1 February 2016 Canadian SMID E&P Americas/Canada Equity ...
Credit Suisse Equity Research Americas/United States ...
Transcript of Credit Suisse Equity Research Americas/United States ...
1
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE
STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse 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.
Credit Suisse Equity Research
Americas/United States
Global BioPharma Alzheimer’s Disease Call
October 19th, 2016
A Detailed Deep-dive into Alzheimer’s Disease, Key Players and Upcoming Data Readouts RESEARCH TEAM
Alethia Young
Research Analyst +1 212-538-0640 [email protected] Matthew Weston
Research Analyst +44 020-7888 -690 [email protected]
Vamil Divan, MD
Research Analyst +1 212-538-5394 [email protected]
Jo Walton
Research Analyst +44 020- 7888-0304 [email protected]
Fumiyoshi Sakai
Research Analyst +81-4550-9737 [email protected]
2
Outline for today’s call
Why is the amyloid hypothesis still under debate?
How we look at comparing the key late stage assets?
What are the lessons we have learned from prior AD studies?
How do we think about prior Sola studies and upcoming EXPEDITION3 readout?
How do we think Lilly and Merck trade around Sola Ph3 readout?
How do we think Biogen and AC Immune trade around Sola Phase 3 readout?
How do we think about potential impacts to Roche and other EU read-throughs?
Source: Company data, Credit Suisse estimates and analysis
3
Solanezumab Phase 3 Results Will Are a Big Catalyst for AD Space, With Topline Data Expected in 4Q16
LLY’s Solanezumab Phase 3 is reading out in Q4 2016. This data could provide more
confidence in the hypothesis which both ACIU and BIIB’s lead assets are developed around.
Our team did an extensive deep-dive analysis into the preclinical and clinical data behind each of
these AD assets and we believe the Phase 3 Lilly trial could be successful.
Source: Company data, Credit Suisse estimates and analysis
Company Drug Rating TP Analyst
Biogen Aducanumab Neutral $322 Alethia Young
AC Immune Crenezumab Outperform $18 Alethia Young
Roche Crenezumab Outperform SFr300 Matthew Weston
Eli Lilly Solanezumab Outperform $96 Vamil Divan
Merck Verubacestat Outperform $73 Vamil Divan
Eisai BAN2401 Neutral ¥5,900 Fumiyoshi Sakai
4
We Assume a 60% Chance of a Cognition Benefit, 40% Chance of a Failed Trial for EXPEDITION3
EXPEDITION3 is a major catalyst for the AD space in 4Q16
Solanezumab data will help confirm or refute the validity of the amyloid hypothesis and all key
late stage Alzheimer companies will likely have stock moves based on these results
We think there are four scenarios to consider when thinking about stock reactions
Scenario CS Case CS Biotech POS
Super-bull scenarioSola shows significant cognitive and
functional endpoints10%
Bull scenarioSola shows significant data and a trend
on functional endpoints30%
Base scenarioSola shows significant cognitive data but
NO trend on functional20%
Bear scenarioSola shows NO significant benefit on
cognition40%
Source: Company data, Credit Suisse estimates and analysis
5
Why is the amyloid hypothesis under debate?
Source: Company data, Credit Suisse estimates and analysis
6
Alzheimer’s Disease May Be Due to Misfolding of Amyloid Beta Protein
AD is a progressive neurodegenerative disease that destroys brain cells, leading to problems
with memory, thinking, and behavior.
While still under debate, it is thought that the misfolding and buildup of a protein called amyloid
beta in the brains of AD patients is at the root cause of the disease.
By stopping the buildup of amyloid beta plaques, you may be able to slow AD progression.
Source: Company data, Credit Suisse estimates and analysis
7
Various Neurodegenerative Drug Targets for AD
BACE inhibitor – beta-secretase inhibitor: Beta secretase is an enzyme that cleaves the amyloid
precursor protein (APP). Beta amyloid is formed from the breakdown of the APP.
Inhibiting this enzyme is hypothesized to prevent the breakdown of the APP into amyloid beta peptides, thereby preventing the buildup of amyloid beta which is implicated in Alzheimer’s.
Amyloid beta inhibitor: Binds to beta amyloid fragments directly to prevent their accumulation into
plaques.
