of specialists cited payer/pricing pressure
as #1 headwind, compared to 19% of generalists)*
 Among all investors expecting better performance of Biotech than the broader market in 2018, hedge funds ranked ACA repeal/healthcare reform as the
#2 tailwind whereas long-only investors were equally divided across negative sentiment, healthcare reform, pricing pressure and slowing growth/earnings*
Factor Rank Distribution Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
Payer / Pricing Pressure 38% 17% 13% 12% 11%

Negative Sentiment 15% 12% 20% 17% 7%
Clinical Data / Failures / Lack of catalysts 10% 15% 11% 13% 12%
Lagging M&A appetite 12% 7% 12% 11% 14%
ACA repeal / Healthcare reform 4% 15% 8% 8% 11%
Slowing Growth / Earnings 5% 9% 14% 9% 7%
Rich Valuation 6% 10% 6% 4% 13%
Rising interest rates / Macro 4% 5% 5% 13% 10%
Influx of Capital Markets / IPOs 1% 7% 3% 10% 7%
Repatriation / Tax reform 2% 3% 4% 3% 0%
Corporate Greed 2% 1% 2% 2% 6%
There aren't any 2% 0% 2% 0% 2%
30
* Detailed data in Appendix
What is your top Large Cap LONG headed into 2018?

Among our survey responders, CELG is the top Large Cap long pick
 In order, the top 3 picks are CELG, BIIB/ALXN, and INCY
 Hedge funds: 1) CELG/INCY, 2) BIIB, and 3) GILD/ALXN
 Long-only: 1) CELG, 2) ALXN, and 3) BIIB
Top Large cap LONG

Institution Type Role Expected Biotech Performance
by…
Hedge Fund Long-Only Generalist Specialist Better Inline Worse

CELG 15% 28% 29% 21% 23% 22% 12%
BIIB 13% 14% 21% 12% 16% 11% 6%
ALXN 12% 16% 14% 14% 15% 6% 18%
INCY 15% 2% 0% 9% 9% 6% 12%
VRTX 7% 9% 0% 9% 7% 11% 6%
GILD 12% 2% 0% 8% 5% 11% 12%
AGN 3% 9% 0% 7% 7% 6% 0%
REGN 3% 7% 14% 3% 4% 0% 18%
BMRN 3% 4% 14% 2% 5% 0% 0%
SHPG 3% 2% 0% 3% 4% 0% 0%
ROCHE 3% 0% 0% 2% 0% 11% 0%
ABBV 0% 4% 0% 2% 2% 0% 0%
BMY 0% 2% 0% 1% 0% 0% 6%
NVS 2% 0% 0% 1% 0% 6% 0%
PFE 0% 2% 0% 1% 0% 6% 0%
VRX 0% 2% 0% 1% 0% 0% 6%
MRK 2% 0% 7% 0% 1% 0% 0%
BMS 2% 0% 0% 0% 1% 0% 0%
JNJ 2% 0% 0% 1% 1% 0% 0%
UNH 2% 0% 0% 1% 0% 0% 6%
ALNY 2% 0% 0% 0% 0% 6% 0%
31

Source: J.P. Morgan Research; Bloomberg.
What is your top Large Cap SHORT headed into 2018?

AMGN was most commonly named the top Large Cap Short
 In order, the top 3 shorts are AMGN, REGN and ABBV/INCY
 Hedge funds: 1) AMGN, 2) REGN, and 3)ABBV/BIIB
 Long-only: 1) AMGN, 2) REGN, and 3) INCY
Top Large cap

SHORT by…

AMGN 23% 24% 30% 22% 23% 24% 22%
REGN 12% 14% 0% 15% 10% 18% 22%
ABBV 9% 10% 0% 11% 8% 6% 17%
INCY 7% 12% 10% 10% 11% 12% 0%
BIIB 9% 8% 10% 9% 10% 12% 0%
ALXN 7% 4% 0% 5% 5% 0% 11%
CELG 7% 4% 10% 5% 5% 6% 6%
LLY 5% 6% 0% 6% 5% 6% 6%
GILD 5% 4% 10% 4% 4% 6% 6%
NOVO 2% 4% 0% 3% 3% 6% 0%
VRTX 4% 2% 20% 1% 3% 0% 6%
ALNY 0% 4% 0% 2% 3% 0% 0%
BMY 2% 2% 10% 1% 3% 0% 0%
MRK 4% 0% 0% 2% 1% 6% 0%
AGN 0% 2% 0% 1% 1% 0% 0%
IONS 2% 0% 0% 1% 1% 0% 0%
SANOFI 2% 0% 0% 0% 1% 0% 0%
SHIRE 2% 0% 0% 0% 1% 0% 0%
TEVA 0% 2% 0% 1% 0% 0% 6%
32

What is your top SMid Cap Long headed into 2018?

On the SMid cap side, the top long Top SMid Cap
LONG by…
pick is PBYI Hedge Fund Long-Only Generalist Specialist Better Inline Worse
 In order, the top 3 SMid longs are PBYI 9% 8% 25% 8% 13% 0% 0%
PBYI, ESPR/CLVS/SAGE, and NKTR ESPR 13% 0% 0% 8% 5% 6% 20%
 Hedge funds: 1) ESPR, 2) CLVS 11% 3% 0% 8% 7% 6% 10%
CLVS/NKTR, and 3) PBYI SAGE 4% 11% 25% 7% 5% 18% 0%
 Long-only: 1) SAGE/BLUE, 2) NKTR 11% 0% 0% 7% 7% 0% 10%
PBYI/TSRO, and 3) SRPT 7% 3% 25% 4% 7% 0% 0%
XLRN/ALKS GLPG 4% 5% 0% 5% 0% 24% 0%
BLUE 0% 11% 0% 5% 2% 6% 20%
ZGNX 4% 3% 0% 4% 4% 6% 0%
TSRO 0% 8% 0% 4% 5% 0% 0%
FOLD 4% 3% 0% 3% 5% 0% 0%
EXEL 0% 5% 25% 1% 4% 0% 0%
ALKS 0% 5% 0% 3% 2% 6% 0%
DVAX 4% 0% 0% 1% 2% 6% 0%
AKAO 0% 5% 0% 3% 4% 0% 0%
ADMS 2% 3% 0% 3% 4% 0% 0%
PTLA 2% 3% 0% 3% 0% 6% 10%
IMGN 4% 0% 0% 1% 4% 0% 0%
AVXS 2% 3% 0% 3% 2% 0% 10%
ANAB 4% 0% 0% 3% 4% 0% 0%
XLRN 0% 5% 0% 3% 4% 0% 0%
AIMT 2% 3% 0% 3% 2% 0% 10%
FLXN 0% 5% 0% 3% 4% 0% 0%
NBIX 2% 3% 0% 3% 2% 6% 0%
ALNY 0% 5% 0% 3% 4% 0% 0%
GWPH 2% 3% 0% 3% 2% 6% 0%
WVE 4% 0% 0% 1% 0% 6% 10%
33

What is your top SMid Cap Short headed into 2018?

On the SMid cap side, the top Top SMid cap
SHORT by…
short pick is TSRO Hedge Fund Long-Only Generalist Specialist Better Inline Worse
 In order, the top 3 SMid shorts are TSRO 10% 16% 50% 8% 17% 7% 0%
TSRO, NKTR, and ICPT/UTHR NKTR 10% 13% 0% 13% 8% 27% 0%
 Hedge funds: 1) ICPT 0% 13% 0% 6% 6% 0% 10%
TSRO/NKTR, 2) UTHR 7% 3% 0% 6% 6% 7% 0%
UTHR/EXEL/INCY, and 3) PBYI 2% 6% 0% 5% 4% 7% 0%
BLUE/ALNY/BMRN/SEGN BLUE 5% 3% 0% 5% 4% 7% 0%
 Long-only: 1) TSRO, 2) ALNY 5% 3% 0% 5% 4% 0% 10%
NKTR/ICPT, and 3) EXEL 7% 0% 0% 5% 4% 0% 10%
PBYI/PRTA PRTA 2% 6% 0% 5% 2% 0% 20%
INCY 7% 0% 17% 3% 2% 7% 10%
BMRN 5% 3% 0% 5% 2% 7% 10%
SGEN 5% 3% 0% 5% 4% 7% 0%
SAGE 2% 3% 0% 3% 4% 0% 0%
SRPT 2% 3% 0% 3% 4% 0% 0%
NBIX 2% 3% 0% 3% 2% 0% 10%
ALKS 2% 3% 0% 3% 0% 7% 10%
ONCE 2% 3% 0% 3% 4% 0% 0%
JUNO 2% 3% 0% 3% 2% 0% 10%
CORT 5% 0% 17% 2% 2% 7% 0%
CLVS 0% 3% 0% 2% 2% 0% 0%
ESPR 2% 0% 17% 0% 2% 0% 0%
GLPG 2% 0% 0% 2% 2% 0% 0%
GWPH 0% 3% 0% 2% 0% 7% 0%
AIMT 2% 0% 0% 0% 2% 0% 0%
XLRN 2% 0% 0% 2% 2% 0% 0%
DVAX 2% 0% 0% 0% 2% 0% 0%
PTLA 0% 3% 0% 2% 2% 0% 0%
34

Do you expect an increase in biotech M&A in 2018 (whole company acquisitions, not licensing deals)?
 84% of survey responders expect an uptick in M&A in 2018 relative to 93% in 2017
 Generalists (93%) expect more M&A in 2018 in comparison to specialists (83%)

A little more than 2017 48% 54% 71% 49% 51% 45% 61%
Much more than 2017 35% 31% 21% 34% 38% 30% 17%
A little less than 2017 12% 13% 7% 14% 2% 5% 6%
Same level as 2017 5% 2% 0% 3% 9% 20% 17%
Same level as
2017
13%
A little less than
2017
3%
A little more
than 2017
51%
Much more than
2017
33%
35
Source: J.P. Morgan Research; Bloomberg. tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
And what are your top M&A candidates in the sector?

CLVS stood out as the top pick among survey participants for M&A in 2018, followed closely by PBYI
Company # of responses Percentage (N= 303)
CLVS 31 10%
PBYI 29 10%
TSRO 17 6%
NBIX 15 5%
SAGE 11 4%
VRTX 11 4%
INCY 10 3%
JUNO 8 3%
AVXS 7 2%
BLUE 7 2%
EXEL 7 2%
RXDX 7 2%
SRPT 7 2%
AERI 6 2%
BIIB 6 2%
ONCE 6 2%
BMY 5 2%
FOLD 5 2%
GLPG 5 2%
NKTR 5 2%
PTLA 5 2%
RDUS 5 2%
ACAD 4 1%
BMRN 4 1%
BPMC 4 1%
DVAX 4 1%
GWPH 4 1%
CELG 3 1%
FLXN 3 1%
TGTX 3 1%
XLRN 3 1%
ADMS 2 1%
ARRY 2 1%
DERM 2 1%
ESPR 2 1%
36
What are the most significant CLINICAL catalysts on your radar for 2018?
IDO Melanoma data is the most frequently cited clinical catalyst for 2018
 Most responders are looking forward for the INCY ECHO data
The next most anticipated catalysts are a potential interim look at BIIB’s aducanumab (for Alzheimer's) and BMY’s Checkmate
227 (for NSCLC) Catalyst # of responses
IDO/ECHO Melanoma INCY 22
BIIB’s aducanumab for AD interim data 16
Checkmate 227 13
ALXN 1210 9
VRTX Ph3 CF triple data 6
IONS HTTrx 4
BMY NSCLC I/O combo 4
Luspatercept 4
CAR-T 3
KN-189 3
ESPR p3 safety 3
BMY - PD1 3
MYSTIC 3
RXDX 2
GBT in SCD 2
SAGE 2
Ozanimod 2
ALNY Givosiran 2
DRM01 Phase 3 acne readout 2
ASH18 1
Pompe 1
TRK 1
BOLD Initial Data 1
NKTR 1
ITCI 1
NBIX Elagolix UF 1
RDUS TD Update 1
CDTX Ph II Candidemia data 1
GLPG cystic fibrosis 1
Fate Therapeutics 1
BLUE 1
37
How likely is Republican Tax Reform in 2018 and how do you view its potential impact to biotech?
67% of survey responders expect that the Republican Tax Reform will be enforced in 2018 and will have positive impact

Likely / positive 63% 72% 63% 67% 73% 43% 67%
Likely / no impact 18% 17% 25% 17% 16% 24% 17%
Likely / negative 6% 5% 0% 7% 2% 10% 17%
Unlikely / no impact 6% 5% 6% 6% 3% 19% 0%
Unlikely / negative 3% 0% 0% 1% 2% 0% 0%
Unlikely / positive 4% 2% 6% 3% 3% 5% 0%
Unlikely / negative
2% Unlikely / positive
Unlikely / no impact
6% 3%
Likely / negative
5%
Likely / no impact
17%
Likely / positive
67%
38
How likely are the Democrats to take back control of Congress in the 2018 mid-terms?
How do you see the read-through to biotech?
62% of survey responders believe that the Democrats might get the control of congress in the 2018 mid-terms; 38% of them
expect a negative impact from the event
Likely / negative 46% 28% 38% 38% 40% 33% 33%
Likely / no impact 18% 32% 44% 23% 25% 19% 28%
Unlikely / negative 15% 15% 13% 15% 19% 0% 11%
Unlikely / positive 12% 13% 0% 14% 10% 19% 17%
Unlikely / no impact 9% 8% 6% 8% 5% 24% 11%
Likely / positive 0% 3% 0% 2% 1% 5% 0%
Likely / positive
Unlikely / no impact 1%
9%
Unlikely / positive
13% Likely / negative
38%
Unlikely / negative
15%
Likely / no impact
24%
39
Key Themes to Monitor in 2018
 Uses of Cash/M&A
 Regulatory Environment
 Growth Expectations
 Drug Launches
 The Innovation Cycle
 Capital Markets
 Biosimilars
 Pricing Pressure / Tax Reform *Other themes to watch include: FX Headwinds. Top-Line Growth
40

Key Themes for 2018: Uses of Cash
We expect continued focus on capital allocation in 2018
180
2012-2017E Large Cap Aggregation ($B)
160 156
CFOp expected to remain stable in 2018; we estimate >$31B in 140
combined CFOp for the 4 legacy Large Caps
120
 In 2018, Large Cap Biotech (the big 4) is expected to generate an
$ in Billions
estimated $30.8B in cash flow from operations (CFOp) 100 -50
-3 -65
80 -11
 Capital allocation from 2012-2017e… 60 -20
 Share buybacks ($65B)
40
 M&A ($50B)
 Capital expenditures ($11B) 20 5
 Dividend (GILD and AMGN, $20B) 0

CFO - of which - of which - of which Dividends Buy Backs Excess
M&A BD Capex Cash
(>$500M)
We expect increasing focus on M&A / BD as growth levers are
40
drying up. Also, we expect decreasing focus on share 35 2013 2014 2015 2016 2017E 2018E
repurchases as Large Cap biotechs look to bolster their pipelines 30
in 2018 25
20
 GILD and AMGN are the only dividend-issuing biotech companies, and 15
$ in Billions
we expect that will continue for the foreseeable future 10
 Increasing focus on M&A among the Large Caps given growing cash 5
0
balances and concerns about long-term revenue growth
(5)
 AMGN, BIIB, CELG, and GILD ended 3Q17 with $41B, $7B, $12B and (10)
$41B in cash, respectively (15)
(20)
(25)
CFO - of which - of which - of which Dividends Buy Backs Excess
M&A BD Capex Cash
(>$500M)
41
Source: J.P. Morgan estimates, Company Reports.

