2019 US Biotech Outlook...2 2019 US Biotech Outlook: The Year of the Pig Source: KarmaWeather; The...

www.jpmorganmarkets.com

North America Equity Research12 December 2018

2019 US Biotech OutlookYear of the Pig Supports Selectivity in Biotech

US Biotechnology

Cory Kasimov AC

(1-212) 622-5266

[email protected]

Jessica Fye AC

(1-212) 622-4165

[email protected]

Bloomberg JPMA FYE <GO>

Anupam Rama AC

(1-212) 622-0900

[email protected]

Eric Joseph AC

(1-212) 622-0659

[email protected]

J.P. Morgan Securities LLC

See page 99 for analyst certification and important 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.

In many ways the biotech sector is as healthy as ever with the innovation engine humming along, heightened regulatory productivity (evidenced by a 20+ year high in FDA’s new drug approvals in 2018), and clear access to capital. Nevertheless, large-cap valuations are at historical lows (vs. the S&P/major pharma) and many investors remain on the sidelines given a number of headwinds (e.g., pricing headlines, underwhelming M&A, dreary macro backdrop, etc.) paired with a lack of perceived sector-moving catalysts. With US/China tariffs dominating headlines, it’s worth bearing in mind that 2019 is the Year of the Pig according to the Chinese zodiac,which suggests that risk taking may present both challenges and opportunities. In our view, without a resurgence of M&A or reversal of the risk-off trade (or both), we’re expecting 2019 to be more of a stock picker’s market, similar to 2018. Our favorite names heading into ’19 are: ASND, ATRA, BMRN, DCPH, IFRX, MYOV, NVAX and SAGE. Please join us for a CC today at 11am ET to discuss our sector outlook (contact us for details) and see our ~100-page slide deck within.

For the large caps, despite increasingly attractive valuations (the big 4 now tradingat ~11x 2019E P/E, vs. ~15x for major pharma and the S&P), decent fundamentals, and improving execution, investors remain apathetic. Beyond the negative macro backdrop, there’s also uncertainty around growth prospects and drug pricing headlines. What will it take for the tune to change? Outside of replenishing the pipeline via M&A (as opposed to capital allocation focused on share repo) and/or a reversal of the macro risk-off trade, our sense is performance may largely hinge on stock-specific catalysts. Overall, we believe biotech needs more large-cap leadership for the sector to work.

For the SMID caps, we believe 2019 is poised to be a stock picker’s market. Weexpect SMIDs to continue to benefit from innovation and the regulatory environmentin 2019 and see a number of launches to watch in 2019 despite lingering “short thelaunch” sentiment keeping many investors away. SMIDs’ access to capital haspersisted; however, the breadth of new companies has been overwhelming at times.

Buyside survey reflects cautious optimism: Our buyside survey (n=93) indicates58% of respondents anticipate biotech to outperform the broader markets (vs. 66% inour 2017 survey) and 18% to underperform (vs. 11%). Top long ideas include CELG(large) and SRPT (SMid); top shorts include AMGN (large) and AMRN (SMid). Notsurprisingly, 86% expect an uptick in M&A in 2019.

Key sector tailwinds: Two overarching themes that could reverse negativesentiment are M&A and an improved macro backdrop, both of which areunfortunately largely out of the hands of any individual biotech. If one or two ofthese reverse early in 2019, we see fund flows having the potential to reverse relativeto 4Q18 (we would monitor the J.P. Morgan Healthcare Conference as an earlysentiment gauge for 2019).

Key sector headwinds: Our buyside survey also indicates pricing pressure/headlines are likely to be a major headwind for the sector again in 2019. While theadministration’s proposals have become slightly more actionable, we awaitadditional details to quantify impact to the sector, if any. Couple this with otherfactors cited in our survey, lack of M&A and clinical failures (or perceived lack ofcatalysts), the negative overall sentiment in the sector is a clear headwind.

J.P. Morgan is acting as a Joint Financial Adviser to Takeda Pharmaceutical Co Ltd in relation to their recommended offer for Shire Plc and is therefore a connected adviser for the purposes of the City Code of Takeovers and Mergers. The transaction is subject to shareholder and regulatory approvals. This research report and the information contained herein is not intended to provide voting advice, serve as an endorsement of the proposed transaction or result in procurement, withholding or revocation of a proxy or any other action by a security holder.

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2

2019 US Biotech Outlook: The Year of the Pig

Source: KarmaWeather; www.travelchinaguide.com

The zodiac predicts a stock picker’s market in 2019

With US/China tariffs continuing as a macro overhang, it’s worth remembering that, according to the Chinese

zodiac, 2019 is the Year of the Pig

“… well considered actions shall be rewarded much more than risk taking during the Year of the Pig 2019…”

Lucky signs worth noting

Lucky numbers: 2, 5, 8 (numbers to avoid 1, 3, 9)

Lucky colors: yellow, gray, brown, gold (colors to avoid red, blue, green)

2018 brought ups and downs for the Pig, and this trend could hold in 2019

KEEP CALM AND

GET SELECTIVE

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&ved=2ahUKEwjixITS4ZXfAhWkTd8KHaU3APAQjRx6BAgBEAU&url=https://www.travelchinaguide.com/intro/social_customs/zodiac/pig.htm&psig=AOvVaw0PztUplFPQdrwzGzgLDPg2&ust=1544548489186343

3

2019 US Biotech Outlook: Key Takeaways

Source: J.P. Morgan Research

Anticipating more of a stock pickers’ market while awaiting a macro recovery

On the positive side, fundamentals remain strong…

The innovation engine is still running at a very high level

A number of high-profile launches captured investors’ attention in 2018 (e.g., HIV, CGRP, CF, orphan… and even gene/cell therapies)

The FDA remains constructive, approving 55 new drugs or biologics in 2018 (vs. 46/22 in 2017/2016) – the highest number since the mid-90s

… and valuations are attractive

We get the sense that the group is significantly under-owned at this point

Following a dramatic downturn (NBI -13% since 9/28 vs. S&P -7%), large-cap valuations are hovering around a 52-week low (and well below 2013-17

levels), trading at a steep discount to pharma (~11x 2019E EPS for big 4 biotech vs. ~15x for major pharma) and of course the broader market

… but there are a number of headwinds keeping investors on the sidelines

Drug pricing controversy remains at the forefront

With a Republican White House and Senate, the likelihood of government intervention appears lower on the surface, but rhetoric has been unpredictable

at best. Moreover, with pricing increasingly becoming a bipartisan issue, generalists fear “gridlock” may not be the hurdle it’s been in the past

Uncertainty around large-cap leadership/growth prospects

While there have been a number of encouraging launches in 2018, a lack of needle-moving growth has deterred some investors

What, if anything, can turn sentiment around in 2019?

One pervasive swing factor is M&A…

M&A sputtered along in 2016-18, with an uptick in activity seemingly always just over the horizon given BioPharma’s ever increasing need to backfill

pipelines & strong balance sheets

While our buyside survey suggests heightened M&A is still anticipated, a year of increased deal activity could act as the rising tide so many are waiting for

… although an improvement in the macro market may be essential to broadly reverse negative sentiment

Biotech needs a better macro backdrop; historically, the sector has had a hard time bucking the risk-off trend, as we’ve documented in the past

Net-net, 2019 is shaping up to be a stock picker’s market until (and if) swing factors broadly improve sentiment

Our buyside survey indicates that 58% of investors expect biotech to outperform the broader market in 2019; 18% expect the sector to underperform

4

2019 US Biotech Outlook: Top Picks Summary

Cory Kasimov BioMarin (BMRN) – For 2019, we expect BMRN to garner interest ahead of key pivotal read-outs for vosoritide

(achondroplasia) and val rox (gene therapy for hemophilia A); in addition, the recent launch of the company’s 7th product, Palynziq, could help bridge the gap to these potentially transformational events and may attract a broader investor audience.

Sage Therapeutics (SAGE) – Admittedly a binary idea for early 2019, we believe SAGE is attractively positioned following a significant pullback and ahead of an important catalyst-rich year. The read-out for SAGE-217 in post partum depression (PPD) expected in January will be important (on both efficacy and safety fronts) in elucidating the ultimate potential of SAGE’s platform. If positive, we believe the substantial scarcity value of a wholly owned, potentially paradigm shifting asset with the possibility of broad applications across an array of depressive disorders has the potential to drive substantial upside throughout the year.

Anupam Rama Atara (ATRA) – There are multiple catalysts in 1H19 that should drive value higher. Despite high consensus probability of

success assumptions (well appreciated by the Street), the phase 3 trials of tab-cel data in EBV+ R/R PTLD should underpin the path to commercialization. Additionally, the phase 1 allogenic ATA188 in MS could drive further upside as an under-appreciated catalyst (evolving science supports and prior autologous ATA190 data help de-risk the ATA188 readout). Next-generation CAR-T provides longer-term pipeline optionality.

InflaRx (IFRX) – As a more traditional biotech binary event, we believe IFX-1 in hidradenitis suppurativa (HS )goes underappreciated, but that the phase 2b readout has a high probability of success (expected 1H19). Prior phase 2a data provide confidence in drug activity and to date there have been no major safety concerns . HS remains an underserved opportunity with blockbuster commercial potential.

Source: J.P. Morgan Research, Data as of 12/4/2018

42%

89%

26%

42%

Implied Upside to PT

5

2019 US Biotech Outlook: Top Picks Summary, Continued

Jessica Fye Ascendis (ASND) – We have a high degree of conviction in the success of the TransCon growth hormone phase III trial with

data anticipated in 1Q19 and, bigger picture, are positive on the stock heading into what we expect will be a big transitional year for Ascendis – one in which we see potential for significant value creation from the company’s platform.

Deciphera (DCPH) – We see an interesting upside case for DCPH in 2019 and have a very high level of confidence in compelling phase III results in 4L GIST in mid-2019. Beyond 4L, we anticipate updated 2L/3L GIST data will further derisk the pivotal 2L trial, and note that every 10% increase to our current 45% POS in 2L GIST is worth $2-$3 to our valuation.

Eric Joseph Myovant (MYOV) – We see MYOV shares setting up for significant growth momentum into a series of pivotal readouts in

2019 (phase 3 trials under way in uterine fibroids, endometriosis and advanced prostate cancer), while viewing Relugolix as clinically de-risked and commercial differentiated offering that is well suited for a significant proportion of the addressable oral GnRH market.

Novavax (NVAX) – We see an attractive near-term setup for NVAX shares into late 1Q19 with a pivotal readout for ResVax in the prevention of RSV lower respiratory tract infection in infants via maternal immunization (~$650M peak sales potential in the US). Phase 2 NanoFlu immunogenicity data in older adults, also in 1Q19 (potentially at the Healthcare Conference), could pave the way to an accelerated approval development strategy, further broadening strategic interest in the pipeline.

Source: J.P. Morgan Research, Data as of 12/4/2018

31%

36%

112%

Implied Upside to PT

6

A Quick Look Back at 2018

Performance Metrics / Catalysts

Fund Flows

Healthcare vs. Broader Markets

Biotech vs. Healthcare Sub-sectors

7


Source: J.P. Morgan Research; Bloomberg. Data as of 12/4/2018

Biotech performed essentially in line with broader markets YTD in 2018

2018 YTD Performance: NBI -0.2% vs. S&P 500 +1.0%

Legacy Large Caps Emerging Large Caps

-0.2%

-30.6%

-2.9%

1.3%

13.7%

NBI

CELG

GILD

BIIB

AMGN

-0.2%

-30.8% -0.8%

2.3% 5.1%

18.7%

NBI

INCYREGNALXN

BMRNVRTX

8


Despite lackluster performance in 2018, Biotech has significantly outperformed the broader market in aggregate since 2012

2012-18 YTD Performance: NBI +209% vs. S&P 500 +115%

Year NBI S&P 500 ∆ (%)

2012 31.9% 13.4% 18.5%

2013 65.6% 29.6% 36.0%

2014 34.1% 11.4% 22.7%

2015 11.4% -0.7% 12.1%

2016 -21.7% 9.5% -31.2%

2017 21.1% 19.4% 1.6%

2018 -0.2% 1.0% -1.1%


0%

50%

100%

150%

200%

250%

300%

% C

ha

ng

e

NBI S&P 500

9


There were quite a few positive developments for biotech in 2018…

The number of NME approvals reached record highs not seen since the mid-90s, highlighting the continued efforts on the part of

the FDA to work with sponsors on innovative therapies

Innovation productivity continues with approvals of a number of highly anticipated drugs and new drug classes (e.g., CGRPs,

Biktarvy, Luxturna, Palynziq, Yescarta, etc.)

Capital markets activity was at its highest since 2014, supporting continued funding of emerging biotechs through IPOs and

secondary offerings

Large-cap execution improved as the year went on, but to some extent this was overshadowed by uncertain growth prospects and

management turnover

Valuations remain compelling and the large caps still trade at a relatively steep discount to the market (~11x 2019E EPS for big 4

biotech vs. ~15x for the S&P)

… but the macro risk-off trade in 4Q, coupled with a lack of M&A, weighed on the sector

While some M&A materialized (JUNO, BIVV, AVXS) early in the year, the pace was not at the level expected… and increased share

repurchase activity over the course of the year was not able to provide the support needed for stocks

Macro driven risk-off trade starting at the beginning of 4Q led to a meltdown of the biotech sector, erasing YTD gains

Several high-profile C-suite departures during 2H18 (most notably but not limited to GILD’s CEO) made it tougher for investors to

engage in a meaningful way

Drug pricing rhetoric remained an overhang, capped by Trump’s recent speech on drug pricing (APF) & Medicare Part B proposal


While the broader markets were highly unstable, biotech performance was characterized by more periods of volatility (particularly in 4Q)

10


Healthcare overall traded in line with the broader markets during 1H18; pharma facilitated significant outperformance in 2H18

Biotech was ahead of the broader market until the end of third quarter, when a tech sector driven major risk-off trade turned the tides and wiped out YTD

gains, whereas Pharma, traditionally defensive, remained resilient to the correction

Healthcare performance was the best across all sectors in 2018 in the wake of the recent macro risk-off trade…


-15%

-10%

-5%

0%

5%

10%

15%

20%

Cons Discret Industrials Materials Energy TelecomServ

Cons Staples Info Tech Financials Utlities Health care

Tota

l R

etu

rn (

%)

Rela

tive t

o the S

&P

500

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

11

48%

-2%

25%

16%

8%

33%

2% 3%

16%

-5%

49%

4%

24%

17% 20%

-28%

-3% -1%

-13%

-5%

22%

5% 10%

21%

1%

33%

21%

30%

42%

25%

16% 9%

17% 11%

-3%

9% 6% 8% 7%

-1%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

MANAGEDCARE

DIST/PBM MED TECH PHARMA BIOTECH MANAGEDCARE

DIST/PBM MED TECH PHARMA BIOTECH

2017 2018

Return P/E EPS Growth Rev Growth


EPS growth for large-cap biotech was healthy in 2018, although sector returns were lower than in other healthcare subsectors

Earnings leverage continued to be key for biotech in 2018, which drove acceleration on the bottom line; this was partially boosted by aggressive share

repurchases. However, big 4 (AMGN, BIIB, CELG & GILD) revenue growth peaked and started trending down

Investors are clearly uninspired by bottom-line performance in the absence of top-line growth, as biotech multiples contracted in 2018 and still remain at

a discount to pharma, managed care, & med-tech

… but compared with other healthcare sub-sectors, average returns for legacy large-cap biotechs lagged in 2018


12


Source: J.P. Morgan Research; Bloomberg. Data as of 12/4/2018; Large Cap Biotech: AMGN, BIIB, CELG, GILD. Large Cap Pharma: BMY, MRK, PFE, LLY, ABBV

Biotech P/E multiples have continued on a downward trend over the past 5 years, trading at a sizeable discount to Pharma and the S&P

Legacy Large

Caps

vs.

Major Pharma

vs.

S&P 500

(last 5 years)

Legacy Large

Caps vs.

Biotech Peers

(last 5 years)

13


Source: J.P. Morgan Research; Bloomberg. Data as of 12/4/2018; Large Cap Biotech: AMGN, BIIB, CELG, GILD. Large Cap Pharma: BMY, MRK, PFE, LLY, ABBV

Depressed multiples potentially indicate a growing disconnect between fundamentals & price for biotech

Legacy Large-Cap Biotech Major Pharma

P/E

Company Current P/E Prem. / Disc. vs. bio peers

Prem. / Disc. vs. pharma

peers

5-year EPS CAGR

PEG Ratio Company Current P/E Prem. / Disc. vs. pharma

peers

5-year EPS CAGR

PEG Ratio

Lega

cy

Larg

e C

aps AMGN 13.6x 28% -9% 4% 3.7x

Maj

or

Ph

arm

a

ABBV 10.4x -31% 7% 1.5x

BIIB 11.7x 9% -22% 6% 2.0x BMY 12.9x -14% 10% 1.3x

CELG 7.1x -34% -53% 11% 0.6x LLY 20.1x 35% 8% 2.4x

GILD 10.2x -4% -32% 4% 2.4x MRK 16.6x 11% 8% 2.2x

Mean 10.7x 6% 2.2x PFE 14.7x -2% 7% 2.3x

Median 10.9x 5% 2.2x Mean 14.9x 8% 1.9x

Median 14.7x 8% 2.2x

Despite only slightly lower growth expectations than major pharma, current legacy large cap biotech P/E multiples are trading, on average, at a

considerable discount (~29%) to US major pharma

14


Flows had a strong start but weak finish in 1H18

Fund flows started on a positive note in 2018 following generally upbeat sentiment from The J.P. Morgan Healthcare Conference and initial M&A activity

(including ~$20B in transactions on 1/22) . . . that said, this momentum proved difficult to sustain through 1Q18 given broader market weakness (multi-

500+ point day drops in the Dow) in addition to some drug pricing commentary and sector-specific headwinds (negative headlines/trial failures)

Trump’s long-awaited speech on drug pricing (5/11) was perceived to be benign overall. Hence, we were not surprised by the group’s recovery shortly

thereafter (we’d point out the week of 5/11 saw the largest weekly inflow YTD for Biotech ETFs)

While 2Q claimed the largest weekly inflow of the year, the quarter was otherwise touch and go from a fund flows perspective (compounded by a

relatively neutral ASCO), and the quarter ended with a slight net outflow of funds

Biotech ETF flows ended the summer/3Q on a positive note, but 4Q has been turbulent to say the least

A series of positive large-cap catalysts in late June/early July proved particularly helpful (including underwhelming competitive updates for VRTX, CELG

clinical wins, and BIIB’s top-line BAN2401 data), in addition to broader market/HC outperformance, triggering >$1B of flow funds into the IBB ETF over the

summer

After capping off 3Q with net positive inflows, a generally underwhelming biotech/healthcare tape resulted in outflows in the first 2 weeks of 4Q against

the backdrop of macro headwinds

During 4Q, biotech got caught up in a macro risk-off trade, which resulted in massive outflows from the sector. To date, the quarterly flows have clearly

been turbulent for biotech (7 weeks of outflows out of 9 weeks for 4Q) as sentiment continued to take a hit

Fund flows were generally negative in 2018… with accelerating outflows in 4Q in particular

Source: J.P. Morgan Research; Bloomberg. Data as of 11/30/2018 (weekly data)

15


Institutional investors were generally overweight healthcare in 3Q18, increasing their positions vs. 2Q18… but that included an

increase in non-pharma/biotech and a decline in pharma/biotech positioning

From 2Q to 3Q18, institutional investors slightly decreased their exposure to Pharma/Biotech (except for pension funds + sovereign WF) with greater declines

from mutual funds & asset managers. 4Q18 trends are likely to show even less Pharma/Biotech exposure following major macro risk-off trade

Institutional investors increased healthcare positioning in the most recent quarter… but not specifically pharma/biotech positions

Source: J.P. Morgan US Equity Strategy 2019 Outlook

https://www.jpmm.com/research/content/GPS-2856015-0

16

Based on an analysis of key binary events in our universe, average returns post binary events were slightly negative in 2018

On average, the magnitude of upside post positive events was lower than the magnitude of downside post negative events during the year

Upside after +ve events was higher in 1H18 (vs. 2H18); however, downside after –ve events was roughly similar in both halves. The decreased risk appetite in

2H18 likely stems from the heightened macro concerns/market volatility

A Quick Look Back at 2018 – Snapshot of Binary Events

Source: J.P. Morgan Research; Bloomberg as of 12/4/2018.

On average, upside after positive events was of lower magnitude than the downside after negative events in 2018, similar to 2017

Return profiles of

Binary Events in 2018

Return profiles of

Binary Events in 1H18

Return profiles of

Binary Events in 2H18

Some of the events 1 month performances were N/A as they happened less than a month ago for 2H18 events

1% 4%

-5%

1% 1% 1% 1% 1% 1%

-1%

7%

-21%

0%

9%

-21%

-2%

7%

-20%

-2%

5%

-16%

-30%

-20%

-10%

0%

10%

All Events All +ve Events All -ve Events

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

3% 5%

-5%

1% 1% 2% 1% 0% 1% 2%

11%

-21%

4%

13%

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3%

11%

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4%

10%

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0%

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0%

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0% 0%

0% 1% 1% 2%

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3%

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-7%

1%

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-8% -4%

-16%

-30%

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-10%

0%

10%



*Detailed list of Binary Events can be found in subsequent slides

17

A Quick Look Back at 2018 – Snapshot of Binary Events On average, regulatory events returned marginally more than clinical events (with IP & Corporate events trailing both)

Return profiles

by type of event

Surprisingly, average returns post clinical +ve events lagged regulatory +ve events

High returns post +ve clinical events are not surprising. However, higher +ve returns post regulatory +ve events are noteworthy

This perhaps underscores the increasing investor sentiment of pumping money into late-stage or de-risked assets post positive regulatory developments


Return profiles

by type of event

Similar to 2017, regulatory events on average returned more than the clinical events, whereas IP & Corporate events lagged the other two

We believe this is due to the fact that…

1) Negative clinical events had more –ve returns compared to negative regulatory events (the caveat being there are very few regulatory events compared

with clinical )

2) Positive clinical events had lower +ve returns compared with +ve regulatory events

-3%

4%

11%

-8%

2% 0% 2%

-3%

1% 1% 4%

0%

2%

0%

-11% -12%

5%

0%

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2%

-2%

-26%

-6%

9%

-5%

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-6%

-30%

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0%

10%

20%

Regulatory Clinical IP Corporate


-4%

6%

31%

4% 3%

0%

12%

-1%

1% 1%

11%

-1%

10% 7%

5% 5%

13%

8% 4%

6% 8%

6%

0%

10% 10%

2% 0%

6%

-10%

0%

10%

20%

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Regulatory +ve Clinical +ve IP +ve Corporate +ve


*Detailed list of Binary Events can be found in subsequent slides

18

Based on an analysis of key binary events in our universe, the average upside post binary events was slightly lower in 2H18 vs. 1H18

Downside after negative events was roughly similar between 1H and 2H

A Quick Look Back at 2018 – 1H18 Binary Events On average, upside after positive events was higher in 1H18 vs. 2H18


%Return

Ticker Event Type of Event

Good or Bad

Date of Event


CCXI Avacopan MAA Accepted for Review Regulatory + 01/04/18 -4% 4% 5% 39% 37% 35% 56%

ASND Initial TransCon PTH phase I results Clinical + 01/08/18 9% 0% 2% 2% 15% 19% 22%

ALDR PROMISE 2 topline results Clinical + 01/08/18 25% 13% -3% 17% 36% 31% 2%

JAZZ Disclosure that Vyxeos beat '18 guidance Corporate + 01/08/18 1% 1% -1% 1% 5% 10% 3%

XLRN Top line ACE-083 data in FSHD Clinical + 01/08/18 17% -1% -2% 0% 4% 7% -8%

GBT Breakthrough desgination awarded for voxelotor in SCD Regulatory + 01/09/18 -13% 1% -5% 19% 40% 32% 55%

ARRY BEACON CRC Updates for the Phase 3 Safety Lead-in Clinical + 01/20/18 20% -4% 2% 18% 18% 15% 31%

PBYI Results of CHMP oral hearing for Nerlynx in extended adjuvant HER2+ BC setting

Regulatory - 01/23/18 -6% 3% -3% -29% -25% -24% -27%

PTCT Risdiplam FIREFISH Type 1 SMA preliminary data Clinical + 01/27/18 48% 13% 5% 10% 8% -2% 7%

VRTX Initial results from 445/659 in het-min patients Clinical + 01/31/18 11% -1% 0% 4% 0% -5% 2%