Tau inhibitor: Inhibits tau protein, another protein whose accumulation (in tangles) is associated with
AD pathology
Source: Company data, Credit Suisse estimates and analysis
8
Drug Targets Have Also Focused on Tau Protein; It Remains Unclear What Role of Tau May Be in the Clinic
Tau hypothesis of AD is tested in multiple anti-Tau assets. However, most are in the early
development stage compared to amyloid beta target
Misfolded hyperphosphorylated Tau forms tangles that are extremely insoluble and may
contribute to the neurodegenerative disease
Source: Company data, Credit Suisse estimates and analysis
Asset Lead company Type Phase Reference
AADvac1Axon
NeuroscienceVaccine Phase 2 NCT02579252
ACI-35 ACImmune/JNJ Vaccine Phase 1
RO7105705 ACImmune/Gen
entechAntibody Phase 1 NCT02820896
BMS-
986168
Bristol-Myers
SquibbAntibody Phase 1 NCT02294851
C2N-8E12 AbbVie Antibody Preclinical
Select Pipeline Products Targeting Tau
9
Key drugs in development: what data do we have about these assets so far? Solanezumab, Aducanumab, Crenezumab
Source: Company data, Credit Suisse estimates and analysis
10
Many of the Drugs in Development are Targeting Amyloid Beta
Lilly: lead amyloid beta asset in development, along with BACE inhibitor and others in earlier
development
Merck expected to have data next year on BACE program
Biogen: two amyloid betas and a BACE
Roche has two an amyloid beta asset as well: our sense is that crenezumab is the higher
priority asset but Roche may begin late-stage studies with gantenerumab again
Source: Company data, Credit Suisse estimates and analysis
Compound Company Stage Patients MOA
Solanezumab Lilly Phase 3 Mild Anti-Abeta antibody
Aducanumab Biogen Phase 3 Mild Anti-Abeta antibody
Crenezumab Roche/AC immune Phase 3 Mild and moderate Anti-Abeta antibody
Verubecestat Merck Phase 3 Prodromal BACE inhibitor
Verubecestat Merck Phase 3 Mild to moderate BACE inhibitor
Gantenerumab Roche Phase 3 Mild Anti-Abeta antibody
AC-1204 Accera Phase 2/3 Mild to moderate metabolic
AZD-3293 Astrazeneca/Lilly Phase 2/3 Mild BACE inhibitor
BAN2401 Eisai / Biogen Phase 2 Mild Anti-Abeta antibody
E2609 Eisai / Biogen Phase 2 Prodromal or Mild BACE inhibitor
MEDI1814 Astrazeneca Phase 1 Mild to moderate Anti-Abeta antibody
Select Anti-Amyloid Therapies in Development
11
Solanezumab Could be At Least 2 Years Ahead of Next Antibodies Making it to the Market
LLY’s Solanezumab Phase 3 is reading out in Q4 2016
Phase 3 designs are notably different
Solanezumab
(Expedition 3)
Aducanumab
(Engage and Emerge)
Crenezumab
(CREAD)
Estimated Enrollment 2,100 1,350 (each) 750
Began Enrolling August 2013 June/July 2015 January 2016
MMSE at Baseline 20-26 24-30 22+
Primary Endpoint/s ADAS-Cog14 CDR-SB CDR-SB
Dosing Length 80 Weeks 78 Weeks 105 Weeks
Doses Studied
400mg versus
placebo
IV every 4 weeks
Low dose vs. placebo
High dose vs. placebo
IV every 4 weeks
60mg vs. placebo
IV every 4 weeks
Expected data readout 4Q 2016 2019 2019
Source: Company data, Credit Suisse estimates and analysis
12
Quick Summary of Data Presented on Key Late-Stage Assets Under Coverage
Source: Company data, Credit Suisse estimates and analysis
Asset Company Main Dataset CS Comments
Solanezumab Eli LillyPhase 3 Expedition 1 & 2 Trials
(~2,000 patients)
Studies failed overall population (MMSE 16-26)
Cognitive and some functional benefits seen in mild patients
Crenezumab AC Immune/RochePhase 2 ABBY Study
(~250 patients at the 15mg/kg dose)
Study failed in overall population (MMSE 18-26)
Cognitive and some functional trends in mild patients
Minimal ARIA seen
Haven't yet seen data on the Phase 3 60mg/kg dose
Aducanumab Biogen
Phase 1B PRIME Study
(~32 and ~30 patients at the 6mg/kg
and 10mg/kg doses)
Study showed solid CDR-SB and MMSE benefits (MMSE 20-30)
Small population
Some ARIA-E concerns
BAN2401 Biogen/Eisai
18 month trial Baysean design that
can enroll up to 800 patients. Trial
primary endpoint will measure a
change in a composite cognitive
endpoint
Status: 750th patient enrolled around (~September 2016), and if
no early or success criteria met, again at 800th (~December), and
again if no early success or failure met, IAs at every 3 months until
completion of trial (12 months).
13
Solanezumab, Aducanumab and Crenezumab have All Shown Statistically Significant Benefit on Cognitive Endpoints in Mild Patients
ADAS-Cog14 (EXPEDITION3 primary endpoint) was significant in the pooled mild cohorts from
EXPEDITION 1/2
Crenezumab has also shown a statistically significant benefit on ADAS Cog12.
We have seen statistically significant differences on MMSE in Aducanumab and Solanezumab but
not Crenezumab
MMSE is primarily used for screening purposes vs. as a clinical measure
Source: Company data, Credit Suisse estimates and analysis
14
Aducanumab is the Only Amyloid Beta to Have Shown a Stat Sig Benefit on CDR-SB
The PRIME study enrolled more mild to prodromal patients
CDR-SB is a difficult functional endpoint to hit so clinicians took notice after this data
However, we note the small sample size in the 10mg/kg arm of the PRIME study and that the
patients were slightly more mild at baseline 24.5 in PRIME vs. 22.5 in EXPEDITION 1&2 pooled
mild
Asset Trial DoseDosing
Lengthn
MMSE
Enrollment
Baseline
MMSECDR-SB
Higher is better Lower is better
Aducanumab PRIME 10mg/kg IV 54 weeks 32 20-30 24.5 -1.24*
(p<0.05)
Crenezumab ABBY 15mg/kg IV 72 weeks Plc: 39
Cren: 8222-26
-0.44
p=.423
SolanezumabExpedition 1 & 2: Pooled Mild
Subgroup400mg IV 72 weeks 1322 20-26 22.5
-0.16*
(p=.34)
* calculated based on change from baselines reported in placebo and active arms
Source: Company data, Credit Suisse estimates and analysis
15
There Was a Trade-Off; ARIA-E was Higher for Aducanumab Studies than Others
ARIA-E is not an ideal safety issue but likely manageable; maybe harder for community docs
Some started to debate whether inflammation was a sign of efficacy suggesting the plaque was
moving
We think the verdict is still out and agree with Biogen exploring titration
Source: Company data, Credit Suisse estimates and analysis
16
Crenezumab Missed its Primary Endpoints in Phase 2, but Showed Activity in Mild Patients
Roughly 346 patients dosed between ABBY (cognition) and BLAZE (biomarker on amyloid
burden)
Crenezumab did not meet its co-primary endpoints in mild-to-moderate AD (MMSE 18-26)
patients but did show activity in mild (MMSE 22 26) patients
Two co-primary endpoints, ADAS-cog12 and CDR-SOB, were not significant in the
pre-specified population and had 16.8% (p=0.19) and 3.1% (p=0.85) reduction,
respectively.