Will we see an uptick in M&A activity in 2018?
In 2017 we saw M&A activity mostly on par vs. 2016; however, in our view, expectations for increasing deal flow continue to be
central to the Biotech investment thesis
 Through 12/01/2017, 9 public M&A deals were completed vs. 10 in 2016 with a combined deal value of $57B (vs. $59B in 2016)
 Largest transactions on the biotech side were the acquisition of Actelion by JNJ ($30B) and the acquisition of KITE by GILD ($11B)
 In spite of numerous signs for potential deals / rumors, actual bids haven’t materialized at the anticipated rate
While hard to envisage, we think M&A activity could be a lever for upside in 2018
 With mounting cash balances and heightened need for near and longer term growth, we think large Pharma and large Biotech could once again look to
external innovation to augment pipelines and commercial portfolios
 With tax reform & repatriation inching towards reality, these policies could serve as a catalyst for the overall sector (particularly repatriation) by both
creating the impetus and allowing for greater flexibility in regards to M&A
 Essentially all of Large Cap biotech and Pharma have publicly indicated an interest in exploring M&A (of varying scope) throughout the year; some
examples include ABBV, PFE, MRK, LLY, NVS, JNJ, Roche, GILD, BIIB, CELG, and SNY
18 $140 $132
16 $126
Total Public M&A Deal Value ($B)

16
14 $120
14 13
12
# of Public M&A Deals
$100
12
10
10 9 9 $80
8
8 7 $59 $57
6 $60
6 $37
$40
4
$20 $20 $19
$16
2 $20
$8
0 $0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
YTD YTD
* Through 12/1/2017
42
Source: J.P. Morgan Research, M&A data through 12/1/2017.

M&A continues to be a key topic of conversation…
A small sampling of comments from 3Q17 earnings…

MRK
 “We intend, where we find opportunities, to further augment that business with additional business development. As it relates to our business development
strategy, what we're looking for is the opportunity to find the best scientific innovations that will enhance our overall pipeline and help our patients live
healthier lives. Overall, I think the key here is we are agnostic to the therapeutic category. We like the work that we're doing in oncology, but we'll look beyond
oncology to find other partnerships and collaborations and acquisitions. We're very actively engaged and looking for the best scientific innovations to enhance
our long term growth in our pipeline. As it relates to large transactions, what we've said is that we're primarily looking for those things that enhance the
company's ability to innovate. We're not looking at things purely for synergies or consolidation purposes. I would think that our view continues to be that we're
going to look for those things, particularly bolt-ons.
CELG
 “We intend to continue to augment our collaborative research model through aggressive business development activity while also taking advantage of current
conditions to pursue a strong share repurchase agenda over the next few months. Quite frankly we love to take the opportunity to jump in when the stock
needs support. That in no way causes us to have to curtail our BD capacity or our M&A capacity, we can easily do that at the same time as we continue to
pursue M&A or BD opportunities. With respect to a sweet spot, I don't know that there's a defined way of looking at the value of assets and/or companies that
we might want to partner with or acquire. It is really how it layers into our strategy to innovate, leverage our efficiencies, and our global strength in
hematology, oncology, and increasingly in I&I; we would be looking to build on that strength.”
BIIB
 “We believe we have the ability to be the leader in neuroscience, and we are committed to building out our pipeline through both our internal R&D efforts and
prudent but high-impact business development and strategy collaborations. We have strong cash flow generation, and we expect that this cash flow will grow
mostly after 2019, when we have less royalties to pay on TECFIDERA. Unlike in the past where we returned value to shareholders in terms of share repurchase,
we will prioritize, as for now, the capital allocation efforts towards building the neuroscience pipeline. The sweet spot of Biogen remains at the early stage,
we'll be very careful if we go beyond the early stage. We've got a number of active discussions ongoing. We've been bringing online more search and
evaluation, and we're really retuning a lot of the entire R&D organization and beyond to be more externally oriented. So I think that you will see over time both
an increase in the productivity of the existing portfolio and a number of assets coming into the portfolio.”
GILD
 “Having said that, it's also true that M&A is going to be an ongoing activity at Gilead, where we will be in a constant state of evaluation of opportunities to
bring in revenues or technologies that we think will help enhance our portfolio and our top line for the future. So I can tell you we're very, very active. I'm not
going give you hints as to what we might be looking at. But I can say the group that we've put together is very, very good. And we are constantly evaluating
stuff internally and with our board. So I would expect us to continue to be quite active in the coming years”
43
Source: J.P. Morgan Research; Company Reports. tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
M&A activity could center on assets in “hot” therapeutic areas
16
Focus expected to remain on “hot” areas with high strategic
value
 Oncology / Hematology: bluebird (BLUE), Clovis (CLVS), 14
Deciphera (DCPH), G1 Therapeutics (GTHX), Halozyme (HALO),
Ignyta (RXDX), Incyte (INCY), ImmunoGen (IMGN), Juno (JUNO),
Merrimack (MACK), Nektar (NKTR), Puma (PBYI ), Radius (RDUS), Other
Rigel (RIGL), Seattle Genetics (SGEN) 12
Opthamology
 CNS: Acadia (ACAD), Acorda (ACOR), Alkermes (ALKS), Neurocrine
Hematology
(NBIX), Sage (SAGE)
 Orphan disease: Alnylam (ALNY), Amicus (FOLD), BioCryst (BCRX), Orphan
10
BioMarin (BMRN), Ionis (IONS), InflaRX (IFRX), PTC Therapeutics Dermatology
# of M&A Deals
(PTCT), Ultragenyx (RARE), United Therapeutics (UTHR), Vertex Metabolic
(VRTX)
8 Anti-infective/viral
We also think unencumbered assets with clear value CV
proposition could be attractive targets in 2018 CNS
 One-product companies may represent opportunities for 6 Inflammation

relatively easy integration Oncology
 We also expect focus on agents that have potential in multiple
indications (e.g., PARPs)
4
 Past examples include NPSP, PCYC, RCPT, RLYP, RPTP and ZSPH
0
2015 2016 2017
44

If there is an uptick in 2018 M&A, as expected, it could lead to upside across the Smid-cap space
Given the expected uptick in Biotech M&A next year, we took a closer look at recent public M&A deals…
 From 2011 to 2017, the average premium paid was 40-50%, which has remained fairly consistent over the years
 Larger deals (>$20B) tend to have lower premiums in the ~30% range, while smaller deals (<$20B) tend to hover in the 40-50% range
If deals begin to materialize in 2018, we could see meaningful upside across the Smid-cap space as potential M&A premiums begin
to work their way into valuations
2011 2012 2013 2014 2015 2016 2017 YTD TOTAL 2010-2017
TOTAL deals 6 9 12 16 14 10 9 76
avg. Premium excl
56%, 40% 81%, 55% 40%, 40% 41%, 41% 49%,40% 61%, 53% 45%, 35% 53%, 43%
>200%, excl>100%
Deals > $20B 0 0 0 2 2 1 1 6
avg. premium (1-day, or
n/a n/a n/a 23% 39% 37% 23% 29%
from pre-rumor level)
Deals > $10B 1 0 0 2 4 2 2 10
avg. premium (1-day, or 46%; excl MDVN
89% n/a n/a 23% 40% 78% 29%
from pre-rumor level) its 38%
Deals $5-10B 1 1 3 3 4 1 1 14
avg. premium (1-day, or 57%; excl > 100%

42% 101% 42% 42% 61% 55% 106%
from pre-rumor level) its 40%
Deals < $5B 4 8 9 11 6 7 6 51
avg. premium (1-day, or 102%; excl ANDS 79%; excl INHX 236%; excl VTAE 103%; excl DMTX 77%; excl >200%
40% 69%; excl IDIX 45% 44%
from pre-rumor level) its 51% and ISTA its 55% and TBRA its 56% its 40% its 55%
45

Historically, R&D as a percent of sales is higher for Biotechs
R&D as % of Sales 2011 2012 2013 2014 2015 2016

AMGN 20% 20% 22% 21% 19% 17%
BIIB 32% 32% 26% 23% 22% 20%
CELG 26% 24% 24% 22% 22% 22%
Over the years, large-cap biotech has higher
GILD 15% 16% 18% 11% 9% 13%
R&D expenses as a proportion of sales
US Biotech ALXN 16% 18% 18% 16% 20% 22%
compared to Pharma
BMRN 45% 57% 61% 59% 66% 55%
 It is particularly high among the emerging large caps
INCY n/a 155% 111% 97% 80% 66%
(ALXN, BMRN, INCY, REGN & VRTX), stressing the
VRTX 66% 55% 100% 151% 84% 53%
capital intensiveness of the sector
REGN NM 67% 52% 62% 51% 52%
MRK 16% 17% 16% 15% 17% 17%
PFE 16% 15% 14% 16% 17% 16%
Among pharma, large-cap pharma has a US Pharma ABBV n/a 17% 15% 16% 16% 16%
higher proportion of R&D as percent of sales LLY 23% 26% 26% 27% 29% 29%
compared to spec pharma, as expected BMY 51% 46% 40% 37% 30% 26%
 Single-digit percentages indicate the lower R&D VRX 9% 8% 3% 3% 3% 5%
business models of the spec pharma companies
US Spec MYL 5% 6% 7% 7% 7% 6%
 AZN, BMY, LLY, NVS & Roche have higher spending Pharma TEVA 6% 7% 7% 7% 8% 8%
than their peers
AGN 6% 7% 8% 9% 9% 10%
SHP 18% 19% 19% 14% 14% 12%
SNY 15% 15% 15% 15% 15% 16%
NVS 23% 23% 24% 24% 23% 21%
EU Pharma
Roche 29% 30% 26% 24% 25% 25%
AZN 13% 15% 17% 19% 25% 26%
GSK 17% 17% 17% 17% 20% 18%
GILD was lower in 2014/2015 due to HCV launches
46

Source: J.P. Morgan Research, Bloomberg data as of 12/1/2017.
Does this increased R&D spend in the sector lead to higher value generation in the long run?
Over the last eight years, historical R&D spend (GAAP) during any year has had a linear relationship with market value of the
company after three years
 This relationship is highest in the case of Emerging Large Caps (correlation of 0.80) followed by Legacy Large Caps (correlation of 0.72), underscoring the
significance of return generation due to pipeline investment
Investment in biotech companies over the years has returned more in comparison to pharma
 In general, R&D investment has resulted in significant value creation over the years, though the translation is lower in case of pharma (correlation of 0.69)
offering a compelling risk/reward opportunity for biotech
Not surprisingly, Emerging Large Caps offer the highest benefit in terms of yield due to the rapid revenue growth of newly
launched products
120 40 150
35 140
100
30 130
Market Cap ($bn)
Market Cap ($bn)

Market Cap ($bn)
80
25 120
60 20 110
y = 41.391x - 4.5705
R² = 0.518 15 y = 50.758x - 0.537 100
40 R² = 0.6367
y = 27.31x - 33.436
10 90
R² = 0.4794
20
5 80
0 0 70
1.0 1.5 2.0 2.5 3.0 0.0 0.2 0.4 0.6 0.8 4.5 5.0 5.5 6.0 6.5
R&D Spends ($bn) R&D Spends ($bn) R&D Spends ($bn)
Legacy Large-Cap Biotech Emerging Large-Cap Biotech Large-Cap Pharma

(M-cap > $60bn) (M-cap > $15bn & <$60bn) (M-cap > $60bn)
(AMGN, BIIB, CELG & GILD) (ALXN, BMRN, INCY, REGN & VRTX) (ABBV, BMY, LLY, MRK & PFE)
*Average Market cap at the end of the year is regressed with average R&D spend three years prior
47

Key Themes for 2018: Regulatory Productivity
Regulatory activity picked up substantially in 2017 and we do not expect this to slow in 2018
The rate of FDA approvals rebounded in 2017 & remains relatively high. We expect this trend to continue and believe the
environment at the FDA is much more favorable for the sector than before with increased clarity on regulatory requirements and
expedited approaches employed by new FDA commissioner Scott Gottlieb
The FDA (and Congress) remains committed to expedited drug development where appropriate
 The FDA granted 88 Fast Track designation requests in FY17 (as of 30th June 2017), down from 132 in 2016 (and 115 in 2015)
 6 Accelerated Approvals were granted under Subpart H in FY16 & FY15, vs. 6 in 2014
 In its 2016 New Drugs Summary, the FDA highlights the sustained success of its expedited approval pathways, noting that 73% (vs. 60% in 2015) of new
drugs approved during 2016 were expedited; 95% of approvals during the year were first-cycle & similarly 95% of decisions by the PDUFA date
 We expect the FDA’s programs will continue to accelerate development/approval significantly for key products in 2018 based on FDA commissioner's
comments; new FDA commissioner Scott Gottlieb wants to expedite drug approval processes by employing outcomes-based & indication based pricing
for brand-name medicines
NME/Biologic Approvals by the FDA 2012-17 Avg:36

45 45
41 40
38 39
37 36
2005-10 Avg:22
29 29 30
27 22 27
24 24 25
21 22
20
18
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
48

