Biogen Update Target Price $ 355

BIIB : NASDAQ : US$303.60
Target: US$355.00

Biogen Idec is a biotechnology company that discovers,
develops, manufactures and markets therapies including
the currently marketed Tecfidera, Avonex, Tysabri, and
Fampyra for multiple sclerosis; Fumaderm for psoriasis;
and Rituxan (partnered with Roche) for multiple
indications including RA and NHL. Late-stage pipeline
products include Eloctate and Alprolix for hemophilia A
and B.
All amounts in US$ unless otherwise noted.

Life Sciences — Biotechnology
Investment recommendation
Reiterate BUY; raising PT to $355. Tecfidera’s WW promise is materializing
as we look forward to continued US sales growth and a near-term EU
launch. We see continued Avonex and Tysabri long-term value and major
potential in BIIB’s hemophilia franchise with a near-term approval and
launch expected. We are raising our company DCF-based target from $291
to $355 based on the additional of potential SMNRx sales.
Investment highlights
 We see SMNRx/SMA as a major value opportunity for BIIB with $2+B
potential peak sales with potential 2017 approval. Although BIIB has
not yet opted into the ISIS SMA program, we see data as compelling,
with a healthy probability of success and strong chance BIIB will opt-in.
 Significant investor focus on SMA opportunity as ISIS-SMNRx multi-dose
data approaches. We think the 5.75 Hammersmith pt gain seen in the
9mg cohort at 9 mos suggests SMNRx is active. We would expect a >4 pt
increase in the multi-dose data this Q. Given the open-label nature of
the trial, we think the data will be positive but it is unclear if 9mg will
be the optimal dose given ISIS/BIIB added a 12mg dose.
 We like the SMNRx dose-response trend; view Hammersmith scale as
reliable for SMA drug development. While CMAP (compound muscle
action potential) was stable (-0.38 mV) and MUNE (motor unit number
estimation) increased (+14.09) in the 9 mg group at day 85 vs. baseline,
we see these data as preliminary and less functionally relevant.
 We expect positive data from Ph1b/2 SMNRx multi-dose trial in Q1/14
ahead of pivotal type 1& 2/3 trials. Given the new 12mg arm in the
ongoing Ph1b/2 trial, we expect there to be 2 doses of >9mg in the
Ph2/3 study in the first 6 mos with follow-up dosing every 6-9 mos. ISIS
noted stopping decline in a pivotal trial could be sufficient for
registration, but we think this may only apply to >1 yr trials. Proprietary
assays that measure SMN1 vs. SMN2 may help elucidate SMNRx
molecular effect.

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