ABBY BLAZE ADAD CREAD
Phase Ph 2 Ph 2 Ph 1 Ph 2 Ph 3
Cognition Biomarker Explore high dose Prevention Pivotal
Initiation
date6/7/2011 8/17/2011 Jan 2015 11/29/2013 1/28/2016
Number
enrolled431 91 72 300 750
Status Completed Completed Enrolling Enrolling Enrolling
Duration 73 wk 73 wk 10 mo 260 wk 105 wk
Patient
criteriaMMSE 18-26 MMSE 18-28
MMSE >/= 26
PSEN1 mutationMMSE >22
Primary
Endpoints
ADAS-cog11
CDR-SOB
Brain amyloid
change by
florbetapir-PET
Safety
Alzheimer's
Prevention Initiative
(API) Composite
Cognitive score
CDR-SB
Dosage 300mg SC q2w OR 15mg/kg IV q4w 60mg/kg IV q4w
Source: Company data, Credit Suisse estimates and analysis
17
Crenezumab Showed Trends on CDR-SB Based on Baseline MMSE Scores
CDR-SB, an endpoint with a functional component and the Phase 3 endpoint for both
Crenezumab and Aducanumab, was not statistically significant in MMSE 22-26 patients.
However, the data do show a trend on CDR-SB suggesting some activity the more mild the
patient cohort
Source: Company data, Credit Suisse estimates and analysis
18
Statistically Significant Difference was Seen Versus Placebo on ADAS-Cog12 in Mild Patients (MMSE 22-26)
The effect on ADAS-Cog12 was greater the milder the population at baseline, with the greatest
effect being seen in the 22-26 MMSE group (n= 121; Placebo 39, Crenezumab 82)
Source: Company data, Credit Suisse estimates and analysis
19
For Crenezumab, No Trend Yet in Functional Endpoints
Dosing is at 15mg/kg in Phase 2 but Ph3 dose is 60mg/kg. We have not seen that data
published yet; likely a smaller cohort
Data seen at 15 mg/kg on a functional basis has no effect so any info around higher dosing and
functional endpoints would be important
Source: Company data, Credit Suisse estimates and analysis
20
What went wrong in all these prior Alzheimer’s trials?
Source: Company data, Credit Suisse estimates and analysis
21
Has Dosing Been Pushed Enough to Lead to Efficacy?
We think that it is a key question for many drugs below which have failed
ARIA-E (brain inflammation) is the key safety issue that limits dosing
There are some questions around the current solanezuamab dosing as well
Source: Company data, Credit Suisse estimates and analysis
Drug Lead
CompanyTarget
Phase
when
failed
Type
Bapineuzumab JNJ/PfizerAmyloid
BetaPhase 3 Antibody
Idalopirdine Lundbeck 5-HT6 Phase 3 Small molecule
Gammagard BaxterAmyloid
BetaPhase 3
Immunoglobulin
s
LMTX TauRx Tau Phase 3 Small molecule
PF-04360365 PfizerAmyloid
BetaPhase 2 Antibody
22
Has Dosing Been Pushed Enough to Lead to efficacy?
In December 2014 Roche halted the Phase 3 trial of gantenerumab after a pre-planned futility
analysis in 312 patients who had reached two years of treatment (no new safety signals, so
presumably halted for efficacy)
Had enrolled a mild population (MMSE of 24+ vs. EXPEDITION3 which is in MMSE of 20-26)
However, the doses used were 105mg and 225mg vs. 400mg in Sola, 10mg/kg in
Aducanumab, and 15mg/kg for Crenezumab in ABBY (10 to 15mg/kg is equivalent to 680-
1020mg assuming average weight of 68kg)
We think the low doses could have been a cause of lack of efficacy
Source: Company data, Credit Suisse estimates and analysis
23
Maybe We Need to Look for Mild Prodromal Patients…
Many of the earlier trials worked in mild sub-group populations (mostly in post-hoc analyses)
Most of these studies studied mild to moderate which seemingly did not work
Biogen’s study made a splash because though small it worked in the defined cohort
Source: Company data, Credit Suisse estimates and analysis
Drug Trial nMMSE
population
ADAS-
Cog14
ADAS-
cog12MMSE CDR-SOB
Crenezumab ABBY 103 22-2635%
(p=0.036)
45.8%
(p=0.25)
19.6%
(p=0.42)
SolanezumabPooled
EXPEDITION1322 20-26
34.3%
(p=0.001)
33.7%
(p=0.001)
9.5%
(p=0.34)
Aducanumab PRIME 45 20-302.25
(p<0.05)
1.24
(p<0.05)
24
Is every amyloid beta created equal?
Although they are all targeting Abeta, thy have distinct molecular properties e.g. different binding sites,
epitopes and backbones
Clinically, there is no clear evidence yet to suggest that the binding sites and epitopes make a difference for
clinical efficacy
Crenezumab is the only drug on the IgG4 backbone; they think that this helps with ARIA-E profile which allows
for them to dose higher
Preclinical data (Adolfsson et al.) suggests IgG4 backbone vs. IgG1 backbone reduces inflammation by activating the microglia cells vs. IgG1 which is shown to activate complement and TNF-alpha inflammatory factors
Source: Company data, Credit Suisse estimates and analysis
Crenezumab Solanezumab Aducanumab Bapineuzumab Gantenerumab
IgG lgG4 lgG1 lgG1 lgG1 IgG1
Source Humanized Humanized Human Humanized Human
Binding
profile
Monomers;
Oligomers;
Fibrils
MonomersOligomers;
Fibrils
Monomers;
Oligomers;
Fibrils
Oligomers; Fibrils
Epitope Mid-domain mid-domain N-term N-term N-term + mid
MOA
Microglia-
mediated
clearance
Sequestration of
soluble
monomeric Aβ
Microglia-
mediated
clearance
Microglia-
mediated
clearance
Microglia-
mediated
clearance
25
Market opportunity for AD: What are the commercial implications?
