Blue Sky Grey Sky Analysis

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1 Americas/United States Equity Research Biotechnology Research Analysts Alethia Young Eliana Merle Grant Hesser Blue Sky Grey Sky Analysis SECTOR REVIEW Blue/Grey Sky Analysis Framing Key Debates in Our Coverage Universe Credit Suisse Research is now featuring Blue and Grey Sky analysis across the entire platform. In conjunction with rolling Blue and Grey sky scenarios out, we are highlighting companies with important catalysts coming in 2Q17 and our views on up/downside scenarios into the events. We also think all the companies highlighted below represent interesting opportunities where sentiment is negative (Gilead, Alexion, or Alnylam) or under significant debate (Tesaro, Gilead). Besides what are they going to buy, our most popular Gilead conversation is how to think about the worst case. Our Grey Sky valuation is $58/share (-13% downside from current market price) vs. Blue Sky scenario if we had greater visibility into their pipeline of $85/share (25% upside from current market price): Our worst case scenario assumes 2020 revenues of $12.8B for HIV and $2B for HCV vs. our base case of $14.8B in HIV and $5.4B in HCV. Our base case assumes $2.1B in 2022 adjusted sales for NASH and 2022 adjusted sales of $850 M for filgotnib. Our Blue Sky scenario assumes an acquisition that is likely dilutive (raised expenses) but adds $3.5B in sales to our 2020 base case estimate. We believe this scenario analysis suggests that shares are likely range-bound until we know what the company will do strategically in building an external pipeline. Although the company is now viewed as a show me story for investors, we think Alexion shares are pretty close to reflecting a worst case scenario for the company long-term. Our Grey Sky scenario of $101/share assumes 2025 revenues of $3.5B vs revenues of $3.6B (~0% growth). We understand that investors generally are viewing Alexion as a show me story over 1H 2017 which is probably fair. However, this stock remains an out of favor top pick for the franchise as we think 1210 remains a significant value driver for the company. Biosimilars and competitors remain a risk for the franchise, but we also view these as a show me story as well though we do model 20% price cut and 15% share loss in our base case. In the near-term, we are focused on quarterly performance, potential MG approval in Oct (additional $700M in peak sales), and timelines for If all three PARP assets split the market by 1/3, our Tesaro non M&A valuation is $104/share (-32% downside from current market price) vs. our M&A valuation which is $160/share if share is split evenly. We still believe that these companies will not evenly divide in second line ovarian though that is the point of focus for investors. However, it is our most popular investor question around Tesaro so we are highlighting our sensitivities. Our Grey Sky scenario for Tesaro assumes 35% market share across all ovarian and breast cancer lines of therapy vs. our Blue Sky scenario that assumes 65% across all lines of therapy and some additional credit for PARP expansion. If we assume no M&A, our Grey Sky scenario for Tesaro is $104/sh vs. our base case of $131/share vs Blue Sky scenario of $160/share. For the three scenarios, our Zejula sales are $2B, $3B, and $3.7B respectively. If we assume M&A synergies, our Grey Sky scenario for Tesaro is $160/sh vs. our base case of $198/share vs Blue 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.