Source: J.P. Morgan Research, Statistics Published by the FDA. Through 12/1/2017.
Key Themes for 2018: Regulatory Productivity
Interest in breakthrough designation remains high
The pull of BTD remains high, and benefits (e.g., faster review 160
137
times) have borne out over the last several years 140 129
113
# of BTD Applications
120
 BTD conveys all of the Fast Track Designation program features as
well as more intensive FDA guidance on an efficient drug 100
development program 80
54
 Breakthrough status is designed to help shorten the development 60 46
40
time of a promising new therapy 40
 This is a new designation that went into effect after July 9, 2012; 2013 20
is the first year any new drug was approved with the breakthrough designation 0
FY2015 FY2016 FY2017
Though initial granting of BTD isn’t necessarily a magic bullet… Requested Granted
 In 2016/2017 we saw that what the FDA giveth, the FDA can taketh away…2 BTDs were rescinded in 2016 and 3 more in 2017
 In 2018, one BTD therapy that could be rescinded is JCAR015 following the recent safety issues / clinical holds
Select BTD Drugs to Watch in 2018 Potential Candidates for BTD in 2018
Drug Company Indication Drug Company Indication
SAGE-547 SAGE Post-partum depression Epacadostat INCY Melanoma
VX-661/Ivacaftor VRTX Cystic Fibrosis Optune NVCR Mesothelioma
Emicizumab Roche Hemophilia A SPK-8011 ONCE Hemophilia A
Val Rox BMRN Hemophilia A DTX301 RARE Ornithine transcarbamylase
bb2121 CELG/BLUE Relapsed/refractory multiple myeloma Voxelotor GBT Sickle cell disease
JCAR017 CELG/JUNO Relapsed/refractory aggressive large B-cell NHL IMO-2125 IDRA PD-1 Refractory Melanoma
Luxturna ONCE RPE65-mediated inherited retinal disease Avacopan CCXI ANCA Associated Vasculitis and/or C3 Glomerulopathy
SPK-9001 ONCE Hemophilia B AG-348 AGIO Pyruvate Kinase Deficiency
Burosumab RARE X-linked hypophosphatemia Ivosidenib AGIO IDH1 positive Acute Myeloid Leukemia (AML)
Nuplazid ACAD Dementia-related psychosis Trilaciclib GTHX SCLC
Dupilumab REGN Atopic dermatitis RG7916 PTCT Spinal Muscular Atrophy
Yescarta GILD Refractory, Aggressive NHL Lumasiran ALNY Primary Hyperoxaluria Type 1
LentiGlobin BLUE Beta-thalassemia Major ATB200 / AT2221 FOLD Pompe disease
Entrectinib RXDX TRK fusion tumors IFX-1 IFRX Hidradenitis Suppurativa (HS)
Givosiran ALNY Acute Hepatic Porphyria Mavacamten (MYK- Symptomatic, Obstructive Hypertrophic Cardiomyopathy
MYOK
Patisiran ALNY hATTR Polyneuropathy 461) (oHCM)
Mavyret ENTA HCV APL-2 APLS Geographic Atrophy
ralinepag ARNA PAH
BCRX7353 BCRX Hereditary Angioedema
Elacestrant RDUS Breast cancer
49
NKTR-214 NKTR Oncology

Source: J.P. Morgan Research, Statistics Published by the FDA.
Key Themes for 2018: Growth Expectations
2018 growth expectations look sensible to us
Consensus 2018 forecasts for the legacy large-cap group call for a 2% revenue decline mainly due to significant HCV erosion.
However, if we include the emerging large caps, it calls for 1% growth (which is expected to pick up in the coming years)
 Bloomberg consensus calls for 3% EPS growth
 Over the past several years, large-cap biotech revenue and earnings growth increased from 12% and 17% in 2012, respectively, to a peak of 44%
and 59% in 2014
 Of note, 2014/2015 are somewhat anomalous years, with astronomical growth largely driven by the launch of Gilead’s HCV drugs; HCV franchise
contributed 29% in 2014 & 8% in 2015 of the overall Large cap biotech growth
 We think fundamentals are intact and 2018 estimates are realistic at this stage with growth dented mainly by unpredictable HCV erosion. That
said, we expect more growth to come from Emerging Large Caps as the new launches significantly ramp-up
Legacy Large Cap Revenue and EPS estimates Legacy & Emerging Revenue and EPS estimates
70%
*includes AMGN, ALXN, BIIB, CELG, GILD, REGN & VRTX
59% 60%
60% 54%
HCV franchise growth
50%
50%
44% 41%
40%
40%
30% 30% 28%

30%
29% 24% 21%
19% 20%
20%
8% 11% 12% 13%
9% 10% 9%
10% 7% 10% 17% 7% 7%
6% 5% 13% 4% 5%
2% 2% 3% 3%
15% 10% 1%
0% 0%
-2% -1%
-3%
-10% -10%
2014 2015 2016 2017E 2018E 2019E 2020E 2014 2015 2016 2017E 2018E 2019E 2020E
Revenue EPS Revenue EPS
50

Source: J.P. Morgan Research; Bloomberg. Data as of 12/1/2017
Looking forward, biotech looks well positioned for the next five years with high revenue & EPS CAGRs
As anticipated, emerging large-caps have double digit CAGRs (3-year and 5-year) which are higher than those of legacy large
caps
 That said, we still believe CELG has the best prospect in terms of growth among legacy large caps, with 11% revenue CAGR expected from 17E-22E
 Lower base of revenues along with expected ramp up of new products resulted in higher expectations for emerging large caps
'17E-20E CAGR '18E-21E CAGR '19E-22E CAGR '17E-22E CAGR '17E-20E CAGR '18E-21E CAGR '19E-22E CAGR '17E-22E CAGR
15% 30%
Revenue CAGR (%)
10% 25%
Consensus
20%
5%
15%
0%
10%
-5% 5%
-10% AMGN BIIB CELG GILD 0%

ALXN BMRN INCY REGN VRTX
Higher expected top-line growth translates to higher bottom-line expectations as evident in EPS CAGRs
 INCY, BMRN & VRTX are the major growth engines for emerging large caps
 CELG still makes the cut among legacy large caps with 17% earnings CAGR over the next five years
'17E-20E CAGR '18E-21E CAGR '19E-22E CAGR '17E-22E CAGR '17E-20E CAGR '18E-21E CAGR '19E-22E CAGR '17E-22E CAGR
20% 140%
15% 120%
EPS CAGR (%)
100%
Consensus
10%
80%
5%
60%
0%
40%
-5% 20%
-10% AMGN BIIB CELG GILD 0%
ALXN BMRN INCY REGN VRTX
*Please note INCY has negative EPS in 2017E, hence we didn’t include the EPS CAGR for 17E-20E, 17E-22E
51
Revenue YoY Growth

2017E 2018E 2019E 2020E 2021E 2022E Trajectory
AMGN $22,915 $22,917 $22,853 $23,253 $23,913 $23,989
BIIB $12,034 $12,620 $13,088 $13,445 $14,004 $14,486
CELG $12,969 $14,826 $16,950 $19,334 $20,503 $22,226
GILD $25,797 $22,212 $21,648 $22,386 $22,765 $23,195
Legacy Large Caps
Consensus #s EPS YoY Growth
AMGN $12.7 $12.7 $13.1 $13.5 $13.9 $14.6
BIIB $21.9 $23.7 $24.9 $26.1 $27.5 $28.7
CELG $7.3 $8.7 $10.4 $12.2 $13.9 $16.1
GILD $8.7 $6.8 $6.7 $7.1 $7.5 $8.0
Revenue YoY Growth

ALXN $3,518 $4,085 $4,804 $5,529 $6,105 $6,612
BMRN $1,307 $1,487 $1,726 $2,041 $2,287 $2,737
INCY $1,503 $1,740 $2,088 $2,668 $3,425 $4,323
REGN $5,778 $6,239 $6,941 $7,809 $8,516 $9,066
VRTX $2,146 $2,746 $3,378 $4,163 $5,076 $5,959
Emerging Large Caps EPS YoY Growth

Consensus #s 2017E 2018E 2019E 2020E 2021E 2022E Trajectory
ALXN $5.7 $7.1 $8.8 $10.6 $12.2 $13.2
BMRN $0.4 $0.7 $1.8 $2.9 $3.3 $4.7
INCY -$0.4 $0.4 $1.2 $3.0 $4.6 $7.2
REGN $15.6 $16.7 $19.7 $23.5 $26.6 $28.6
VRTX $1.9 $2.9 $4.6 $6.6 $9.3 $11.6
52
Key Themes for 2018: Drug Launches
Drug launches remain a key theme for the sector and provide further validation of innovation
Some recent successful launches for key products over the course of the last 2-3 years have somewhat
diminished the blanket “short the launch” strategy
 Transformative products that are meeting a need in large markets have performed well out of the gate
 Overall, commercial execution, combined with better management of expectations by companies, have helped the
perception around drug launches
 But… recent history does hold numerous examples of high-profile failed drug launches or mis-managed expectations or PBM
driven launch impediments (e.g. the PCSK9s), which remind us that failed (or perceived as failed) launches can cause
dramatic turns in sentiment for an individual security or even the entire sector
We expect drug launches to continue to be a key point of focus in 2018, with a number of “buzz-worthy”
products recently introduced to – or soon anticipated to reach – the market
 Expectations for new launches have moderated in recent in recent years in the face of payer pressure; nevertheless, we
believe 2018 estimates still look achievable, if not beatable
 Key watch list on the following slide…
53
Source: J.P. Morgan Research.

Key Themes for 2018: Drug Launches
All eyes will be on several high-profile drug launches
2018E 6mo 2019E 6mo

Drug Company Launch Date cons trend cons trend
JPMe Cons cons % Δ JPMe Cons cons % Δ
Pra l uent REGN/SNY 2H15 $371M $295M -5% $618M $564M -6%
Repa tha AMGN 2H15 $923M $784M -15% $1,577M $1,443M -15%
Orka mbi /661 VRTX 3Q15/1H18 $1797M $1902M 4% $2491M $2567M -4%
Optune TTF NVCR 4Q15 $325M $263M 12% $381M $389M 30%
Ari s tada ALKS 4Q15 $190M $176M -12% $289M $275M -12%
Kasimov
Rubra ca CLVS 4Q16 $195M $223M 0% $409M $415M 12%

Spi nra za BIIB 1Q17 $1453M $1529M 57% $1874M $1958M 23%
Dupi xent REGN/SNY 1Q17 $879M $930M -1% $1,852M $2,004M 8%
Bri neura BMRN 2Q17 $80M $44M -22% $151M $90M -15%
Ocrevus BIIB/Roche 2Q17 $1885M* $1560M 54% $2724M* $2380M 36%
Nerl ynx PBYI 3Q17 $297M $212M -21% $590M $611M 7%
Yes ca rta GILD 4Q17 $187M $209M -29% $540M $559M -12%
B/F/TAF GILD 1Q18 $726M $884M 62% $2,040M $2,148M 22%
Luxturna ONCE 1Q18 $91M $75M -27% $180M $224M -1%
Ai movi g AMGN 2Q18 $42M $92M -2% $194M $262M -21%
Buros uma b RARE 2Q18 $20M $12M 10% $77M $39M -32%
Ga l a fol d FOLD 2Q16 (EU) $81.0M $83.3M 6% $116.7M $163.7M 31%

Rama
Exondys 51 SRPT 4Q16 $267.2M $319.6M 47% $392.7M $462.6M 42%

Ingrezza NBIX 2Q17 $235.2M $297.0M 204% $451.7M $508.9M 114%
Bi ni metini b /
ARRY 2H18 $0.0M $5.5M -85% $68.6M $101.1M -43%
Encora feni b
Intra ros a AMAG 3Q17 $155M $167M -20% $178M $206M -13%
Xermel o LXRX 1Q17 $51M $56M -14% $84M $99M -13%
Fye
Tyml os RDUS 2Q17 $63M $83M -11% $138M $141M -3%

Vyxeos JAZZ 3Q17 $77M $106M 14% $132M $156M 0%
*From JPM Analy st Richard Vosser
54
Source: Bloomberg and J.P. Morgan estimates.

Key Themes for 2018: Innovation
Innovation is the backbone of biotech and should continue to drive the sector in 2018 and beyond
The past 5 years have seen significant innovation in biotech, particularly in “hot” areas such as oncology and orphan disease…
…and we think new and innovative products and technologies will continue to be critical drivers of interest in the sector in 2018
Key areas to watch include (but are not limited to) gene therapy, CAR-T / immuno-oncology / targeted oncology, CNS, and orphan
diseases
 Gene Therapy / Editing: Continued interest in potentially curative gene therapies – BMRN/ONCE’s hemophilia products, BLUE’s LentiGlobin (among
others) - additional de-risking data produced this year as well as potential approval of the first gene editing drug (ONCE’s Luxturna) has helped to drive
investor enthusiasm for this emerging technology. We expect further updates in 2018 as well as the initiation of several key trials.
• Companies to watch in the JPM universe: BLUE, BMRN, EDIT, ONCE
 CNS: There’s significant investment ongoing in CNS-related disorders with huge unmet medical need (e.g., Alzheimer’s, Parkinson’s, HD, ALS, etc.);
though 2018 looks to be a bit sparse in terms of data from our universe, we still expect excitement to build over the latter half of the year in
anticipation of BIIB’s potential Phase 3 Alzheimer’s readout in 2019/20
• Companies to watch in the JPM universe: ACAD, ALKS, BIIB, NBIX, SAGE
 Cell Therapy: We saw cell therapy come of age in 2017 with the approval of two CAR-T products (NVS’s Kymriah; KITE’s Yescarta) and additional
promising data from JUNO and BLUE
• Companies to watch in the JPM universe: BLUE, CELG, GILD (acquired KITE), JUNO
 Oncology: Companies are pouring into the targeted molecule and I/O oncology spaces, and sequencing of the human genome has led to significant
advances in cancer treatment, as “personalized” therapies become a reality
• Targeted therapy oncology companies to watch in the JPM universe: AGIO, CELG, CLVS, DCPH, GTHX, MACK, PBYI, RXDX, SGEN
• I/O companies to watch in the JPM universe: CELG, DVAX, IDRA, IMGN, INCY, JNCE, NKTR, RDUS (and many, many more)
 Orphan diseases: There continues to be innovation in the orphan world in established disease areas (e.g., Fabry disease, PNH) and especially in new
indications (e.g., hypophosphatemia, achondroplasia, OTC, DMD, Friedreich’s Ataxia etc.)
• Companies to watch in the JPM universe: ALXN, BCRX, BIIB, IONS, BMRN, IFRX, FOLD, LIFE, PTCT, RARE, UTHR etc.
55

Key Themes for 2018: Capital Markets
It remains to be seen whether the appetite for Biotech IPOs returns in a meaningful way in 2018
IPO activity picked up in 2017, though still remained below its peak levels
 There have been ~33 IPOs in 2017, up from ~22 in 2016; 15 deals in 1H17 and 18 in 2H17 (through 11/28)
 Surprisingly, we saw a decreasing share of earlier-stage IPOs in 2017, with 55% of deals involving pre-clinical or Phase 1/2 assets vs. 82% in 2016 ; a
successful IPO for an early-stage company with a novel platform and/or a seasoned management is still possible but the environment of late has
increasingly favored more de-risked assets
 Similar to the previous years, IPOs were largely focused on companies in “hot” therapeutic markets, such as oncology (e.g., GTHX, ZLAB, JNCE, NCNA,
MRSN, DCPH), orphan disease (e.g., RYTM, OVID) and gene therapy (e.g., TOCA)…to name a few.
We expect companies with ground breaking technologies and differentiated approaches to continue to be in focus in 2018;
candidates for early-year IPOs may offer an informative proxy
 We don’t see a proverbial magic window; while we continue to think that the market will be more selective, we also believe the right companies with
the right science, teams, and strategies can get out…and obviously the healthier the market, the easier this will be
70 # of IPOs Average
# of IPOs Raise Average
64 Raise 120
60
Average IPO Raise (in millions)

100
Total # of IPOs
50
80
38
40 34 33
60
30
22
40
20
12 11
10 7 20
Stage: 0 0
2010 2011 2012 2013 2014 2015 2016 2017TD
Phase 1 or 2 33% 0% 9% 68% 58% 66% 82% 55%
Phase 3 or 67% 100% 91% 32% 42% 34% 18% 45%