Source: Company data, Credit Suisse estimates and analysis
26
Diagnosis is Still Relatively Poor But We Expect This to Improve Over Time
AD is one of the most poorly diagnosed diseases in the US given the clinical difficulty of
distinguishing between natural aging vs. disease progression
Many biomarkers and diagnostics for AD are currently in development that we think will
eventually improve diagnosis
45%
27%
93% 96% 91%84%
92% 90%84% 81%
72% 72% 70%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: Company data, Credit Suisse estimates and analysis
27
We Think Initial Market Opportunity is with Patients Earlier in the Disease Course
Most studies are focusing on the prodromal and or mild patient population and we think this
could be indicative of the initial market opportunity for a disease-modifying therapy
It is theorized that chronic treatment with an effective therapy could potentially be used in these
earlier patients to slow or even prevent disease progression
Source: Company data, Credit Suisse estimates and analysis
29
Current Drugs on the Market Only Address the Symptoms, But Have Still Been Blockbusters
These drugs have been blockbusters in spite of just addressing symptoms
But strong consensus that therapies to address cognition and functional deficits are needed
Source: Company data, Credit Suisse estimates and analysis
Product Company Drug Class WW Peak sales ($) Comments
Aricept Pfizer/Eisai AChE inhibitor 4.2BPrior market leader, nearly all scripts
converted to generics
Exelon Novartis AChE inhibitor 1.0B*Available as oral BID and transdermal
patch - oral formulation rarely used
Razadyne ER JNJ/Shire AChE inhibitor 540MNever caught on in the market, GI
side effects may have limited use
Cognex Sciele AChE inhibitor NAFirst AChEI approved; Liver enzyme
monitoring severly limits use
Namenda/Named
a XR/NamzaricAllergan/Adamas NMDA antagonist 2B
IR version discontinued in Aug 2014
to be replaced by XR to defend
against generics
31
It Has Been a Long, Winding Road for Solanezumab as we
Approach Topline EXPEDITION3 Data
Source: Company data, Credit Suisse estimates and analysis
Timeline Event Design/result
July, 2008
Lilly published results of a 12-week Phase 2
trial. 4 dosages are 100mg or 400mg Q1W or
Q4W.
No change in cognition and levels of brain
amyloid
Increase in amyloid beta in blood and CSF
which may suggest dissolving of amyloid plaques
May, 2009
Enrollment of Phase 3 trials, EXPEDITION1
and EXPEDITION2 started
18-month, 1000 pts each trial, 1:1 randomize
to 400mg QIW vs pbo
Primary endpoints: ADAS-Cog11 and ADCS-
ADL
Jan, 2011 Enrollment of EXP1 and 2 completed Overall safety "appear to be very good"
Aug, 2012
Lilly announced that both cognitive and
functional endpoints were not met in EXP1 and
2
Pre-specified secondary analysis of pooled data
showed stat sig slowing of cognition decline
Oct, 2012 Presented detailed results for EXP1 and 2
EXP1: pre-specified mild AD showed
42%(p=0.008) reduction of ADAS-Cog11
EXP2: pre-specified mild AD showed
20%(p=0.12) reduction in ADAS-Cog14
Dec, 2012
Lilly after talking to the regulatory agencies,
planned to do another Ph3 EXP3 and did not
have intend to submit BLA at this time
July, 2013Presented design of Phase 3 EXPEDITION3
trial
2100 pts, 18-month 400mg Q4W :Pbo
Primary: ADAD-Cog14 and ADCS-iADL
Jan, 2014NEJM published EXPEDITION 1 and 2 study
by Doody et al
July, 2015Presented EXPEDITION-EXT analysis at AAIC
and published in “Alzheimer’s and Dementia"
Stat sig reduction in ADAS-cog11, ADAS-
cog14, MMSE
Mar, 2016 Change primary endpoint for EXP 3Only has ADAS-Cog14 and removed ADCS-
iADL
32
Positive Results Seen On ADAScog14 in Pooled Mild
Population for EXPEDITION 1/2
Source: Company data, Credit Suisse estimates and analysis
33
Benefit Also Seen on the Function Endpoint of ADCS-iADL
in the Pooled Analysis of EXPEDITION 1/2
Source: Company data, Credit Suisse estimates and analysis
34
Mild Patients, Amyloid Screening and Larger Sample Size are Key Changes to EXPEDITION3
Company predicts last patient visited in Oct 2016
Discontinuations are also lower than EXP 1 & 2, increasing overall powering of the study
95% of patients have elected to continue in delayed start portion of trial at end of placebo
control
Source: Company data, Credit Suisse estimates and analysis
Expedition 3 Expedition 1 and 2
Phase 3 3.00
Cohort size & # of cohorts 1050 per arm 500 per arm
Dosing 400mg IV monthly 400mg IV monthly
Duration of treatment 18 months 18 months
Primary endpoint ADAS-COG14 ADAS-cog11and ADCS-ADL
Patients enrolled by MMSE MMSE 20-26 MMSE 16-26
Requirement for amyloid
pathologyAmyloid positive by PET or CSF None
Number of mild patients 2100 about 1300 (est 1000 amyloid positive)
Other notes
ADCS-iADL had been a co-
primary endpoint but this was
moved down to a key secondary
endpoint in March 2016
After analysis of data from EXPEDITION 1,
primary outcome was revised ADAS-cog14
in mild patients for EXPEDITION 2
35
Based on FDA Comments, We Think a Benefit on Cognition Alone May be Enough for Accelerated Approval
In FDA Draft Guidance published in 2013 the FDA specifically calls out accelerated approval as an
option based on an effect seen on cognition alone, although this could be only for preclinical AD
Specifically they stated: “Assuming that these patients can be reliably identified, we can use the
accelerated approval mechanism (21 CFR149 314.510) to consider an effect on a valid and reliable
cognitive assessment used as a single primary efficacy measure as support for a marketing
approval”
FDA 2013 Draft Guidance: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM338287.pdf
Source: Company data, Credit Suisse estimates and analysis
36
The FDA’s Stated Preference is for Data on Both Cognitive and Functional Endpoints
Per FDA comments, the intent of the functional endpoints is to “ensure the clinical
meaningfulness of a cognitive benefit that may be observed”
However, they have noted that, in practice, it may be impractical to use co-primary
endpoints, especially before the onset of overt dementia
FDA has noted that they think the co-primary approach in practice may be impractical and
suggested cognition alone could be sufficient, especially for patients early in the spectrum of the
illness:
“Therefore, although the principle behind the co-primary outcome measure approach still holds,
the application of this approach in practice may be impractical in these cases and clear
evidence of an effect on delaying cognitive impairment may provide sufficient evidence of
effectiveness.”