2 Sky scenario of $239/share. 3 April 2017 Because we are confident in Alnylam s upcoming FAP readout, we think risk/reward is favorable. We see downside scenarios of $30/share (-40% from current market price) if study fails or IONS looks more competitive vs. upside scenario of $70-$100/share ( % from current market price). Alnylam Ph3 patisiran FAP data is expected in 3Q17, but IONS competitive FAP readout is 2Q17. We think Alnylam shares will be volatile into this event but because we remain very confident in their own FAP success we think the risk/reward is favorable. The company has other late stage programs beyond FAP so it is highly unlikely that it trades to cash if FAP is unsuccessful. If we assume credit for porphyria and PCSK9 (no hemophilia and FAP), our FV is $33/share. Alnylam cash value is $13/share. Our Grey Sky scenario of $30/share for Alnylam highlights a scenario where IONS takes greater share in FAP if data is clean on efficacy and safety because it s a weekly subq. Our Blue Sky scenario of $108/share case assumes Alnylam is successful in Ph3, maintains dominant share, and that investors give some further credit to the pipeline. A word on our other top franchise picks (Celgene and Vertex) where Blue and Grey Sky scenarios are focused on the potential success of new product cycles and clinical data. For Celgene, our focus remains on the I&I readouts in MS, ulcerative colitis, and Crohn s disease. Our Blue and Grey Sky scenario analysis suggests $172/share vs. $114/share based on the success and market potential of these upcoming readouts. We think the new I&I opportunities will add $3.3B in 2023 revenues on-top of Otezla using our probability adjusted numbers. In our Blue Sky scenario, if we assume 100% success for all three indications, we think the I&I opportunities will add $5.5B on top of Otezla. For Vertex after positive 661 data, we do feel more like it s a matter of when not IF Vertex is successful with a triplet. Blue Sky scenario for the triplet is $148/share vs. Grey Sky of $70/share. Blue/base/Grey Sky CF revenues are $6.4B, $5.2B, and $4.1B in 2025, respectively. If we added M&A to our base case or Blue Sky scenario, our M&A valuations are $157-$194 for Vertex (depending on how much success we assume for the HetMin population). Blue Sky Grey Sky Analysis 2

3 Figure 1: Blue Sky / Grey Sky Summary Credit Suisse Estimates Revenue Blue Sky Grey Sky Base Case Upside/Downside to Current Price 12M Current CS Rating 2014A 2017E 2020E Price Price Price Blue Sky Grey Sky Base Case P/E Price Large Cap Biotech CELG OUTPERFORM $7,670 $13,293 $22,910 $172 $114 $148 38% -8% 19% $124 GILD OUTPERFORM $24,890 $24,673 $20,815 $85 $58 $79 25% -15% 16% 7.25 $68 AMGN NEUTRAL $20,063 $22,595 $23,641 $199 $167 $178 21% 2% 8% $164 BIIB NEUTRAL $9,703 $11,190 $12,252 $347 $262 $296 27% -4% 8% $273 Emerging Large Cap Biotech REGN OUTPERFORM $2,820 $5,484 $8,048 $540 $318 $485 39% -18% 25% $388 ALXN OUTPERFORM $2,234 $3,422 $5,036 $211 $101 $164 74% -17% 35% $121 VRTX OUTPERFORM $580 $2,096 $3,909 $148 $70 $108 35% -36% -1% $109 Small-Midcap Biotech ALNY OUTPERFORM $51 $102 $689 $108 $30 $50 111% -41% -2% $51 BIVV UNDERPERFORM $134 $1,040 $1,182 $58 $33 $45 7% -39% -17% $54 UTHR UNDERPERFORM $1,289 $1,622 $947 $155 $100 $120 14% -26% -11% 7.54 $135 MESO NEUTRAL $23 $2 $93 $15 $2 $5 67% -78% -44% $9 PTCT OUTPERFORM $25 $133 $298 $60 $10 $25 510% 2% 154% $10 CHRS OUTPERFORM $31 $45 $511 $45 $5 $38 113% -76% 80% $21 TSRO OUTPERFORM $0 $100 $1,427 $239 $160 $198 55% 4% 29% $154 NTLA OUTPERFORM $0 $22 $64 $56 $7 $39 297% -50% 177% $14 ICPT OUTPERFORM $2 $107 $656 $270 $66 $ % -42% 75% $113 ACIU OUTPERFORM $33 $21 $39 $34 $7 $18 228% -32% 74% $10 ASND OUTPERFORM $15 $5 $30 $42 $15 $28 50% -46% 0% $28 Blue Sky Grey Sky Analysis 3