Marketed
56

The IPO environment should remain favorable, but it seems justifiable to expect an increase in pace following robust performances
We believe there is typically an accommodating market for the right companies. Strong performance by new IPOs (particularly
late-stage) in 2017 supported by resilient performance from 2016 IPOs could encourage more selectivity (particularly late-stage /
de-risked assets) in 2018
Median (all 2016/17 IPOs) Mean (all 2016/17 IPOs)
19%
2017 YTD
37%
10%
1 yr (2016 IPOs)
22%
8%
6 month
27%
10%
1 month
21%
0% 5% 10% 15% 20% 25% 30% 35% 40%

Performance
2017 IPOs performance 2016 IPOs performance
All 2017 IPOs Preclin-Ph2 Ph 3+ All 2016 IPOs Preclin-Ph2 Ph 3+
80% 74% 100%
90% 87%
70%
80%
60%
70%
48%
50% 60%
39% 51%
40% 35% 50%
32%
40% 35%
30% 33%
23% 23% 29%
30% 26%
20% 21% 22%21%
15% 18% 16%
20%
11%
10% 4% 10%
0% 0%
1 month 6 month 2017 YTD 1 month 6 month 2017 YTD 2016
57

On average, IPOs in 2017 have outperformed the overall benchmark index (39% vs. +20% for NBI; median 19% almost in-line with NBI)
IPOs performance in 2017 to date

-100% 0% 100% 200% 300% 400% 500%
AnaptysBio 462.6%
UroGen 205.0%
Akcea 135.1%
Argenx 82.4%
Rhythm 77.9%
Dova 77.0%
Athenex 54.8%
Zai Lab 44.0%
InflaRx 39.2%
Sienna 34.6%
Ablynx 33.9%
Biohaven 32.8%
Nightstar 31.6%
G1 30.9%
Kala 26.0%
Mersana 23.9%
Erytech Pharma 19.3%
Tocagen 19.2%
scPharmaceuticals 18.4%
OptiNose 15.8%
Deciphera 15.0%
Clementia 8.8%
Apellis 0.1%
Allena 0.0%
Jounce (1.5)%
Spero (13.3)%
Verona Pharma (14.0)%
NuCana (20.9)%
Zealand Pharma (21.1)%
Ovid (23.2)%
Aileron (26.7)%
ObsEva (32.3)%
Zymeworks (39.4)%
58

Key Themes for 2018: Biosimilars
Assessing The Current US Biosimilar Landscape
FDA provides for an approval pathway for sponsors US Biosimilar Approvals & Development Candidates
of biosimilar product candidates … Company Candidate Reference Product Target | Class Approval / Decision / Stage
Sandoz Zarxio Neupogen ESA Appoved 3/15; Launched 9/15
 Biosimilars are defined as highly similar to reference
Approved 4/5/16; Launched
product with respect to safety, purity, potency and Pfizer Inflectra Remicade TNF
11/16
clinical activity Approved 8/30/16; patent case
Sandoz Erelzi Enbrel TNF not to be resolved until at least
 351(k) approval pathway allows for use of comparative 2018
data and publically available information with the Approved 9/23/16; Launch 2023
Amgen Amjevita Humira TNF
reference product following global settlement
Samsung Bioepis Renflexis Remicade TNF Approved 4/17; Launched 7/17
 Biosimilar development places emphasis on non-clinical Approved 9/17; Avastin retains
Amgen / Allergan Mvasi Avastin VEGF
analyses, animal toxicology studies, PK/PD studies, and US patent exclusivity until 2019
in most cases, phase 3 head-to-head non-inferiority Mylan-Biocon Ogivri Herceptin HER2 Approved 12/17; Launch 2019
Approved 8/17; patent case may
studies Boehringer Ingleheim Cyltezo Humira TNF prevent launch until at least
2022
In the 2018 / 2019 timeframe, we can anticipate Amgen / Allergan ABP 980 Herceptin HER2 PDUFA 5/28/18
FDA approval to continue with agents targeting Coherus CHS-1701 Neulasta ESA Est Approval 2018
Pfizer PF-05280014 Herceptin HER2 Est Approval 2018

TNF-alpha, ESA, CD20, and VEGF pathways…
Pfizer / Sandoz PF-06438179 Remicade TNF Est Approval 2018
 To date, there have been eight approved biosimilar
Pfizer Retacrit Epogen / Procrit ESA Est Approval 2018
products covering six reference products, however
approvals thus far are in a few therapeutic classes Novartis GP2017 Humira TNF Est Approval 2018
 Development has been focused on larger treatment Mylan-Biocon MYL-1401H Neulasta ESA
Est Approval / Launch late 2018 /
early 2019
landscapes (TNF in particular); Amgen’s Mvasi
Amgen ABP 798 Rituxan CD20 Est Approval 2019
represents the first US approval for a biosimilar
Est Approval late 2019 / early
oncology treatment Novartis LA-EP2006 Neulasta G-CSF
2020
Amgen ABP 710 Remicade TNF Est Approval 2019
….but patent litigation remains a common Pfizer PF-05280586 Rituxan CD20 Phase 3 / Est Approval 2019
occurrence for many biosimilar applicants, and Pfizer PF-06439535 Avastin VEGF Phase 3 / Est Approval 2019
prohibitive of launch of approved agents in certain Coherus CHS-1420 Humira TNF

Est Approval 2022, following
ruling against IPR
cases Pfizer PF-06410293 Humira TNF Phase 3
 E.g., global settlement to resolve patient litigation has Amgen ABP 959 Soliris C5 complement Comparative phase 3 underway
delayed launch of Amgen’s Amjevita until January 2023 Pfizer HSP-130 Neulasta G-CSF Phase 1
Amgen ABP 494 Erbitux EGFR Undisclosed
59

Source: J.P. Morgan Research; Coherus Company presentation, March 2016.; Amgen, Novartis and Pfizer Company Reports; Amgen’s 2017 Trends in Biosimilars Report; Academy of Managed Care Pharmacy
Key Themes for 2018: Biosimilars
Large Market Opportunities/Revenue Potential Pave the Way For Biosimilar Development
Biosimilar development is driven by loss of patent exclusivity and market opportunity

 23 biologics have patent expiry by 2023 across a wide range of indications
 Over $75B in sales were recorded by oncology and rheumatology indications representing a large market opportunity
 Alexion’s Soliris is the only pure ultra-orphan drug listed below
 Pricing / reimbursement changes are in store for 2018; CMS will now separately code and pay for biosimilar products under Medicare Part B and
reimburse each biosimilar based on its own average sale price (ASP)
On reimbursement; biosimilars will get their own J-codes in 2018: “We were very pleased that November 1, 2017, CMS adopted a final policy to establish separate J-
codes for each biosimilar biological product for particular reference product, beginning January 1, 2018. This means that physician reimbursement of our product under
CMS will not be linked to the price of a biosimilar competitive product within the same class. The ASP of our product, upon which reimbursement is based, will thus be
more fully under our control. This is a very important step for us in the biosimilar industry and has the potential to accelerate development and adoption of our
products.” – Coherus 3Q17 Earnings call
*Coherus is covered by J.P. Morgan analyst Chris Schott; note chart represents FY1660
reported sales
Source: J.P. Morgan Research; Bloomberg; Academy of Managed Care Pharmacy; The Center for Biosimilars
Key Themes for 2018: Pricing Pressure
Pricing Rhetoric was still widespread in 2017, but with little concrete action, and clearly abated relative to the 2016 election year
President Trump has made numerous comments on drug pricing…though without much to back it up
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Favorable Exec
order on drug CMS proposes new
pricing leaked rules aimed at out of
Jan 31: Trump Meets pocket drug costs
Aug 14: MRK CEO leaves Manufacturing
with Pharma CEOs
Council Oct 16: “Prescription drug prices
Trump tweets “Now that Ken Frazier of are out of control…the drug prices
Jan 17: “[Drug makers] are have gone through the roof”
getting away with murder” Merck Pharma has resigned from
President's Manufacturing Council, he
will have more time to LOWER RIPOFF
DRUG PRICES”
 Trump kicked off the year with pricing rhetoric at one of his first news conferences in January, which was followed by a number of similar comments
periodically throughout the year
While Trump has repeatedly mentioned a desire to cut prescription drug costs, a clear-cut proposal has yet to surface
 Despite these comments, precious little political capital has gone towards enacting substantive policy changes while at the same time several campaign
promises such as allowing Medicare to negotiate drug prices or importing cheaper medicines from overseas hasn’t materialized
 Media commentary in 2017 has suggested Trump would likely propose an “industry friendly” fix, supported by his recent nomination of ex-LLY executive
and lawyer Alex Azar as HHS secretary
Draft Executive order published over the summer contained few policies aimed at reducing drug prices (link)
 Overall the text of the order seems beneficial to drug companies, and proposes such actions as easing regulatory hurdles and barriers for innovative
medicines
 Though sparse on details, the order does little to specifically call out drug companies
In November, CMS proposed a new 700 page rule targeted at out of pocket drug costs (link)
 The rule drastically cuts how much Medicare reimburses hospitals for drugs purchased through a 25-year-old discount program and would affect what
people or the government pay for drugs, but wouldn't touch their prices directly
 The proposed rule triggered swift reaction from groups that represent hospitals and pharmacy benefit managers
61

Source: J.P. Morgan Research; Bloomberg. ESRX 2016 Drug Trend Report.
We expect pricing related headlines/volatility to continue on a downward trend in 2018 (from a peak in 2016)
Coming off of a peak in 2016, media focus on drug pricing began to wane in 2017 after the election – a trend
we expect to continue in 2018
 On the back of successes in HCV, payers identified PCSK9’s as the next target of cost-control efforts; however, the mass-
prescribing payers seemed to expect did not come to fruition (in large part due to restrictions put in place)
 In 2016, ESRX’s 2016 Drug Trend Report notes prescription drug plans saw prescription drug spend increase 3.8% per
person (vs. 5.2% in 2015), with 1/3 seeing per-person spend decreasing (despite an average 10.7% increase in list price
for brand drugs in 2016, unit prices rose 2.5%)
 Per ESRX, the five most expensive therapy classes (by PMPY spend) in 2016 were inflammatory conditions, diabetes,
oncology, multiple sclerosis and pain/inflammation
 With the first potential U.S. gene therapy approval (ONCE’s Luxturna PDUFA date 1/12/18), pricing of long-duration
therapies may come into greater focus in 2018 (e.g., outcomes-based reimbursement, annuity model)
We continue to believe that novel, innovative medicines will be reimbursed

 Novel medications that significantly add value to patients will continue to be reimbursed, in our view
 Conveniently, these types of medications often lack comparable options that could allow payers to drive down prices
– PBMs have noted that they are “in trouble” when new drugs with no competitors come to market, as the single best
way to bring down cost is to increase competition
– Ultra-orphan disease have remained sheltered from these headlines
62

Source: J.P. Morgan Research; Bloomberg. ESRX 2016 Drug Trend Report.
Biotech growth has generally been driven less by price increases vs. Pharma
Over the past five years, Biotech price increases have usually lagged those of Pharma peers
 With the exception of AMGN and BIIB, biotech companies generally do not take price increases >10%/yr, with demand continuing to be the main growth
driver; some companies – such as REGN and VRTX (which start at a relatively high price) – have not taken any price increases to date
 The majority of biotech companies are well positioned for any potential policies that may limit the ability to increase price, as new, innovative therapies
drive demand growth
30% Neulasta Enbrel
Epogen Neupogen 30%
20% Januvia Zetia Gardasil Janumet
AMGN 20% (HPV)
10%
MRK
10%
0%
2012 2013 2014 2015 2016
0%
30% Tecfidera Avonex 2012 2013 2014 2015 2016
Plegridy Tysabri 30%
20% Lyrica Prevnar Viagra Premarin/ Duavee
BIIB 20%
10% PFE
10%
0%
2012 2013 2014 2015 2016 0%
30%
Revlimid Abraxane 2012 2013 2014 2015 2016
Pomalyst Otezla 30%
20% Humira Androgel Synthroid Lupron
CELG 20%
10%
ABBV
10%
0%
30%
2012 2013
Truvada
2014
Atripla
2015 2016
Stribild Vs. 0%
2012 2013 2014 2015 2016
Viread Harvoni Sovaldi 30%
20% Humalog Alimta Cialis Humulin
GILD 20%
10%
LLY
10%
0%
2012 2013 2014 2015 2016 0%
30%
Naglazyme Kuvan Aldurazyme Vimizim 2012 2013 2014 2015 2016
30%
20% Orencia Eliquis Sustiva franchise Sprycel
BMRN 20%
10%
BMY
10%
0%
2012 2013 2014 2015 2016 0%
30%
Jakafi 2012 2013 2014 2015 2016
20%
INCY
10%
0%
2012 2013 2014 2015 2016
63
Source: J.P. Morgan Research; Bloomberg; PriceRx.tbancroft@snowphipps.com