AMAG Feraheme IDA label expansion Regulatory + 02/05/18 -7% -1% -2% -7% -5% -9% 46%

AMAG Makena SC Approval Regulatory + 02/14/18 -3% 7% 1% 29% 33% 39% 41%

BIIB Announcement of increased enrollment on Aducanumab Trials Clinical - 02/14/18 -6% 2% 0% -7% -6% -9% -10%

CLVS SAG Meeting/CHMP vote regarding rucaparib in 3L+ treatment Regulatory + 02/21/18 -9% 1% 2% 9% 3% 8% 4%

OBSV Top line nolasiban IMPLANT2 phase 3 results Clinical + 02/23/18 59% 8% 6% -5% -4% -5% -12%

CELG Announces RTF on NDA in RMS for Ozanimod Regulatory - 02/27/18 -9% 2% -1% -9% -9% -7% -7%

PBYI Report 4Q17 earnings Corporate + 03/01/18 -6% -10% -6% 15% 24% 31% 4%

CLSD Phase 3 PEACHTREE Results in NIU Clinical + 03/02/18 24% 29% 11% 32% 66% 62% 31%

GTHX Phase 2a Trilaciclib Topline Results Clinical + 03/05/18 -2% 4% 5% 5% 5% 42% 49%

ESPR Study 4 Topline Results Clinical + 03/07/18 11% -3% 0% -2% -6% 0% -11%

MYOK Phase 2 PIONEER-HCM Cohort B Data at ACC Clinical + 03/08/18 6% -11% -2% -2% -6% -10% -15%

REGN Full data from ODYSSEY outcomes study at ACC for Praluent Clinical + 03/10/18 2% 3% 0% 1% -1% -1% -6%

ALXN Phase 3 ALXN1210 in PNH Trial Results Clinical + 03/15/18 8% -2% 1% 3% 3% -4% -9%

ARNA Etrasimod phase II results Clinical + 03/19/18 -24% -14% -2% 29% 42% 33% 27%

ALNY Topline data from phase 3 ATTR-ACT (read-through) Clinical - 03/29/18 6% -6% -1% -8% -22% -27% -27%

ALKS Refuse to File letter received for ALKS 5461 Regulatory - 04/02/18 1% -1% -2% -22% -25% -27% -24%

INCY Report Phase 3 topline data in combo with pembro (ECHO 301) for Epacadostat

Clinical - 04/06/18 -9% 0% -1% -23% -21% -16% -24%

CLVS Approval for Rucaparib in 2L maintenance Regulatory + 04/06/18 -11% -1% -1% 6% 12% 16% -18%

ACAD CNN report on FAERS database safety concerns for Nuplazid Corporate - 04/09/18 -15% -4% -3% -23% -18% -12% -14%

RIGL Tavalisse Approval in Chronic ITP Regulatory + 04/17/18 -9% 20% -6% 10% 4% -3% 5%

NVCR Topline from Ph2 (STELLAR) mesothelioma trial for Optune Clinical + 04/17/18 -1% 6% 0% 8% 10% 16% 35%

19

A Quick Look Back at 2018 – 1H18 Binary Events (Cont’d)


% Return

Ticker Event Type of Event

Good or Bad

Date of Event -1 Month -5 Days -1 Day Day 0 1 Day 5 Days 1 Month

SLDB SGT-001 Clinical Hold Regulatory - 04/18/18 10% 5% 2% 2% 3% 23% 115%

ACAD (Another) CNN report on FAERS database safety concerns for Nuplazid Corporate - 04/25/18 -14% -1% -2% -22% -22% -19% -10%

KPTI Top line selinexor phase 2b STORM data Clinical + 04/30/18 -3% -7% -14% 11% 19% 33% 42%

ESPR Study 1 Topline Results Clinical - 05/02/18 -3% 3% 1% -35% -48% -42% -45%

PBYI Report 1Q18 earnings Corporate - 05/09/18 2% 2% 2% -21% -19% -17% -26%

JNCE Preliminary efficacy for ICONIC Ph2 trial (Gastric and TNBC) in ASCO abstract for JTX-2011

Clinical - 05/16/18 -15% 5% 6% -35% -36% -39% -55%

DOVA Doptelet Approval in CLD Thrombocytopenia Regulatory + 05/21/18 12% 10% 4% -13% -7% -15% 9%

ESPR Study 3 Topline Results Clinical + 05/23/18 -46% -7% 5% -4% -5% -9% -4%

BMRN Approval of pegvaliase in PKU Regulatory + 05/24/18 8% 0% -1% 5% 3% 4% 12%

CLSD Phase 2 TYBEE Results in DME Clinical - 05/31/18 17% 9% 3% -32% -33% -38% -26%

BLUE Add'l data updates from CRB-401 study at ASCO for bb2121 Clinical + 06/01/18 6% -3% 2% 5% 4% -1% -16%

DCPH DCC-2618 Phase I Update @ ASCO Clinical + 06/02/18 3% 2% 1% 48% 54% 39% 49%

NKTR PIVOT-02 results @ ASCO Clinical - 06/02/18 6% 13% 13% -42% -38% -41% -46%

JNCE ASCO data for JTX-2011 from ICONIC trial Clinical - 06/02/18 -46% -1% 0% -33% -32% -35% -30%

IMGN Avastin + mirv combo results from FORWARD II Clinical + 06/04/18 1% 4% -7% 7% 7% -11% 3%

ARRY Phase 3 COLUMBUS OS Results Clinical + 06/04/18 24% 7% 4% -3% 2% 5% -2%

IDRA Tilsotolimod ASCO Updates Clinical + 06/04/18 23% 4% -2% -4% 3% -4% -34%

SAGE Clarify regulatory pathway in MDD for SAGE-217 Regulatory + 06/12/18 -14% -6% -1% 20% 15% 11% 12%

ATRA Long-term Phase 2 MSK Data for tab-cel in Refractory EB+PTLD at EHA Clinical + 06/14/18 2% 0% 3% 1% 0% -1% -11%

KPTI Selinexor phase 1b STOMP update Clinical + 06/15/18 -2% 3% 3% 3% 3% 4% 2%

PTCT Risdiplam FIREFISH Type 1 SMA update Clinical + 06/15/18 24% 3% 2% 25% -13% -12% -6%

BLUE HGB-206 trial update in SCD for Cohort C patients at EHA Clinical + 06/15/18 13% 8% 5% -7% -10% -14% -10%

SRPT Initial Phase 1/2 Micro-Dystrophin DMD Data at R&D Day Clinical + 06/18/18 13% 7% 3% 37% 46% 31% 30%

SLDB SGT-001 Clinical Hold Lifted Regulatory + 06/18/18 13% 10% 7% 11% 62% 63% 58%

OBSV Linzagolix EDELWEISS phase 2b data in EM Clinical + 06/18/18 19% -1% -3% 23% 6% -2% 6%

APLS APL-2 PNH Phase 1/2 Updates & Phase 3 Initiation in PNH at R&D Day Clinical + 06/26/18 12% -2% 4% 3% -2% -7% -23%

FOLD EU Pompe Regulatory Update Regulatory - 06/26/18 -2% -6% 1% -3% 0% 0% -1%

PBYI Positive CHMP trend vote on re-examined MAA for Nerlynx in extended adj HER2+ BC

Regulatory + 06/26/18 -2% -7% -3% 24% 11% 16% -2%

ARRY Mektovi/Braftovi FDA Approval in BRAF Melanoma Clinical + 06/27/18 16% -5% -2% -5% -9% -10% -12%

GBT Topline data from Part A of Phase 3 HOPE study for voxelotor in adults with SCD

Clinical + 06/27/18 -17% -6% -1% 16% 23% 11% 11%

XLRN Top line luspatercept phase 3 MEDALIST results in MDS Clinical + 06/28/18 -7% -9% 1% 43% 39% 36% 24%

All Events 3% 1% 1% 2% 4% 3% 4%

All +ve Events 5% 1% 0% 11% 13% 11% 10%

All -ve Events -5% 2% 1% -21% -22% -21% -16%

20

Upside after positive events was lower in 2H vs. 1H yet downside remained similar after negative events, potentially reflecting the decreased

appetite for playing binary events

That said, some of the positive events in 2H18 erased the gains as a “sell the news” dynamic came to impact performance

A Quick Look Back at 2018 – 2H18 Binary Events Upside after positive events was lower in 2H18 vs. 1H18


% Return

Ticker Event Type of Event Good or Bad


BIIB Phase 2 18 month data for BAN2401 in Alzheimer's disease Clinical + 07/05/18 0% 3% 2% 20% 18% 17% 14%

XLRN Luspatercept phase 3 BELIEVE results in beta-thal Clinical + 07/09/18 32% 0% 1% 3% 1% -3% -1%

MRSN Patient death & clinical hold in '1522 ph I Regulatory - 07/19/18 -15% 1% 3% -32% -34% -30% -26%

AGIO Tibsovo Approval in IDH1 R/R AML Regulatory + 07/20/18 -6% 1% -1% 0% -1% -4% -17%

NBIX Orilissa Approval in Endometriosis Regulatory + 07/23/18 2% 2% 0% 2% 4% -5% 10%

ACOR US Court of Appeals denies temporary injunction on Ampyra generics IP - 07/25/18 -3% -2% 2% -14% -14% -15% 1%

BIIB Present detailed Phase 2 results at AAIC for BAN2401 Clinical - 07/25/18 31% 7% 3% -10% -11% -13% -11%

SGEN 2Q18 earnings (top line beat) Corporate + 07/26/18 8% 1% 0% 2% -2% 0% 5%

DNLI DNL201 topline results Clinical + 08/01/18 -18% 1% 1% 10% 9% 23% 54%

ONCE Updated Phase 1/2 data in hemophilia A for SPK-8011 Clinical - 08/07/18 -16% 6% 5% -28% -26% -21% -19%

UTHR FREEDOM-EV topline results Clinical + 08/08/18 1% 1% 1% 1% 2% -2% -5%

EBS PaxVax acquisition Corporate + 08/09/18 1% -1% -1% 4% 2% 9% 10%

ALNY Patisiran Approval for Polyneuropathy in hATTR (label narrower than Street expectations)

Regulatory - 08/09/18 -10% 3% 1% 3% -4% 0% 16%

FOLD Galafold Approval for Fabry Regulatory + 08/10/18 -7% 8% 2% -7% -9% -14% -22%

ESPR FDC Topline Results Clinical +/- 08/27/18 14% 2% 0% 5% 4% 2% -13%

IONS Waylivra CRL Regulatory - 08/27/18 19% 6% 8% -16% -14% -15% -4%

ALNY Full data from phase 3 ATTR-ACT at ESC (read-through) Clinical - 08/27/18 -8% 2% 0% 16% 21% 23% -4%

EIDX Full data from phase 3 ATTR-ACT at ESC (read-through) Clinical - 08/27/18 5% 11% -2% -31% -28% -40% -45%

EBS Adapt acqusition Corporate + 08/28/18 16% 2% 1% 2% 2% -1% 7%

BCRX Initial data from ZENITH-1 Study for '7353 in HAE acute attacks Clinical + 09/04/18 18% -1% 0% 6% 12% 4% 2%

SGMO SB-913 phase 1/2 data in MPS II Clinical - 09/05/18 41% 22% 4% -24% -31% -23% -22%

FOLD FDA Pompe Regulatory Update Regulatory - 09/07/18 -17% -7% 3% -4% -6% -6% 6%

ACOR Outcome of oral arguments for Ampyra patent appeal trial IP - 09/10/18 4% -4% -1% -25% -30% -37% -36%

GILD Phase 3 data from FINCH 2 in RA (inadequate response to bDMARDs) Clinical + 09/11/18 -6% -1% 0% 2% 3% 1% 0%

KNSA Phase 1a/1b KPL-716 data in EADV abstract Clinical + 09/12/18 64% -5% -2% -2% 3% 8% -26%

MRSN Clinical hold lifted for '1522 ph I Regulatory + 09/17/18 13% 6% 2% -23% -15% -21% -44%

ACAD Updates on FDA safety review of Nuplazid in PDP Regulatory + 09/20/18 11% 9% 6% 27% 34% 42% 47%

ALXN Phase 3 NMOSD Trial Results Clinical + 09/24/18 4% 3% -2% 5% 6% 12% 2%

MYOK Pipeline updates at R&D Day Clinical + 09/30/18 9% 2% -1% -2% -7% -17% -17%

21

A Quick Look Back at 2018 – 2H18 Binary Events (Cont’d)


% Return

Ticker Event Type of Event Good or Bad


SGEN Topline Phase 3 ECHELON 2 data in MTCL for Adcetris Clinical + 10/01/18 1% -1% -1% 5% 5% 0% -29%

SRPT Updated Phase 1/2 Micro-Dystrophin DMD Data at WMS Clinical + 10/03/18 3% -9% 3% -3% -8% -12% -4%

OBSV Nolasiban IMPLANT2 phase 3 data update Clinical + 10/03/18 37% -1% 1% -3% -2% -6% -8%

PTCT Risdiplam Type 1/2/3 SMA data at WMS Clinical + 10/03/18 8% -4% -3% 0% -11% -10% -10%

LXRX Competitor SLGT-2 data in TID @ EASD Clinical + 10/04/18 -10% -8% 1% -3% -5% -8% -6%

IONS Tegsedi Approval Regulatory +/- 10/05/18 8% -6% 3% -8% 0% 0% 21%

KPTI Selinexor NDA accepted in pr-MM Regulatory + 10/08/18 -28% -12% 1% 4% 4% -16% -26%

APLS APL-2 Phase 3 in GA Paused Clinical - 10/16/18 -16% -3% -1% 7% 7% -15% -2%

DCPH DCC-2618 Phase I Update @ ESMO Clinical + 10/19/18 -25% -3% -5% -18% -17% -22% -16%

CLVS Phase 2 (TRITON-2) study update in relapsed mCRPC at ESMO for Rucaparib

Clinical + 10/19/18 -7% 12% -5% -12% -30% -40% -45%

IMGN Keytruda + mirv combo results at ESMO Clinical +/- 10/20/18 -16% 1% -5% -16% -16% -24% -28%

DVAX SD-101 ESMO Updates Clinical + 10/20/18 -11% -4% -4% 11% 22% 1% 6%

BIIB Present sub-group analysis from Phase 2 study for BAN 2401 Clinical +/- 10/25/18 -13% -6% -4% -1% -1% 1% 6%

SGEN 3Q18 earnings (top line miss) Corporate - 10/25/18 -18% -9% 3% -15% -16% -14% -12%

RARE Phase 3 data in Glut1 DS with movement disorders for Triheptanoin Clinical - 10/26/18 -34% -6% 8% -18% -20% -9% -6%

ESPR Study 2 Topline Results Clinical + 10/28/18 -6% -7% 13% -4% 2% 41% 24%

CLVS 3Q earnings (top line miss) Corporate - 10/30/18 -43% -12% -1% -30% -17% -14% 4%

ACAD Data from Phase 2 CLARITY study in MDD for Nuplazid Clinical + 10/31/18 2% -1% 0% -8% 6% 3% -5%

SAGE Briefing docs released for Adcom for Zulresso Regulatory + 10/31/18 -14% 1% 3% 6% 13% 4% -6%

ALKS Adcom for ALKS 5461 Regulatory - 11/01/18 -5% -1% 3% -8% -8% -8% -11%

PBYI Report 3Q18 earnings (Nerlynx miss; guidance reiterated) Corporate - 11/01/18 -17% -4% 4% -48% -41% -39% -38%

SAGE Adcom for Zulresso Regulatory + 11/02/18 -1% 15% 7% -8% -7% -12% -16%

CLSD Phase 3 SAPPHIRE Results in RVO Clinical - 11/05/18 -4% -3% -9% -63% -60% -69% -73%

NKTR Results from 1L melanoma cohort from PIVOT-02 Clinical + 11/09/18 -35% -13% -6% 9% 10% 12% NA

EIDX AG10 Phase 2 Update at AHA Clinical + 11/10/18 38% -1% 3% 15% 9% 11% NA

INFI Phase 1b MARIO-1 Update at SITC Clinical - 11/10/18 3% -2% 0% -45% -44% -41% NA

SLDB Announcement of Preliminary Micro-Dystrophin DMD Update for IGNITE-DMD

Clinical + 11/13/18 -16% -16% -5% 10% 3% 15% NA

VRTX Initial Phase 3 Triple Data for Teza/Iva/VX-659 in Cystic Fibrosis Clinical + 11/27/18 -1% 4% 4% 5% 7% 10% NA

KPTI Selinexor phase 2b SADAL data in DLBCl at ASH Clinical + 12/01/18 -1% -1% 9% 5% 2% NA NA

GBT Full data from Part A of Phase 3 HOPE study for voxelotor in adults with SCD & regulatory update

Clinical / Regulatory

+ 12/03/18 -10% -9% -1% 48% 44% NA NA

CLVS EU patent ruling for Rucaparib IP + 12/04/18 31% 12% 11% 5% 4% NA NA All Events 0% 0% 1% -5% -5% -7% -8% All +ve Events 3% 0% 1% 3% 3% 1% -4% All -ve Events -5% 0% 2% -20% -20% -20% -16%

22

Looking Ahead to 2019: Views from Multiple J.P. Morgan Teams

JPM US Equity Strategy View

JPM Trading Desk Perspective

JPM Biotech Team Overview

23

Looking Ahead to 2019 – JPM US Equity Strategy View

J.P. Morgan US Equity Strategy Team Is Underweight Healthcare

In its 2019 outlook for the US Equity Markets (here), the JPM US Equity Strategy Team downgraded Healthcare to UW, given its

expensive valuation and an increased chance of political rhetoric turning more negative heading into the 2020 election season

“We recommend investors avoid defensives (Staples-UW, REITs-UW, Utilities-UW, Healthcare-UW), given increasing crowding concerns, record high

relative valuation and low probability of near-term recession”

“We downgrade Healthcare to underweight as the sector has benefited from its defensive growth status and seen its relative valuation expand over the

last year. While the sector will continue to provide sustainable growth over the long-term, we believe the political rhetoric could turn increasingly more

negative on healthcare leading up to the 2020 presidential elections.”

The JPM US Equity Strategy Team expects a rotation to Cyclicals from Defensives

“We anticipate a rotation to Cyclicals from Defensives and favor sectors that could benefit from improvements in trade and softening Fed rhetoric

(Technology-OW, Discretionary-OW, Industrials-OW, Energy-OW)”


https://jpmm.com/research/content/GPS-2197206-0


24

Looking Ahead to 2019 – JPM US Equity Strategy View

In 2019, Biotech is expected to deliver 3.4% revenue growth and 5.1% earnings growth


Healthcare is expected to contribute 21% of the revenue growth of the S&P500, the highest for any sector

S&P 500 Current Constituents


25

Looking Ahead to 2019 – The Trading Perspective


Perspective from our desk… what they’re seeing and what’s the vibe into 2019

Thoughts from the J.P. Morgan Healthcare Trading Desk (conference call commentary)

26

Though we believe core fundamentals are solid, that hasn’t stopped sentiment from taking a hit in conjunction

with the macro risk-off trade late this year. In our view, 2019 is setting up to be a stock picker’s market in the

absence of (1) M&A finally accelerating in a meaningful way, (2) a materially better macro backdrop, and/or (3)

large-cap leadership

We remain generally constructive on the sector for 2019, as fundamentals remain strong and valuations have come in quite a bit.

A material increase in M&A could be a wild card for the whole sector…

We continue to expect investor appetite for biotechs will be driven by high-profile clinical / regulatory catalysts and commercial performance

The pace of innovation has not slowed, and first-in-class and/or disruptive technologies have drawn significant investor attention (and capital), which

we expect could continue into 2019

Regulatory productivity continues as more clarity is provided on approval requirements, 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 Trump administration

may further increase FDA output (“new FDA” has become a tailwind thesis in the sector)

M&A sputtered along in 2016-18, with an uptick in activity seemingly always just over the horizon despite BioPharma’s need to backfill pipelines and

strong balance sheets. While our buyside survey suggests heightened M&A is still anticipated, a year of increased deal activity could still represent that

rising tide so many are waiting for.

In our recent buyside survey (see slide 31), 58% of responders expect Biotech will outperform the broader markets in 2019 (only 18% predict

underperformance), with clinical data / innovation (and not M&A, which was #2) as the most often cited tailwind during the year

… that said, drug pricing headlines remain front and center, and we see a dearth of major sector-moving catalysts on tap for 2019;

not to mention the shaky market backdrop continues to weigh on the sector

Controversy around drug pricing will remain in focus; we expect continued discussion from both politicians and PBMs (not to mention biotech/pharma

companies) on the issue

With a Republican White House and Senate, the likelihood of government intervention appears lower on the surface. However, rhetoric around pricing

has been unpredictable and increasingly a bipartisan issue, suggesting that “gridlock” may not be the hurdle it’s been in the past

With potentially limited sector-moving catalysts on tap this year (unless some emerge earlier than anticipated), we see 2019 as shaping up to be a stock

picker’s market

Further, concerns of a recession and/or higher interest rates as we head in to the later stages of the business cycle could keep investors out of sectors

like biotech

A key question is whether uncertainty/volatility will keep fund inflows / broader investor interest at bay (and potentially accelerate outflows)

A capital markets influx could continue in 2019 but will have to be balanced by large-cap leadership, positive earnings momentum, clinical progress, and

M&A

Source: J.P. Morgan Research.

Looking Ahead to 2019 – Thoughts from the JPM Biotech Team

27

We evaluated BTK performance relative to the S&P 500 during the week of the JPM Healthcare Conference over the past 18 years

We observed that ~78% 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 this nearly two decade span, and last year’s conference

performance was similar with ~2% outperformance relative to S&P

Many will be looking to the 2019 Conference as a sentiment check for the year ahead and the potential to reset expectations after a

rocky 4Q

Looking Ahead to 2019 Biotech has generally outperformed the broader market during the J.P. Morgan Healthcare Conference… 2018 saw a similar trend


Mo

n

Mo

n

Mo

n

Mo

n

Mo

n

Tue

Tue

Tue

Tue

Tue

Wed

s

Wed

s

Wed

s

Wed

s

Wed

s

Thu

rs

Thu

rs

Thu

rs

Thu

rs

Thu

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Fri

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-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

2014 2015 2016 2017 2018

BTK Performance Relative to the S&P 500

-0.5%

0.0%

0.5%

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2.0%

2.5%

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Mon Tue Wed Thurs Fri

Per

form

ance

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ing

JPM

HC

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BTK S&P 500

2.5% Relative

Outperformance

on Average from

2001-2018

28

Looking Ahead to 2019 – The Large Caps (The Big 4)


What will it likely take for the LEGACY large caps to work – or not work – in 2019?

AMGN

It works if… Aimovig sales are strong in 2019 despite increasing competition, biosimilar impact (particularly on Neulasta) is more modest than expected,

Enbrel litigation plays out favorably for AMGN, and/or AMGN executes on smart/well received M&A transactions to add new growth drivers

It doesn’t work if… Enbrel litigation does not play out in AMGN’s favor, biosimilar risk intensifies (on Neulasta and/or other legacy products), Aimovig loses

share to new entrants, 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 early 2020); any additional

near-term growth prospects / boosts to perceived ex-Alzheimer’s valuation introduced by M&A would be a plus (and we think a necessary one)

It doesn’t work if… ongoing competitive pressures in MS put a greater dent on the topline than currently anticipated, Spinraza sales fall short and/or

competitive updates point to an overwhelmingly negative future outlook, or if there are negative clinical updates in the Alzheimer’s space that go against

the amyloid hypothesis in general or of course aducanumab in particular; further a lack of late-stage M&A may make investors more hesitant to hold shares

into the binary Alzheimer’s event

CELG

It works if… CELG settles with Dr. Reddy’s Laboratories on favorable terms (e.g., similar parameters to Natco but with less volume), it executes on the “big 5”

regulatory filings as anticipated (fedratinib, ozanimod, luspatercept, JCAR017, bb2121), key clinical catalysts are positive (in particular, updated data for

JCAR017 & bb2121), and/or BD strategy adds new and later-stage growth drivers

It doesn’t work if… CELG fails to settle with DRL or does so on surprisingly unfavorable terms, one or more key regulatory filings are delayed, clinical catalysts

end up disappointing, additional IP concerns surface, and/or (to a lesser extent) the commercial franchise struggles

GILD

It works if… Dan O’Day (new CEO) instills greater investor confidence in the business and strategic direction, late-stage pipeline readouts (selonsertib in

NASH & filgotinib in RA) exceed expectations, the Biktarvy launch and sales in HIV continue to beat estimates, the Yescarta launch gains traction and begins

to show appreciable growth and competitive updates fail to impress, or additional pipeline candidates emerge either internally and/or through additional

M&A

It doesn’t work if… Dan O’Day fails to instill investor confidence, GILD is unable to grow the top line, late-stage pipeline updates disappoint (selonsertib in

NASH and/or filgotinib in RA) ,the Biktarvy launch and HIV franchise is not as robust as expected, Yescarta growth stalls and competitive updates exceed

expectations, and/or further M&A does not materialize

29

Looking Ahead to 2019 – The Large Caps (the Emerging 5)


What will it likely take for the EMERGING large caps to work – or not work – in 2019?

