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 19 th , 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 alethia.young@credit- suisse.com Matthew Weston Research Analyst +44 020-7888 -690 matthew.weston@credit- suisse.com 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 Fumiyoshi.sakai@credit- suisse.com
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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
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
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
US Major Pharma: Thoughts on Lilly and Merck from Vamil Divan
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
43
Large Cap Biotech: AC Immune and Biogen Stock Thoughts
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
52
EU Pharma: Thoughts on Roche from the EU Pharma team
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
54
Appendix slides: More details on the data
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
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Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
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*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.
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*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
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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.
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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).
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This research report is authored by:
Credit Suisse Securities (USA) LLC .................................................................................................................................................... Alethia Young
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