Data as of 12/1/2017 Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
We expect efforts to repeal/replace the ACA will continue in some form or another
Despite multiple failed attempts at ACA repeal/replace this The Republican tax plan includes a clause to remove the ACA’s
year, President Trump’s website still includes Obamacare individual mandate
reform as a key issue  Although there has always been a certain degree of uncertainty as to
the true effectiveness of the individual mandate, the CBO has
“Obamacare has led to higher costs and fewer health insurance options for determined repealing the individual mandate will lead to 13 million
millions of Americans. The 2010 healthcare law has brought the American people without insurance
people rising premiums, unaffordable deductibles, fewer insurance choices,  With that said, there is open debate as to whether ACA enrollments
and higher taxes. President Donald J. Trump promised to repeal and replace are driven more by the proverbial carrot (subsidies) rather than the
this disaster, and that is exactly what he is working with Congress to stick (penalties)
achieve.”
 Additionally, the segment of patients (elderly, chronically ill) who
utilize the most healthcare will likely opt to keep their insurance
despite rising premiums
Repeal of the mandate could be an incremental negative for

drug spend…
 Under the ACA: “Uninsured people who gained private coverage
filled, on average, 28 percent more prescriptions and had 29 percent
less out-of-pocket spending per prescription in 2014 compared to
2013. Those who gained Medicaid coverage had larger increases in
fill rates (79 percent) and reductions in out-of-pocket spending per
prescription (58 percent)” - Mulcahy, Eibner and Finegold. Health
Aff (Millwood). 2016 Sep 1;35(9):1725-33. doi:
10.1377/hlthaff.2016.0091. Epub 2016 Aug 17.
 PBMs have noted that drugs are least utilized in ACA plans due to
the high deductible
64
Source: J.P. Morgan Research; Bloomberg; Whitehouse.gov Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Key Themes for 2018: Tax Reform
Importantly, we believe the repatriation tax proposal could serve as a catalyst for the overall sector by allowing greater flexibility towards M&A
While a lower US corporate tax rate would certainly be a good thing for Large Cap biotech, Biotech companies already
enjoy Cap
Large lower effective
biotech, rates companies
Biotech given the multinational
already enjoynature
lowerof the business
effective tax
 The potential beneficiaries in our universe from a pure tax rate perspective look to include GILD, BIIB, REGN, and UTHR (GILD & UTHR have the
highest U.S product sale exposure as a % of total revenue)
 We expect the proposed 20% rate to have a minimal impact on AMGN, CELG and ALXN
 We note that the House proposal repeals the current corporate alternative minimum tax (AMT) rate of 20% (the Senate proposal retains the
AMT at the current rate); corporates we spoke to did not comment directly on the impact of the corporate AMT proposal.
Large Cap Biotech Effective Tax Rate Emerging Cap Biotech Effective Tax Rate
CELG 16.5% ALXN 10.0%
AMGN 19.0% BMRN *N/A
BIIB 24% REGN 26-29%
GILD 25-27% VRTX *N/A
UTHR 35%
*N/A: Company is expected to receive an
overall tax benefit for FY2017
Repatriation would also benefit large-cap biotech firms given the

significant amounts of current ex-US cash OUS Cash as of Est. 2018 US % of Total
Ticker % OUS Cash
 Both the Trump and House Republican tax plans include repatriation of foreign 9/30 ($B) Prod Revenue Revenue
untaxed profits at a one-time, reduced rate AMGN $38.9B 94% ~$17.4B 75%
 Although these companies have stated that tax reform isn't necessarily a GILD $31.1B 75% ~$15.0B 67%
gatekeeper for M&A, the cash repatriation proposal could nevertheless serve to
CELG $9.0B 76% $9.0B 62%
provide enhanced flexibility for BD as well as higher shareholder payouts in the
form of share repurchase / dividends (only AMGN/GILD pay dividends) BIIB $4.4B 66% $6.6B 55%
 As such we’d expect meaningful upside for Smid-cap names on repatriation as ALXN $0.4B 29% $1.5B 38%
anticipation for M&A builds BMRN <$0.1B 5% ~$0.7B ~45%
Possible effective repeal of the R&D Tax Credit and a reduction/ REGN - - $3.8B 62%
elimination of the Orphan Drug Credit (from 50% to 27.5%) are VRTX - - $2.0B 71%
incremental negatives UTHR - - ~$1.3B ~90%
 Companies with high orphan drug exposure (such as BMRN) would be most
adversely affected
65
Source: J.P. Morgan Research tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC
Key Themes for 2018: FX Headwinds
A weakening US dollar could positively impact top-line growth
The US dollar Index is down ~10% YTD from near its 5yr high vs. a group of Companies in Our Universe with Notable
major currencies ex-US Exposure
 The strengthening of the Euro, escalating political turmoil, and expectations that % ROW Revenues
Ticker
interest rates are likely to remain low for some time are all likely contributors to the in 3Q17
dollar’s relative weakness
ALXN 66%
 Alexion, BioMarin, and Celgene have the highest ex-US exposure BMRN 55%
 Orphan disease business tends to have more exposure OUS… CELG 36%
 …for example, a significant portion of BMRN’s revenues are derived ex-US BIIB 28%
(29% Europe, 8% Latin America, and 18% ROW in 3Q17)
GILD 29%
AMGN 21%
104
US Dollar Index YTD performance
102
100
98
96
94
92
90
88
1/2/2017 2/2/2017 3/2/2017 4/2/2017 5/2/2017 6/2/2017 7/2/2017 8/2/2017 9/2/2017 10/2/2017 11/2/2017
66

Source: J.P. Morgan Research, Company Data, Bloomberg as of 12/1/2017.
Key 2018 Catalysts in Our Universe
67

Key Potential Catalysts Within Our Coverage - Kasimov
Top Kasimov catalysts to watch
Ticker Catalyst Timing Comments
REGN Topline data for Praluent CVOT ODESSEY Trial Early 2018 Critical to the potential relaxation of payer restrictions to kick-start the disappointing launch
Teza/Iva is currently under priority review for F508del homozygous and residual function patients; we expect approval by
VRTX Potential FDA approval of tezacaftor/ivacaftor 1Q18
the 02/28/18 PDUFA date
We expect approval by 05/25/18 (three months past the 02/28/18 PDUFA date to account for recently submitted CMC
BMRN Potential FDA approval of pegvaliase in PKU 1H18
data that could be considered a major amendment)
GILD Interim analysis from Phase 3 filgotinib UC study 1H18 This will be an initial look at filgotinib in ulcerative colitis
INCY ECHO-301 data in melanoma 1H18 This will be our first look at randomized Phase 3 data for epacadostat + pembro versus pembro monotherapy
REGN Ph3 results for Eylea in NPDR 1H18 We believe positive Phase 3 results in non-proliferative diabetic retinopathy could extend the Eylea franchise
Readout from Part A of Ph3 HOPE study with This will be our first look at the Phase 3 data in adult sickle cell disease; patient reported outcome (PRO) learnings in Part
GBT 1H18
voxelotor in SCD A of this study will be important to assess the magnitude of clinical benefit
JNCE JTX-2011 initial efficacy data 1H18 We expect first in human efficacy data from JNCE's anti-ICOS antibody from the ICONIC trial in 1H18 (likely at ASCO)
Optune currently has a HUD (equivalent of Orphan Designation); pending the results, NVCR may choose to file off of this
NVCR Phase 2 mesothelioma data for Optune 1H18
single arm trial
Phase 3 data for neratinib in 3L+ HER2+ metastatic NALA evaluates neratinib + capecitabine in the 3L+ treatment setting (vs. current approval in the early-stage extended
PBYI 1H18
breast cancer (NALA) adjuvant setting)
Data from 2-yr Ph3 GI safety study with ALKS 8700 Although admittedly less important following the licensing deal with BIIB, this data will be critical to determine whether
ALKS 1H18
in MS ALKS 8700 shows better GI tolerability compared to Tecfidera
CLVS filed an sNDA for Rucaparib as second line maintenance therapy in ovarian cancer in October 2017, we expect
CLVS Rucaparib maintenance approval 2Q18
approval by the April 6th 2018 PDUFA; an MAA is expected to be filed in early 2018
Potential FDA approval of Aimovig in chronic &
AMGN 2Q18 We expect approval by the 05/17/18 PDUFA date
episodic migraines
Phase 3 data for luspatercept in MDS & beta-
CELG mid 2018 Enrollment was completed in both the MEDALIST and BELIEVE studies in June 2017
thalassemia
ONCE Updated data for SPK-8011 in hemophilia A mid 2018 We assume update at either EHA or ISTH; will be critical post disappointing ASH update
Given the mixed data in pivotal studies, this approval stands to one of the most controversial regulatory reviews in 2018.
ALKS Potential approval of ALKS 5461 in MDD mid 2018
If positive this could represent significant upside for the stock
Additional data for the triple combinations involving VX-152/659/445 are expected in 2018 with subsequent initiation of a
VRTX Additional triple combo data 2H18
pivotal development program
SAGE Brexanalone approval in PPD 2H18 SAGE plans on filing an NDA in 2018; brexanalone currently has BTD in the US and PRIME designation in EU
Phase 3 data for UX007 in glucose transporter type- The trial of ~40 patients (started in mid-2016) will look at disabling movement events by diary; UX007 in Glut1 DS
RARE 2H18
1 deficiency syndrome represents ~30% of our valuation
ALKS Ph3 weight gain results for ALKS 3831 Fall 2018 This data will be key to determine whether ALKS 3831 has a better metabolic profile compared to olanzapine
SGEN Phase 3 ECHELON-2 Data 2018 Data from the E2 trial of Adcetris in PTCL is expected sometime in 2018
FDA approval of Inbrija in Parkinson's disease OFF
ACOR 2018 Following receipt of a Refusal to File Letter in August 2017, ACOR re-resubmitted an NDA on 12/07/17
periods
JUNO Pivotal results for JCAR017 in NHL 2018 This is a key driver for JUNO; how these results compare to competitor profiles (i.e., Yescarta, Kymriah) will be the focus
BLUE Updates from bb2121 in r/r MM 2018 We expect bb2121 to be a significant driver for BLUE based on strong results to date
BLUE Further updates for LentiGlobin in SCD 2018 We expect to see Cohort C data (all process improvements) and could get clarity on regulatory requirements/timelines
*Large cap catalysts highlighted in blue 68

Key Potential Catalysts Within Our Coverage – Fye
Top Fye catalysts to watch

CMRX Brinci IV MAD data Early-2018 Focus on safety, particularly any GI Aes
MRSN XMT-1522 interim phase I data Early-2018 Watching for interim safety results
ARNA Etrasimod phase II UC data Late-1Q18 Watching for initial efficacy, with safety as a key focus, particularly around CV and liver effects
ARNA Ralinepag FDA development feedback 1Q18 Watching for study design and potential timelines to data that could support approval in PAH
ASND Initial TransCon PTH phase I data 1Q18 Focus on PK/PD, safety data, and initial biomarker changes (e.g. serum calcium)
RDUS TD patch regulatory update 1Q18 Looking for clarity on a regulatory path to approval (mtg in Jan likely means update after minutes in Feb)
AMAG SC Makena PDUFA 2/14/17 Watching for approval and conversion of market to SC Makena
Mirv (FORWARD II) Keytruda combo dose SGO (3/24-
IMGN Watching for efficacy and safety
escalation cohort 3/27)
Eptinezumab in chronic migraine - topline data We see a high probability of success for the PROMISE 2 study in chronic migraine and continue to see IV eptinezumab as
ALDR 2Q18
from phase III PROMISE 2 trial a $1bn WW peak sales franchise and see a substantial upside case for IV chronic migraine oppty alone
ESPR Topline bempedoic acid phase III data 2Q18 Expect long-term, 52-week safety, single-agent result in patients with ASCVD and/or HeFH
ESPR Topline bempedoic acid phase III data 2Q18 Report 12-week single-agent LDL-C efficacy in statin intolerant patients
ESPR Topline bempedoic acid phase III data 2Q18 Report 12-week LDL-C efficacy with bempedoic acid/Eze combo in statin intolerant patients
IONS Volanesorsen PDUFA 2Q18 Watching for approval for FCS

Potential expansion cohort phase I data in 4L
DCPH ASCO Watching for efficacy and safety supportive of succcess in 4L pivotal study starting 1H18
and 5L GIST
Mirv (FORWARD II) Avastin combo expansion
IMGN ASCO Watching for efficacy and safety
cohort
BCRX BCRX7353 liquid formulation data 2018 Focus on efficacy in patients following acute HAE attack
NKTR NKTR-214 2018 Watching for additional PD-1 combo data
ESPR Topline bempedoic acid phase III data 3Q18 Report 12-week single-agent LDL-C efficacy in patients with ASCVD and/or HeFH
IONS Inotersen PDUFA 3Q18 Watching for approval for hereditary TTR amyloidosis
DCPH Expansion cohort phase I data in 2L/3L GIST 2H18 See expansion cohort data as key to increased mkt conviction in success of the planned pivotal in 2L GIST starting 2H18
UTHR FREEDOM-EV 2H18 Looking for morbidity/mortality benefit for Orenitram
JAZZ JZP-110 Approval YE 2018 Expect filing by YE17 and launch in early-2019
69

Key Potential Catalysts Within Our Coverage – Rama / Joseph
Top Rama / Joseph catalysts to watch

Ablynx Anticipating FDA approval for caplacizumab in 1H19 in acquired thrombotic thrombocytopenic purpura (aTTP); could pull
Caplacizumab BLA filing for aTTP 1H18
NV forward to 2H18 if capla receives priority review
Ablynx Approval and launch of caplacizumab in EU for Ablynx believe that caplacizumab could achieve full approval over conditional approval from the EMA as a result of the
3Q18
NV aTTP additional phase 3 data
AGIO Ivosidenib PDUFA 1H18 Anticipating FDA approval for IDH1m R/R acute myeloid leukemia (AML) by 3Q18; NDA submission on track for YE17
ALNY Patisiran in hATTR amyloidosis mid-2018 Watching for approval for hATTR amyloidosis (as early as end of June assuming priority review)
ALNY Interim givosiran phase 3 data in hepatic porphyria mid-2018 Pending agency review, positive phase 3 interim analysis could result in NDA submission by YE18
ALXN Soliris phase 3 NMOSD data mid-2018 Report topline data from phase 3 prevent study of Soliris in relapsing neuromyelitis optica spectrum disorder (NMOSD)
Report data from randomized phase 3 data of ALXN1210 Q8W in 1) treatment naïve PNH compared with Soliris; and 2) Soliris
ALXN Topline phase 3 ALXN1210 PNH 2Q18
switch PNH patients
APLS 18-month phase 2 follow-up data of APL-2 in GA 1Q18 Report 18-month follow up results (6-months post final dose) from the phase 2 FILLY trial of APL-2 in geographic atrophy (GA)
ARRY Encorafenib / binimetinib PDUFA 6/30/2018 Waiting for approval in BRAF melanoma
Topline phase 3 data of Zuprata in non-infectious uveitis (NIU); assuming positive results, the data would open to door to an NIU
CLSD Topline Zuprata phase 3 data in NIU 1Q18
NDA filing in 2018
DOVA Avatrombopag PDUFA 5/21/2018 Watching for approval for chronic ITP
FOLD ATB200/AT2221 Pompe regulatory update 1H18 Looking for clarity on a regulatory path to approval, post discussions with multiple regulatory bodies
Report topline randomized 24-week myelopreservation data (e.g. febrile neutropenia, transfusions; response rates; duration of
GTHX Topline phase 2 trilaciclib data in 1st-line SCLC 1Q18
response) in patients with newly diagnosed extensive-stage small cell lung cancer (SCLC)
G1T38 in ER+, HER2- breast cancer - phase 1b
GTHX 2Q18 Report preliminary 14-month safety / PK / antitumor activity data in ER+ breast cancer
preliminary data readout
Updated phase 2 IMO-2125 / Yervoy data in PD(L)1 Watching for rolling efficacy updates of in ~2Q18 / mid-2018 timeframe (comprising a sufficient bolus of patients with
IDRA 2018
refractory melanoma meaningful follow-up)
IPI-549 / Opdivo combination data updates in CPI- Report combination dose-escalation and initial combination expansion cohort results in 1H18, with more mature combination
INFI 2018
resistant tumors expansion cohort data (including paired biopsy analyses) in 2H18
Topline phase 2 STORM data in penta-refractory Report ORR and DOR data from phase 2 expansion cohort (~122 additional patients) of selinexor in penta-refractory multiple
KPTI Apr-18
MM myeloma (MM); potentially to serve as the basis of an initial accelerated NDA filing
LJPC LJPC-501 PDUFA 2/28/2018 Watching for approval into the PDUFA data (expecting a smooth approval process) and launch beginning in 1H18
Topline phase 2 MM-141 data in 1L pancreatic
MACK 1H18 Report randomized phase 2 data of MM-141 plus standard chemo in patients with IGF+ front-line metastatic pancreatic cancer
cancer
MYOK Topline phase 2 PIONEER-HCM readout in oHCM 1Q18 Report second cohort 12-week efficacy / safety data with low-dose mavacamten in patients with obstructive HCM (oHCM)
NBIX Elagolix PDUFA 2Q18 Watching for approval for endometriosis
RIGL Tavalisse PDUFA 4/18/2018 Watching for approval in chronic ITP
RXDX Topline pivotal entrectinib TRK+ tumor data 1H18 ORR and DOR results for entrectinib in TRK+ tumor cohort in pivotal STARTRK-2 trial
Looking for clarity on potential accelerated / biomarker-based approval pathway (ongoing global phase III ESSENCE trial in Exons
SRPT Regulatory update on golodirsen for Exon 53 DMD 1Q18
45 / 53 DMD could provide requisite safety follow-up data)
Report initial dystrophin biopsy data from micro-dystrophin gene therapy study in collaboration with Nationwide Children's
SRPT Initial micro-dystrophin gene therapy data 1H18
Hospital
Topline luspatercept phase 3 data in
MEDALIST: report placebo controlled 24- and 48-week red-cell transfusion independence in lower risk, RS+ MDS
XLRN myelodysplastic syndromes (MDS) and beta mid-2018
BELIEVE : report placebo controlled 24- and 48-week transfusion burden data in transfusion-dependent beta thalassemia
thalassemia
XLRN ACE-083 in FSHD Jan-18 Report phase 2 dose cohort 1 results in facioscapulohumeral muscular dystrophy (FSHD)
70