ALXN

It works if… ALXN1210 switch-rate is faster than the Street models (each patient switched is DCF additive), as well as better appreciation of high hurdle for

complement competition relative to Soliris / ALXN1210; additional BD also is a wild card

It doesn’t work if… ALXN1210 switch rate is slower than anticipated and if competition dominates headlines

BMRN

It works if… clinical timelines remain on track (e.g., Phase 3 trials of vosoritide and val rox, the val rox 3-year update shows persistent or only moderately

attenuated FVIII expression), the company files early for approval of val rox, vosoritide hits in Phase 3, and Palynziq sales exceed expectations

It doesn’t work if… the pipeline encounters surprising setbacks, the val rox 3-year update is disappointing (e.g., shows an appreciable decline in FVIII expression

or an unexpected safety signal), product sales falls short of expectations, and/or updates from other achondroplasia or hemophilia A programs are competitive

INCY

It works if… the commercial launch in acute, refractory GVHD goes smoothly, Jakafi growth continues, management cuts back at least somewhat on R&D spend,

and the company continues to execute on its broad pipeline (data for a number of ongoing trials, including some pivotal such as FGFR, PI3kd, and itacitinib are

expected in 2019) in order to restore investor confidence

It doesn’t work if… Jakafi commercial trends start to slow, the company fails to produce encouraging results in multiple ongoing programs, or investors resist re-

ganging for what some consider to me more incremental opportunities

REGN

It works if… dupi’s strong launch in AD continues and the launch in asthma exceeds expectations, Eylea growth is maintained or accelerates due to the diabetic

retinopathy indication coming online, Libtayo/Praluent/Kevzara post encouraging commercial metrics, there are additional well-received updates from the IO

pipeline, and/or we get additional pipeline surprises

It doesn’t work if… dupi fails to exceed commercial expectations or additional competitive overhangs emerge, Eylea growth stalls, Libtayo / Praluent / Kevzara

launches fall short, or the IO pipeline disappoints

VRTX

It works if… updates from the triple combos continue to be encouraging and filing occurs in an expeditious manner, updates from potential competitors

disappoint, sales for the CF portfolio remain strong, the company continues to progress in their discussions with EU payers; execution on, and elucidation of

additional assets from the earlier stage pipeline would be a plus

It doesn’t work if… filing for the triple combo is delayed, aggressive spending limits bottom-line growth, and/or competitive concerns in CF intensify; further, if

the story switches to “what’s next for Vertex beyond CF?” shares could be range-bound in the near term

30

SMid Caps – Big Pullbacks in 2018

Source: JP Morgan Research; Bloomberg. Data as of 12/4/2018

Sifting through some of the names that had pullbacks in 2018 and what could get them working

An incomplete sampling of stocks that pulled back in 2018 that have the potential to stage a comeback in 2019…

ACAD

It could come back if… Nuplazid’s (pimavanserin ) launch in PDP gets back on track (following the FDA review) and additional clinical readouts demonstrate

clear efficacy (especially if the dementia-related psychosis, or DRP, interim look prompts an early stop of the Phase 3 study)

ALNY

It could come back if… if Onpattro consensus estimates moderate and/or launch inflects and there is a better appreciation of the late-stage pipeline (which

is de-risk and on the verge of commercialization)

BLUE

It could come back if… bb2121 pivotal data impress, competitor BCMA products disappoint, and/or steady progress is made for LentiGlobin on the sickle cell

disease / beta thal fronts (including EU approval)

FOLD

It could come back if… Galafold launch continues to beat expectations, if Pompe program surprises to the upside regulatory / clinical execution front,

increased credit is to gene therapy platform is ascribed on back of data, and/or overall sentiment on the name just improves

RDUS

It could come back if… Tymlos scripts continue to grow nicely in 2019, particularly through the entry of Forteo generics in 2H19, and especially should

Forteo generics encounter regulatory hiccups

JAZZ

It could come back if… the company executes on improving Vyxeos sales, continues to drive better-than-expected Xyrem growth, and completes a BD

transaction that investors view as a smart use of capital

KPTI

While up ~4% YTD (NBI -3%), shares have retraced ~50% from highs following pivotal STORM data in pRMM; on the heels of potentially label-expansion

enabling data in RR-DLBCL shown at ASH, KPTI looks poised to rally with positive regulatory updates in 1H19 (STORM PDUFA April 6th; and accelerated

approval filing for DLBCL)

SGMO

It could come back if … company shows encouraging liver biopsy data from the SB-913/MPS-II program given read-through to the broader genome editing

platform, and/or firm guidance on clinical data timelines, particularly for SB-525 in hemophilia A

31

2019 Buyside Survey

32

In last year’s buyside outlook survey, 66% of responders expected

Biotech to outperform the market in 2018 (including 56% who

expected it to outperform by 5-15% & 12% who expected it to

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

Year-to-date, both the NBI and the S&P 500 are ~flat

In our 2018 outlook, the buyside voted CELG, BIIB/ALXN (tie) and

INCY as top Large Cap longs and AMGN, REGN and ABBV/INCY as

top shorts

Longs: Compared with the NBI (flat YTD as of 12/4/18), BIIB (+4% YTD) and

ALXN (+6% YTD) both outperformed; CELG (-31% YTD) and INCY(-31% YTD)

significantly underperformed

Shorts: ABBV (-6% YTD) underperformed the NBI (as did INCY, as mentioned

above), while REGN (flat YTD) performed about in line and AMGN (+14%

YTD) comfortably outperformed the market and its peers

Responders voted PBYI and ESPR/CLVS/SAGE as top Smid Cap picks

in 2018 and TSRO, NKTR and ICPT/UTHR as top shorts

Compared with the NBI, all four top picks underperformed: ESPR (-19%),

SAGE (-34%), CLVS (-71%) & PBYI (-76% YTD)

Amongst the top shorts, TSRO (-11% YTD even after recently announced

acquisition), NKTR (-36% YTD) and UTHR (-23%) underperform, while ICPT

(+81% YTD) outperformed

First, a look back at 2018 survey predictions

Source: J.P. Morgan Research. Bloomberg. Data as of 12/4/2018

Key takeaways from our 2018 outlook buyside survey (conducted in late 2017)

Top Large Cap Longs Top LC Shorts

Top Smid Cap Longs Top Smid Cap Shorts

NBI CELG BIIB ALXN INCY AMGN REGN ABBV

NBI PBYI ESPR CLVS SAGE TSRO NKTR ICPT UTHR

33

We conducted a buyside survey from Nov 26th – Dec 7th 93 participants completed the survey

Slightly more participation came from hedge funds: 53% of responders were from a hedge

fund compared with 42% who were at long-only funds, and 5% listed as “other”

The vast majority of responders (87%) are healthcare or biopharma “specialists”

Key takeaways include: 58% of responders expect Biotech to outperform the broader markets in 2019;

18% expect biotech to underperform

Not surprisingly:

Clinical data/innovation, increasing M&A, and easier regulatory environment/FDA

are the most commonly anticipated tailwinds in 2019

Continued payor/pricing pressure is the most commonly expected

headwind, followed by rising interest rates/macro

Top buyside large-cap ideas….

Long Idea: CELG

Short Idea: AMGN

Top buyside Smid-cap ideas….

Long Idea: SRPT

Short Idea: AMRN

86% of survey responders expect an uptick in M&A in 2019 compared with 84% in 2018; if

M&A does materialize, Sarepta is the most commonly cited take-out candidate

The potential interim analysis of aducanumab and SAGE’s PPD data (anticipated in Jan) are

most frequently cited as the most important clinical catalysts for 2019

Looking Ahead to 2019 – Buyside Survey


Key takeaways from our latest buyside survey

Long-only specialist -

Overall Healthcare

22%

Long-only generalist

4%

Hedge fund specialist -

Biopharma / Therapeutics

33%

Long-only specialist -

Biopharma / Therapeutics

16%

Hedge fund specialist -

Overall Healthcare

16%

Hedge fund generalist

3%

Other 6%

Responder Type (N=93)

34



What do you think has been the biggest contributor to biotech underperformance relative to the broader

market thus far in 2018?

Contributor (open-ended responses) Number of Responses*

Macro 19

No M&A 16

Risk 14

Frothy valuations 11

Pricing pressure 11

Too many capital raises 10

Growth challenges for large caps 9

Lack of catalysts 6

Lack of innovation 6

Lackluster launches 3

Investor focus elsewhere 3

Asinine quant strategies undermining the purpose of the capital markets

1

Sentiment 1

Prior outperformance 1

Reversion to the mean 1

Short speculation 1

Investors believe the macro environment of 2018 largely drove underperformance, followed by, unsurprisingly, a lack of large-

scale M&A

Rising interest rates, trade war fears, etc., were all cited as sources of weakness

*Note some respondents offered more than one contributor

35

58% of responders expect Biotech will outperform the

broader markets in 2019

54% of long-only investors expect Biotech will perform “better”

(5-15%) and 3% expect “much better” (15%+) performance vs.

51% and 4%, respectively, for hedge funds

31% of long-only investors vs. 20% of hedge funds expect biotech

to perform in line



How do you expect biotech to perform relative to

the broader markets in 2019?

Much better (outperform by

15%+) 3%

Better (outperform by

5-15%) 55%

In line (+/- 5%) 24%

Worse (underperform

by 5-15%) 15%

Much worse (underperform

by 15%+) 3%

0

10

20

30

40

50

60

Much better(outperformby 15%+)

Better(outperformby 5-15%)

In line (+/-5%)

Worse(underperform

by 5-15%)

Much worse(underperform

by 15%+)

Num

ber

of

Responses

Other

Long-only specialist - Biopharma / Therapeutics

Long-only specialist - Overall Healthcare


Hedge fund specialist - Biopharma / Therapeutics

Hedge fund specialist - Overall Healthcare


36

51% of responders expect Biotech will outperform the

broader Healthcare sector in 2019

41% of long-only investors expect Biotech will perform “better”

(5-15%) and 8% expect “much better” (15%+) performance vs.

40% and 10%, respectively, for hedge funds

28% long-only investors and 27% of hedge funds anticipate in-line

performance with the broader healthcare sector

23% of long-only investors and hedge funds expect

underperformance



How do you expect biotech to perform relative to

the broader Healthcare sector (Managed Care,

Dist/PBM, Med Tech/Tools, Pharma) in 2019?

Much better (outperform by

15%+) 9%

Better (outperform by

5-15%) 42%

In line (+/- 5%) 27%

Worse (underperform

by 5-15%) 20%

Much worse (underperform

by 15%+) 2%

0

5

10

15

20

25

30

35

40

Much better(outperform by

15%+)

Better (outperformby 5-15%)

In line (+/- 5%) Worse(underperform by

5-15%)

Much worse(underperform by

15%+)

Num

ber

of R

esponses

Other

Long-only specialist - Biopharma / Therapeutics

Long-only specialist - Overall Healthcare


Hedge fund specialist - Biopharma / Therapeutics

Hedge fund specialist - Overall Healthcare


37

What do you see as the biggest TAILWIND in the space in 2019? (Top 5 ranked factors selected)

Unlike 2018 (when focus was squarely on M&A), this year’s most commonly anticipated tailwind is clinical data / innovation

Based on the top 5 ranked factors, a majority of responders cite clinical data / innovation as the leading tailwind for 2019, followed by increasing M&A

(which was the number one response in last year’s survey) and attractive valuations

Hedge funds are more focused on increasing M&A as the primary tailwind in 2019 compared with long-only funds (29% hedge fund responders cited

increasing M&A as the #1 tailwind, versus 19% of long-only investors)*

Interestingly, 14% of generalists selected “There aren’t any” as their #1 choice for tailwinds in 2019, compared with only 1.3% of specialists, potentially

demonstrating that the generalist community is more skeptical of the biotech sector heading into 2019 than the specialists are* (caveat is that

generalists make up a very small minority of this survey sample)



* Detailed data in Appendix

Factor Rank Distribution Rank 1 Rank 2 Rank 3 Rank 4 Rank 5Clinical data / Innovation 44% 18% 8% 13% 5%

Increasing M&A 24% 18% 19% 10% 10%

Attractive valuations 11% 20% 18% 8% 3%

Easier Regulatory Environment / FDA 9% 9% 22% 15% 10%

Improving Sentiment 3% 10% 5% 19% 12%

Strong Product Launches 2% 8% 11% 9% 14%

There aren't any 2% 3% 1% 1% 1%

Less political uncertainty 1% 6% 4% 5% 12%

Capital Markets 1% 0% 0% 1% 3%

Renewed Generalist interest 1% 6% 11% 9% 12%

Less pricing pressure 0% 3% 0% 5% 14%

Non-Pricing related healthcare reform 0% 0% 1% 5% 4%

38

What do you see as the biggest HEADWIND in the space in 2019? (Top 5 ranked factors selected)

Payer/pricing pressure is not surprisingly the most anticipated headwind for 2019

Based on the top 5 ranked factors, continued payer/pricing pressure is most frequently cited as the biggest challenge to performance in 2019, followed by

rising interest rates / the macro environment

Long-only investors are slightly more focused on payer/pricing pressure as the primary headwind in 2019 versus hedge funds (42% of long-only responders

cited payer/pricing pressure as the #1 headwind, compared with 38% of hedge funds)*

Specialists are more inclined to view rising interest rates/macro pressures as the leading headwind in 2019 compared with generalists (18% of specialists

cited rising interest rates/macro as #1 headwind, compared with 0% of generalists)*



* Detailed data in Appendix

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

Payor / Pricing Pressure 41% 12% 13% 8% 15%

Rising Interest Rates / Macro 15% 8% 13% 15% 15%

Lackluster M&A 14% 19% 18% 16% 8%

Clinical Data / Failures / Lack of Catalysts 11% 10% 14% 10% 16%

Rich Valuations 5% 5% 4% 8% 10%

Capital Markets / IPOs 5% 8% 8% 10% 11%

Slowing Growth / Earnings 3% 10% 15% 18% 13%

Negative Sentiment 3% 14% 14% 8% 11%

Non-Pricing Related Healthcare Reform 2% 13% 3% 7% 0%

There Aren't Any 1% 1% 0% 0% 2%

39

What is your top Large Cap LONG headed into 2019?



Among our survey responders, CELG is the top Large Cap long pick

In order, the top 3 picks are CELG, ALXN/VRTX, and BMRN

Hedge funds: 1) CELG, 2) GILD, and 3) BMRN/ALXN/REGN

Long-only: 1) CELG, 2) ALXN/VRTX, and 3) BMRN

Hedge Fund Long-Only Specialist Generalist Much Better Better In-line Worse Much WorseCELG 20% 27% 22% 33% 33% 24% 24% 15% 0%

GILD 11% 5% 9% 0% 0% 11% 5% 8% 0%

BMRN 9% 11% 9% 17% 33% 7% 10% 8% 33%

ALXN 9% 14% 9% 33% 0% 9% 19% 8% 0%

REGN 9% 3% 7% 0% 0% 2% 10% 8% 33%

VRTX 7% 14% 11% 0% 0% 9% 19% 8% 0%

None 7% 5% 7% 0% 0% 2% 5% 23% 0%

BIIB 7% 5% 7% 0% 33% 11% 0% 0% 0%

INCY 4% 5% 5% 0% 0% 4% 10% 0% 0%

AMGN 4% 3% 4% 0% 0% 2% 0% 15% 0%

MRK 2% 3% 1% 17% 0% 4% 0% 0% 33%

ALNY 2% 0% 1% 0% 0% 2% 0% 0% 0%

AGN 2% 0% 1% 0% 0% 2% 0% 0% 0%

BMY 2% 0% 1% 0% 0% 2% 0% 0% 0%

AZN 2% 0% 1% 0% 0% 2% 0% 0% 0%

NVS 2% 0% 1% 0% 0% 2% 0% 0% 0%

JAZZ 0% 0% 0% 0% 0% 2% 0% 0% 0%

ROG 0% 3% 1% 0% 0% 2% 0% 0% 0%

NBIX 0% 3% 1% 0% 0% 0% 0% 8% 0%

Institution Type Role Expected Biotech Performance

40

What is your top Large Cap SHORT headed into 2019?



AMGN was most commonly named the top Large Cap Short

In order, the top 3 shorts are AMGN, BIIB, and CELG/ALXN

Hedge funds: 1) AMGN, 2) BIIB, and 3) CELG

Long-only: 1) AMGN, 2) BIIB/ALXN, and 3) REGN/GILD

Hedge Fund Long-Only Specialist Generalist Much Better Better In-line Worse Much WorseAMGN 30% 25% 28% 25% 0% 26% 56% 17% 0%

BIIB 19% 13% 14% 50% 33% 14% 17% 17% 0%

CELG 12% 3% 8% 0% 33% 7% 6% 8% 0%

ABBV 9% 0% 6% 0% 0% 9% 0% 0% 0%

REGN 5% 9% 7% 0% 0% 9% 6% 0% 0%

VRTX 5% 6% 6% 0% 33% 7% 0% 8% 0%

ALXN 5% 13% 8% 0% 0% 7% 0% 17% 33%

PFE 5% 0% 3% 0% 0% 0% 0% 17% 0%

LLY 2% 0% 1% 0% 0% 0% 6% 0% 0%

None 2% 6% 4% 0% 0% 2% 0% 17% 0%

MRK 2% 0% 1% 0% 0% 0% 6% 0% 0%

JAZZ 2% 0% 1% 0% 0% 0% 0% 0% 33%

BMY 2% 3% 3% 0% 0% 7% 0% 0% 0%

INCY 0% 3% 1% 0% 0% 2% 0% 0% 0%

All 0% 0% 0% 0% 0% 0% 0% 0% 0%

NOVO 0% 3% 1% 0% 0% 2% 0% 0% 0%

Takeda 0% 3% 1% 0% 0% 2% 0% 0% 0%

MYL 0% 3% 1% 0% 0% 2% 0% 0% 0%

GILD 0% 9% 3% 25% 0% 2% 6% 0% 33%


41



On the SMid cap side, SRPT came

out on top as a favorite long

In order, the top 3 SMid longs are SRPT,

SAGE, and ARNA

Hedge funds: 1) SRPT, 2)

SAGE/ARNA, and 3)

GLPG/GBT/HRTX/EXEL/NBIX

Long-only: 1) SRPT, 2) SAGE, and

3) ARGX/PTLA/BMRN

What is your top SMid Cap Long headed into 2019?

Hedge Fund Long-Only Specialist Generalist Much Better Better In-line Worse Much WorseSRPT 13% 16% 15% 0% 0% 12% 16% 15% 33%

ARNA 7% 3% 6% 0% 0% 2% 11% 8% 0%

SAGE 7% 13% 10% 0% 33% 12% 0% 8% 0%

GLPG 4% 0% 3% 0% 33% 2% 0% 0% 0%

GBT 4% 0% 3% 0% 0% 2% 5% 0% 0%

HRTX 4% 0% 1% 17% 0% 5% 0% 0% 0%

EXEL 4% 0% 3% 0% 0% 2% 0% 8% 0%

NBIX 4% 0% 3% 0% 0% 2% 0% 0% 33%

OCUL 2% 0% 1% 0% 0% 0% 5% 0% 0%

CLVS 2% 0% 1% 0% 0% 0% 0% 8% 0%

ARGX 2% 6% 4% 0% 0% 0% 11% 8% 0%

PTLA 2% 6% 3% 17% 0% 2% 0% 15% 0%

MDGL 2% 0% 1% 0% 0% 0% 0% 8% 0%

AMRN 2% 0% 1% 0% 0% 0% 5% 0% 0%

PBYI 2% 0% 1% 0% 0% 0% 5% 0% 0%

JAZZ 2% 0% 1% 0% 0% 0% 0% 8% 0%

BMRN 2% 6% 1% 33% 0% 5% 0% 0% 33%

BHVN 2% 3% 3% 0% 0% 5% 0% 0% 0%

ASMB 2% 0% 1% 0% 0% 0% 5% 0% 0%

PCRX 2% 0% 1% 0% 0% 2% 0% 0% 0%

AERI 2% 0% 1% 0% 0% 2% 0% 0% 0%

ALNY 2% 0% 0% 17% 0% 2% 0% 0% 0%

IOVA 2% 0% 1% 0% 0% 0% 5% 0% 0%

MYOK 2% 0% 1% 0% 0% 2% 0% 0% 0%

XENE 2% 0% 1% 0% 0% 2% 0% 0% 0%

EXAS 2% 0% 1% 0% 0% 2% 0% 0% 0%

ANAB 2% 0% 1% 0% 0% 2% 0% 0% 0%

MRTX 2% 0% 1% 0% 33% 0% 0% 0% 0%

RARE 2% 0% 1% 0% 0% 2% 0% 0% 0%

BHC 2% 0% 1% 0% 0% 2% 0% 0% 0%

MNTA 2% 0% 1% 0% 0% 2% 0% 0% 0%

DCPH 0% 3% 0% 17% 0% 0% 5% 0% 0%


42



What is your top SMid Cap Short headed into 2019?

On the SMid cap side, the top short

pick is AMRN

In order, the top 3 SMid shorts are

AMRN, NKTR, and NBIX

Hedge funds: 1) AMRN, 2)

NBIX/IONS/GBT and 3)

LOXO/SLDB

Long-only: NKTR and SRPT stand

out as favorite shorts, followed

by a long list of names tied in 3rd

Hedge Fund Long-Only Generalist Specialist Much Better Better In-line Worse Much WorseAMRN 13% 4% 10% 0% 0% 8% 9% 0% 0%

NBIX 8% 4% 7% 0% 0% 2% 9% 14% 0%

IONS 8% 0% 5% 0% 0% 0% 9% 7% 0%

GBT 8% 0% 5% 0% 0% 6% 0% 0% 0%

LOXO 5% 0% 3% 0% 0% 2% 0% 7% 0%

SLDB 5% 4% 5% 0% 0% 6% 0% 7% 0%

NKTR 3% 17% 8% 0% 0% 10% 5% 0% 0%

AGIO 3% 4% 2% 25% 0% 2% 5% 0% 33%

SRPT 3% 9% 5% 0% 0% 2% 5% 7% 0%

UTHR 3% 4% 2% 25% 0% 4% 0% 0% 0%

GWPH 3% 0% 2% 0% 0% 0% 0% 7% 0%

ESPR 3% 0% 2% 0% 0% 0% 5% 0% 0%

HRTX 3% 4% 3% 0% 0% 4% 0% 0% 0%

IMMU 3% 4% 3% 0% 0% 0% 5% 7% 0%

SGEN 3% 4% 2% 25% 0% 2% 0% 0% 33%

ALLK 3% 0% 2% 0% 0% 0% 5% 0% 0%

RGNX 3% 4% 3% 0% 0% 0% 5% 0% 33%

ONCE 3% 0% 2% 0% 0% 0% 0% 7% 0%

ACOR 3% 4% 3% 0% 0% 4% 0% 0% 0%

MDCO 3% 0% 2% 0% 0% 2% 0% 0% 0%

SAGE 3% 4% 3% 0% 0% 2% 5% 0% 0%

EXEL 3% 0% 0% 25% 0% 2% 0% 0% 0%

ALLO 3% 0% 2% 0% 0% 0% 5% 0% 0%

TSRO 3% 0% 2% 0% 0% 2% 0% 0% 0%

RUBY 3% 0% 2% 0% 0% 0% 0% 7% 0%

ALNY 3% 0% 2% 0% 0% 2% 0% 0% 0%

RETA 3% 0% 2% 0% 33% 0% 0% 0% 0%


43



A vast majority (86%) of survey responders expect an uptick in M&A in 2019 relative to 2018

43% of generalist responders believe that M&A will remain at a similar level in 2019 compared to just 11% of specialists who believe the same

Do you expect an increase in biotech M&A in 2019 (whole company acquisitions, not licensing deals)?