FDA 2013 Draft Guidance: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM338287.pdf
Source: Company data, Credit Suisse estimates and analysis
37
We Think Regulators (Both EMA and FDA) Recognize Challenges of Existing Endpoints
We think it could be difficult to show large magnitude of differences on cognitive endpoints in
mild patients due to the low levels of impairment present in early AD
This sentiment has been echoed by the FDA and EMA and we think this could give some
flexibility in interpreting clinically meaningful differences
Some challenges broadly with endpoints
– Mild disease is hard to show a large difference versus placebo
– In a global study controlling for different cultures and languages is not a perfect science
– Cognitive scales have a ceiling effect which makes it hard to detect small changes
Source: Company data, Credit Suisse estimates and analysis
38
The FDA has Mentioned CDR-SB as a Single Primary Outcome Measure Suitable for Approval
This is both Biogen and Roche/AC Immune’s primary endpoint in their Phase 3s
Biogen has a special protocol assessment (SPA) with the FDA suggesting that the FDA views
this endpoint as acceptable for approval
The EMA has also mentioned the CDR-SB as useful, but they noted the pitfalls of 1) the
extensive training needed for the scoring and 2) that it is subject to variability among ethnicity
and language
FDA 2013 Draft Guidance: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM338287.pdf
EMA 2014 Draft Guideline: http://www.ema.europa.eu/docs/en_GB/document_library/Scientific_guideline/2016/02/WC500200830.pdf
Source: Company data, Credit Suisse estimates and analysis
40
Our Recent Survey Suggested Investors are Getting a Bit More Positive on Sola
Source: Company data, Credit Suisse estimates and analysis
41
Lilly has Other Shots on Goal in Alzheimer’s Beyond Solanezumab
Source: Company data, Credit Suisse estimates and analysis
Could also support a positive stock reaction even without strong functional data
In addition, we see a lot more to the Lilly story than just Alzheimer’s
42
Expect a Significant Move in LLY Shares in Either Direction; More Modest Moves Expected in MRK
Source: Company data, Credit Suisse estimates and analysis
Positive, statistically significant data on both cognition and function could lead to a move of >20%
in LLY shares (we think there is a 10% probability of this)
Positive cognitive data with a trend on function would likely also result in a meaningful positive move
(~+5-8%), based on recent conversations with investors (30% probability)
Positive cognitive data with no trend of function would lead to the most debate (20% probability)
– May see initial positive stock reaction but then debate around regulatory and commercial potential
likely to heat up
Negative cognitive data would mean a failed study and could result in a 10-15% selloff in LLY
shares (40% probability)
Reaction in MRK will be more modest, but likely in the same direction as LLY
44
We agree with our survey; we expect a big move on Biogen either way on Sola data
Source: Company data, Credit Suisse estimates and analysis
45
On BIIB, our model suggests a smaller move of 3-6% up or 3-4% down
Generally we think AC Immune is much more exposed to the Sola readout given their lead asset
and much of their pipeline is focused on AD while Biogen has other franchises
We expect all 3 stocks to be volatile come “sola” day especially as the data is likely to be
nuanced in the way that prior EXPEDITION readouts have been
We also think Biogen will likely trade higher than what our model says especially since this would
further the M&A thesis. However it probably trades more on the downside as well
We have gotten comments post launch on AC Immune that stock could move on the upside
more
Source: Company data, Credit Suisse estimates and analysis
46
Biogen Alzheimer’s Sensitivities
Every 10% success is worth ~$10/sh (or approximately 3%) to our valuation
Source: Company data, Credit Suisse estimates and analysis
0% 15% 25% 40% 50% 60% 75% 100%
$284 $298 $308 $322 $331 $341 $355 $378
DCF Valuation by POS to Aducanumab
$100 $1,074
$2,254 $3,775
$5,938
$7,792
$10,077
$12,790 $13,406 $14,056
$14,740
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
Biogen AD Franchise Sales
47
AC Immune Alzheimer’s Sensitivities
AC Immune is highly levered to the AD space and we think the stock could move on a much
larger percentage basis relative to both Lilly and Biogen whatever the results.
We think the Phase 3 Solanezumab data could move POS 10-20% for AC Immune’s program
depending on the relative strength or weakness of the data which would be a $6-$12/sh move.
We are currently at 40% POS for Crenezumab.