Key Conferences Within Our Coverage
Key 2018 Medical Conferences
Meeting Start Date End Date Location
ASCO-GI ASCO Gastrointestinal Cancers Symposium 18-Jan-18 20-Jan-18 San Francisco, California
ISC International Stroke Conference 23-Jan-18 26-Jan-18 Los Angeles, California
ASCO-SITC ASCO-SITC Clinical Immuno-Oncology Symposium 25-Jan-18 27-Jan-18 San Francisco, California
WORLD WORLD Symposium 5-Feb-18 9-Feb-18 San Diego, California
ASCO-GU ASCO Genitourinary Cancers Symposium 8-Feb-18 10-Feb-18 San Francisco, California
AAD American Academy of Dermatology 16-Feb-18 20-Feb-18 San Diego, California
AVF American Venous Forum 20-Feb-18 23-Feb-18 Tucson, Arizona
AAAAI / WAO American Academy of Allergy, Asthma & Immunology / World Allergy Organization 2-Mar-18 5-Mar-18 Orlando, Florida
CROI Conference on Retroviruses and Opportunistic Infections 4-Mar-18 7-Mar-18 Boston, Massachusetts
ACC American College of Cardiology 10-Mar-18 12-Mar-18 Orlando, Florida
EASL European Association for the Study of the Liver 11-Apr-18 15-Apr-18 Paris, France
SGO Society of Gynecologic Oncology Annual Meeting 24-Mar-18 27-Mar-18 New Orleans, Lousiana
AACR American Association for Cancer Research 14-Apr-18 18-Apr-18 Chicago, Illinois
AAN American Academy of Neurology 21-Apr-18 27-Apr-18 Los Angeles, California
ASGCT American Society of Gene & Cell Therapy 16-May-18 19-May-18 Chicago, Illinois
ASCO American Society of Clinical Oncology 1-Jun-18 5-Jun-18 Chicago, Illinois
DDW Digestive Disease Week 2-Jun-18 5-Jun-18 Washington, DC
EULAR European Congress of Rheumatology 13-Jun-18 16-Jun-18 Amsterdam, Netherlands
EHA European Hematology Association 14-Jun-18 17-Jun-18 Stockholm, Sweden
ADA American Diabetes Association 22-Jun-18 26-Jun-18 Orlando, Florida
ISTH International Society of Thrombosis and Haematology 18-Jul-18 21-Jul-18 Dublin, Ireland
APA American Psychological Association 9-Aug-18 12-Aug-18 San Francisco, California
ESC European Society of Cardiology 25-Aug-18 29-Aug-18 Munich, Germany
HFSA Heart Failure Society of America 15-Sep-18 18-Sep-18 Nashville, Tennessee
IASLC International Association for the study of Lung Cancer 23-Sep-18 26-Sep-18 Toronto, Canada
ASBMR American Society of Bone and Mineral Research 28-Sep-18 1-Oct-18 Montreal, Quebec
WMS World Muscle Society 2-Oct-18 6-Oct-18 Mendoza, Argentina
ECTRIMS European Committee for Treatment and Research in MS 10-Oct-18 12-Oct-18 Berlin, Germany
NACFC North American Cystic Fibrosis Conference 18-Oct-18 20-Oct-18 Denver, Colorado
ESMO European Society for Medical Oncology 19-Oct-18 23-Oct-18 Munich, Germany
ACR/ARHP American College of Rheumatology 19-Oct-18 24-Oct-18 Chicago, Illinois
ANA American Neurological Association 21-Oct-18 23-Oct-18 Atlanta, Georgia
ASN American Society of Nephrology & Kidney Week 23-Oct-18 28-Oct-18 San Diego, California
CTAD Clinical Trials on Alzheimer's Disease 23-Oct-18 27-Oct-18 Barcelona, Spain
AAO American Academy of Ophthalmology 27-Oct-18 30-Oct-18 Chicago, Illinois
SITC Society for Immunotherapy of Cancer 7-Nov-18 11-Nov-18 Washington, DC
AASLD American Academy for the Study of Liver Disease "The Liver Meeting" 9-Nov-18 13-Nov-18 San Francisco, California
AHA American Heart Association 10-Nov-18 14-Nov-18 Chicago, Illinois
AACR-NCI-EORTC AACR-NCI-EORTC Molecular Targets and Cancer Therapeutics 13-Nov-18 16-Nov-18 Philadelphia, PA
ASH American Society of Hematology 1-Dec-18 4-Dec-18 San Diego, California
SABCS San Antonio Breast Cancer Symposium 4-Dec-18 8-Dec-18 San Antonio, Texas
71

Favorite Names in 2018
72

Favorite Names: Biogen – Cory Kasimov
Biogen (BIIB) – Overweight, Dec 2018 PT $378
Our call is early, but we suspect that BIIB could transition into one of the most over-owned names in biotech over the
next couple of years as a wave of anticipation builds ahead of the all-important Ph3 aducanumab Alzheimer’s read-out
BIIB’s aducanumab (currently in Phase 3) has the potential to become the first disease modifying intervention available for
Alzheimer’s disease
 An estimated 5.5 million patients currently suffer from Alzheimer’s in the US alone with a potential market opportunity in the 10s of billions
 Aducanumab has thus far produced promising data in a Phase 1 proof of concept trial with persistent benefits over placebo demonstrated as far out as
36 months; learnings from competitive failures also seem to suggest that BIIB appropriately designed its Phase 3 program
 The Phase 3 program is expected to complete enrollment by mid-2018 and produce data around the end of 2019 or early 2020 (we are not assuming an
interim analysis); this is likely to be one of the most highly anticipated events in all of biotech
 Currently, our model conservatively assigns only a 25% probability of success ($34 of our $378 price target), which implies substantial room for upside
in the event of a positive result
Admittedly, the story lacks major catalysts in the near term, and thus performance may largely depend on the resilience of the
base multiple sclerosis franchise and the evolving Spinraza launch; M&A would provide upside
 Other than the early BAN2401 data (mechanistically similar to aducanumab) expected in 1Q18 (which probably only matters if it’s substantially
different from aducanumab’s early data), we don’t expect there to be much in the way of value inflecting catalysts for most of 2018
 So far, BIIB’s multiple sclerosis business has been resilient in the face of new market entrants (Ocrevus); our baseline assumption is that this should
continue. It’s important to note that BIIB also receives economics on Ocrevus ranging from mid teens to low twenties
 The dosing schedule for Spinraza has caused some confusion in regards to quarterly sales numbers; we expect that investors will grow more
comfortable over time as the patient flow/dosing becomes better understood and the ramp smooths out as more patients transition to maintenance
dosing. Competitive dynamics on the gene therapy front will also be important to monitor
 A later stage acquisition that diversifies the business and adds to near term growth could be a potential upside lever. While management has indicated
that they are primarily looking at earlier stage assets, we believe many investors would much prefer to see a later stage deal
Where we could be wrong… if ongoing competitive pressures in MS (e.g. Ocrevus) put a greater dent on the topline than currently anticipated, Spinraza sales
fall short and/or are impacted by competition, accrual for aducanumab is delayed or if unforeseen side effects arise, or if the BAN2401 data is substantially
worse than what we’ve seen for aducanumab (which could be a hit to the amyloid hypothesis).
If looking for other ideas… CELG was a close second choice for top large cap pick with its potential to stage a comeback
based on industry leading growth rate, deep/broad pipeline, & financial bandwidth to execute meaningful M&A
73

Favorite Names: BioMarin Pharmaceuticals – Cory Kasimov
BioMarin (BMRN) – Overweight, Dec 2018 PT $131
For 2018, we expect BMRN shares to finally emerge from ~2 years of stagnation as a new product cycle drives growth /
profitability and investors (likely both existing and new) begin to better appreciate / position ahead of key pivotal
readouts anticipated in 2019
Bottom line, there are several reasons we believe new & existing investors could get involved in 2018, pushing the stock higher
 With a recent turn to non-GAAP profitability, we expect (and mgmt has noticed) an uptick in interest from generalist and ex-U.S. investors
 While clinical catalysts may be light for 2018, 2019 is poised to be catalyst-rich & we expect investors to begin doing work in anticipation of these key
events…
– Pivotal data from the Phase 3 trials of val-rox (gene therapy) for hemophilia A are expected by YE19 (we believe accrual could be rapid and enable
data sooner than that); we expect a launch of this potentially disruptive multi-billion-dollar product in 2020
– Pivotal data from the Phase 3 trial of vosoritide for achondroplasia are also anticipated in 2019; we expect a launch in 2020 generating $1B+ in
sales by 2025
– Potentially pivotal Phase 2 data for BMN 250 for MPS IIIB could also be available in 2019
 There hasn’t been much buzz around pegvaliase for PKU; however, with a PKU sales force and education programs in place, potential FDA approval
(PDUFA date of 02/28/18; 05/25/18 including likely 3-month extension) and launch could be catalysts for the stock as investors assign BMRN more
credit for the asset…our doc feedback has been encouraging
Fundamentally, we see BMRN as uniquely positioned with both a strong pipeline/R&D engine and $1B+/year base business
 BMRN is trading near its 52-week low (up 4% YTD vs. NBI 19%)
 We forecast a 18% revenue CAGR from 2016-2021E, driven by approvals of pipeline products (Brineura, pegvaliase…eventually followed by vosoritide,
val-rox) and continued growth in Vimizim
 On a DCF basis, we derive a value of $131/share
– This contemplates only 60%/50% probability of success for vosoritide/val-rox, figures that we believe are conservative
 We believe BMRN carries significant longer term scarcity value
 BMRN has ample cash ($1.7B) to support its commercial/R&D operations; we expect sustained non-GAAP profitability in 2018 and GAAP in 2019
Where we could be wrong… If BMRN’s relative lack of 2018 catalysts cause investors to wait for 2019. While expectations for pegvaliase are low at present,
regulatory hold-up or failure could hit management’s credibility.
If looking for other ideas…we believe VRTX has the potential to be a must own for growth managers given an estimated
50% 5 year EPS CAGR… and INCY is likely the binary story of 1H behind IDO Phase 3 with downside into the 70’s and
upside of 150+; that potential volatility isn’t appropriate for everyone but could be intriguing for some
74

Favorite Names: Puma Biotechnology – Cory Kasimov
Puma Biotechnology (PBYI) – Overweight, Dec 2018 PT $136
Following a sharp post-3Q17 sell-off, we believe PBYI is attractively set up going into 2018 particularly given what we
consider to be low 2018 consensus expectations for Nerlynx and heightened scarcity value for a wholly-owned oncology
asset
We thought the ~20% post 3Q sell-off was unjustified…and now cons for 2018 Nerlynx sales appear conservative, in our view
 PBYI reported $6.1M in Nerlynx sales in 3Q17, easily eclipsing consensus but perhaps shy of unrealistically aggressive expectations driven in part by
numbers implied through physician survey results
 In our view, the robust metrics provided by the company during their 3Q report points to a strong launch trajectory; overall discontinuation rates
appear to be the same or even lower than what was seen in clinical trials, new patient enrollments demonstrate an encouraging ramp, and so far there
have been no on label insurance denials
 Therefore, we believe consensus estimates for Nerlynx in 2018 may still be materially too low ($212M vs. JPMe $297M)
 EU approval and Phase 3 metastatic data are potential non-commercial catalysts in 1H18
We believe the scarcity value of an approved oncology asset targeting a large market opportunity with limited direct competition
remains high
 Nerlynx’s oral nature , relatively common target indication, and well understood mechanism of action render it an easy fit into the portfolio of many
strategics
Where we could be wrong… if Nerlynx sales unexpectedly stagnate, if European approval of neratinib is delayed, if Phase 3 NALA metastatic data in ~1H18 is
negative (even though the overall contribution of this indication is modest), and if the company’s financing needs becomes a more pronounced overhang
(ended 3Q with $106M and subsequently secured a non-dilutive $100M term loan that should fund the company well into 2018).
If looking for other ideas… we still like innovative SMid caps such as BLUE & SAGE, but acknowledge that the significant
recent runs in these stocks position PBYI as more attractive heading into 2018. We’d also highlight ALKS as a somewhat
under-the-radar name heading into what should be a very eventful 2018 (on the commercial, regulatory, and clinical
fronts), which is worth doing work on.
75

Favorite Names: Jazz Pharmaceuticals – Jessica Fye
Jazz Pharmaceuticals (JAZZ) – Overweight, Dec 2018 PT $185
We see a compelling opportunity in Jazz with shares trading at 11-12x 2018E EPS and the company poised to generate
double-digit earnings growth over the next several years
We see a nice setup for the stock with reaccelerating Xyrem growth in 2018
 We expect mid-single-digit Xyrem bottle volume growth in 2018 supporting our 11% Xyrem sales growth forecast for next year
 We see 2017 headwinds for Xyrem (loss of government pay patients and 3Q refill delays) as addressable and short-term in nature
Biz dev could layer on growth, further diversify long-term earnings mix
 We not be surprised were Jazz to acquire another underfollowed/international company similar to past deals and could see potentially biz dev larger
than prior deals
 From a therapeutic category standpoint, we believe the next deal could be another in hematology-oncology
We continue to see JAZZ offering a healthy organic top-line/EPS growth over the next several years
 Xyrem remains the key near-term driver and we expect the franchise to reaccelerate in ‘18
 Vyxeos’ first quarter of sales in 3Q/17 points to strong initial launch driven by better-than-expected uptake in community (not just academic centers)
 While a settlement with the first Xyrem filer is in place and a line extension strategy has been (partly) revealed, we believe settlements with the
remaining generics filers would still represent a positive for shares, and could also be a possible 2018 event
 We see the hematology-oncology franchise doubling in sales by 20201off of 2017 levels to ~$735mm and expect it to represent ~30% of revenue by
2020 vs ~23% in 2017
Key Risks: Risks to our thesis/price target include earlier than expected generic competition for Xyrem, weaker-than-expected sales performance for core
products, particularly Xyrem, and regulatory/development setbacks for pipeline assets such as JZP-110 and Vyxeos
76