Yes – a little more than

2018 61%

YES! - much more than

2018 25%

Same level as 2018

13%

No – a little less than

2018 1%


Hedge Fund Long-Only Specialist Generalist Much better Better In-line Worse Much worse

Yes – a little more than 2018 67% 54% 64% 29% 0% 59% 82% 57% 33%

YES! - much more than 2018 20% 28% 23% 29% 100% 29% 14% 14% 0%

Same level as 2018 12% 15% 11% 43% 0% 10% 5% 29% 67%

No – a little less than 2018 0% 3% 1% 0% 0% 2% 0% 0% 0%

44

If M&A were to increase, which companies might be M&A candidates?



SRPT stood out as the most frequently cited take-out candidate among survey participants for 2019, followed by NBIX & SAGE

Company Number of Responses Percentage (N=217*)

SRPT 21 10%

NBIX 13 6%

SAGE 12 6%

CLVS 9 4%

AMRN 8 4%

TSRO 8 4%

ARGX 7 3%

ZGNX 5 2%

MDGL 5 2%

DVAX 4 2%

EXEL 4 2%

MDCO 4 2%

INCY 4 2%

IOVA 4 2%

AERI 4 2%

BHVN 3 1%

ESPR 3 1%

VKTX 3 1%

ARNA 3 1%

ICPT 3 1%

INSM 3 1%

VRTX 3 1%

ALDR 3 1%

PTLA 3 1%

HRTX 3 1%

ARRY 3 1%

RDUS 3 1%

ASND 3 1%

IMMU 3 1%

BOLD 2 1%

*Note some respondents offered more than one candidate

45



A potential aducanumab interim analysis and SAGE’s PPD data tied for most significant…

Most responders are looking forward to a potential look at Biogen’s Alzheimer data as well as SAGE’s postpartum depression Phase 3results

… and the next most anticipated catalysts are NASH updates from GILD and ICPT

What are the most significant CLINICAL catalysts on your radar for 2019?

Catalyst Number of Responses*

Aducanumab Interim Analysis 13

SAGE PPD 13

ICPT NASH 9

SRPT DMD 8

GILD NASH 7

NASH Readouts 5

BMRN Valrox (gene therapy) 5

SLDB DMD 4

BMRN vosorotide 4

MDCO Inclisiran 4

ASND GH 3

FGEN roxadust 3

MRTX KRAS 3

VRTX triple 3

ARRY BEACON 2

ASMB 2

DERM 2

GILD filgotinib 2

NOVN - AVXS-101 2

SRPT limb-girdle 2

TOCA GBM 2

ANAB etokimab 2

ANAB ANB019 1

AGIO MTAP 1

BLUE BCMA CAR-T update 1

MYOK Ph3 data 1

NKTR NSCLC data 1

SGMO full data in Feb. 1

LOXO/BPMC RET data 1

*Note some respondents offered more than one catalyst

46



On the regulatory front, focus is on GBT’s voxelotor

Following the FDA’s agreement on an accelerated approval pathway for voxelotor in sickle cell disease, investors are looking forward to additional

regulatory updates (e.g., pre-NDA meeting in ~1Q19, potential AdCom, potential approval)

The next most anticipated regulatory catalysts are IMMU-132’s PDUFA date in TNBC and drug pricing updates

What are the most significant REGULATORY catalysts on your radar for 2019?


GBT voxelotor 8

IMMU 132 PDUFA 6

Pricing 6

Peanut allergy (DBVT/AIMT) 5

VRTX triple PDUFA 5

ALXN1210 PDUFA (02/18/19) 4

AERI PDUFA 3

AVXS-101 3

AMRN 2

Ozanimod re-filing 2

ESPR AdCom 2

HRTX PDUFA for HTX-011 2

SAGE 2

ABBV: upadacitinib (4Q19) 2

CELG fedratinib PDUFA in late 2019 1

Ease orphan drug barrier to entry 1

Biosimilars 1

Golodirsen and casimersen approvals 1

Trade War headlines moving entire market 1

Valrox accelerated approval 1

BMY Ipi+Nivo 1L NSCLC rejection 1 *Note not all respondents participated

47



In terms of corporate/financial catalysts, all eyes are on new GILD CEO Dan O’Day taking the helm

In July, John Milligan announced that he would be stepping down from his position at the end of 2018; on 12/10, GILD announced successor Dan

O’Day (of Roche Pharmaceuticals) would take the helm on 3/1/19

Beyond changes to the C-suite at GILD, investors also think M&A will be a significant corporate catalyst in the New Year

What are the most significant CORPORATE/FINANCIAL catalysts on your radar for 2019?


New GILD CEO** 9

M&A 6

Pfizer corporate structure 4

AMGN capital strategy 2

AMRN vascepa launch 2

CELG / Dr. Reddy's Revlimid 2

CELG mgmt changes 1

ABBV Humira EU erosion 1

ALXN's underappreciated earnings power

1

EXEL earnings 1

Alcon spin 1

DVAX partnership announcement for SD-101

1

ALXN EU IP decisions in Jan-Feb 1

Opioid fine headline for TEVA 1

CELG guidance 1

*Note not all respondents participated **Survey closed prior to announcement on 12/10

48



81% of survey responders (in aggregate) expect pricing to be a similar or bigger overhang in 2019 relative to 2018

Specialists are split on the issue, with 14% expecting pricing to be a much bigger overhang and another 14% expecting it to be a

much smaller overhang

How big of an overhang do you expect drug pricing to be on biotech in 2019?

Drug pricing in 2019 will be… Hedge Fund Long-Only Generalist Specialist Much Better Better In-line Worse Much Worse

SLIGHTLY SMALLER overhang 13% 21% 18% 0% 0% 20% 14% 7% 0%

SLIGHTLY BIGGER overhang 35% 21% 28% 43% 33% 31% 18% 50% 0%

SIMILAR overhang 42% 49% 46% 29% 67% 41% 59% 29% 67%

MUCH BIGGER overhang 6% 8% 6% 14% 0% 2% 9% 14% 33%

MUCH SMALLER overhang 4% 3% 3% 14% 0% 6% 0% 0% 0%


SLIGHTLY SMALLER overhang

15%

SLIGHTLY BIGGER overhang

30%

SIMILAR overhang

45%

MUCH BIGGER overhang

7%

MUCH SMALLER overhang

3%

49

Key Themes to Monitor in 2019

Pricing Pressure

Biosimilars

Growth Expectations

Macro – FX & Interest Rates

The Innovation Cycle

Regulatory Environment

Drug Launches

Uses of Cash/M&A

Capital Markets

50

Key Themes for 2019: Pricing Pressure


The Trump administration unveiled a broad policy proposal to tackle drug prices in May…

Trump’s American Patients First Initiative announced in May appeared to be benign overall (link)

The initiative outlined four broad areas of concern, namely 1) high list prices for drugs; 2) lack of negotiation tools; 3) high and rising out-of-pocket

costs; 4) foreign governments “free-riding” off of American investment in innovation. Many of these proposals were light on detail and would require

action by Congress

In fact, we actually found a number of the President's comments to be broadly supportive of innovation in biotech (the speech itself included phrases

such as “reward innovation” and “enormous cost of R&D”)

Key takeaways from the speech and the Blueprint

Reducing Drug Prices for the elderly: While the proposal fell short of allowing Medicare to directly negotiate Part D prices, it did include calls to allow

Medicare the choice to not cover certain drugs (in which case the agency could threaten to drop coverage if the price of a drug were not reduced). The

plan also called for cutting out-of-pocket costs by requiring insurers to pass on savings from rebates to the consumer

Persuading other countries to pay more: Self explanatory, but overall it’s hard to see whether other countries would be willing to raise their prices in

the first place, or whether doing so would lead drug companies to lower prices in the United States

Requiring drug ads to include price: The idea here is that the fear of consumer backlash could potentially shame drug companies into dropping prices.

An obvious issue would be which price to include (the list price? WAC? net price?) and the fact that most patients wouldn’t pay anywhere close to this

price out of pocket

Banning the “gag clauses” at pharmacies: This would allow pharmacists to tell patients when it would be cheaper to pay in cash vs going through their

insurance company

Naming and Shaming

The FDA followed up Trump’s speech the next week by publishing a list of brand name sponsors accused of attempting to block generic entry through

actions such as refusing to provide samples to generic manufacturers

https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf

https://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/AbbreviatedNewDrugApplicationANDAGenerics/ucm607738.htm

51


Source: J.P. Morgan Research; Bloomberg. ESRX 2017 Drug Trend Report.

… and Trump delivered a second, slightly more actionable drug pricing speech in October

Progress on Trump’s agenda?

Rhetoric aside, what has actually taken place with respect to the Blueprint proposed earlier this year? While we’ve heard from some management

teams that they are more hesitant to raise prices for fear of being singled out (and some actually pledged not to increase prices for the remainder of

2018), list prices for branded drugs nevertheless continue to rise. A report from the associated press indicates that in the first 7 months of 2018, there

were 96 price hikes for every price cut

Lowest Price Act and the Patient Right to Know Drug Prices Act: On October 10th, two laws were signed by Trump that seek to remove the so-called

gag order on pharmacists that prevents them from discussing cheaper price options for consumers, including whether paying out of pocket would

actually be cheaper than the insurance copay

Drug prices in advertisements: Additionally, a new rule proposed by HHS secretary Azar on October 15th aims to make good on the requirement for

companies to disclose drug prices in direct-to-consumer ads. If enacted, manufacturers may be asked to disclose the list price of a 30-day supply of any

drug that is covered through Medicare and Medicaid and costs more than $35 a month

Second Drug Pricing Speech in October

Trump’s latest speech regarding drug pricing on October 25th was largely aimed at Medicare

International Pricing Index: under this proposal, CMS would establish a benchmark based on WW prices to determine how much Medicare would pay

for drugs covered by Medicare Part B.

– HHS estimates that this pricing index would save Medicare $17.2B over 5 years

– The proposal is structured as an experiment and would apply to half the country. Officials said they’re seeking input on how to select the areas of

the country that will take part in the new pricing system

– Physician fees could also potentially be affected, as the proposal would attempt to align reimbursement for doctors more closely with what other

countries typically pay

– Another question we have is, what if companies avoid or delay OUS approvals?

Takeaways from Express Scripts 2017 Drug Spending Report

In 2017, ESRX’s Drug Trend Report (released January, 2018) notes commercial drug plans saw prescription drug spend increase 1.5% per person (vs.

3.8% in 2016), the lowest Express Sripts has seen in 24 years of tracking data

Lower unit cost trend for pain/inflammation, high cholesterol and mental/neurological disorder medications helped push spending down 3.3%

The five most expensive therapy classes (by PMPY spend) in 2017 were inflammatory conditions, diabetes, oncology, multiple sclerosis and HIV

With the approval of the first gene therapy (ONCE’s Luxturna) and CAR-T therapies (NVS/GILD), pricing of long-duration and one-time therapies may

come into greater focus in the coming years (e.g., outcomes-based reimbursement, annuity model)

52

Over the past five years, Biotech list 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 for some products

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 based growth


Source: J.P. Morgan Research; Bloomberg; PriceRx. Data as of 12/4/2018

Biotech growth has mostly been driven less by price increases when compared with Pharma

AMGN

BIIB

CELG

GILD

BMRN

INCY

MRK

PFE

ABBV

LLY

BMY

Vs.

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Neulasta EnbrelEpogen Neupogen

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Tecfidera AvonexPlegridy Tysabri

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Revlimid Abraxane

Pomalyst Otezla

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Truvada Atripla Stribild

Genvoya Harvoni Epclusa

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Naglazyme Kuvan Aldurazyme Vimizim

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Jakafi

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Januvia Zetia Gardasil(HPV)

Janumet

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Lyrica Prevnar Viagra Premarin/ Duavee

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Humira Androgel Synthroid Lupron

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Humalog Alimta Cialis Humulin

0%

10%

20%

30%

2014 2015 2016 2017 2018 YTD

Orencia Eliquis Sustiva franchise Sprycel

53

FDA provides an approval pathway for sponsors of biosimilar product candidates

Biosimilars are defined as highly similar to reference products with respect to

safety, purity, potency and clinical activity

351(k) approval pathway allows for use of comparative data and publically

available information with the reference product

Biosimilar development places emphasis on non-clinical analyses, animal tox

studies, PK/PD work, and in most cases, phase 3 head-to-head non-inferiority

studies

Large market opportunities pave the way for biosimilar development

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

In 2018 we saw several FDA biosimilar approvals and anticipate this

continuing in 2019 with agents targeting TNF-α, CD20, and VEGF…

Development has been focused on larger treatment landscapes

(TNF in particular); Amgen’s Mvasi (bevacizumab-awwb) is the

first US approval for a biosimilar oncology treatment

… but patent litigation remains a common occurrence, and prohibits

launch of approved biosimilars in some cases

AbbVie, owner of incumbent Humira, just settled its seventh

biosimilar litigation with Pfizer, which prevents the biosimilar

candidate from launching in the US until 2023

Biosimilar development is driven by loss of patent exclusivity and

market opportunity

At least 23 biologics have patent expiration by 2023 across a

wide range of indications

Over $75B in sales of these agents were recorded in 2018 alone,

representing a large market opportunity

ALXN’s Soliris is the only pure ultra-orphan drug listed to the left

Key Themes for 2019: Biosimilars

An evolving area of biopharma

In a July 2018 FDA statement, Commissioner Gottlieb said he

worries the market for biosimilars is not yet established

The FDA released the Biosimilars Action Plan (BAP) aiming to:

1. Improve efficiency of the biosimilar and interchangeable

product development approval process

2. Maximize scientific and regulatory clarity for the biosimilar

product development community

3. Develop communications to improve understanding of

biosimilars among patients, clinicians, and payors

4. Support market competition by reducing gaming of FDA

requirements / other attempts to unfairly delay competitors

To this end, we expect the FDA to be active in 2019 on the BAP

deliverables, especially in raising awareness (i.e., updating draft

guidance, hosting public events, etc.)

54

Assessing the current US biosimilar landscape for key (large) reference products

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 2019: Biosimilars

US Biosimilar Development Candidates

Reference Product Company Candidate Stage

Avastin

Pfizer PF-06439535 BsUFA goal date of 2Q19

Amgen Mvasi Approved 9/17; Avastin retains US patent exclusivity until 2019

Boehringer Ingelheim BI-695502 "Late phase of clinical development" Prestige BioPharma HD204 Phase 3 trial underway; market launch projected in 2020

Enbrel

Sandoz Erelzi Approved 8/30/16; litigation ongoing

Coherus CHS-0214 Phase 3; lost IPR decision in March 2018

Samsung Bioepis Benepali BLA filing expected soon; EMA approval in 2016 Epogen Pfizer Retacrit Approved 5/15/2018

Erbitux Amgen ABP 494 Phase 1 development

Herceptin

Mylan / Biocon Ogivri FDA Approved 12/17 (not yet launched), positive CHMP opinion 10/18

Amgen / Allergan Kanjinti (ABP 980) Received CRL in June 2018 (launch plans unchanged), approved by EMA in May 2018

Pfizer Trazimera (PF-05280014) BsUFA date of 1Q19 (resubmission following April 2018 CRL), approved by EMA in July 2019 Tanvex BioPharma TX05 Global phase 3 trial underway

Prestige BioPharma HD201 Global phase 3 trial underway; market launch projected in 2019 Samsung Bioepis Ontruzant (SB3) BLA accepted for review in December 2017, EMA approval in November 2017

Celltrion Herzuma (CT-P6) BLA resubmitted for review following CRL received in January; EU launch underway

Humira

Amgen Amjevita Approved globally; US launch in January 2023; EU launch in October 2018 Boehringer Ingelheim Cyltezo Approved in the US and EU in 2017, but patent case may prevent launch until at least 2022

Novartis Hyrimoz (GP2017) FDA/EMA approval in 2018; US launch not until 2023, EU launch underway

Coherus CHS-1420 Following ruling against IPR, focus is on US launch in 2022 (post-AbbVie patent expiration)

Pfizer PF-06410293 Phase 3 underway; US launch not until 2023, EU launch upon approval Samsung Bioepis Imraldi (SB5) BLA submission in July 2018; EMA approval in 2017

Momenta M923 BLA filing has been delayed given market entry in 2023 per recent AbbVie agreement

Neulasta

Teva Lonquex Under FDA review; EMA approval in 2013

Coherus Udenyca (CHS-1701) FDA approval November 2018; EMA approval September 2018

Mylan-Biocon Fulphila (MYL-1401H) FDA approval June 2018; EMA approval November 2018 Novartis (Sandoz) Ziextenzo (LA-EP2006) Received CRL from FDA in 2016, resubmission is pending; EMA approval November 2018

Apotex Lapelga BLA submission in 2014, as of 2016 the application is still under review

Neupogen

Sandoz Zarxio FDA approval in 2015

Teva Granix FDA approval in 2012

Pfizer Nivestym FDA approval in 2018

Adello TPI G-CSF BLA filed in 2017, litigation with Amgen ongoing

Tanvex BioPharma TX-01 BLA filed in October 2018; BsUFA in 2019

Remicade

Pfizer / Sandoz Ixifi (PF-06438179) FDA approval December 2017; EMA approval May 2018

Amgen ABP 710 Filing anticipated

Celltrion / Pfizer Inflectra Approved 4/5/16; Launched 11/16

Samsung Bioepis Renflexis Approved 4/17; Launched 7/17

Rituxan

Amgen ABP 798 FDA/EMA submissions 2H19

Pfizer PF-05280586 BsUFA goal date of 3Q19

Teva Truxima FDA approved on 11/28/18; EMA approved on 02/17/17

Soliris Amgen ABP 959 Comparative phase 3 underway

55

41%

21%

4% 1% 1%

4% 6% 6%

54%

28%

9% 13%

19%

7% 11% 10%

0%

10%

20%

30%

40%

50%

60%

70%

2014 2015 2016 2017 2018E 2019E 2020E 2021E

Revenue EPS

.

44%

19%

2%

-2% -1%

2% 5% 4%

59%

30%

10%

3%

10% 7% 7% 7%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2014 2015 2016 2017 2018E 2019E 2020E 2021E

Revenue EPS

9%

Consensus 2019 forecasts for the legacy large-cap group call for a mere 2% revenue growth. If we include the emerging large

caps, that would call for still modest 4% growth (which is expected to pick up in the coming years)

Bloomberg consensus calls for 7% EPS growth for the legacy large caps

Looking back, large-cap biotech revenue and earnings growth increased from 12% and 17% in 2012, respectively, to peak at 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; the HCV

franchise contributed 29% in 2014 & 9% in 2015 of the overall large-cap biotech growth

We think fundamentals are intact in the near term, and that 2019 estimates are achievable at this stage, with growth from new product cycles

offsetting sales erosion of legacy franchise drugs to some extent. That said, we expect more growth to come from the emerging large caps as their

new launches continue to ramp up significantly

Key Themes for 2019: Growth Expectations Modest 2019 growth expectations look achievable to us

15% 10%

29%

Legacy Large Cap Revenue and EPS estimates

HCV franchise growth

8%

17%

24%

*includes AMGN, ALXN, BIIB, CELG, GILD, REGN & VRTX

Legacy & Emerging Large Cap Revenue and EPS estimates

13%


56

Co

nse

nsu

s

EPS

CA

GR

(%

)

Key Themes for 2019: Growth Expectations Looking forward, biotech looks well positioned for the next five years with high revenue and EPS CAGRs

As expected, emerging large caps in general have double-digit CAGRs (3-yr & 5-yr), which are higher than those of legacy large caps

Lower revenue bases coupled with expected ramp-up of new products lead to higher expectations for emerging large caps

We continue to believe CELG has the best prospects in terms of growth among legacy large caps for the next 5 years, with 7% revenue CAGR expected

over 2018-23. That said, questions of growth beyond 2022/23 linger as the Revlimid patent cliff approaches, and we believe pipeline execution will be

critical to restore confidence/recovery of sentiment

Co

nse

nsu

s

Re

ven

ue

CA

GR

(%

)

Higher expected top-line growth translates to higher bottom-line prospects as evident in EPS CAGRs

INCY, BMRN & VRTX continue to be the major growth engines for emerging large caps

CELG still makes the cut among legacy large caps with 11% EPS CAGR over the next five years


57

Key Themes for 2019: Growth Expectations


Legacy Large Caps

Consensus #s

Emerging Large Caps

Consensus #s

58

Key Themes for 2019: Macro – FX Headwinds

Source: J.P. Morgan Research, Company Data, Bloomberg as of 12/4/2018

A strengthening US dollar could negatively impact top-line growth

The US dollar index is up ~5% YTD, bouncing back 8.9% from its February lows vs. a

group of major currencies

Accelerated growth aided by the fiscal policy, and an unexpected slowdown in rest-of-the-

world, particularly the pillar economies of the Eurozone and China, contributed to the

dollar’s relative strength

– Lower economic growth and a tightening Fed may cause a reversal in the trend of

dollar index in 2H19

BioMarin, Alexion and Biogen have the highest ex- US exposure

– Orphan disease business tends to have more exposure OUS

– … for example, a major portion of BMRN’s revenues is derived ex-US (28% Europe,

14% Latin America, and 13% ROW in 3Q18)

Companies in Our Universe with

Notable ex-US Exposure

23%

26%

33%

37%

48%

55%

0% 50% 100%

AMGN

GILD

CELG

BIIB

ALXN

BMRN

% ROW Revenues in 3Q18

59

-1.00

1.00

3.00

5.00

7.00

9.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(%)

Key Themes for 2019: Macro – Interest Rates

Source: J.P. Morgan Research, Company Data, Bloomberg as of 12/4/2018

Historically, rising interest rates tend to have no effect on biotech performance

As shown in previous cycles, biotech performance during rising interest rate periods is nearly flat, except for the 1998-99 cycle

The 2019 US Equity Strategy Outlook also highlighted the slightly negative sensitivity of biotech/pharma performance to bond yields/the yield curve in rising

rate environments

Fed

- F

un

ds r

ate

Y

ield

Cu

rve

(T10Y

Y2Y

) N

BI

Ind

ex

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

-0.3% -0.1% 44.3% 101.6% 23.0% -16.2% -45.3% 45.7% 6.1% 2.8% 1.0% 4.6% -12.6% 15.6% 15.0% 11.8% 31.9% 65.6% 34.1% 11.4% -21.7% 21.1% -0.2%

-1.00

0.00

1.00

2.00

3.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Spre

ad (

bp

s)

0

1000

2000

3000

4000

5000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ind

ex V

alu

e

0%

-7%

Rising interest

rates

U.S Recession

Correlation 23% 62% 81%



60

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 / technologies will continue to be critical drivers of interest in the sector in 2019

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 this year have helped to drive investor enthusiasm for this emerging technology. We expect further

updates in 2019 as well as the initiation of several key trials.

• Companies to watch in the JPM universe: BLUE, BMRN, BOLD, EDIT, FOLD, ONCE, SRPT, SLDB, ORTX

CNS: There’s significant investment ongoing in CNS-related disorders with huge unmet medical need (e.g., Alzheimer’s, Parkinson’s, HD, ALS,

etc.); 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 2020,

and updates from a number of SAGE’s programs could also be informative for the CNS space

• Companies to watch in the JPM universe: ACAD, ALKS, APTX, BIIB, DNLI, ITCI, 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 CELG and BLUE

• Companies to watch in the JPM universe: BLUE, CELG (acquired JUNO), GILD (acquired KITE), ALLO, ATRA, RUBY

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, ARRY, CELG, CLVS, DCPH, GTHX, IMGN, PBYI, RIGL, SGEN,

STML

• I/O companies to watch in the JPM universe: CELG, DVAX, IDRA, INCY, JNCE, NKTR, REPL (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., achondroplasia, DMD, XLMTM, SMA, Friedreich’s Ataxia, etc.)

• Companies to watch in the JPM universe: ALXN, ASND, BCRX, BIIB, CRNX, IONS, BMRN, LIFE, PTCT, RARE, UTHR, etc.