0% 15% 25% 40% 50% 65% 75% 100%
($9) $2 $8 $18 $24 $33 $40 $56
DCF Valuation by POS to Crenezumab
Source: Company data, Credit Suisse estimates and analysis
48
How we model AD – BIIB and ACIU
Source: Company data, Credit Suisse estimates and analysis
US 2020E
Alzheimer's Prevalence (ex-prodromal) 6,144,153
% growth 3%
Diagnosed & Treated Population 3,993,699
Diagnosis Rate 65%
Mild patients treated & diagnosed 1,078,299
% of diagnosed & treated total 27%
Prodromal patient prevalence 4,405,241
% growth 3%
Prodromal patients converting to mild 440,524
% conversion rate 10%
Total Patients Elligible for AD treatment 1,518,823
Crenezumab Share 1%
Total Patients on Crenezumab 7,594
Price $25,000
% growth
Net Price $12,250
Gross to Net 30%
Compliance 70%
AD Market US EU
Alzheimer's Prevalence
(Exluding Prodromal)5.3M 8M
Diagnosed & Treated 2.4M 3.6M
Mild Treated & Diagnosed 644k 972k
Prodromal Prevalence 3.8M 3.5M
Prodromal Patients
Converting to Mild380k 350k
Total Patients Elligible for
AD treatment1M 1.3M
Gross Price $25k $15k
Gross to Net 30% 40%
Compliance 70% 70%
Net Price $12.3k $10.5k
49
Needless to say Eisai ties up with Biogen for E2609/BACE inhibitor and BAN2401/ Aβinhibitor.
E2609: Held End-of-Phase 2 meeting with FDA and a Phase III study is planned in FY3/2017
BAN2401: P2 trial enrolled 750 patients by the end of September for 3rd interim analysis but
the trial is still ongoing. The last patient in to complete 800 patient trial is expected by the of
December. Eisai should be able to report quick read out of 800 patients data early 2017. Then
decision time if Eisai will have to opt-in Biogen to co-develop aducanumab.
Lemborexant: This could be a wild card. Initiated Phase 3 for insomnia and planning P2 aiming
for dementia related for irregular sleep wake rhythm disorder (ISWRD) to target world’s first
indication. Who knows?
Source: Company data, Credit Suisse estimates and analysis
50
Otsuka has 4 AD assets as per below:
Lu AE58054/idalopirdine selective 5-HT3 receptor blocker, as you know failed 1 of 3 ongoing
P3 trial. This is a joint trial with Lundbeck.
brexpiprazole /Rexulti is already approved for schizophrenia. P3 is ongoing for agitation related
to AD.
APV-786/NMDA receptor antagonist, P3 trial is ongoing aiming AD related agitation. Otsuka
acquired APV-786 through Avanir acquisition.
LuAF205013, this is beta amyloid vaccine. P1 stage with Lundbeck co-developing.
Source: Company data, Credit Suisse estimates and analysis
51
Stock overview on AD assets
Eisai was once surrounded by speculation with outcome of BAN2401 interim analysis. We still
have to wait see 800 patients outcome to trade the stock. Risk reward is very high.
Having failed Lu AE58054/idalopirdine 1st trial, Otsuka is held back despite of relatively strong
AD assets. It is difficult to access AD assets but given some probability of success to them,
Otsuka may be undervalued.
Source: Company data, Credit Suisse estimates and analysis
53
Roche – major AD investment, portfolio approach
Roche is highly committed to AD with two late-stage Abeta programs in the clinic.
Crenezumab targets all 3 forms of Abeta with a focus on oligomers, gantenerumab targets plaque.
Roche was encouraged by the aducanumab data showing a nice correlation between drug and
biomarkers of AD in a prospective analysis. A retrospective analysis of Roche’s gantenerumab
studies shows a similar correlation.
Roche’s experience with the failed SCARLET ROAD P3 study is that dose is critical. Pushed
crenezumab dose in P3 to 60mg/kg. Now using gantenerumab at 220mg flat dosing. Antibody
penetration into the brain is <1%.
COGS and manufacturing going to be a meaningful element of biologics in AD. Crenezumab
patients will be receiving over 1 gram of antibody per infusion.
Dose titration is also critical in Roche’s view. The bulk of the CNS side effects are seen in the
first 6 months. Roche philosophy is to dose titrate slowly up to peak dose levels. Roche is
currently testing 4 different dose titration schedules for gantenerumab.
Functional endpoints are what payers benefit from.
MODEL: $6bn peak of ‘Alzheimer’s franchise’ sales across crenezumab & gantenerumab
Source: Company data, Credit Suisse estimates and analysis
55
Solanezumab data from publications by endpoints
Trial DoseDosing
Lengthn
MMSE
Enrollment
Baseline
MMSE
Baseline
ADAS-Cog11
ADAS-
Cog14ADCS-iADL ADCS-ADL
Expedition 1 1012 16-26 21 22 -1.4
(p=.09)
-0.4
(p=.64)
Expedition 2 1040 21Plc: 23
Sola: 24
-1.6
(p=.04)
1.6
(p=.08)
Expedition 2: Mild
Subgroup647
Plc: 23
Sola: 22
Plc: 19
Sola: 20
-1.7
(p=.06)
2.3
(p=.04)
Expedition 1 & 2: Pooled
Mild Subgroup1322 22.5
Plc: 18.9
Sola: 19.4
-2.13*
(p=.001)
1.21*
(p=.045)
1.42*
(p=.057)
Expedition Phase 3 2100Primary
Endpoint
Previously a
Primary
Endpoint
Lower is better
BaselinesChange from Baseline (ITT) Mean
Difference from Placebo In:
Higher is better
* calculated based on change from baselines reported in placebo and active arms
400mg IV
Last dose at
week 76;
last
observation
at week 80
Higher is better
20-26
Source: Company data, Credit Suisse estimates and analysis
56
Key endpoints in AD trials
Source: Company data, Credit Suisse estimates and analysis
TestShort
name
Score
range
Meaning of
scoreComments
Mini-Mental State
ExamMMSE 0-30 30 is the best
The MMSE is an assessment of
cognitive function employed in both
clinical practice and clinical trials. Scores
may be impacted by a number of factors
including education, cultural background
and literacy
Clinical Dementia
Rating-Sum of
Boxes
CDR-SB 0-18 0 is the best
Interview between patients and caregiver
measuring impairment of memory,
orientation, judgement and problem
solving, etc. Tracks early stages of AD
Alzheimer's Disease
Assessment Scale
cognitive subscale
ADAS-cogDepending
on subtypesmaller is better
Dealing with memory, language,
construction and praxis orientation. Is
widely used and can be considered as a
standard tool in trials on patients with
mild to moderate Alzheimer's disease.