Favorite Names: Ascendis Pharma – Jessica Fye
Ascendis Pharma (ASND) – Overweight, Dec 2018 PT $50
We see a high probability of success for the TransCon hGH (GHD) phase III heiGHt trial in early 2019, and meanwhile see
value creation in 2018 driven by advancing the company’s early endocrinology pipeline
We see a high probability of success for the heiGHt trial in 2019 based on prior phase II data…
 While we see long-acting growth hormone (GH) as a competitive market, we see phase II data derisking the phase III readout in 2019
 Following the failure of Versartis’ long –acting GH in pediatric growth hormone deficiency (GHD), we see the market split roughly equally between 3
players (Novo Nordisk, OPKO, Ascendis)
 We could see upside should other long-acting GH competitors stumble in development
…meanwhile, we see further upside in ‘18 from the Ascendis’ endocrinology pipeline
 We expect to see phase I data from TransCon PTH (hypoparathyroidism) in 2018 and we expect the first update from this study at the J.P. Morgan
Healthcare Conference
 Further, TransCon CNP (achondroplasia) is expected to enter the clinic in 2018
We believe we could see further upside in shares to the extent initial TransCon PTH data provides POC
 While phase I is a single- and multiple-ascending dose study with a focus on PK/PD and safety of TransCon PTH, we expect this will be a robust study
that could potentially be sufficient to determine dose as well as provide and initial look at efficacy in the form of biomarker changes (e.g., serum
calcium).
 We would note that every 10% increase in probability of success for TransCon PTH adds ~$5 to our valuation.
Key Risks: Risks to our thesis/price target include negative clinical data for TransCon hGH and TransCon PTH
77

Favorite Names: Amicus Therapeutics – Anupam Rama
Amicus (FOLD) – Overweight, Dec 2018 PT $19
We believe a combination of commercial Galafold momentum and pipeline progress across the spectrum of programs
will drive FOLD shares in 2018
OUS Galafold launch should continue to gain momentum in 2018 via pull-through from 2017 reimbursement wins
 Amicus is on track to have 300 reimbursed patients on therapy by YE17 (>260 as of 10/31/17)
 More meaningful pull-through from countries beyond Germany, including the UK, Italy, Spain, and key mid-size countries should begin in 2018
– Initial market metrics have been strong within the switch population, with broad uptake regardless of prior Fabrazyme / Replagal therapy, males /
females, or classic / late-onset mutations
– Amicus has noted strong compliance overall
– Indeed, we believe 2018 Galafold consensus of ~$83M and our estimate (JPMe: $81M) is beatable
Pipeline momentum will be key to watch in 2018 and, overall, we believe the pipeline is undervalued
 US Galafold filing is expected by YE17 and we believe the totality of the data support approval
– Clearance to and NDA filing, given regulatory history, is a tailwind for the program and a positive indicator
– US Galafold approval would could be worth ~$2-3/share
 Pompe program continues to be undervalued / underappreciated, in our view
– We believe that data from the 2017 World Muscle meeting support a best-in-class therapy profile for Pompe disease (see note here)
– A regulatory update is expected in 1H18, where the focus is on potential accelerated approval pathways
– Our baseline assumption is that a phase 3 will need to be conducted ahead of approval; however, we do believe that a potential accelerated
approval pathway in the ERT switch population could emerge as a faster path to market, given the unmet need in the population (which will
still require some additional clinical trial work)
– We conservatively forecast Pompe sales approaching ~$650M at peak but note that there are plenty of levers for upside in the model
– Next data update expected at WORLD 2018 (Feb 5-9; San Diego)
 Technology platform should come into greater focus, with progress from the Fabry co-formulation program
– An update on the Fabry co-formulation program is expected in 1Q18
– We believe that proof-of-concept data for ERT + chaperone co-formulation in Fabry disease, which dates back to ASHG 2012, has gone largely
underappreciated my the Street
– Recall, at ASHG 2012, Warnock et al. highlighted in a poster that the addition of migalastat to Fabrazyme / Replagal resulted in 2-5X increase in
plasma activity and increased tissue uptake (no major safety concerns)
Where we could be wrong… In our view, the biggest risk for FOLD shares centers on Street expectations for accelerated approval filing for the Pompe program,
and we are less concerned about Galafold launch metrics / US regulatory progress. For Pompe, we believe it is prudent to assume a phase 3 requirement ahead
of approval (some additional clinical trial work), but many on the Street are taking a more aggressive approach to approval timelines.
78

Favorite Names: Alexion – Anupam Rama
Alexion (ALXN) – Overweight, Dec 2018 PT $178
We believe ALXN1210 will emerging as a long-term defense point for Alexion’s base complement business and be an
upside driver for shares in 2018
2018 earnings are important, but are likely to matter less in the run up to ALXN1210 PNH data in 2Q
 Alexion has prudently keep expectations low, particularly for Soliris, given ALXN1210 enrollment dynamics
– Soliris 2018 consensus: ~$3.514B (JPMe: ~$3.416B)
– Strensiq 2018 consensus: ~$461M (JPMe: ~$421M)
– Kanuma 2018 consensus: ~$95M (JPMe: ~$83M)
We have believed for some time that ALXN1210 will be a long-term defense point for ALXN shares, and this thesis is unchanged
 We believe the burden of proof lies with the competition and that data from SMIDs has disappointed to date, shifting much of the competitor focus
on Amgen’s biosimilar and Roche’s SKY59
 That said, ALXN120 can be a long-term defense point for both branded / biosimilar competition (see slide deck here)
– Alexion continues to make headway on Soliris IP (various new IP issues ranging from 2027-2032 now) and ALXN1210 COM out to 2035
– Patient ID and enrollment challenges remain an issue for the competition
– There is precedent for switching to more convenient dosing products (physicians feedback suggests that moving to Q8W dosing relative Q2W is
game changing)
– Importantly at ASH 2017 earlier this week, data were presented that highlighted patients from the phase 1b/2 that transitioned to the Q8W
dosing regimen had sustained suppression of LDL levels
– Ultra-orphan diseases markets tend to be sticky (i.e., Gaucher disease as an example)
– Our model accounts for biosimilar / branded competition (US model forecasts 25% of competitor market share; EU and ROW 40%)
Recent downside has created a favorable reward / risk scenario going into ALXN1210 data in 2Q
 Recall, PNH naïve and switch data are expected in 2Q
 The reward / risk profile is very favorable from current levels, even accounting for a worst-case sentiment based downside
– Our current model assumes a 75% POS for ALXN1210 (or 55-60% upside from current levels)
– Taking our POS to 100% for ALXN1210 results in a December 2018 price target of ~$205 (for 80%+ upside from current levels)
– Eliminating ALXN1210 from our model is a disaster scenario, particularly from a sentiment perspective)
– Just eliminating ALXN1210 from our model completely results is a <$95/share valuation (or ~15-20% side from current levels); though this does
not account for greater biosimilar / branded competition in the early- to mid-2018 timeframe
– As a result, fundamental and sentiment based downside could be much more volatile (potentially in the 25-45%+ range)
Where we could be wrong… We believe if ALXN1210 has a setback, we believe there is both fundamental and sentiment-based downside
79

Favorite Names: Karyopharm Therapeutics – Eric Joseph
Karyopharm (KPTI) – Overweight, Dec 2018 PT $18
We see a high probability of registration enabling data from the phase 2 STORM study in 1H18, with additional pivotal
readouts in 2H18 / 2019 to further drive KPTI share momentum.
Seeing high probability of success for near-term pivotal STORM data readout for selinexor in later-line myeloma
 Topline expansion cohort data (~120 patients) of selinexor in penta-refractory multiple myeloma anticipated by April 2018
– Highly refractory patient population, with no approved therapies
– 20% ORR with 4+ month DOR set as the hurdle for meaningful activity, based on physician and regulatory feedback
 Optimism for STORM success rooted in known phase 2 data …
– Prior phase 2b (ASH 2016) showing 20% ORR in penta-refractory patients and overall 5 month DOR in quad- and penta-refractory patients
 … and important trial adjustments as part of the registration expansion cohort
– Newly enrolled patients receive the more dose-intensive regimen (80mg BIW for 4x per 4-week cycle rather than 3x), which yielded a higher 22%
ORR in the prior phase 2b data
– Enrollment criteria exclude patients with low hemoglobin, which should favorably impact duration metrics
 Forecasts of ~$300M market opportunity in initial penta-RRMM indication could prove conservative
– Assuming positive data, we anticipate an accelerated approval and market launch for selinexor in 2019
– Addressable patient estimates of ~9,000 could prove conservative with expanding MM survival rates from new product entrants
– Potential for early off-label use, backed by phase 1b combination data across IMiD / PI / CD38 landscape
Share momentum potentially continues with additional selinexor readouts in 2H18 (DLBCL) and 2019 (earlier –line RRMM)
 Similar accelerated approval opportunity in relapsed / refractory DLBCL on phase 2b SADAL expansion readout in 2H18
– Prior data show competitive, broad activity for a heavily pretreated population with no approved oral therapy
 Positive Phase 3 BOSTON readout in 2019 would open the door to earlier-line use in RRMM
– Confirmatory phase 3 evaluating selinexor + Velcade + dex (SVd) versus Vd in non-PI refractory patients
– Potential for broad 2-4L RRMM use as a differentiated, ‘at home’ regimen (oral selinexor / SC Velcade), particularly as RDd moves upstream
– Updated phase 1b SVd data at ASH support meaningful PFS differentiation from Vd (13+ mos versus historical 9.4 mos)
– We conservatively forecast ~$1B sales in the BOSTON eligible population, with several levers for upside
Where we could be wrong… The biggest risk for KPTI shares centers around strength of penta-refractory STORM data in April. Results short of 20% ORR / 4+
month DOR expectations could challenge the accelerated approval / initial launch thesis.
80

Q&A
81

Appendix: Kasimov Comp Sheet
Price Rating PT Mkt Cap Cash Debt EV Revenues ($M) EPS P/E P/S YTD 52 Week SI
Company Ticker 12/10/2017 YE18 ($B) ($M) ($M) ($B) 2017E 2018E 2017E 2018E 2018E 2018E High Low $M % of float
AMEX Bi otech Index BTK $4,201.07 36.6% $4,329 $3,061

NASDAQ Biotech Index NBI $3,353.28 20.9% $3,586 $2,762
S&P SPX $2,662.85 18.9% $2,672 $2,234
Amgen AMGN $177.38 N $185 $128.8 $41,351 $35,776 $123.2 $23,079 $23,267 $12.54 $12.90 13.75x 5.5x 21.3% $191.1 $145.1 $8.4 1.2%
Biogen BIIB $330.71 OW $378 $69.9 $6,570 $6,512 $69.9 $11,942 $12,168 $22.11 $20.88 15.84x 5.7x 26.6% $348.8 $244.3 $3.7 1.7%
Celgene CELG $108.20 OW $123 $85.2 $11,759 $14,274 $87.7 $12,950 $14,545 $7.37 $8.90 12.16x 5.9x -6.5% $147.2 $94.6 $11.5 1.5%
Gilead GILD $76.58 OW $85 $100.0 $41,360 $26,346 $88.3 $26,003 $22,345 $8.74 $7.24 10.58x 4.5x 6.9% $86.3 $63.8 $19.6 1.5%
Legacy Large-Caps Average: $96 $25,260 $20,727 $92 $18,493 $18,081 $12.69 $12.48 13.08x 5.4x 12.1% $10.8 1.5%
BioMarin BMRN $88.66 OW $131 $15.6 $1,257 $1,166 $15.5 $1,306 $1,550 $0.38 $0.92 96.35x 10.0x 7.0% $100.5 $80.1 $9.4 5.4%
Incyte INCY $98.10 OW $149 $20.7 $1,281 $24 $19.4 $1,509 $1,732 ($1.26) ($1.59) NM 12.0x -2.2% $153.2 $92.9 $7.0 4.0%
Regeneron REGN $386.67 N $455 $41.5 $2,706 $702 $39.5 $5,700 $6,167 $16.21 $16.13 23.97x 6.7x 5.3% $543.6 $340.1 $2.1 2.6%
Vertex VRTX $144.80 OW $184 $36.6 $1,812 $40 $34.9 $2,442 $2,823 $1.97 $3.53 40.98x 13.0x 96.6% $167.9 $71.5 $4.3 1.7%
Emerging Large-Caps Average: $29 $1,764 $483 $27 $2,739 $3,068 $4.32 $4.75 53.77x 10.4x 26.7% $5.7 3.4%
Acadia ACAD $29.94 OW $50 $3.7 $367 $0 $3.4 $126 $267 ($2.41) ($1.38) NM 13.9x 3.8% $41.2 $24.3 $9.2 9.5%
Acorda ACOR $21.30 N $19 $1.0 $192 $307 $1.1 $618 $311 $2.05 $0.04 500.06x 3.2x 13.3% $33.0 $13.6 $5.9 12.8%
Alkermes ALKS US $52.25 OW $78 $8.0 $450 $282 $7.9 $867 $1,066 ($0.03) $0.47 111.74x 7.5x -6.0% $63.4 $46.4 $9.3 6.1%
aTyr Pharma LIFE $3.55 N NA $0.1 $90 $15 $0.0 $0 $0 ($1.88) ($1.37) NM NM 65.1% $6.5 $2.1 $0.3 1.5%
bluebird bio BLUE $184.90 OW $164 $9.1 $1,143 $0 $7.9 $40 $79 ($6.79) ($6.22) NM 114.2x 199.7% $222.0 $61.0 $4.2 8.6%
Clovis Oncology CLVS $63.77 OW $111 $3.1 $628 $282 $2.8 $57 $195 ($7.68) ($3.13) NM 16.0x 43.6% $99.5 $35.4 $7.1 15.5%
Editas EDIT $24.37 N $27 $1.1 $296 $34 $0.8 $16 $15 ($2.74) ($3.02) NM 71.6x 50.2% $31.8 $13.1 $5.3 14.7%
Global Blood Therapeutics GBT $38.35 OW $46 $1.7 $259 $0 $1.4 $0 $0 ($2.51) ($2.38) NM NM 165.4% $45.9 $13.4 $4.9 12.7%
Jounce Therapeutics JNCE $12.90 OW $28 $0.4 $271 $0 $0.1 $81 $81 ($0.62) ($1.38) NM 5.1x -1.5% $29.3 $11.1 $3.3 21.7%
Juno JUNO $47.41 N $50 $5.4 $1,056 $10 $4.4 $105 $80 ($3.02) ($3.03) NM 67.7x 151.5% $63.5 $17.5 $8.0 9.2%
Novocure NVCR $20.05 OW $22 $1.8 $110 $97 $1.7 $179 $325 ($0.72) $0.51 39.09x 5.5x 155.4% $22.3 $6.0 $4.1 6.0%
Puma Biotechnology PBYI $105.20 OW $136 $3.9 $106 $0 $3.8 $28 $297 ($5.17) ($2.43) NM 13.3x 242.7% $136.9 $28.4 $3.1 9.7%
Sage Therapeutics SAGE $164.65 OW $109 $6.8 $243 $0 $6.6 $0 $8 ($6.78) ($7.13) NM 855.0x 222.5% $173.4 $44.6 $3.6 9.2%
Seattle Genetics SGEN $55.71 N $60 $8.0 $450 $0 $7.6 $468 $659 ($0.92) ($0.51) NM 12.2x 5.6% $71.3 $45.3 $12.9 13.4%
Spark Therapeutics ONCE $45.91 OW $92 $1.7 $575 $1 $1.1 $5 $91 ($7.90) ($4.32) NM 18.8x -8.0% $91.8 $41.1 $3.2 10.1%
Ultragenyx RARE $45.19 OW $76 $1.9 $371 $0 $1.6 $0 $18 ($7.21) ($7.21) NM 109.2x -35.7% $91.3 $43.4 $5.2 13.3%
SMid-Cap Average: $4 $413 $64 $3 $162 $218 ($3.40) ($2.66) 216.96x 93.8x 79.2% $5.6 10.9%
82