Key Themes for 2019: Innovation Innovation is the backbone of biotech and should continue to drive the sector in 2019 and beyond

61

56

45

37 38

29 29

24 27

36

20 22

18

24 25

21

30

39

27

41

45

22

46

55

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018YTD

2005-11 Avg:23

2012-18 Avg:39

The rate of FDA approvals is scaling new peaks in 2018, almost reaching its highest level in the last two decades (and the year isn’t

quite over yet), underscoring the favorable regulatory environment. We expect this trend to continue and are encouraged by the

FDA’s increased clarity on regulatory requirements and expedited approaches

The FDA (and Congress) remains committed to expedited drug development where appropriate

The FDA granted 126 Fast Track designation requests in calendar year 2017 (the last cut of data available), about flat with 125 in 2016 (and down from

130 in 2015)

There were 8 Accelerated Approvals granted under Subpart H in the same period (vs. 7 each in calendar years 2016 and 2015)

In its 2017 New Drug Therapy Approvals, the FDA highlights the continued success of its expedited approval pathways, noting that 61% (vs. 73% in

2016) of new drugs approved during 2017 were expedited; 85% of approvals during the year were first-cycle, and 100% of decisions were reached by

the PDUFA date

We expect the FDA’s programs will continue to meaningfully accelerate development/approval for key products in 2019

FDA chief Scott Gottlieb is implementing various provisions to maximize the “21st Century Cures” Act. Recently, the FDA issued guidance (here)

on conversations between drug makers and payers to help ease this process

Source: J.P. Morgan Research, Statistics Published by the FDA. Through 12/4/2018.

Key Themes for 2019: Regulatory Environment Regulatory activity picked up substantially to reach record levels in 2018, and we do not expect this to slow in 2019

NME/Biologic Approvals by the FDA

https://www.fda.gov/downloads/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/ReportsBudgets/UCM591976.pdf

https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM537347.pdf

62

The pull of BTD remains high, and benefits (e.g., faster review timelines) have

borne out over the last several years

BTD conveys all of the Fast Track Designation program features as well as more

intensive FDA guidance on an efficient drug development program

Breakthrough status is designed to help shorten the development time of a promising

new therapy in which preliminary clinical evidence has demonstrated substantial

improvement over available therapy on a clinically significant endpoint

This is a new designation that went into effect after July 9, 2012; 2013

is the first year any new drug was approved with the breakthrough designation

Source: J.P. Morgan Research, Statistics Published by the FDA.

Key Themes for 2019: Regulatory Environment Interest in breakthrough designation remains high

Select BTD Drugs to Watch in 2019

Potential Candidates for BTD in 2019

Drug Company Indication Venetoclax ABBV Acute Myeloid Leukemia

Nuplazid ACAD Dementia-related psychosis

Givosiran ALNY Acute Hepatic Porphyria

Lumasiran ALNY Primary Hyperoxaluria Type 1

Tezepelumab AMGN Severe asthma Braftovi + Mektovi + Erbitux

ARRY / LLY BRAF V600E-mutant mCRC

EBV-CTL ATRA EBV-associated lymphoproliferative disease

LentiGlobin BLUE Beta-thalassemia Major

Val rox BMRN Hemophilia A

bb2121 CELG/BLUE Relapsed/refractory multiple myeloma

JCAR017 CELG/JUNO Relapsed/refractory aggressive large B-cell NHL

Voxelotor GBT Sickle cell disease

Yescarta GILD Refractory, aggressive NHL

SPK-9001 ONCE Hemophilia B

Tafamidis PFE Transthyretin Cardiomyopathy

Dupilumab REGN Atopic dermatitis

Libtayo REGN CSCC

SAGE-547 SAGE Post-partum depression

Elzonris STML BPDCN

VX-661/ivacaftor VRTX Cystic Fibrosis

Drug Company Indication AG-348 AGIO Pyruvate Kinase Deficiency

NYX-783 APTX Post-Traumatic Stress Disorder

Vosoritide BMRN Achondroplasia

Avacopan CCXI ANCA Associated Vasculitis and/or C3 Glomerulopathy

JCARH125 CELG Relapsed/refractory multiple myeloma

bb21217 CELG/BLUE Relapsed/refractory multiple myeloma

SD-101 DVAX PD-1 Refractory Melanoma and / or Head and Neck Cancer

Tilsotolimod IDRA PD-1 Refractory Melanoma

Rilonacept KNSA Recurrent Pericarditis

Selinexor KPTI Relapsed/refractory DLBCL

Optune NVCR Mesothelioma

SPK-8011 ONCE Hemophilia A

OTL-102 ORTX X-Linked Chronic Granulomatous Disease

OTL-103 ORTX Wiskott-Aldrich Syndrome

OTL-200 ORTX Metachromatic Leukodystrophy

DTX301 RARE Ornithine transcarbamylase deficiency

DTX401 RARE Glycogen storage disease type 1a

REGN 1979 REGN Relapsed/refractory NHL

Tavalisse RIGL wAIHA

129 136

160

54 59 58

0

20

40

60

80

100

120

140

160

180

FY2016 FY2017 FY2018

# o

f B

TD

Ap

plic

atio

ns

Requested GrantedAlthough initial granting of BTD isn’t necessarily a magic bullet… In 2017/2018 we saw that what the FDA giveth, the FDA can taketh away… 3 BTDs were rescinded in 2017 and 4 more in 2018

63

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

That said, 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 2019, with a number of “buzz-worthy”

products recently introduced to – or soon anticipated to reach – the market

We believe 2019 estimates still look achievable, if not beatable

Key watch lists on the following slides…


Key Themes for 2019: Drug Launches Drug launches remain a key theme for the sector and provide further validation of innovation

64

Kasim

ov

Source: Bloomberg and J.P. Morgan estimates.

Key Themes for 2019: Drug Launches (Continued) All eyes will be on a number of high-profile drug launches

6mo 6mo

JPMe Cons cons % Δ JPMe Cons cons % Δ

Aris tada ALKS 4Q15 $219M $218M -3% $265M $291M -5%

Optune TTF NVCR 4Q15 $333M $324M -13% $464M $437M -8%

Nuplazid ACAD 2Q16 $266M $317M -24% $480M $561M -24%

Rubraca CLVS 4Q16 $148M $142M -59% $227M $226M -53%

Dupixent REGN/SNY 1Q17 $1675M $1708M 3% $2695M $2711M 4%

Spinraza BIIB / IONS 1Q17 $2096M $2100M 3% $2247M $2380M -3%

Barici tinib* INCY/LLY 2Q17 $400M $365M -9% $625M $539M -17%

Nerlynx PBYI 3Q17 $271M $270M -40% $340M $387M -48%

Yescarta GILD 4Q17 $587M $546M 0% $966M $889M -9%

Biktarvy GILD 1Q18 $2879M $2956M 14% $3575M $4095M 8%

Luxturna ONCE 1Q18 $96M $85M -32% $159M $144M -35%

Symdeko VRTX 1Q18 $1342M $1421M 60% $1649M $1682M 13%

Aimovig AMGN 2Q18 $300M $326M 23% $467M $564M 26%

Crysvi ta RARE 2Q18 $63M $102M 44% $110M $205M 17%

Palynziq BMRN 3Q18 $111M $80M 2% $186M $181M 2%

Libtayo REGN/SNY 4Q18 $107M $92M 63% $307M $261M 25%

Zulresso SAGE 1Q19 $33M $27M -36% $118M $103M -13%

Inbri ja ACOR 1H19 $53M $54M -40% $152M $159M 6%

Ozanimod CELG late 2019 $0M $12M -73% $284M $208M -7%

cons trendDrug Company Launch Date2019E

cons trend2020E

* JPM estimates are from Chris Schott

65

Source: Bloomberg and J.P. Morgan estimates.

Key Themes for 2019: Drug Launches (Continued) F

ye

Ram

a

Joseph

6mo 6mo

JPMe Cons cons % Δ JPMe Cons cons % Δ

Makena AMAG 1Q18 (SC) $202M $185M -1% $139M $151M -1%

Intrarosa AMAG 2Q17 $46M $40M -16% $72M $63M -11%

Vylees i AMAG 2H19 $3.5M $8M -6% $9M $38M 4%

Tymlos RDUS 2Q17 $161M $171M -5% $219M $241M -7%

Vyxeos JAZZ 3Q17 $115M $145M -30% $167M $199M -25%

solriamfetol JAZZ 1Q19 $20M $39M -23% $45M $118M -6%

Remodul in UTHR 1Q19 (RIS) $378M $451M 4% $282M $398M -3%

Tegsedi IONS 4Q18 $40M $59M 16% $97M $257M 113%

Elzonris STML 1Q19 $23M $34M 117% $65M $83M 37%

lumateperone ITCI 3Q19 $7M $45M 138% $51M $126M 14%

Ingrezza NBIX 2Q17 $537M $578M 7% $747M $789M 2%

Giapreza LJPC 3Q18 $44M $61M -37% $96M $160M -27%

Taval isse RIGL 2Q18 $30M $37M -19% $50M $91M -14%

Doptelet DOVA 2Q18 $51M $66M -31% $109M $163M -17%

Onpattro* ALNY 3Q18 $79M $113M -48% $183M $318M -30%

Mektovi/Braftovi ARRY 3Q18 $77M $67M -37% $181M $181M -36%

Idhi fa AGIO 3Q17 $11M $10M -45% $26M $23M -41%

Tibsovo AGIO 3Q18 $26M $55M -66% $45M $158M -50%

Galafold FOLD 3Q16** $146M $175M 8% $163M $246M 8%

ALXN1210 ALXN 1Q19 $123M $202M -4% $675M $590M -13%

HCV (Mavyret/Viekira) ABBV/ENTA 3Q17 $3,137M $3,215M -7% $2,738M $3,117M -9%

Trans larna PTCT 4Q14 $203M $239M 7% $237M $272M 7%

Deflazacort PTCT 1Q17 $112M $129M 2% $132M $142M 2%

Sel inexor KPTI 2Q19 $5M $30M 0% $58M $162M 0%

cons trendDrug Company Launch Date2019E

cons trend2020E

AMAG Makena sales are for the overall franchise while launch date cited is for SC version

UTHR Remodulin sales are for the overall franchise while launch date cited is for RIS

* JPM estimates are from Chris Schott

** EU launch in '16, US launch in '18

66

CFOp expected to increase in 2019; we estimate >$32B in

combined CFOp for the 4 legacy large caps

In 2019, Large Cap Biotech (the big 4) is expected to generate an

estimated $30.8B in cash flow from operations (CFOp)

Capital allocation over 2013-18e…

Share buybacks ($83B)

M&A ($45B)

Capital expenditures ($12B)

Dividend (GILD and AMGN, $25B)

We anticipate continued focus on M&A/BD as growth levers are

drying up… although in the absence of attractive deals,

companies may turn to accelerated share repurchase (as

seemed to be the case in 2018)

GILD and AMGN are the only dividend-issuing biotech companies, and

we expect that will continue for the foreseeable future

Given growing cash balances and concerns about long-term revenue

growth, M&A continues to be an area of significant focus among the

Large Caps

AMGN, BIIB, CELG, and GILD ended 3Q18 with $30B, $6B, $4B and

$31B in cash, respectively

Source: J.P. Morgan estimates, Company Reports.

Key Themes for 2019: Uses of Cash We expect continued focus on capital allocation in 2019

176

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67

M&A activity in 2018 was higher than in 2017, but deal activity continues to be important part of the thesis for a number of

biotechs

Through 12/04/2018, 8 public M&A deals were completed in the US vs. 9 in 2017 with a combined deal value of $38B (vs. $56B in 2017). One larger

merger at $62B (between Takeda and Shire) increases the 2018 deal value to in excess of levels seen in 2017

The largest transactions beyond Takeda/Shire on the biotech side were the acquisition of BIVV by SNY ($11B) and the acquisition of JUNO by CELG ($9B)

After a promising start to 2018, M&A activity in 2H underwhelmed with only two major transactions recorded (NVS acquisition of ECYT and GSK

acquisition of TSRO)… and at this point, our sense from investor conversations is that expectations for further M&A have subsided – or at least aren’t a

singular reason to own the group (although our survey suggests there’s still an anticipated uptick)

While hard to predict, we think M&A activity could be a “wild card” for a potential swing in sentiment in 2019

With mounting cash balances and intensified 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; in many cases we believe this is an increasingly important issue for companies

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, AMGN, BIIB, CELG, and SNY

* Through 12/4/2018

Key Themes for 2019: Uses of Cash / M&A With expectations seemingly a little lower than 2018, M&A activity presents more of a ‘swing’ factor for sentiment in 2019

Source: J.P. Morgan Research, M&A data through 12/4/2018.

68

Source: J.P. Morgan Research; Company Reports.

Key Themes for 2019: Uses of Cash / M&A M&A still continues to be a key topic of conversation

A small sampling of comments from 3Q18 earnings…

AMGN

“From a capital allocation standpoint, we've continued with our share buyback and dividend increases, and we'll continue to take a disciplined approach to business development where we believe we can create value for Amgen's shareholders. Valuations have been volatile and have started to come down for some of the earlier-stage companies in our sector, and we'll continue to look for opportunities. I suspect our well-capitalized peers will as well, opportunities to advance innovation where we think we can do that through business development that adds value to our shareholders. So we're paying close attention to it, as you would expect, and we will continue to do that. As with respect to the cadence, though, I wouldn't like to comment on whether we'll see an increase in activity or not, but I think it's fair to observe that prices are adjusting in the sector.”

CELG

“Capital allocation is our number one priority by investing in the business, both our internal research and development programs as well as looking for the best science externally and funding our collaborations as well, which has been extremely successful for us if you look at the next five products that we talked about on the call today, but most of those are coming from our external collaborations. So, it’s a very important part because we’re agnostic on where the science comes from. We’re just looking for the best science. At the same time, however, we’re not looking to build up excess cash reserves. And if opportunities aren’t present, then we’d look to return that cash to our shareholders through the form of share repurchases. Today, we still believe that it’s the most efficient way for us to return cash to shareholders. And currently, we have no intention of beginning a dividend.”

BIIB

“We believe we have and will continue to have ample capacity to execute meaningful future business development and M&A activity as well as return capital to shareholders. We will continue to be disciplined in our approach and focused on value creation. We continue to diligently evaluate new opportunities for potential Biogen development and M&A, and our board has authorized a $3.5 billion share repurchase program. As we have demonstrated in the past, we are committed to maximizing returns for our shareholders while continuing to bring innovative therapies to patients; something that demands a thoughtful approach towards all our investment over both the short and long term.”

MRK

“As a reflection of our confidence in our future growth prospects, today we announced a dividend increase, along with an acce lerated share repurchase program. These actions are driven by our commitment to a balanced capital allocation strategy and supported by our strong balance sheet and cash flow generation that provide us the flexibility to return cash to shareholders, while also investing in our pipeline, innovation, and growth. Even with these actions, we continue to have ample capacity for business development, which remains a major priority. Looking ahead, we are confident in the strength of our business. We believe that our well-balanced portfolio will continue to drive sustainable growth and value creation. With our strong balance sheet, we have the financial flexibility to pursue all forms of business development, including acquisitions, partnerships and collaboration. We will continue to actively look at and evaluate those opportunities to create the strongest portfolio and pipeline.”

69

Focus expected to remain on “hot” areas with high strategic

value (based on company business models, business

reports, etc.)

Oncology / Hematology: Agios (AGIO), Allogene (ALLO), Array

(ARRY), bluebird (BLUE), Clovis (CLVS), Deciphera (DCPH), Global

Blood (GBT), G1 Therapeutics (GTHX), Halozyme (HALO), Incyte

(INCY), ImmunoGen (IMGN), Nektar (NKTR), Puma (PBYI), Seattle

Genetics (SGEN), Radius (RDUS), Rigel (RIGL)

NASH: Galmed (GLMD), Madrigal (MDGL), Viking Therapeutics

(VKTX)

CNS: Acadia (ACAD), Neurocrine (NBIX), Sage (SAGE), Intra-

Cellular (ITCI), Aptinyx (APTX)

Orphan disease: Ascendis (ASND), Alnylam (ALNY), Amicus

(FOLD), Audentes (BOLD), BioCryst (BCRX), BioMarin (BMRN),

Crinetics (CRNX), Ionis (IONS), Orchard (ORTX), PTC Therapeutics

(PTCT), Sarepta (SRPT), Solid (SLDB), Ultragenyx (RARE), Rubius

(RUBY), United Therapeutics (UTHR), Vertex (VRTX)

We also think unencumbered assets with clear value

proposition could be attractive targets in 2019

One-product companies may represent opportunities for

relatively easy integration

We also expect focus on agents that have potential in multiple

indications (e.g. PARPs) after two acquisitions in the last 2 years

Past examples include NPSP, PCYC, RCPT, RLYP, RPTP and ZSPH

Key Themes for 2019: Uses of Cash / M&A M&A activity could center on assets in “hot” therapeutic areas


70

We took a closer look at recent public M&A deals to get a sense of premiums over the last 5 years…

From 2012 to 2018, the average premium paid was 40-50%, which remained in a fairly consistent range until 2015. However, it started going up in the

last 2-3 years , with the current premiums reaching up to ~70%

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 pick up in 2019, we could see meaningful upside across the SMid-cap space as potential M&A premiums begin to work

their way into valuations


Key Themes for 2019: Uses of Cash / M&A If there is an uptick in 2019 M&A, it could lead to upside across the Smid-cap space

2012 2013 2014 2015 2016 2017 2018 YTD TOTAL 2012-2018

TOTAL deals 9 12 16 14 10 9 10 79

avg. Premium excl >200%, excl>100%

81%, 55% 40%, 40% 41%, 41% 49%,40% 61%, 53% 56%, 49% 69%, 71% 57%, 48%

Deals > $20B 0 0 2 2 1 1 0 6

avg. premium (1-day, or from pre-rumor level)

n/a n/a 23% 39% 37% 23% n/a 29%

Deals > $10B 0 0 2 4 2 2 1 11


n/a n/a 23% 40% 78% 29% 64% 44%; excl MDVN its

36%

Deals $5-10B 1 3 3 4 1 1 3 15


101% 42% 42% 61% 55% 106% 89% 63%; excl > 100%

its 49%

Deals < $5B 8 9 11 6 7 6 5 52


79%; excl INHX and ISTA its 55%

40% 69%; excl IDIX

45% 44%

236%; excl VTAE and TBRA its

56%

103%; excl DMTX its 40%

77% 76%; excl >200% its

57%

71

We believe that the big 4 biotechs have enough fire-power – and need – to execute on meaningful M&A…

Between a favorable mix of cash on hand (~$71B), FCF generation (we est. cumulative ~$158B through 2022), and the ability to lever up the balance

sheet (assuming anywhere from 2x to 4x net-debt/EBITDA), large caps are well positioned to execute on further business development (further boosted

by the tailwind of lower effective US tax rates)


Key Themes for 2019: Uses of Cash / M&A Overall, the legacy large-cap biotechs maintain significant financial flexibility to trigger meaningful M&A in 2019

… and investors both expect and want to see more M&A in 2019

In our Dec 2018 buy-side survey, 86% of responders expected an uptick in M&A in 2019 on the back of tax reform and foreign cash repatriation… in our

Dec. 2017 survey, this number was similar at 84%

Current Cash Current Debt EBITDA Current Debt Debt Debt

Position ($B) Position ($B) 2018E Net Debt/ EBITDA 18E Capacity (2x) Capacity (3x) Capacity (4x)

AMGN $30B $34B $14B 0.3x $24B $39B $53B

BIIB $6B $6B $7B 0.0x $13B $20B $26B

CELG $4B $20B $6B 2.6x -$4B $3B $9B

GILD $31B $27B $11B -0.3x $27B $39B $51B

Total $71B $87B $38B 0.2x $61B $100B $139B

Current Cash

Position ($B) 2018E (1 Year) 2018E-20E (3 Years) 2018E-22E (5 Years) 2019E 2020E 2021E

AMGN $30B $9B $26B $44B 14.9% 15.0% 15.2%

BIIB $6B $5B $16B $28B 21.2% 21.2% 21.2%

CELG $4B $2B $19B $40B 18.6% 18.6% 18.6%

GILD $31B $11B $29B $46B 20.4% 21.2% 22.0%

Total $71B $26B $90B $158B

Cumulative FCF Effective Tax Rate

72

Over the years, large-cap biotech has higher

R&D expense as a proportion of sales

compared with Pharma

It is particularly high among the emerging large caps

(BMRN, INCY, REGN & VRTX), highlighting the capital

intensiveness of the sector

Within Pharma, Major Pharma has a higher

proportion of R&D as percent of sales

compared with Spec Pharma, as anticipated

Single-digit percentages indicate the lower R&D

business models of the Spec Pharma companies

AZN, BMY, LLY, NVS & Roche have higher spending

than their peers

Key Themes for 2019: Uses of Cash Historically, R&D as a percentage of sales is higher for Biotechs compared with Pharma

GILD was lower in 2014/2015 due to HCV launches

Source: J.P. Morgan Research, Bloomberg data as of 12/4/2018

R&D as % of Sales 2011 2012 2013 2014 2015 2016 2017

AMGN 20% 20% 22% 21% 19% 17% 16%

BIIB 32% 32% 26% 23% 22% 20% 22%

CELG 26% 24% 24% 22% 22% 22% 21%

GILD 15% 16% 18% 11% 9% 13% 12%

ALXN 16% 18% 18% 16% 20% 22% 21%

BMRN 45% 57% 61% 59% 66% 55% 42%

INCY n/a 155% 111% 97% 80% 66% 73%

VRTX 66% 55% 100% 151% 84% 53% 53%

REGN NM 67% 52% 62% 51% 52% 48%

MRK 16% 17% 16% 15% 17% 17% 19%

PFE 16% 15% 14% 16% 17% 16% 16%

ABBV n/a 17% 15% 16% 16% 16% 17%

LLY 23% 26% 26% 27% 29% 29% 27%

BMY 51% 46% 40% 37% 30% 26% 26%

VRX / BHC 9% 8% 3% 3% 3% 5% 5%

MYL 5% 6% 7% 7% 7% 6% 6%

TEVA 6% 7% 7% 7% 8% 8% 8%

AGN 6% 7% 8% 9% 9% 10% 10%

SNY 15% 15% 15% 15% 15% 16% 18%

NVS 23% 23% 24% 24% 23% 21% 21%

Roche 29% 30% 26% 24% 25% 25% 25%

AZN 13% 15% 17% 19% 25% 26% 27%

GSK 17% 17% 17% 17% 20% 18% 20%

US Biotech

US Pharma

US Spec

Pharma

EU Pharma

73

Over the last nine years, mean historical R&D spend (GAAP) during any year has had a linear relationship with average market

value of the company after three years

This relationship is highest in the case of Emerging Large Caps (correlation of 0.81) followed by Legacy Large Caps (correlation of 0.71), emphasizing the

significance of return generation due to pipeline investment

Investment in biotech companies over the years has returned more in comparison to pharma

As a matter of fact, R&D investment has resulted in significant value creation over the years; however, 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 return due to the rapid revenue growth of newly

launched products

*Average Market cap at the end of the year is regressed with average R&D spend three years prior

Key Themes for 2019: Uses of Cash Does increased R&D spend in the sector lead to higher value generation in the long run?