Due to ceiling and floor effects, its
sensitivity to change is limited in early
and late stages
Basic activities of
daily living BADL Varies Higher is better
Physical activities, such as toileting,
mobility, dressing and bathing
instrumental
activities of daily
living
iADL Varies Higher is better
Better to track early stage of AD.
Shopping, cooking, doing laundry,
handling finances, using transportation
57
Comparing Data
Trial DoseDosing
Lengthn
MMSE
Enrollment
Baseline
MMSE
Baseline
ADAS-Cog11ADCS-iADL ADCS-ADL MMSE
ADAS-
Cog11
ADAS-
Cog14CDR-SB
Solanezumab Lower is better
Expedition 1 1012 21 22 -0.4
(p=.64)
0.6
(p=.06)
-0.8
(p=.24)
-1.4
(p=.09)
0.1
(p=.51)
Expedition 2 1040 21Plc: 23
Sola: 24
1.6
(p=.08)
0.8
(p=.004)
-1.3
(p=.06)
-1.6
(p=.04)
-0.3
(p=.17)
Expedition 1: Mild
Subgroup675
Expedition 2: Mild
Subgroup647
Plc: 23
Sola: 22
Plc: 19
Sola: 20
2.3
(p=.04)
0.7
(p=.10)
-1.5
(p=.05)
-1.7
(p=.06)
-0.3
(p=.22)
Expedition 1 & 2: Pooled
Mild Subgroup1322 22.5
Plc: 18.9
Sola: 19.4
1.21*
(p=.045)
1.42*
(p=.057)
0.93*
(p=.001)
-1.74*
(p=.001)
-2.13*
(p=.001)
-0.16*
(p=.34)
Expedition Phase 3 2,100
Previously a
Primary
Endpoint
Primary
Endpoint
Aducanumab
10mg/kg IV 32 24.8 2.25*
(p<.05)
-1.24*
(p<0.05)
6mg/kg IV 30 24.4 0.85*
NS
-.76*
NS
3mg/kg IV 32 23.2 2.11*
(p<.05)
-.50*
NS
CrenezumabADAS-
Cog12
Plc: 84
Cren: 16318-26
Plc: 21.6
Cren: 21.9
.51
p=.77
.49
p=.46
-1.78
p=.190
-0.08
p=.85
Plc: 54
Cren: 11120-26
2.18
p=.26
.70
p=.351
-2.24
p=.128
.02
p=.964
Plc: 39
Cren: 8222-26
0.21
p=.95
1.05
p=.250
-3.44
p=.036
-0.44
p=.423
* calculated based on change from baselines reported in placebo and active arms
15mg/kg IV
PRIME
ABBY Trial
Last dose at
week 68;
last
observation
at week 72
400mg IV
Last dose at
week 76;
last
observation
at week 80
Change from Baseline (ITT) Mean Difference from Placebo In:
Higher is better
54 weeks
20-26
16-26
20-30
Baselines
Lower is betterHigher is better
Source: Company data, Credit Suisse estimates and analysis
58
Companies Mentioned (Price as of 18-Oct-2016)
AC Immune (ACIU.OQ, $15.19, OUTPERFORM[V], TP $18.0) AbbVie Inc. (ABBV.N, $61.55) AstraZeneca (AZN.L, 5002.0p) Baxter International Inc. (BAX.N, $48.06) Biogen, Inc. (BIIB.OQ, $295.05, NEUTRAL, TP $322.0) Bristol Myers Squibb Co. (BMY.N, $50.05) Eisai (4523.T, ¥6,664) Eli Lilly & Co. (LLY.N, $78.77, OUTPERFORM, TP $96.0)
Johnson & Johnson (JNJ.N, $115.41) Lundbeck (LUN.CO, Dkr218.6) Merck & Co., Inc. (MRK.N, $62.09) Novartis (NVS.N, $76.31) Pfizer (PFE.N, $32.69) Roche (ROG.S, SFr233.6, OUTPERFORM, TP SFr300.0) Shire Pharmaceuticals (SHP.L, 5146.0p)
Disclosure Appendix
Important Global Disclosures
The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
3-Year Price and Rating History for AC Immune (ACIU.OQ)
ACIU.OQ Closing Price Target Price
Date (US$) (US$) Rating
18-Oct-16 15.19 18.00 O *
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
3-Year Price and Rating History for Biogen, Inc. (BIIB.OQ)
BIIB.OQ Closing Price Target Price
Date (US$) (US$) Rating
28-Oct-13 254.58 290.00 O
10-Dec-13 285.23 375.00
13-Feb-14 328.62 400.00
23-Jul-14 337.60 425.00
19-Nov-14 303.61 400.00
17-Mar-15 426.12 500.00
13-May-15 390.04 NR
19-Jan-16 269.85 322.00 N *
07-Jun-16 252.86 312.00
01-Aug-16 301.83 322.00
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
N O T RA T ED
N EU T RA L
3-Year Price and Rating History for Eli Lilly & Co. (LLY.N)
LLY.N Closing Price Target Price
Date (US$) (US$) Rating
28-Oct-13 50.88 52.00 N
07-Jan-14 51.19 54.00
19-Feb-14 58.09 56.00
24-Apr-14 58.68 61.00
02-Nov-14 66.33 65.00
17-Dec-14 70.28 71.00
04-May-15 73.05 72.00
08-Jun-15 78.52 75.00
03-Aug-15 84.14 89.00
08-Oct-15 83.77 105.00 O
12-Oct-15 79.44 99.00
04-Feb-16 74.28 94.00
01-May-16 75.53 91.00
28-Jul-16 82.93 96.00
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
O U T PERFO RM
3-Year Price and Rating History for Roche (ROG.S)
ROG.S Closing Price Target Price
Date (SFr) (SFr) Rating
18-Oct-13 242.10 280.00 O
20-Jan-14 250.00 320.00
03-Feb-14 248.20 300.00
09-Jan-15 278.10 295.00
16-Mar-15 265.30 300.00
31-Mar-15 268.10 320.00
28-Jan-16 258.10 300.00
* Asterisk signifies initiation or assumption of coverage. O U T PERFO RM
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s t otal return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time.
Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
59
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 53% (55% banking clients)
Neutral/Hold* 29% (24% banking clients)
Underperform/Sell* 18% (44% banking clients)
Restricted 0%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.
Target Price and Rating Valuation Methodology and Risks: (12 months) for AC Immune (ACIU.OQ)
Method: Our AC Immune $18 target price and Outperform rating are based on a probability adjusted DCF. We extend our estimates to 2030 and use a 12% discount rate and 2% terminal growth rate in line with small cap biotech peers with platform technologies.
Risk: Key risks to our AC Immune $18 target price and Outperform rating include: clinical setbacks in the AD space e.g. with Solanezumab, crenezumab fails to show significance in Phase 3, difficulty enrolling Phase 3 or a safety issue for platform.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Biogen, Inc. (BIIB.OQ)
Method: Our BIIB $322TP and Neutral rating is based on a DCF. Our DCF is $322/sh based on an 8% discount rate & 2% terminal growth in-line with peers.
Risk: Risks to our BIIB $322 TP and Neutral rating: Key upside risks: Success (meaning hitting primary endpoint) on the anti-Lingo program in mid-16, Positive data that provides greater confidence around BAN2401 (anti-amyloid Beta antibody), Tecfidera sales reaccelerate, Hemophilia assets continue to take share in spite of competition, SMA program gets to market earlier than our expectations through surprise regulatory approval. Key downside risks: Anti-Lingo1 program discontinues after failure in Ph2 Synergy study, Efficacy or safety concern with aducanumab Ph3 program, Worse than expected MS and hemophilia sales during 2016, SMA program has a surprise efficacy or safety failure in Ph3.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Eli Lilly & Co. (LLY.N)
Method: Our $96 target price is based 75/25 blend of DCF valuation ($95) and relative valuation ($98). We use a 7% WACC along with a -1.5% perpetuity growth forecast for our DCF valuation and apply 24 times our 2017 EPS estimate for relative valuation. Our rating of Outperform is based on positive outlook of its core product franchises above comparable peers.
Risk: Key risks to our $96 target price and outperform rating include (1) pipeline failures, particularly on their key diabetes phase 3 assets and autoimmune assets; and (2) inability to appropriately contain costs in keeping with long-term targets.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Roche (ROG.S)
Method: We value Roche on a PE relative basis to the European markets modulated by our PharmaValues NPV methdology. Our European Major Pharma market relative assumption is 160% and our sector PE relative for Roche is 105%, giving a price target of SFr 300 per share. Roche
‘s 3-year historical average PE sector relative is 103%. Our Outperform rating is based on material upside to mid-term sales growth
expectations as Roche's P3 pipeline matures. We believe Esbriet, ocrelizumab, PD-L1, lebrikizumab and venetoclax offer combined peak sales potential in excess of $10bn.
Risk: In addition to the typical pharmaceutical industry risks associated with potential product approvals, withdrawals and patent challenges, key risks are the competitive development of Roche's immuno-oncology pipeline relative to peers and the mid-term potential of ocrelizumab in MS. The medium-term impact of biosimilars on Roche's in-market drugs is also key. The key ris to outperform rating is lack of delivery of sufficient pipeline to drive top quartile growth
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, MRK.N, AZN.L, PFE.N, LUN.CO, SHP.L) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, MRK.N, PFE.N, SHP.L) within the past 12 months.
Credit Suisse provided non-investment banking services to the subject company (BIIB.OQ) within the past 12 months
Credit Suisse has managed or co-managed a public offering of securities for the subject company (LLY.N, ACIU.OQ, ABBV.N, PFE.N, SHP.L) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, MRK.N, PFE.N, SHP.L) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (LLY.N, ACIU.OQ, ROG.S, BIIB.OQ, ABBV.N, BMY.N, JNJ.N, MRK.N, AZN.L, 4523.T, PFE.N, LUN.CO, SHP.L) within the next 3 months.
Credit Suisse has received compensation for products and services other than investment banking services from the subject company (BIIB.OQ) within the past 12 months
As of the date of this report, Credit Suisse makes a market in the following subject companies (LLY.N, BIIB.OQ, ABBV.N, BMY.N, JNJ.N, MRK.N, PFE.N).
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SHP.L).
As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (PFE.N). As of the date of this report, an analyst involved in the preparation of this report, Vamil Divan, has following material conflicts of interest with the subject company. The analyst or a member of the analyst's household has a long position in the common stock Pfizer (PFE.N). A member of the analyst's household is an employee of Pfizer (PFE.N).
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=263487&v=-45y2krtz57vxa5j14t45439ll .
Important Regional Disclosures
Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.
The following disclosed European company/ies have estimates that comply with IFRS: (BMY.N, AZN.L, LUN.CO).
Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (LLY.N, ACIU.OQ, BIIB.OQ, ABBV.N, BMY.N, MRK.N, AZN.L, PFE.N, SHP.L) within the past 3 years.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
This research report is authored by:
Credit Suisse Securities (USA) LLC .................................................................................................................................................... Alethia Young
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
60
This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.
This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited, Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines: Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2016 CREDIT SUISSE AG and/or its affiliates. All rights reserved.
Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.
When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only