Source: Bloomberg, J.P. Morgan estimates, priced as of 12/13/2017
Appendix: Fye Comp Sheet
Price Market Net Debt 52 Week Short Interest
Com pany Nam e Ticker Rating Cap (MM) (MM) YTD High Low % of Float
Advanced Accelerator Applications AAAP N $81.70 3,532 (157) 205.3% 81.75 23.50 -
Alder Biopharmaceuticals ALDR OW $11.05 749 (331) -46.9% 25.45 8.60 11%
AMAG Pharmaceuticals AMAG N $14.33 507 460 -58.8% 36.83 11.93 26%
Arena Pharmaceuticals, Inc. ARNA N $30.82 1,210 (216) 117.0% 32.18 11.30 7%
Ascendis Pharma A/S ASND OW $37.39 1,357 (243) 84.7% 42.00 19.21 -
BioCryst Pharmaceuticals BCRX OW $4.97 489 (107) -21.5% 9.25 3.95 12%
Chimerix CMRX N $4.43 209 (150) -3.7% 6.64 4.17 3%
Deciphera DCPH OW $17.82 547 (81) - 24.50 16.11 1%
Emergent BioSolutions EBS OW $46.08 1,907 (92) 40.3% 46.34 27.94 7%
Enanta Pharmaceuticals ENTA OW $53.98 1,032 (293) 61.1% 54.83 25.92 6%
Esperion Therapeutics ESPR N $57.13 1,497 (202) 356.3% 65.20 10.71 16%
Halozyme Therapeutics HALO OW $20.80 2,961 (110) 110.5% 20.91 9.68 10%
ImmunoGen IMGN N $6.79 898 (186) 232.8% 8.84 1.53 10%
Ionis Pharmaceuticals IONS N $53.57 6,685 (413) 12.0% 65.51 37.26 9%
Jazz Pharmaceuticals JAZZ OW $140.63 8,431 1,127 29.0% 163.75 101.44 4%
Lexicon Pharmaceuticals LXRX N $10.44 1,102 (97) -24.5% 18.00 8.07 25%
Melinta MLNT NR $15.60 342 (166) 11.4% 39.15 10.25 4%
Mersana MRSN OW $18.66 425 (137) 24.4% 21.01 12.71 9%
Nektar Therapeutics NKTR OW $56.63 8,917 (105) 361.5% 56.87 11.41 7%
Novavax NVAX N $1.32 414 145 4.8% 1.78 0.73 14%
Radius Health RDUS OW $29.62 1,321 (305) -22.1% 49.16 24.66 23%
The Medicines Company MDCO NR $27.65 2,016 434 -18.5% 55.95 25.40 29%
United Therapeutics UTHR N $136.29 5,889 (1,299) -5.0% 169.89 112.01 15%
83

Source: Bloomberg, J.P. Morgan estimates, priced as of 12/13/2017
Appendix: Rama Comp Sheet
Price Price Market Cash Net Debt 52 Week Short Interest
Com pany Nam e Ticker Rating Target Cap (MM) (MM) (MM) YTD High Low % of Float
Agios Pharm aceuticals AGIO OW $55.00 76.00 2,681 642 0 31.8% 72.73 39.24 15%
Alexion Pharm aceuticals ALXN OW $113.54 178.00 25,366 1,529 3,263 -7.2% 149.34 96.18 2%
Alnylam Pharm aceuticals ALNY OW $124.86 162.00 12,382 1,000 150 233.5% 147.63 35.98 7%
Am icus Therapeutics FOLD OW $13.00 19.00 2,162 427 189 161.6% 16.60 4.41 19%
Apellis Pharm aceuticals APLS OW $12.71 31.00 626 25 0 - 15.41 12.45 2%
Array BioPharm a ARRY OW $11.49 14.00 2,264 464 123 30.7% 13.40 6.73 11%
Chem oCentryx Inc. CCXI OW $5.99 13.00 292 121 0 -19.1% 10.80 5.66 6%
Clearside Biom edical CLSD OW $6.40 17.00 162 53 8 -28.4% 10.46 5.44 7%
Dova Pharm aceuticals DOVA OW $31.63 34.00 811 100 27 - 31.87 16.98 52%
Dynavax DVAX OW $19.00 31.00 1,151 192 0 381.0% 24.45 3.70 10%
G1 Therapeutics GTHX OW $19.80 24.00 561 118 0 - 28.67 12.04 2%
Idera Pharm aceuticals IDRA OW $1.93 5.00 376 65 0 28.7% 2.87 1.30 3%
Ignyta RXDX OW $15.95 20.00 1,058 145 30 200.9% 18.30 4.60 7%
Infinity Pharm aceuticals INFI N $1.82 - 92 56 6 34.8% 3.84 0.93 4%
InflaRx IFRX OW $18.05 30.00 423 31 0 - 22.48 14.47 1%
Ironw ood Pharm aceuticals IRWD N $15.55 14.00 2,329 225 396 1.7% 19.94 13.43 13%
La Jolla Pharm aceuticals LJPC UW $26.59 20.00 589 121 0 51.7% 39.28 16.41 21%
Merrim ack Pharm aceuticals MACK N $10.35 14.00 138 107 50 -62.7% 37.28 10.04 16%
Mesoblast MESO N $5.46 7.00 514 46 0 2.1% 12.50 4.80 N/A
Myokardia MYOK OW $37.25 54.00 1,331 140 0 187.6% 49.55 10.55 5%
Neurocrine Biosciences NBIX OW $70.97 79.00 6,280 511 365 83.4% 75.98 37.35 11%
Ophthotech OPHT N $2.85 - 103 180 0 -41.0% 5.49 2.24 4%
Otonom y OTIC N $5.05 7.00 153 134 0 -68.2% 21.15 2.80 6%
OvaScience OVAS N $1.35 - 48 76 0 -11.8% 3.25 1.25 6%
PTC Therapeutics PTCT N $16.65 15.00 691 169 143 52.6% 22.00 8.12 19%
Rigel Pharm aceuticals RIGL OW $3.72 5.00 545 68 0 56.3% 4.48 1.94 6%
Sarepta Therapeutics SRPT OW $54.09 63.00 3,496 618 31 97.2% 57.57 26.26 19%
Zai Lab ZLAB N $25.28 32.00

841,278 93 0 - 35.74 23.80 N/A

Source: J.P. Morgan Research, Bloomberg, priced as of 12/13/2017
Appendix: Buyside Survey
Factor Rank Distribution – Hedge Fund Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Factor Rank Distribution – Long-Only Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
Easier Regulatory Environment / FDA 11% 16% 18% 14% 11% Easier Regulatory Environment / FDA 12% 12% 17% 16% 13%
Increasing M&A 52% 19% 10% 9% 2% Increasing M&A 32% 22% 20% 7% 13%
Less pricing pressure 2% 3% 8% 2% 13% Less pricing pressure 3% 5% 7% 7% 9%
Less Political uncertainty / 2018 mid- Less Political uncertainty / 2018 mid-
2% 5% 3% 11% 4% 2% 8% 3% 7% 9%
term elections term elections
Clinical data / Innovation 16% 17% 13% 11% 15% Clinical data / Innovation 24% 22% 13% 19% 4%
Improving Sentiment 0% 5% 8% 14% 15% Improving Sentiment 5% 8% 18% 11% 9%
Repatriation / Tax reform 6% 19% 20% 16% 4% Repatriation / Tax reform 12% 8% 10% 12% 9%
Low interest rates 0% 2% 0% 0% 9% Low interest rates 0% 2% 2% 0% 0%
Renewed Generalist interest 5% 11% 8% 11% 19% Renewed Generalist interest 2% 5% 2% 12% 20%
Easy comps / Earnings growth 0% 0% 2% 2% 4% Easy comps / Earnings growth 0% 0% 0% 4% 4%
Attractive valuation 5% 3% 8% 12% 2% Attractive valuation 8% 7% 8% 4% 11%
There aren't any 2% 0% 0% 0% 4% There aren't any 0% 0% 0% 2% 0%
Factor Rank Distribution – Generalist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Factor Rank Distribution – Specialist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
0% 6% 6% 7% 20% 2% 7% 3% 9% 4%
85

Factor Rank Distribution – Hedge Fund Factor Rank Distribution – Long-Only

Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
and Better Performance and Better Performance
2% 2% 2% 12% 3% 0% 8% 5% 0% 11%
86

Factor Rank Distribution – Hedge Fund Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Factor Rank Distribution – Long-Only Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
Payer / Pricing Pressure 49% 10% 7% 10% 9% Payer / Pricing Pressure 26% 24% 20% 13% 13%
ACA repeal / Healthcare reform 7% 19% 7% 6% 2% ACA repeal / Healthcare reform 2% 10% 9% 9% 19%
Negative Sentiment 7% 14% 21% 27% 9% Negative Sentiment 22% 10% 20% 9% 6%
Lagging M&A appetite 14% 5% 18% 8% 13% Lagging M&A appetite 10% 9% 7% 13% 15%
Rich Valuation 10% 10% 4% 8% 15% Rich Valuation 2% 10% 9% 0% 11%
Influx of Capital Markets / IPOs 0% 3% 5% 10% 9% Influx of Capital Markets / IPOs 2% 10% 0% 9% 6%
Clinical Data / Failures / Lack of Clinical Data / Failures / Lack of
2% 22% 5% 6% 17% 19% 7% 16% 18% 6%
catalysts catalysts
Slowing Growth / Earnings 3% 5% 16% 10% 9% Slowing Growth / Earnings 7% 12% 13% 7% 6%
Rising interest rates / Macro 2% 5% 9% 10% 11% Rising interest rates / Macro 7% 5% 2% 16% 9%
Corporate Greed 3% 2% 2% 2% 4% Corporate Greed 0% 0% 2% 2% 9%
Factor Rank Distribution – Generalist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Factor Rank Distribution – Specialist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
19% 13% 13% 13% 8% 9% 16% 11% 13% 13%
catalysts catalysts
87

Factor Rank Distribution – Hedge Fund Factor Rank Distribution – Long-Only

Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 1 Rank 2 Rank 3 Rank 4 Rank 5
and Better Performance and Better Performance
0% 20% 5% 9% 24% 14% 11% 19% 20% 7%
catalysts catalysts
88

Cory Kasimov North America Equity Research
(1-212) 622-5266 14 December 2017
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Company (MDCO), United Therapeutics (UTHR)
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Pharmaceuticals (INFI), InflaRx (IFRX), Ironwood Pharmaceuticals (IRWD), La Jolla Pharma (LJPC), Merrimack Pharmaceuticals
(MACK), Mesoblast (MESO), MyoKardia (MYOK), Neurocrine Biosciences (NBIX), Ophthotech (OPHT), Otonomy (OTIC),
OvaScience (OVAS), PTC Therapeutics (PTCT), Rigel Pharmaceuticals (RIGL), Sarepta Therapeutics (SRPT), Zai Lab (ZLAB)
89

(1-212) 622-5266 14 December 2017
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2018 US Biotech Outlook

Core sector fundamentals remain strong…

…and pricing fears have (at least temporarily) eased…

…but M&A really does need to materialize

Net takeaway looking to 2018 – buyside survey suggests favorable expectations

Source: J.P. Morgan Research

Source: J.P. Morgan Research

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

2017 YTD Performance: NBI +20% vs. S&P 500 +18%

30% Kymriah’s CELG’s infamous 3Q

JNJ acquisition of Trump signs HC

4Q Earnings 1Q Earnings 2Q Earnings 3Q Earnings

Legacy Large Caps Emerging Large Caps

2012-2017 YTD Performance: NBI +206% vs. S&P 500 +110%

300% NBI S&P 500

Year NBI S&P 500 ∆ (%)

2013 65.6% 29.6% 36.0%

2015 11.4% -0.7% 12.1%

2017 19.6% 18.0% 1.6%

There were several positives in 2017…

20% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

S&P 500 - 18.3x

Industrials 0.8% 0.0% +2B Momentum

Source: J.P. Morgan, US Equity Strategy team

Biotech outperformed in 1H17, as funds initially flowed into the space

Flow volatility picked up substantially in 2H17

2,000 1H16 2H16 1H17 2H17 (400.0)

Return P/E EPS Growth Rev Growth

40% 34% 36%

20% 13% 14% 11%

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

-1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month

Clinical +ve IP +ve Regulatory +ve

-1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

tbancroft@snowphipps.com Townsend Bancroft 12/14/17 02:02:42 PM SPG Partners, LLC

Top Large Cap Longs Top Large Cap Shorts

In the 2017 outlook buyside survey, 71% of responders expected

outperform by >15%), a prediction that didn’t quite come to fruition

 Year-to-date, the NBI is +20% vs. the S&P 500 +18%

We conducted a buyside survey from Nov 20th – Dec 4th

Key takeaways include:

In line (+/- 5%)

Source: J.P. Morgan Research

Much worse Much better 50

In line (+/- 5%) 20

Source: J.P. Morgan Research

Factor Rank Distribution Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

Increasing M&A 42% 20% 15% 8% 7%

There aren't any 1% 0% 0% 1% 2%

Low interest rates 0% 2% 1% 0% 5%

Easy comps / Earnings growth 0% 0% 1% 3% 4%

Payer/pricing pressure is the biggest expected headwind during the year

Factor Rank Distribution Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

Payer / Pricing Pressure 38% 17% 13% 12% 11%

Influx of Capital Markets / IPOs 1% 7% 3% 10% 7%

Repatriation / Tax reform 2% 3% 4% 3% 0%

There aren't any 2% 0% 2% 0% 2%