Legacy Large-Cap Biotech (M-cap > $50bn)

(AMGN, BIIB, CELG & GILD)

Emerging Large-Cap Biotech (M-cap > $10bn & <$50bn)

(ALXN, BMRN, INCY, REGN & VRTX)

Large-Cap Pharma (M-cap > $60bn)

(ABBV, BMY, LLY, MRK & PFE)

Source: J.P. Morgan Research, Bloomberg data as of 12/4/2018.

y = 40.802x - 3.6698 R² = 0.5073

0

20

40

60

80

100

120

1.0 1.5 2.0 2.5 3.0

Mark

et C

ap (

$bn)

R&D Spends ($bn)

y = 52.121x - 0.8997 R² = 0.6578

0

5

10

15

20

25

30

35

40

0.0 0.2 0.4 0.6 0.8

Mark

et C

ap (

$bn)

R&D Spends ($bn)

y = 27.226x - 33.06 R² = 0.4817

70

80

90

100

110

120

130

140

150

4.5 5.0 5.5 6.0 6.5

Mark

et C

ap (

$bn)

R&D Spends ($bn)

74

IPO activity picked up substantially in 2018, with capital raised reaching unprecedented levels

There have been ~51 IPOs in 2018 to date, up from ~33 in 2017; 29 deals in 1H18 and 22 in 2H18 (through 11/10). Total value raised has reached an all-

time high of ~$6.0B overtaking the previous high of $5.3B in 2014

In contrast to last year, we saw an increasing share of earlier-stage IPOs in 2018, with 78% of deals involving pre-clinical or Phase 1/2 assets vs. 57% in

2017; instead of favoring more de-risked assets, the environment of late has favored more early-stage assets with high risk/reward optionality. We

believe that early-stage companies can still get out as long as they have a novel platform and/or a seasoned management team

Analogous to previous years, IPOs were largely focused on companies in “hot” therapeutic markets, such as oncology (e.g., ALLO, CNST, REPL, MGTA,

GMDA), orphan disease (e.g., RUBY, KNSA, CRNX) and gene therapy (e.g., AVRO, ORTX, UMRX)… to name just a few

We expect companies with platform technologies and differentiated approaches to continue to be in focus in 2019; candidates for

early-year IPOs may serve as an informative proxy

We don’t see a closure to the proverbial IPO window forthcoming; while we continue to think that the market will be selective, we also believe

companies with right profile (compelling science, leadership teams, and development strategies) can get out… and obviously the healthier the market,

the easier this will be


Key Themes for 2019: Capital Markets After a robust year of IPO activity, we expect momentum to continue in 2019

75

We continue to believe that there is an accommodating market for the right companies. Performance by new IPOs (particularly

late-stage) in 2018 is encouraging despite the recent macro risk-off. Adding to that, robust performance from 2017 IPOs could

pave the way for healthy capital market activity in 2019

Key Themes for 2019: Capital Markets The IPO environment should remain favorable, and it seems reasonable to expect an uptick following recent stand-out performances

2018 IPOs performance 2017 IPOs performance


76

IPOs performance in 2018 to date


Key Themes for 2019: Capital Markets On average, IPOs in 2018 have outperformed the benchmark index (17% vs. -0.2% for NBI; median of 6% is also above NBI’s performance)

Positive Performers Negative Performers

* Performance of ARMO till its acquisition by LLY

67%

-36%

77

Key 2019 Catalysts in Our Universe

78


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

Ticker Catalyst Timing Comments

RARE Phase 1/2 data for DTX401 in GSD1a YE18/early '19

This will be the first set of data from RARE's second gene therapy program; given all GSD1a patients have <1% of normal enzyme, getting to ~3% expression could confer a normal phenotype (a low threshold for efficacy)

ACOR PDUFA for Inbrija in Parkinson's disease 1/5/2019 Following the PDUFA date extension (related to add'l CMC requests) in Sept., the company is fairly confident that the FDA remains on track for this new date… the Inbrija manufacturing facility has passed its pre-approval inspection at this point

AMGN AdCom for romosozumab in osteoporosis 1/16/2019 Given this product has largely been written off, any sign of revival could be a (+) (even if sales expectations remain modest)

SAGE Phase 3 data for SAGE-217 in PPD Jan 2019 Efficacy aside, safety details will be very important in order to elucidate the ultimate potential of SAGE's platform w(we anticipate substantial read-through to the ongoing Phase 3 MDD trial)

GBT Phase 3 top-line data for voxelotor in adult SCD (HOPE study)

Early 2019 Following the regulatory & ASH update (for the first 150 pts in the HOPE study), topline Phase 3 results in early 2019 will include an add'l ~120 ps (and should be relatively de-risked at this point). That said, a clean safety profile will be key

CELG Re-submission of ozanimod NDA & submission of MAA in RMS

1Q19 Given generally negative sentiment, execution on regulatory timelines will be key for CELG in 2019; recall a number of drug-drug interaction studies are ongoing, but on track to be complete to support filings in 1Q19

GILD Phase 3 data for filgotinib in RA (FINCH 1 & FINCH3) 1Q19 Two remaining Phase 3 trials (in inadequate MTX responders and tx-naïve pts) in RA are slated to read out in 1Q19 (recall the first study readout in 3Q18). In these larger studies, a clean safety profile (specifically for DVT/PE) will be important.

GILD Phase 3 data for selonsertib in NASH (STELLAR 4 & STELLAR 3)

1Q19 & 2Q19

GILD also expects Phase 3 trials in NASH to readout in 1Q19 (STELLAR 4 in F4 NASH pts) and 2Q19 (STELLAR 3 in F3 NASH pts). Though expectations appear mixed, 2019 may very well be the "Year of NASH" given all the anticipated updates.

VRTX Phase 3 data for VX-445 triple combination 1Q19 Recall we have seen initial data from VX-659; regulatory submissions are planned for mid/late 2019 in the US/EU

SGEN Phase 2 registrational data for enfortumab vedotin in bladder cancer

1Q19 Enfortumab vedotin has the potential to be SGEN's second marketed product. Recall that the lead-in data were quite promising, and given the single-armed nature of the trial, we believe the chances for eventual approval are quite high

CELG Pivotal data for liso-cel in r/r DLBCL (TRANSCEND study)

1H19 The company has not guided to an exact timeframe for data, but expects to launch the drug in mid-2020; enrollment was completed in the trial this summer

BMRN Updated Phase 1/2 data for val rox in hemophilia A 1H19 This will be the three-year update for the Phase 1/2 trial; we look for ~sustained FVIII activity at this time point (the company is confident that FVIII activity has plateaued post-2 years)

ALKS Head-to-head data for Aristada vs. Invega Sustenna 1H19 ALKS believes this head-to-head study may challenge docs perception that Aristada is less potent than Invega Sustenna. Indeed, the company is looking for equal efficacy and to differentiate on safety

ONCE Full Phase 1/2 data for SPK-8011 in hemophilia A mid 2019 Given FVIII data were not available for the highest dose at ASH, we're expecting this to be a major event for the stock; recall the company is enrolling another 5-10 patients at this dose level and implementing a prophylactic steroid regimen

RARE Phase 1/2 third dose cohort data for DTX301 in OTC deficiency

mid 2019 Following the first and second dose cohorts, RARE is looking for >2/3 patients respond in the third cohort to warrant expansion at that dose level (otherwise, additional dose escalation is possible)

ACAD Phase 3 interim for Nuplazid in dementia-related psychosis (HARMONY study)

2019 ACAD expects the interim for the pivotal study with Nuplazid in DRP (event based). Though the co sees a high bar for this study to be stopped at the interim, if positive this would open an a large commercial opportunity for Nuplazid.

BLUE Potential EMA approval of LentiGlobin in non-B0/B0 beta thal

2019 Kicking off a regulatory catalyst rich period, this will be the first potential approval for BLUE expected in the next 24 months

CELG / BLUE

Pivotal data for bb2121 in RRMM (KarMMa study) 2019 With the BCMA space heating up, the KarMMa study in r/r multiple myeloma will be the first pivotal study in the space to readout in 2019 (recall the study recently finished enrolling).

BLUE Data for LentiGlobin in SCD (HGB-206 study) 2019 Recall that encouraging data were presented for the HGB-206 study at ASH. The company expects to continue enrolling the study in line with the recent amendments/accelerated pathway and data updates are expected in 2019.

EDIT Potential data for EDIT-101 in LCA10 2019 The IND for EDIT-101 was accepted in 11/18; EDIT believes the trial could enroll rather quickly with potential initial data in 2019

INCY P3 GRAVITAS-301 data for itacitinib (acute GVHD) 2019 Recall that Itacitinib is being investigated for frontline treatment of GVHD vs Jakafi which is intended for RR GVHD

CLVS Ph2 data for rucaparib in urothelial carcinoma 2H19 This will likely represent the first data set for PARPs in urothelial carcinoma

BMRN Potential filing for val rox in hemophilia 2H19 While Phase 3 data are not expected until 1H20, the company notes potential for an accelerated filing in 2H19

REGN Updated data from the Phase 1 study with REGN 1979 in r/r NHL/FL at ASH

4Q19 We expect the co to provide an update for REGN1979 at ASH 2019 (recall data was reported at ASH 2018 & doses escalation is ongoing r/r NHL), and we could potentially see updates for add’l bispecific programs

BMRN Phase 3 data for vosoritide in achondroplasia late 2019 The last patient was enrolled in Phase 3 on 11/07/18, putting data in late-2019 (1-year endpoint)

*Large cap catalysts highlighted in blue

79


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


ASND Disclosure of a new therapeutic vertical 1Q19 We expect the disclosure of a new therapeutic vertical in early '19 will name the new area, provide rationale, and outline the unmet medical need/commercial opportunity

LXRX Ad com for sotagliflozin in T1D 1Q19 We remain cautious into the FDA briefing docs and ad com for sotagliflozin, which we expect will focus heavily on DKA

APTX Topline data from NYX-2925 phase II trial in DPN 1Q19 With enrollment complete in Nov, we now expect topline phase II data evaluating NYX-2925 for the treatment of painful diabetic peripheral neuropathy (DPN) in early 1Q19

STML Potential Approval for Elzonris 1Q19 Based on the strength of clinical data in BPDCN, we expect an approval on February 21, 2019, (PDUFA)

ASND Topline data from TransCon GH phase III study in GHD

1Q19 We view a successful phase III HeiGHt trial in 1Q19 representing the most meaningful de-risking event for the TransCon platform

IMGN Topline data from FORWARD I 1H19 Positive pivotal data would represent the basis for approval in plat-resistant ovarian cancer - we estimate late 1Q/early 2Q

UTHR Topline data from BEAT study 1H19 Mgmt expects to unblind the BEAT study at the end of March '19 which, if positive, would represent the basis for filing of the Tyvaso/esuberaprost combination in 2H19

JAZZ JZP-258 pivotal results 2Q19 Following completion of enrollment for '258 pivotal trial we see top-line data in the spring (est April/May topline)

ITCI Results from 2 lumateperone trials (monotherapy) in bipolar depression

2Q19 The company may file with data from two positive studies for this indication and, along these lines, should these trials succeed, the filing could come as soon as 2H19

BCRX Topline data from APeX-2 trial in HAE 2Q19 We see potential for ‘7353 to represent an attractive option in the evolving HAE landscape as a convenient oral therapy

DCPH Topline DCC-2618 phase III data in 4L GIST mid-2019

We see a high probability of success for DCC-2618 in 4L GIST based on the strength of phase I data thus far in >100 patients

DCPH Update from the ongoing phase I study evaluating DCC-2618 in GIST

2019 Following immature ESMO update in 2L GIST, we expect an update in 2019 to inform POS for the 2L pivotal study

NKTR Data from PIVOT-02 cohorts 2019 While multiple data presentations from PIVOT-02 cohorts expected over 2019, we continue to see much focus on how the product may ultimately be positioned in lung cancer

ITCI Potential US approval of lumateperone in schizophrenia

3Q19 We continue to see lumateperone’s safety profile as differentiated and see an attractive commercial oppty in schizophrenia

MDCO Topline inclisiran phase III results 3Q19 We expect solid efficacy/safety coupled with rational pricing, and greatly improved dosing convenience (and likely compliance) to lead to a substantial market opportunity for inclisiran

TCDA NDA filing for TRC101 2H19 FDA has requested VALOR-CKD study to be fully or nearly fully enrolled prior to filing, and as such, represents the key gating factor for filing the NDA for TRC101

MGTA Initial MGTA-456 data from phase II study in sickle cell disease

4Q19 With a relatively short primary endpoint, there is potential that we could see the phase II data as soon as ASH '19

HALO Topline HALO-301 data in 1L HA-high metastatic pancreatic cancer

4Q19 Following the change in Study 301's primary endpoint to OS, we expect topline data from this study by YE19

RUBY Initial PKU data for RTX-134 4Q19 We see the first in-human data for RTX-134 by late ’19 as a key derisking event to the PKU program but more importantly believe this first-in-human data will be key for establishing safety and POC for the broader RCT platform

80


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

Ticker Catalyst Timing Comments ALNY Top-line phase 3 givosiran ENVISION in AHP Early 2019 Report top-line phase 3 givosiran data in acute hepatic porphyria with focus on attack rate; NDA submission mid-2019 on

positive results

SRPT Phase 1/2a MYO-101 data in Limb-Girdle MD Early 2019 Report 60-day biopsy data from phase 1/2a program of MYO-101 in Limb-Girdle Muscular Dystrophy (MD)

ALXN ALXN1210 PDUFA for PNH 2/18/2019 Watching for FDA approval in paroxysmal nocturnal hemoglobinuria(PNH ); filings also accepted for PNH in US, EU, and Japan)

FOLD Potential ATB200 / AT2221 updates in Pompe Disease at WORLD Symposium 2019

Feb-19 Potential for phase 1/2 program updates in Pompe disease (additional study data from up to 10 additional ERT-switch patients in Cohort 4 is expected in 2019)

BOLD Phase 1/2 AT132 ASPIRO program update in XLMTM

1Q19 Anticipating phase 1/2 ASPIRO program update of AT132 in X-Linked Myotubular Myopathy (XLMTM; including clarity on the development path going forward)

SLDB Initial microdystrophin (MD) phase 1/2 SGT-001 IGNITE DMD data

1Q19 Report first look at preliminary MD expression data in 3 DMD patients from phase 1/2 trial of SGT-001 in the IGNITE DMD program (focus also on safety data, i.e., platelet declines)

BOLD Phase 1/2 AT342 VALENS update in CN 1Q19 Anticipating a phase 1/2 VALENS program update of AT342 in Crigler-Najjar Syndrome (CN)

ARRY Top-line phase 3 Braftovi/Mektovi BEACON data in CRC

1H19 Top-line ORR/DOR from phase 3 BEACON trial of Braftovi/Mektovi in colorectal cancer (CRC); opens up the door to filing / path to approval in the US and other regions

ATRA Initial phase 3 tab-cel data in EBV+ PTLD 1H19 Report initial phase 3 tab-cel data in Epstein-Barr virus associated post-transplant lymphoproliferative disorder (EBV+ PTLD); outcomes of EMA / FDA discussion to follow (EU CMA submission planned in 2H19)

ATRA Phase 1 ATA188 data in progressive MS 1H19 Report initial off-the-shelf, allogeneic ATA188 data in progressive multiple sclerosis (MS)

GTHX Trilaciclib regulatory update 1H19 Watching for regulatory update (US & EU), anticipated in 1H19, that will provide clarity on a go-forward endpoint for development

IFRX Top-line phase 2b IFX-1 in HS 1H19 Report top-line safety and efficacy results from phase 2b trial of IFX-1 in hidradenitis suppurativa (HS)

DOVA Avatrombopag PDUFA for chronic ITP 6/30/2019 Watching for FDA approval of avatrombopag in chronic ITP

ANAB Top-line phase 2 ANB019 GALLOP data in GPP Mid-2019 Report top-line phase 2 data from GALLOP trial of ANB019 in generalized pustular psoriasis (GPP)

CNST Phase 1b/2 CPI-1205 POC in mCRPC Mid-2019 Report phase 1b/2 data from PRoSTAR trial of CPI-1205 in metastatic castrate-resistant prostate cancer (mCRPC)

CNST Phase 1b/2 CPI-0610 POC in MF Mid-2019 Report phase 1b/2 data from MANIFEST trial of CPI-0610 in myelofibrosis (MF)

LJPC Top-line phase 2 LJPC-401 in HH Mid-2019 Report top-line data from phase 2 trial of LJPC-401 in hereditary hemochromatosis (HH); we will be looking for a reduction in the frequency of phlebotomies

FOLD AAV9-CLN6 gene therapy data in Batten Disease 2019 Report additional data from the AAV9-CLN6 gene therapy program for CLN6-Batten Disease (likely to include additional >2-year follow-up data)

GTHX Phase 1b lerociclib data in breast and lung indications

2019 Report additional data from phase 1b lerociclib + Faslodex trial in ER+, HER2- breast cancer as well as preliminary data from phase 1b lerociclib + Tagrisso in EGFRm NSCLC

ORTX OTL-101/200/103 registration and cryopreservation updates

2019 Registration data updates and cryopreserved formulation clinical trial updates for OTL-101 (ADA-SCID), OTL-200 (MLD), and OTL-103 (WAS)

ANAB Top-line phase 2b etokimab ATLAS in AD 2H19 Report top-line data from phase 2b multi-dose trial of etokimab in atopic dermatitis (AD)

ANAB Top-line phase 2 etokimab ECLIPSE data in CRSwNP 2H19 Report top-line data from phase 2, placebo-controlled trial of etokimab in chronic rhinosinusistis with nasal polyps (CRSwNP)

ANAB Top-line phase 2 ANB019 POPLAR data in PPP 2H19 Report top-line phase 2 data from POPLAR trial of ANB019 in palmoplantar pustulosis (PPP)

KNSA Phase 1b KPL-716 data in AD 2H19 Report repeat single-dose data from phase 1b trial of KPL-716 in atopic dermatitis (AD) with pruritis

MYOK Phase 2 mavacamten MAVERICK-HCM data in nHCM

2H19 Report safety / tolerability / and biomarker (e.g., NT-proBNP) data from phase 2 MAVERICK trial of mavacamten in non-obstructive hypertrophic cardiomyopathy (nHCM)

REPL Phase 1 RP1 data in advanced solid tumors 2H19 Report phase 1 trial data of RP1 (~12 mixed solid tumor patients in combination with nivolumab) at a medical conference

CCXI Top-line phase 3 avacopan ADVOCATE data in AAV 4Q19 Report top-line phase 3 top-line data (including HiSCR data at 12 weeks) for phase 3 ADVOCATE trial of avacopan in ANCA-Associated Vasculitis (AAV); assuming positive results, the data would open to door to an AAV NDA filing in 2020

MYOK Phase 2a MYK-491 POC in DCM 4Q19 Report top-line phase 2a multiple-ascending dose data for MYK-491 in stable systolic heart failure/dilated cardiomyopathy (DCM)

ALNY Top-line phase 3 lumasiran data in PH1 Late 2019 Report top-line phase 3 ILLUMINATE-A data in primary hyperoxaluria type 1 (PH1); NDA submission in early 2020 if positive

81


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


NVAX Phase 3 ResVax RSV Vaccine (PREPARE) pivotal data

1Q19 Expecting end-1Q19 data readout for maternally transferred RSV vaccine for newborns

NVAX Phase 2 NanoFlu topline data 1Q19 Repeat phase 2 immune response data would enable an accelerated approval strategy for the flu vaccination in adults

UROV Phase 3 EMPOWUR topline data 1Q19 Pivotal study readout for vibegron in overactive bladder (OAB), end-March timeframe

KPTI Selinexor MAA submission early 2019 Seeking conditional approval in penta-refractory multiple myeloma

KPTI Selinexor approval in penta-refractory MM 2Q19 Accelerated PDUFA date of April 6th

MYOV Phase 3 relugolix in UF (LIBERTY 1) topline data 2Q19 The first of two replicate studies for the treatment of heavy menstrual bleeding associated with uterine fibroids

XLRN NDA / MAA submissions for luspatercept in MDS and Beta-Thal

1H19 Anticipating standard review timelines, US launch mid-2020

ENTA Phase 2 EDP-305 NASH readout mid-2019 Incl. primary outcome of 12-wk change in baseline ALT; enrollment headwinds in PBC Phase 2 may delay data after 2019

FPRX Phase 1a FPA150 initial safety/efficacy data mid-2019 Phase 1a study in exploratory basket cohort of B7-H4+ tumors to be presented at a medical conference

IRWD Phase 3b Linzess data in abdominal symptom expansion cohort

mid-2019 In support of potential Linzess label expansion for abdominal symptom claims

ENTA Phase 2a EDP-938 human challenge data in RSV 3Q19 Primary endpoint of change in viral load measurements

MYOV Phase 3 relugolix in UF (LIBERTY 2) topline data 3Q19 The second of two replicate studies for the treatment of heavy menstrual bleeding associated with uterine fibroids

PTCT Phase 2 risdiplam Type 2/3 SMA (SUNFISH Part 2) topline data

3Q/4Q19 SUNFISH is overenrolled to 180 patients and powered for HR of 0.5 vs. placebo on the MFM-32 scale

MYOV Relugolix NDA filing in uterine fibroids 4Q19 Anticipating standard review timelines, commericial launch beginning 2H20

MYOV Phase 3 relugolix in advanced prostate cancer (HERO) data

4Q19 Potential to be a safer, more tolerable oral option to current GnRH antagonists for APC

IRWD Phase 2 olinciguat topline data in sickle cell 2H19 Safety to be demonstrated in 88 patients

IRWD Phase 2 praliciguat topline data in diabetic nephropathy

2H19 Including primary outcome of change from baseline urine albumin to creatinine ratio at weeks 8 and 12

IRWD Phase 2 praliciguat topline data in HFpEF 2H19 Safety and change from baseline inpeak VO2 at week 12 in 184 patients

OBSV Phase 3 linzagolix in UF (PRIMROSE 1&2) topline data

2H19 6 month HMB primary endpoint data

XLRN Phase 2 luspatercept in myelofibrosis topline data 2H19 Primary endpoints of anemia response to Hgb increase and/or RBC-TI in 70 patients

KPTI Phase 3 selinexor in 3L+ MM (BOSTON) readout end-2019 Selinexor in combination with Velcade + dexamethasone vs. Velcade/dex alone in multiple myeloma; PFS primary endpoint

OBSV Nolasiban in IVF MAA submission end-2019 Submission will be based on IMPLANT1 & 2 and 10-week ongoing pregnancy rates from the international phase 3 IMPLANT4 trial

MYOV Phase 3 relugolix in EM-related pain (SPIRIT 1&2) data

2019 Replicate registration trials for pain related to endometriosis

OBSV Potential FDA agreement on nolasiban in IVF US study design

2019 Initiation of a US registrational study is on hold pending further clarity from the FDA on study design

PTCT AADC gene therapy BLA and MAA submissions 2019 Submission alleviates perceptions of regulatory concerns given studies were conducted OUS; product was acquired from Agilis

PTCT Potential label expansion for Translarna in non-ambulatory patients

2019 EMA submission in 3Q18

SGMO Developmental updates across phase 1/2 programs 2019 Data expected for SB-525 (Hem A), SB-913 (MPS II), SB-318 (MPS I), SB-FIX (Hem B), ST-400 (beta-thal) sometime in 2019

82


Key Conferences Within Our Coverage Key 2019 Medical Conferences

Meeting Start Date End Date Location ASCO-GI ASCO Gastrointestinal Cancers Symposium 17-Jan-19 19-Jan-19 San Francisco, California WORLD WORLD Symposium 4-Feb-19 8-Feb-19 Orlando, Florida ISC International Stroke Conference 6-Feb-19 8-Feb-19 Honolulu, Hawaii ASCO-GU ASCO Genitourinary Cancers Symposium 14-Feb-19 16-Feb-19 San Francisco, California AVF American Venous Forum 19-Feb-19 22-Feb-19 Rancho Mirage, CA AAAAI / WAO American Academy of Allergy, Asthma & Immunology / World Allergy Organization 22-Feb-19 25-Feb-19 San Francisco, California ASCO-SITC ASCO-SITC Clinical Immuno-Oncology Symposium 28-Feb-19 2-Mar-19 San Francisco, California AAD American Academy of Dermatology 1-Mar-19 5-Mar-19 Washington, DC CROI Conference on Retroviruses and Opportunistic Infections 4-Mar-19 7-Mar-19 Seattle, Washington ACC American College of Cardiology 16-Mar-19 18-Mar-19 New Orleans, Lousiana SGO Society of Gynecologic Oncology Annual Meeting 16-Mar-19 19-Mar-19 Honolulu, Hawaii AACR American Association for Cancer Research 29-Mar-19 3-Apr-19 Atlanta, Georgia EASL European Association for the Study of the Liver 10-Apr-19 14-Apr-19 Vienna, Austria ARVO The Association for Research in Vision and Ophthalmology 28-Apr-19 2-May-19 Vancouver, BC ASGCT American Society of Gene & Cell Therapy 29-Apr-19 2-May-19 Washington, DC AAN American Academy of Neurology 4-May-19 10-May-19 Philadelphia, PA APA American Psychiatric Association 5-May-19 9-May-19 San Francisco, California DDW Digestive Disease Week 18-May-19 21-May-19 San Diego, California ASCO American Society of Clinical Oncology 31-May-19 4-Jun-19 Chicago, Illinois ADA American Diabetes Association 7-Jun-19 11-Jun-19 San Francisco, California EULAR European Congress of Rheumatology 12-Jun-19 15-Jun-19 Madrid, Spain EHA European Hematology Association 13-Jun-19 16-Jun-19 Amsterdam, Netherlands AHS American Headache Society Scientific Meeting 27-Jun-19 30-Jun-19 Philadelphia, PA Cure SMA Cure SMA Annual Conference 28-Jun-19 1-Jun-19 Anaheim, California ISTH International Society of Thrombosis and Haematology 6-Jul-19 10-Jul-19 Melbourne, Australia AAIC Alzheimer's Association International Conference 14-Jul-19 17-Jul-19 Los Angeles, California IAS International AIDS Society Conference 21-Jul-19 24-Jul-19 Mexico City, Mexico IAC International Academy of Cardiology Meetings 26-Jul-19 28-Jul-19 Vancouver, BC ESC European Society of Cardiology 31-Aug-19 4-Sep-19 Paris, France IASLC International Association for the study of Lung Cancer 7-Sep-19 10-Sep-19 Barcelona, Spain ECTRIMS European Committee for Treatment and Research in MS 11-Sep-19 13-Sep-19 Stockholm, Sweden HFSA Heart Failure Society of America 14-Sep-19 16-Sep-19 Philadelphia, PA ASBMR American Society of Bone and Mineral Research 20-Sep-19 23-Sep-19 Orlando, Florida ESMO European Society for Medical Oncology 27-Sep-19 1-Oct-19 Barcelona, Spain WMS World Muscle Society 1-Oct-19 5-Oct-19 Copenhagen, Denmark EADV European Academy of Dermatology and Venereology Congress 9-Oct-19 13-Oct-19 Madrid, Spain AAO American Academy of Ophthalmology 12-Oct-19 15-Oct-19 San Francisco, California ANA American Neurological Association 13-Oct-19 15-Oct-19 St. Louis, Missouri AACR-NCI-EORTC AACR-NCI-EORTC Molecular Targets and Cancer Therapeutics 26-Oct-19 30-Oct-19 Boston, Massachusetts NACFC North American Cystic Fibrosis Conference 31-Oct-19 2-Nov-19 Nashville, Tennessee ASN American Society of Nephrology & Kidney Week 5-Nov-19 10-Nov-19 Washington, DC SITC Society for Immunotherapy of Cancer 6-Nov-19 10-Nov-19 National Harbor, Maryland ACAAI American College of Allergy, Asthma and Immunology Meeting 7-Nov-19 11-Nov-19 Houston, Texas ACR/ARHP American College of Rheumatology 8-Nov-19 11-Nov-19 Atlanta, Georgia AASLD American Academy for the Study of Liver Disease "The Liver Meeting" 8-Nov-19 12-Nov-19 Boston, Massachusetts AHA American Heart Association 16-Nov-19 18-Nov-19 Philadelphia, PA CTAD Clinical Trials on Alzheimer's Disease 4-Dec-19 7-Dec-19 San Diego, California ASH American Society of Hematology 7-Dec-19 10-Dec-19 Orlando, Florida SABCS San Antonio Breast Cancer Symposium 10-Dec-19 14-Dec-19 San Antonio, Texas

https://gicasym.org/

https://www.worldsymposia.org/

https://professional.heart.org/professional/EducationMeetings/MeetingsLiveCME/InternationalStrokeConference/UCM_316901_International-Stroke-Conference.jsp

https://gucasym.org/

https://www.veinforum.org/medical-allied-health-professionals/avf-annual-meetings/2019-annual-meeting/

http://annualmeeting.aaaai.org/

https://immunosym.org/





https://www.aad.org/meetings/annual-meeting

http://www.croiconference.org/

https://accscientificsession.acc.org/?_ga=2.226304026.1628450678.1518447151-560799221.1510144735

https://www.sgo.org/education/annual-meeting-on-womens-cancer/annual-meeting-about-this-meeting/

http://www.aacr.org/Meetings/Pages/MeetingDetail.aspx?EventItemID=136.WoGqpZWWxpg

http://www.easl.eu/discover/events/calendar/future

https://www.arvo.org/annual-meeting/

https://www.asgct.org/

https://www.aan.com/conferences-community/annual-meeting/

https://www.psychiatry.org/psychiatrists/meetings/annual-meeting

http://www.ddw.org/home

https://am.asco.org/

https://www.afassanoco.com/ada/

http://www.congress.eular.org/important_dates.cfm

https://ehaweb.org/congress/eha24/key-information/

https://americanheadachesociety.org/events/60th-annual-scientific-meeting-2/

http://www.curesma.org/get-involved/conference/

https://www.isth.org/page/ISTH2019

https://www.alz.org/aaic/about/losangeles.asp

http://www.iasociety.org/Conferences

http://www.cardiologyonline.com/

https://www.escardio.org/Congresses-&-Events/ESC-Congress/About-the-congress/future-esc-congresses

https://www.iaslc.org/conferences-events/future-world-conferences-lung-cancer

https://www.ectrims.eu/annual-ectrims-congresses/

http://www.hfsa.org/

http://www.asbmr.org/Meetings/FutureAnnualMeetings.aspx

http://www.esmo.org/Conferences/ESMO-2018-Congress

https://www.worldmusclesociety.org/news/view/62

https://www.eadv.org/calendar/2019

https://www.aao.org/annual-meeting/past-and-future-meetings

https://2018.myana.org/future-meeting-dates

https://www.ecco-org.eu/ENA





https://www.nacfconference.org/

https://www.asn-online.org/education/kidneyweek/archives/future.aspx

https://www.sitcancer.org/education/annualmeeting

https://annualmeeting.acaai.org/

https://www.rheumatology.org/Annual-Meeting

https://www.aasld.org/events-professional-development/liver-meeting%C2%AE-2018

https://exhibitatsessions.org/scientific-sessions/future-meetings/

http://www.ctad-alzheimer.com/

http://www.hematology.org/Annual-Meeting/Archive.aspx

https://www.sabcs.org/

83

Favorite Names in 2019

84

BMRN continues to be one of our favorite names heading into 2019 between the potential for a new product cycle to

drive growth / profitability and, more importantly, key pivotal readouts for potentially transformative assets later in the

year

There are several reasons we believe investors will want to get involved in 2019

Later in the year, we’re expecting BMRN to enter a data-rich period including key pivotal trial read-outs from two programs…

– Pivotal data from the Phase 3 trial of vosoritide for achondroplasia around YE19; we believe this could be a $1B+ product by the mid-2020s

– Pivotal data from the Phase 3 trials of val rox (gene therapy) for hemophilia A in 1H20; however, we expect a filing for accelerated approval in 2H19

is more likely than not (manufacturing appears to be the gating factor), and we thus expect a launch of this potentially multi-billion-dollar product

in 2020

… prior to this, we’re expecting a 3-year update from the val rox Phase 1/2 study around mid-2019, which is likely to be a key event for the stock as well

(and could inform the filing strategy)

Insomuch as investors are not currently giving these programs much/any credit, updates from the earlier-stage pipeline (e.g., BMN 250 for MPS IIIB,

BMN 307 gene therapy for PKU) could also provide opportunity for share appreciation

In addition to the pipeline, we expect investors to be more interested in quarterly read-outs throughout 2019 following the launch of Palynziq

Bigger picture, BMRN is uniquely positioned with both a strong pipeline/R&D engine and $1B+/year base business

Coming off a relatively strong 2018 (+7% YTD vs. NBI about flat), we continue to see upside in BMRN shares between its industry-leading growth profile

(we project a ~19% 2017-2022 CAGR) and especially its attractive late-stage pipeline

On a DCF basis, we derive a value of $133/share

– This contemplates only 60% probability of success for both vosoritide and val-rox, which we believe is conservative

We believe BMRN carries significant longer-term scarcity value

BMRN has ample cash ($1.6B as of end-3Q18) to support its commercial/R&D operations

Where we could be wrong… If BMRN’s pipeline encounters surprising setbacks or the val rox 3-year update is disappointing (e.g., shows an appreciable decline

in FVIII expression or an unexpected safety signal), and/or product sales falls short of expectations

Favorite Names: BioMarin Pharmaceuticals – Cory Kasimov BioMarin (BMRN) – Overweight, Dec 2019 PT $133


85

Not for the faint of heart, SAGE is poised to start 2019 in the spotlight; following a significant pullback from its highs, we

believe SAGE is attractively positioned ahead of an important catalyst-rich year given the substantial scarcity value of a

wholly owned, potentially paradigm-shifting asset with the possibility of broad applications across an array of

depressive disorders

IV Zulresso for post-partum depression is launching next year, but we believe the crux of the story is follow-on oral asset SAGE-217

KOLs, the FDA, and patients were in agreement at the recent FDA AdCom for Zulresso in PPD… the drug appears to be a game changer. With that said, a

few cases of abrupt loss of consciousness (LOC) resulted in the FDA instituting the requirement for a REMS program and limiting the initial treatment

sites to accredited in-patient facilities. While this may hamper commercial adoption, we believe the main value driver has always been oral SAGE-217.

SAGE-217 has generated promising randomized Phase 2 data in major depressive disorder (a much broader population vs PPD) for which it received

breakthrough designation earlier this year. Given what we know about its profile (superior efficacy vs standard of care and, moreover, an onset of

action measured in days vs weeks), we believe that SAGE-217 could represent a paradigm shift in the way depression is treated and represents a multi-

billion dollar opportunity.

Important Phase 3 data for SAGE-217 in post-partum depression is expected in January 2019

The reason this next data set is extremely important is twofold. First, if positive we believe it will set off a domino effect ahead of Phase 2 bipolar data

in 1H19 and much more so ahead of Phase 3 MDD data that we anticipate later in 2019. Second, in light of the LOC events observed for Zulresso, it will

be important to see that similar events do not manifest for 217. Of note, from available data in 45 patients enrolled in the Phase 2 MDD trial, no such

events have been observed.

Not only does SAGE maintain a stronger patent estate for 217, but an oral compound that can be dosed at home is obviously much more preferable to

a drug that requires IV administration.

We believe a positive result in PPD could enhance investor confidence in both the potential efficacy, but also safety profile as we

approach the Phase 3 MDD read-out

As mentioned above, the market for major depressive disorder is huge, with an estimated 12-month prevalence of up to ~7% of the total US

population. Based on 217’s profile, we believe SAGE could make a strong case for front-line use, in which case conservative estimates on penetration

could lead to sales in the multiple billions

Recall that SAGE is currently enrolling a ~450 patient Phase 3 trial with a 2-week primary endpoint and 4 weeks of additional follow-up . We expect this

trial to move quickly as the prior randomized Phase 2 trial took only ~9 mos from first patient in to top-line data despite limited prior clinical updates.

So while the Phase 3 trial will be over 4x the size (N = 450 vs. 89) and global (vs. just US), we suspect there will be significant investigator and patient

demand for the study. Once again the trial has very short follow-up as noted above

Where we could be wrong… Most importantly, if the Phase 3 trial for SAGE-217 in PPD fails to meet its primary endpoint (though we note that there are now 4

positive randomized trials for this mechanism in PPD/MDD), or if LOC events emerge

Favorite Names: Sage Therapeutics – Cory Kasimov

Sage Therapeutics (SAGE)– Overweight, Dec 2019 PT $205


86

We have a high degree of conviction in the success of the TransCon growth hormone phase III trial in 1Q19 and are

positive on the stock heading into a big transitional year, one in which we see potential for significant value creation

from the company’s platform

We see a multi-year evolution under way within Ascendis …

We see a multi-year evolution under way within Ascendis as the company transitions from one viewed as a single-product story to one not only with

multiple orphan endocrine assets in the clinic, but also a platform story that we expect will add additional therapeutic verticals overtime

We expect to the company to disclose a new therapeutic vertical at the J.P. Morgan Healthcare Conference

… and see the phase III data for TransCon GH in 1Q19 as key to this evolution…

While we see long-acting growth hormone (GH) as a competitive market, we see the strong phase II data derisking the phase III read-out in 1Q19

Further, we see the phase III read-out for TransCon GH as key to derisking the broader platform

… and see further upside from the Ascendis endocrinology pipeline over time

Following the phase I TransCon CNP (achondroplasia) data, we continue to see TransCon CNP differentiated from vosoritide

With free CNP levels sustained within the expected therapeutic range of 4-15pM (~4 to 6 pM following a single dose of 25g/kg TransCon CNP and ~8-

12pM after a single dose of 75g/kg ), we see these results derisking TransCon CNP for the treatment of achondroplasia and suggesting potential for

improved efficacy relative to vosoritide

With no incidence of hypotension with TransCon CNP in healthy volunteers through the supra-therapeutic 150 mcg/kg dose, we see potential for

improved safety over vosoritide as well

Key Risks: Risks to our thesis/price target include negative clinical data for TransCon GH, or any of the company’s other programs

Favorite Names: Ascendis Pharma – Jessica Fye Ascendis Pharma (ASND) – Overweight, Dec 2019 PT $85


87

We see an interesting upside case for DCPH in 2019 with what we expect will be compelling phase III results in 4L GIST

and limited value priced in for opportunities outside of 4L GIST

We see DCPH well positioned in 4L GIST heading into pivotal results, which we expect around mid-2019…

We continue to see high probability of success for this trial based on the data from phase I 111-patient 4L+ cohort at ESMO

Recall, at ESMO, DCC-2618 showed PFS of 24 weeks (~6 mos) in 4L+ GIST, and we see these data supporting a very high probability of success in the

pivotal 4L study heading into data in 2019

… and see further upside in the stock to the extent more mature data in the 2L GIST cohort support success in the 2L pivotal study

now under way

While the 2L GIST update at ESMO was not yet mature (58% censored), we are encouraged by mPFS of 42 weeks (~10 mos)

We believe the ~10mos of PFS for DCC-2618 compares favorably with phase II mPFS data for Sutent of ~8 mos and phase III mPFS for Sutent of ~6 mos

Every 10% increase to POS in 2L GIST is worth $2-$3 to our valuation

While 2L GIST is a key upside lever to our valuation, we see potential upside driven by other indications as well

We expect data from the DCC-2618 phase I ASM expansion cohort in 2019

Our DCF currently assigns 10% POS for ASM, or ~$1 of our valuation, and while we acknowledge avapritinib has set a high bar in this setting, we could

see upside to the extent derisking data read out

Key Risks: Risks to our thesis/price target include negative clinical trial results for DCC-2618 in 4L GIST and negative update from other cohorts in the

ongoing phase I study

Favorite Names: Deciphera– Jessica Fye Deciphera (DCPH) – Overweight, Dec 2019 PT $36


88

We see multiple value-creating catalysts for Atara in 2019 including phase 3 tab-cel EBV+ R/R PTLD read-out and phase 1

ATA188 MS read-out

Tabelecleucel (tab-cel) high probablity in EBV+ R/R PTLD

Initial data from MATCH (HCT) and/or ALLELE (SOT) phase 3 trials are expected in 1H19

– The overall response rate (ORR) hurdle for success in phase 3 is ~37%

– Prior data from MSK and EAP study have shown a 64-83% ORR, which gives us confidence in a high probablity of success

– Durability has been well received by physicians (see West Coast investor event note here)

– Outcomes of FDA/EMA discussions are expected in 1H19 (CMA submission planned in 2H19 in the EU)

– We believe the r/r PTLD setting could be ~$500-700M peak potential

– Our model assumes a high probablity of success for r/r PTLD, with upside in the ~10-25% range

Tab-cel solid tumor potential continues to gain momentum

– A phase 1/2 study in combination with Keytruda in platinum-resistant / recurrent EBV+ NPC is ongoing (prior monotherapy MSK data showed a

21% response rate and 84% 2-year OS)

– Data assessing potential in EBV+ Leiomyosarcoma are expected this weekend at ESMO-IO

– In our preview note, we highlighted a ~20% ORR to confirm activity in the indication, and abstract data support this (see preview note here)

MS program provides near-term upside potential

Initial data from the phase 1 allogenic ATA188 in progressive MS are expected in 1H19

– Growing body of literature linking viruses to neurodegenerative diseases, underscoring scientific rationale

– Prior data from autologous ATA190 add confidence going into ATA188 results

– Data showed improvement EDSS and no treatment-related SAEs

– In our recent Fall 2018 Conference Call Series, Atara noted that correlation between EBV reactivity with clinical benefit is very encouraging

(underscoring biologic activity)

– The MS opportunity needs to be better understood but clearly has blockbuster potential

Next generation CAR-T efforts provide long-term optionality

Pre-clinical activities are ongoing, and initial IND is expected in 4Q19/1Q20

– While largely scientifically based, key takeaways from recent CAR-T investor breakfast include 1) novel signaling domains/PD1-DNR have the

potential to increase therapeutic activity, 2) co-stimulation has an impact on expansion/persistence and prevents exhaustion, and 3) these

aforementioned technologies/science are being applied/cornerstone of Atara’s development programs (see note here)

– Of note, the next-generation CAR-T opportunity, which has the potential to span a wide range of indications is not currently in our model

Where we could be wrong… In our view, the biggest risk for ATRA shares center on clinical set backs for tab-cel in R/R PTLD or ATA188 in MS in 1H19 (which

includes managing expectations going into these data sets)

Favorite Names: Atara Biotherapeutics – Anupam Rama Atara Biotherapeutics (ATRA) – Overweight, Dec 2019 PT $51





89

We believe IFX-1 clinical success in hidradenitis suppurativa (HS) will drive IFRX shares in 2019

Phase 2b study of IFX-1 in HS is the key value driver for IFRX shares in 1H19

Phase 2b data for lead asset IFX-1 in HS are anticipated in 1H19

– Enrollment for the trial completed in November

There remains an unmet need in HS

– While Humira is approved, there is only a 50% response rate and also a high relapse rate

– We believe the role of complement is well established by InflaRx pre-clinical models

– C5a has role in inflammation and is elevated in HS patients

Prior phase 2a data are very de-risking in our view

– Phase 2a HISCR response rates were 50% at day 29, improving to 83% at day 134 in a refractory population

– At the recent R&D day, Dr. Giamarellos-Bourboulis (National and Kapodistrain University; Athens, Greece) called HISCR responses observed in

the phase 2a trial “dynamic and break-through” (highlighting the durability of the results to date)

– There were no major safety concerns in the phase 2a with all AEs deemed unlikely related to study drug

– Of note, IFX-1 patient exposure is >200 patients based on other studies

The phase 2b population is wider than phase 2a (need to wash out of biologics for certain period)

– Primary endpoint is HISCR at 16 weeks versus placebo (study will assess 4 doses; n=~175)

– Secondary endpoints include HISCR at 12 weeks, PK/PD, and patient global assessment measures

We believe IFRX shares are undervalued on the HS opportunity alone

We believe the HS opportunity has blockbuster potential (~$1.4-1.6B in peak WW sales)

– Our model conservatively assumes a ~60% POS

– We also assume that a pivotal phase 3 will be required for approval

Beyond HS, there is an ongoing phase 2 trial in ANCA-associated vasculitis (AAV)

– First patient in the phase 2 trial has been dosed as of the 3Q18 earnings release

– Like HS, the role of complement in AAV is well established

– While early stage, we do include AAV in our model, but with a low probability of success (~20% POS on scientific rationale)

Where we could be wrong… In our view, the biggest risk for IFRX shares centers on phase 2b trial failure in HS

Favorite Names: InflaRx – Anupam Rama InflaRx (IFRX) – Overweight, Dec 2019 PT $42


90

We see a catalyst-rich 2019 including three phase 3 read-outs for relugolix, sustained momentum into the tail end of the

year, and the potential for significant value creation on positive data

Seeing high probability of success for relugolix across multiple women’s health indications

Top-line phase 3 LIBERTY 1 and LIBERTY 2 data for relugolix in uterine fibroids (UF) expected 2Q19 and 3Q19, respectively

– Prior data from a Japanese phase 3 studies by Takeda as well as competitor GnRH antagonist programs meaningfully de-risk relugolix in UF

– Primary endpoint of <80ml uterine blood loss/cycle and at least a 50% reduction in menstrual blood volume at week 24

Phase 3 SPIRIT 1 & 2 data for relugolix in pain related to endometriosis (EM) expected in 2019

– Prior phase 2 Japanese study showed significant reductions dysmenorrhea and non-menstrual pelvic pain

Emerging oral GnRH antagonist landscape able to support multiple products…

– Total addressable market of $7B+ ($12B+ for the combined US/EU)

– We see MYOV shares as largely insulated from any commercial read-through to the downside, but with the potential to capture sentiment upside

from faster-than-expected Orilissa ramp in EM (led by AbbVie)

… and relugolix is differentiated amongst the class

– Relugolix’s simplified dosing (once-daily administration co-formulation with hormone add-back therapy) is a differentiated offering to Elagolix

– Dosing regimen to resonate with gynecologists and a significant portion of the younger and /or more heavily symptomatic EM/UF patients

– Potential for a long-term alternative to surgery/invasive procedure

Forecasting peak sales of ~$800M in UF and ~$1.6B in EM in the US

– Overall, at current levels, we believe MYOV shares significantly under-reflect the multibillion dollar potential of the EM/UF markets ($2.5B peak

U.S. relugolix estimate, with conservative overall oral GnRH class penetration)

Share momentum potentially continues with additional relugolix read-out in 4Q18 in advanced prostate cancer

Similarly de-risked into phase 3 HERO APC read-out by multiple phase 2 trials

– Phase 2 data vs. leuprolide support relugolix’s activity in achieving high, sustained rates of medical castration, with faster onset of action and

without hormonal flair

– Additional 120 men with metastatic prostate cancer also enrolled to demonstrate superiority over Lupron in time to castrate resistance

Forecasting peak sales of ~$350M in US

Where we could be wrong… Unsuccessful launch of Orilissa could hinder relugolix peak sales potential, despite its co-formulation with add-back therapy; while

de-risked by Japanese studies in UF and EM, differences in patient populations could effect relugolix efficacy in phase 3 studies

Favorite Names: Myovant – Eric Joseph Myovant (MYOV) – Overweight, Dec. 2019 PT $39


91

We see a favorable risk/reward profile into 1Q19 ResVax pivotal data in infant RSV, with additional value creation from

POC phase 2 NanoFlu data also in 1Q19

Seeing high probability of success for phase 3 PREPARE study evaluating ResVax (RSV vaccine) for the maternal immunization of

infants to RSV

Pivotal data due mid- to late 1Q19

– RSV is the leading cause of infant hospitalization, and currently no preventative measures

– ~4,500 pregnant women were enrolled and ~3,000 received ResVax over 4 years

– ResVax must meet an efficacy threshold of 40% with a posterior probability of 90% based on medically significant RSV induced lower respiratory

tract infection in infants

4Q17 informational analysis de-risks readout

– In strategic review of the program, Novavax commissioned an independent informational analysis on the first third of subjects enrolled

– Of the 1,307 infant data set, ResVax had achieved at least the target efficacy threshold of 40%, and informed by the RSV event rate, Novavax

inferred ResVax efficacy to lie between 45% and 100%

– Over the latter two-thirds of subjects, patient populations and RSV event rates have remained consistent

– The analysis passed our own stress test for imperfect study randomization, here

Forecasting $650M+ sales opportunity in the US, with ~20-50% upside

– Assuming positive data, we anticipate BLA-approval in 1Q20

– We can expect future label expansion initiatives in additional high-risk settings in 2019: older adults (this time with adjuvanted ResVax), immuno-

compromised and pediatrics

Additional driver of NVAX shares in 1Q19 with phase 2 POC NanoFlu data in older adults

Accelerated approval strategy potential rests on repeat phase 2 immune response data

– Favorable immunogenicity data was seen in the phase 1/2 study comparing NanoFlu to Fluzone HD (47-63% higher titers for three flu strains)

– Repeat increases in higher titer generation paves the way for an immunogenicity based phase 3 study (<3,000 subjects over a single flu season)

We conservatively view NanoFlu as a $200M peak commercial opportunity

Where we could be wrong… The biggest risk for NVAX shares is meeting the efficacy threshold for ResVax in infants in 1Q19; anything short of the threshold

will end the ResVax program, and challenge the company financially, which would potentially limit NanoFlu pursuits

Favorite Names: Novavax– Eric Joseph Novavax (NVAX) – Overweight



92

Q&A

93

Appendix: Kasimov Comp Sheet

Source: Bloomberg, J.P. Morgan estimates, priced as of 12/10/2018

Price Rating PT Mkt Cap Cash Debt EV P/E P/S YTD

Company Ticker 12/10/2018 YE19 ($B) ($M) ($M) ($B) 2017A 2018E 2019E 2017A 2018E 2019E 2019E 2019E High Low % of float

AMEX Biotech Index BTK $4,500.48 6.6% $5,425 $4,099

NASDAQ Biotech Index NBI $3,269.80 -2.6% $3,866 $3,153

S&P SPX $2,637.72 14.80x -1.3% $2,941 $2,533

Amgen AMGN $194.09 N $192 $123.7 $29,921 $34,427 $128.2 $22,849 $23,413 $22,455 $12.58 $14.14 $13.26 14.64x 5.5x 11.6% $210.2 $163.3 1.5%

Biogen BIIB $319.44 OW $436 $64.4 $5,673 $5,931 $64.6 $12,274 $13,293 $13,772 $21.81 $25.21 $25.10 12.73x 4.7x 0.3% $388.7 $249.2 1.8%

Celgene CELG $68.68 OW $100 $48.0 $2,480 $20,244 $65.8 $13,003 $15,216 $17,144 $7.44 $8.75 $11.21 6.12x 2.8x -34.2% $110.8 $66.6 1.8%

Gilead GILD $67.49 OW $88 $87.3 $30,844 $27,317 $83.9 $26,107 $21,992 $21,543 $8.84 $7.15 $7.24 9.33x 4.1x -5.8% $89.5 $64.3 1.0%

Legacy Large-Caps Average: $81 $17,229 $21,980 $86 $18,558 $18,479 $18,729 $12.67 $13.81 $14.20 10.70x 4.3x -7.0% 1.5%

BioMarin BMRN $93.83 OW $133 $16.7 $1,443 $1,200 $16.5 $1,314 $1,521 $1,716 $0.42 $0.70 $0.87 108.15x 9.7x 5.2% $106.7 $75.8 6.0%

Incyte INCY $65.42 OW $88 $13.9 $1,375 $25 $12.6 $1,536 $1,877 $1,970 ($1.53) $1.04 $2.02 32.32x 7.1x -30.9% $102.6 $58.3 3.1%

Regeneron REGN $377.59 N $405 $40.9 $4,066 $707 $37.5 $5,872 $6,490 $7,050 $16.32 $21.78 $21.58 17.50x 5.8x 0.4% $416.5 $281.9 2.8%

Vertex VRTX $173.78 OW $201 $44.4 $3,056 $27 $41.4 $2,488 $2,985 $3,490 $1.96 $3.94 $4.28 40.57x 12.7x 16.0% $194.9 $139.8 1.5%

Emerging Large-Caps Average: $29 $2,485 $490 $27 $2,802 $3,218 $3,556 $4.29 $6.86 $7.19 49.64x 8.8x -2.3% 3.3%

Acadia ACAD $18.78 OW $26 $2.7 $214 $0 $2.5 $125 $222 $266 ($2.36) ($2.01) ($1.92) NM 10.1x -37.6% $33.0 $12.8 15.5%

Acorda ACOR $19.03 N $18 $0.9 $461 $317 $0.8 $588 $465 $155 $1.75 $0.99 ($2.76) NM 5.9x -11.3% $36.4 $15.6 17.2%

Alkermes ALKS $34.28 OW $63 $5.3 $467 $280 $5.1 $903 $1,034 $1,091 $0.17 $0.28 $0.95 36.05x 4.9x -37.4% $71.2 $32.6 4.4%

Allogene ALLO $26.52 N $29 $3.2 $395 $0 $2.8 $0 $0 $0 ($0.00) ($2.75) ($1.10) NM NM 47.3% $35.6 $21.7 20.7%

bluebird bio BLUE $102.15 OW $195 $5.6 $1,999 $0 $3.6 $35 $47 $63 ($7.71) ($10.70) ($12.36) NM 89.4x -42.6% $236.2 $99.2 9.0%

Clovis Oncology CLVS $21.73 N $20 $1.1 $604 $575 $1.1 $56 $91 $148 ($7.36) ($6.97) ($6.48) NM 7.7x -68.0% $69.0 $11.5 19.4%

Editas EDIT $28.99 N $36 $1.4 $337 $33 $1.1 $14 $55 $20 ($2.98) ($1.94) ($2.73) NM 69.3x -5.7% $45.0 $22.5 15.4%

Global Blood Therapeutics GBT $43.38 OW $75 $2.3 $482 $0 $1.8 $0 $0 $0 ($2.77) ($3.36) ($4.04) NM NM 10.2% $68.1 $30.2 21.3%

Jounce Therapeutics JNCE $3.88 UW NA $0.1 $212 $0 -$0.1 $60 $57 $63 ($0.57) ($1.03) ($1.66) NM 2.0x -69.6% $29.3 $3.3 12.0%

Novocure NVCR $34.87 OW $44 $3.2 $228 $149 $3.2 $246 $333 $401 ($0.70) ($0.67) $0.15 240.03x 8.1x 72.6% $53.7 $19.1 4.4%

Puma Biotechnology PBYI $24.13 UW $23 $0.9 $128 $121 $0.9 $28 $233 $271 ($7.85) ($3.15) ($2.24) NM 3.4x -75.6% $106.3 $17.6 11.5%

Sage Therapeutics SAGE $107.55 OW $205 $5.0 $1,021 $0 $4.0 $0 $90 $83 ($7.09) ($7.09) ($10.22) NM 60.7x -34.7% $196.0 $100.2 6.9%

Seattle Genetics SGEN $60.65 OW $75 $9.7 $463 $0 $9.2 $482 $646 $960 ($0.88) ($1.09) $0.35 172.57x 10.1x 13.4% $84.4 $47.8 11.7%

Spark Therapeutics ONCE $41.46 N $60 $1.6 $618 $51 $1.0 $12 $95 $143 ($7.63) ($0.73) ($2.94) NM 10.9x -19.4% $96.6 $35.6 16.7%

Ultragenyx RARE $47.62 OW $66 $2.4 $503 $0 $1.9 $16 $90 $33 ($8.32) ($5.48) ($8.62) NM 73.4x 2.7% $91.0 $41.7 10.4%

SMid-Cap Average: $3 $542 $102 $3 $171 $231 $246 ($3.62) ($3.05) ($3.71) 149.55x 27.4x -17.0% 13.1%

52 WeekRevenues ($M) SIEPS

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94

Appendix: Fye Comp Sheet

Source: Bloomberg, J.P. Morgan estimates, priced as of 12/10/2018

Price Market Net Debt 52 Week Short Interest

Company Name Ticker Rating Cap (MM) (MM) YTD High Low % of Float

Alder Biopharmaceuticals ALDR OW $11.40 779 (273) -0.4% 20.87 10.45 21%

AMAG Pharmaceuticals AMAG N $17.83 616 (148) 34.6% 26.10 11.95 30%

Aptinyx APTX OW $20.87 699 (166) NA 32.25 17.35 8%

Arena Pharmaceuticals, Inc. ARNA N $41.01 2,026 (503) 20.7% 50.05 29.52 6%

Ascendis Pharma A/S ASND OW $63.00 2,648 (360) 57.3% 76.99 36.07 -

BioCryst Pharmaceuticals BCRX OW $9.06 993 (59) 84.5% 9.71 4.25 9%

Chimerix CMRX UW $3.38 171 (183) -27.0% 5.94 3.11 1%

Crinetics CRNX N $33.56 807 (170) NA 42.00 19.23 24%

Deciphera DCPH OW $27.43 1,033 (302) 21.0% 45.61 15.15 15%

Denali DNLI OW $20.23 1,921 (517) 29.3% 25.79 12.32 13%

Emergent BioSolutions EBS OW $67.00 3,413 (326) 44.2% 73.89 42.67 5%

Esperion Therapeutics ESPR UW $52.93 1,419 (159) -19.6% 82.68 33.06 26%

Halozyme Therapeutics HALO OW $15.52 2,244 (218) -23.4% 21.48 14.33 5%

ImmunoGen IMGN N $5.38 802 (295) -16.1% 13.41 5.11 10%

Intra-Cellular Therapies ITCI OW $15.34 840 (376) 5.9% 25.82 13.29 6%

Ionis Pharmaceuticals IONS N $53.33 7,337 (1,320) 6.0% 59.81 39.07 10%

Jazz Pharmaceuticals JAZZ OW $139.65 8,424 530 3.7% 184.00 130.15 3%

Lexicon Pharmaceuticals LXRX UW $7.15 757 58 -27.6% 13.97 6.75 25%

Magenta MGTA OW $7.76 257 (159) NA 16.33 6.10 22%

Mersana MRSN N $5.18 120 (86) -65.5% 23.96 4.96 18%

Nektar Therapeutics NKTR OW $36.66 6,345 (1,174) -38.6% 111.36 33.50 10%

Radius Health RDUS OW $15.95 726 (58) -49.8% 41.16 14.52 18%

Rubius Therapeutics RUBY OW $19.18 1,516 (382) NA 33.01 14.50 17%

Stemline STML OW $10.35 329 (79) -33.7% 20.55 9.65 6%

The Medicines Company MDCO OW $20.79 1,536 538 -24.0% 41.57 19.55 26%

Tricida TCDA N $31.78 1,338 (52) NA 40.10 21.87 7%

United Therapeutics UTHR N $108.50 4,729 (1,584) -26.7% 152.55 100.57 10%

95

Price Market Cash Net Debt 52 Week Short Interest

Target Cap (MM) (MM) (MM) YTD High Low % of Float

Agios Pharmaceuticals AGIO OW $52.72 $91.00 3,067 878 0 -7.8% 99.82 50.96 14%

Alexion Pharmaceuticals ALXN OW $114.65 $188.00 25,578 1,535 3,206 -4.1% 140.77 102.10 2%

Alnylam Pharmaceuticals ALNY OW $76.69 $99.00 7,748 1,237 30 -39.6% 153.99 63.57 6%

Amicus Therapeutics FOLD OW $10.61 $18.00 2,008 564 203 -26.3% 17.62 9.65 14%

AnaptysBio ANAB OW $70.81 $115.00 1,894 494 10 -29.7% 134.00 62.56 15%

Apellis Pharmaceuticals APLS OW $17.98 $34.00 1,011 176 0 - 32.00 11.45 9%

Array BioPharma ARRY OW $15.43 $18.00 3,288 415 131 20.5% 20.21 10.54 9%

Atara Biotherapeutics ATRA OW $42.97 $51.00 1,962 365 0 137.4% 54.45 14.31 17%

Audentes Therapeutics BOLD OW $23.32 $35.00 996 281 5 -25.4% 46.18 19.62 8%

Constellation CNST OW $5.80 $14.00 150 128 0 - 12.21 5.57 2%

ChemoCentryx Inc. CCXI N $10.04 $15.00 507 182 15 68.7% 15.08 5.42 5%

Clearside Biomedical CLSD UW $1.44 $8.00 46 65 10 -79.4% 15.33 1.31 3%

Dova Pharmaceuticals DOVA OW $15.44 $34.00 435 122 20 - 37.00 14.09 28%

Dynavax DVAX OW $10.87 $26.00 681 180 100 -41.9% 22.80 9.63 27%

Eidos Therapeutics EIDX OW $13.90 $29.00 511 167 0 - 24.75 8.89 30%

G1 Therapeutics GTHX OW $33.00 $59.00 1,227 391 0 - 69.57 18.04 6%

Idera Pharmaceuticals IDRA OW $6.56 $15.00 178 82 0 -61.1% 20.40 5.20 2%

Infinity Pharmaceuticals INFI UW $1.26 - 72 42 0 -37.9% 2.92 1.20 3%

InflaRx IFRX OW $29.51 $42.00 765 148 0 - 42.83 17.50 1%

La Jolla Pharmaceuticals LJPC UW $13.81 $18.00 362 204 0 -57.1% 41.36 12.86 47%

Kiniksa KNSA OW $24.98 $30.00 1,236 338 0 - 32.88 13.04 3%

Merrimack Pharmaceuticals MACK UW $4.26 - 57 85 0 -58.4% 11.70 3.34 4%

Myokardia MYOK OW $57.30 $82.00 2,308 257 0 36.1% 67.79 35.55 10%

Neurocrine Biosciences NBIX OW $85.81 $127.00 7,781 635 384 10.6% 126.98 68.22 5%

Ophthotech OPHT UW $1.60 - 66 135 0 -48.7% 4.50 1.57 1%

Orchard Therapeutics ORTX OW $15.56 $25.00 1,336 330* 0 - 19.24 13.00 N/A

Otonomy OTIC UW $2.52 - 77 93 0 -54.6% 6.45 2.16 1%

Replimune REPL OW $14.00 $26.00 442 148 0 - 23.55 10.52 10%

Rigel Pharmaceuticals RIGL OW $2.75 $7.00 458 135 0 -29.1% 4.71 2.56 12%

Sarepta Therapeutics SRPT OW $122.80 $203.00 8,729 793 415 120.7% 176.50 50.68 14%

Solid Biosciences SLDB UW $25.38 $31.00 899 145 0 - 54.84 6.83 13%

Zai Lab ZLAB OW $19.92 $31.00 1,157 93 0 - 27.34 14.29 N/A

* JPM estimate for the period ending 9/30/2018.

Company Name Ticker Rating Price

Appendix: Rama Comp Sheet

Source: J.P. Morgan Research, Bloomberg, priced as of 12/10/2018

Note: Price target end date: YE19.

96

Appendix: Joseph Comp Sheet

Source: J.P. Morgan Research, Bloomberg, priced as of 12/10/2018

Price Price Market Cash Net Debt 52 Week Short Interest

Company Name Ticker Rating Target Cap (MM) (MM) (MM) YTD High Low % of Float

Acceleron XLRN OW $48.10 57.00 2,222 308 0 13.3% 59.59 32.53 12%

Enanta Pharmaceuticals ENTA N $75.00 74.00 1,457 325 0 27.8% 127.77 47.49 18%

Five Prime Therapeutics FPRX N $12.09 15.00 429 322 0 -44.8% 24.82 10.35 6%

Ironwood Pharmaceuticals IRWD UW $12.30 11.00 1,895 161 409 -17.9% 21.20 11.02 9%

Karyopharm Therapeutics KPTI OW $10.10 21.00 613 207 0 5.2% 21.71 9.00 14%

Myovant MYOV OW $18.41 39.00 1,261 154 45 45.6% 27.45 11.30 4%

Novavax NVAX OW $2.14 - 819 56 319 72.6% 2.75 1.05 15%

ObsEva OBSV OW $14.66 29.00 635 156 0 50.2% 20.35 9.05 0%

OPKO Health OPK UW $3.32 - 1,859 44 205 -32.2% 6.40 2.66 22%

PTC Therapeutics PTCT N $34.52 46.00 1,742 249 151 107.0% 52.95 15.60 9%

Sangamo Therapeutics SGMO N $11.68 11.00 1,192 459 0 -28.8% 27.50 9.00 16%

Urovant UROV OW $6.50 21.00 197 144 0 -53.6% $14.32 6.25 0%

Ziopharm Oncology ZIOP UW $3.08 - 439 32 0 -25.6% 5.25 1.90 31%

Note: Price target end date: YE19.

97

Appendix: Buyside Survey


What do you see as the biggest TAILWIND in the space in 2019? (Top 5 ranked factors selected)

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

Clinical data / Innovation 40% 15% 9% 15% 5% Clinical data / Innovation 46% 22% 9% 12% 6%

Increasing M&A 29% 21% 18% 2% 11% Increasing M&A 19% 14% 24% 18% 6%

Attractive valuations 15% 23% 20% 5% 3% Easier Regulatory Environment / FDA 11% 3% 21% 15% 6%

Easier Regulatory Environment / FDA 8% 13% 20% 12% 14% Attractive valuations 8% 16% 18% 12% 3%

Less political uncertainty 2% 8% 0% 5% 5% Improving Sentiment 8% 14% 3% 12% 16%

Capital Markets 2% 0% 0% 0% 5% Strong Product Launches 5% 11% 9% 6% 16%

Renewed Generalist interest 2% 6% 13% 10% 19% There aren't any 3% 5% 0% 0% 0%

There aren't any 2% 2% 2% 2% 3% Less pricing pressure 0% 8% 0% 3% 19%

Strong Product Launches 0% 4% 9% 10% 14% Less political uncertainty 0% 3% 9% 3% 19%

Less pricing pressure 0% 0% 0% 7% 8% Non-Pricing related healthcare reform 0% 0% 0% 6% 3%

Non-Pricing related healthcare reform 0% 0% 2% 5% 5% Capital Markets 0% 0% 0% 3% 0%

Improving Sentiment 0% 8% 7% 27% 8% Renewed Generalist interest 0% 5% 6% 9% 6%

Factor Rank Distribution - Specialist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Factor Rank Distribution - Generalist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

Clinical data / Innovation 42% 18% 10% 13% 5% Clinical data / Innovation 43% 14% 0% 17% 20%

Increasing M&A 23% 19% 21% 10% 9% Increasing M&A 43% 0% 17% 0% 0%

Attractive valuations 13% 21% 18% 7% 3% There aren't any 14% 0% 0% 0% 0%

Easier Regulatory Environment / FDA 10% 9% 21% 13% 11% Easier Regulatory Environment / FDA 0% 0% 17% 17% 0%

Improving Sentiment 4% 12% 6% 18% 11% Strong Product Launches 0% 14% 0% 0% 40%

Strong Product Launches 3% 6% 10% 9% 13% Less pricing pressure 0% 29% 0% 0% 0%

Less political uncertainty 1% 5% 3% 4% 13% Less political uncertainty 0% 14% 17% 0% 0%

Capital Markets 1% 0% 0% 1% 3% Non-Pricing related healthcare reform 0% 0% 0% 0% 0%

Renewed Generalist interest 1% 5% 10% 10% 13% Attractive valuations 0% 14% 33% 17% 0%

There aren't any 1% 4% 1% 1% 2% Capital Markets 0% 0% 0% 0% 0%

Less pricing pressure 0% 1% 0% 6% 14% Improving Sentiment 0% 0% 0% 50% 20%

Non-Pricing related healthcare reform 0% 0% 1% 6% 5% Renewed Generalist interest 0% 14% 17% 0% 20%

98

Appendix: Buyside Survey


What do you see as the biggest HEADWIND in the space in 2019? (Top 5 ranked factors selected)

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

Payor / Pricing Pressure 38% 13% 13% 5% 15% Payor / Pricing Pressure 42% 11% 12% 9% 12%

Lackluster M&A 17% 17% 22% 10% 8% Clinical Data/Failures/Lack of Catalysts 21% 5% 26% 3% 20%

Rising Interest Rates / Macro 15% 17% 15% 12% 13% Rising Interest Rates / Macro 18% 3% 12% 16% 16%

Rich Valuations 8% 4% 4% 12% 13% Non-Pricing Related Healthcare Reform 5% 14% 3% 6% 0%

Capital Markets / IPOs 8% 6% 7% 10% 10% Lackluster M&A 5% 19% 15% 25% 8%

Slowing Growth / Earnings 6% 6% 17% 22% 5% Rich Valuations 3% 3% 3% 3% 4%

Clinical Data/Failures/Lack of Catalysts 4% 13% 4% 12% 15% Negative Sentiment 3% 19% 9% 9% 12%

Negative Sentiment 4% 11% 13% 10% 18% There Aren't Any 3% 3% 0% 0% 0%

Non-Pricing Related Healthcare Reform 0% 13% 4% 7% 0% Capital Markets / IPOs 0% 11% 9% 13% 8%

There Aren't Any 0% 0% 0% 0% 3% Slowing Growth / Earnings 0% 14% 12% 16% 20%

Factor Rank Distribution - Specialist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Factor Rank Distribution - Generalist Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

Payor / Pricing Pressure 35% 12% 14% 8% 15% Payor / Pricing Pressure 86% 17% 0% 0% 0%

Rising Interest Rates / Macro 18% 10% 15% 12% 12% Clinical Data/Failures/Lack of Catalysts 14% 0% 17% 14% 40%

Lackluster M&A 13% 18% 18% 17% 8% Non-Pricing Related Healthcare Reform 0% 0% 33% 14% 0%

Clinical Data/Failures/Lack of Catalysts 11% 10% 14% 8% 15% Lackluster M&A 0% 17% 33% 14% 0%

Rich Valuations 6% 4% 4% 9% 10% Rich Valuations 0% 0% 0% 0% 0%

Capital Markets / IPOs 5% 8% 8% 11% 10% Capital Markets / IPOs 0% 17% 0% 14% 0%

Slowing Growth / Earnings 4% 9% 16% 21% 12% Slowing Growth / Earnings 0% 17% 0% 0% 0%

Negative Sentiment 4% 14% 11% 9% 15% Negative Sentiment 0% 17% 17% 14% 20%

Non-Pricing Related Healthcare Reform 3% 14% 1% 6% 0% Rising Interest Rates / Macro 0% 17% 0% 29% 40%

There Aren't Any 1% 1% 0% 0% 2% There Aren't Any 0% 0% 0% 0% 0%

99


Cory Kasimov(1-212) [email protected]

Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Important Disclosures

Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://www.jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia and ex-India) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

Coverage Universe: Kasimov, Cory W: ACADIA Pharmaceuticals (ACAD), Acorda Therapeutics Inc. (ACOR), Alkermes PLC (ALKS), Allogene (ALLO), Amgen Inc (AMGN), BioMarin Pharmaceuticals (BMRN), Biogen (BIIB), Celgene (CELG), Clovis Oncology (CLVS), Editas Medicine (EDIT), Gilead Sciences (GILD), Global Blood Therapeutics (GBT), Incyte Corporation (INCY), Jounce Therapeutics (JNCE), Novocure LTD (NVCR), Puma Biotechnology (PBYI), Regeneron Pharmaceuticals (REGN), Sage Therapeutics (SAGE), Seattle Genetics (SGEN), Spark Therapeutics (ONCE), Ultragenyx (RARE), Vertex Pharmaceuticals (VRTX), bluebird bio (BLUE)

Fye, Jessica: AMAG Pharmaceuticals (AMAG), Alder Biopharmaceuticals (ALDR), Aptinyx (APTX), Arena Pharmaceuticals, Inc. (ARNA), Ascendis Pharma (ASND), BioCryst Pharmaceuticals (BCRX), Chimerix (CMRX), Crinetics (CRNX), Deciphera (DCPH), Denali (DNLI), Emergent BioSolutions (EBS), Esperion Therapeutics (ESPR), Halozyme Therapeutics (HALO), ImmunoGen (IMGN), Intra-Cellular Therapies (ITCI), Ionis Pharmaceuticals (IONS), Jazz Pharmaceuticals (JAZZ), Lexicon Pharmaceuticals (LXRX), Magenta (MGTA), Mersana (MRSN), Nektar Therapeutics (NKTR), Radius Health (RDUS), Rubius (RUBY), Stemline Therapeutics (STML), The Medicines Company (MDCO), Tricida (TCDA), United Therapeutics (UTHR)

Rama, Anupam: Agios Pharmaceuticals (AGIO), Alexion Pharmaceuticals (ALXN), Alnylam Pharmaceuticals (ALNY), Amicus Therapeutics (FOLD), AnaptysBio (ANAB), Apellis (APLS), Array BioPharma (ARRY), Atara Biotherapeutics (ATRA), Audentes Therapeutics (BOLD), ChemoCentryx, Inc. (CCXI), Clearside Biomedical (CLSD), Constellation (CNST), Dova Pharmaceuticals (DOVA), Dynavax (DVAX), Eidos Therapeutics (EIDX), G1 Therapeutics (GTHX), Idera Pharmaceuticals (IDRA), Infinity Pharmaceuticals (INFI), InflaRx (IFRX), Kiniksa (KNSA), La Jolla Pharma (LJPC), Merrimack Pharmaceuticals (MACK), MyoKardia (MYOK), Neurocrine Biosciences (NBIX), Ophthotech (OPHT), Orchard Therapeutics (ORTX), Otonomy (OTIC), Replimune (REPL), Rigel Pharmaceuticals (RIGL), Sarepta Therapeutics (SRPT), Solid Biosciences (SLDB), Zai Lab (ZLAB)

Joseph, Eric W: Acceleron Pharma (XLRN), Enanta Pharmaceuticals (ENTA), Five Prime Therapeutics (FPRX), Ironwood Pharmaceuticals (IRWD), Karyopharm Therapeutics (KPTI), Keryx Biopharmaceuticals (KERX), Melinta Therapeutics Inc (MLNT),

mailto:[email protected]


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100



Momenta (MNTA), Myovant (MYOV), Novavax (NVAX), OPKO (OPK), ObsEva (OBSV), PTC Therapeutics (PTCT), Sangamo Therapeutics Inc (SGMO), Urovant (UROV), ZIOPHARM Oncology (ZIOP)

J.P. Morgan Equity Research Ratings Distribution, as of October 01, 2018

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 47% 40% 13%IB clients* 54% 49% 37%

JPMS Equity Research Coverage 45% 42% 13%IB clients* 75% 66% 53%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected]. For material information about the proprietary models used, please see the Summary of Financials in company-specific research reports and the Company Tearsheets, which are available to download on the company pages of our client website, http://www.jpmorganmarkets.com. This report also sets out within it the material underlying assumptions used.

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

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Completed 11 Dec 2018 09:29 PM EST Disseminated 12 Dec 2018 12:15 AM EST

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