4 Americas/United States Biotechnology Rating NEUTRAL Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 120, Target price is for 12 months. Research Analysts Alethia Young Eliana Merle Grant Hesser Amgen, Inc. (AMGN) Will Repatha be the Swing Factor to the Franchise? What is the company worth if Repatha was bigger than our base case assumption? Our Blue Sky scenario associated with a $7.1 B Repatha is $199/share vs. $1.8 B Repatha is $167: In our Blue Sky scenario, we are trying to represent what would happen if Amgen was able to block Regeneron/Sanofi's Praluent from the market. We should learn about the outcome from the appeal this year. In the Grey Sky scenario, we are trying to proxy risk associated with doctors not dramatically increasing uptake from outcomes over the long-term. We think Repatha/PCSK9 remains a key focus for Amgen shares over Our Grey Sky scenario suggests downside of 6% vs. our Blue Sky scenario of 12% relative to our Target Price of $178/share: Amgen Blue Sky scenario valuation = $199/share (12% upside) Amgen base case scenario valuation = $178/share (current Target Price) Amgen Grey Sky scenario valuation = $167/share (6% downside) Share price performance A p r Ju l O c t Ja n A p r A M GN.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 22, , , ,938.0 EBITDA (US$ m) 11, , , ,361.0 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) 26,693 24,800 22,854 20,609 ROIC (%) Number of shares (m) IC (current, US$ m) 56, BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 4

5 Amgen, Inc. (AMGN) Price (31 Mar 2017): US$164.07; Rating: NEUTRAL; Target Price: US$178.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 22, , , ,938.0 EBITDA 11,958 11,929 12,180 12,361 Depr. & amort. (2,164) (2,165) (2,165) (2,166) EBIT (US$) 9,794 9,764 10,015 10,195 Net interest exp (1,260) (1,260) (1,260) (1,260) PBT (US$) 9,163 9,208 9,445 9,720 Income taxes (1,441) (1,474) (1,519) (1,572) Profit after tax 7,722 7,734 7,925 8,149 Minorities Reported net income (US$) 7,722 7,734 7,925 8,149 Other NPAT adjustments Adjusted net income 7,722 7,734 7,925 8,149 Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT 9,794 9,764 10,015 10,195 Net interest (1,260) (1,260) (1,260) (1,260) Change in working capital (964) 131 (63) (41) Cash flow from operations 8,921 10,030 10,028 10,273 CAPEX (700) (700) (700) (700) Free cashflow to the firm 8,221 9,330 9,328 9,573 Aquisitions Divestments Cash flow from investments (2,169) (2,169) (2,169) (2,169) Net share issue(/repurchase) (3,028) (3,000) (3,000) (3,000) Dividends paid (3,005) (2,968) (2,912) (2,859) Cashflow from financing activities (6,033) (5,968) (5,912) (5,859) Changes in Net Cash/Debt 719 1,893 1,947 2,245 Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents 4,863 6,756 8,702 10,947 Account receivables 3,179 3,124 3,153 3,171 Other current assets 29,537 29,497 29,518 29,532 Total current assets 40,163 41,917 43,937 46,229 Total fixed assets 4,920 4,931 4,941 4,949 Investment securities Total assets 73,227 74,985 77,009 79,303 Liabilities Total current liabilities 8,629 8,621 8,632 8,637 Total liabilities 43,455 43,447 43,458 43,463 Shareholder equity 29,772 31,538 33,551 35,841 Total liabilities and equity 73,227 74,985 77,009 79,304 Net debt 26,693 24,800 22,854 20,609 Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) 6.1 (1.7) EBIT growth (%) 15.6 (0.3) Net profit growth (%) EPS growth (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Amgen is a biotechnology company that is engaged in the development and manufacturing of a wide range of therapeutics in both the United States and internationally. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) Our Blue Sky scenario associated with $7.1 B in peak sales for Repatha is $199/shareIn as we are trying to represent what would happen if Amgen was able to block Regeneron/Sanofi's Praulent from the market. Our Grey Sky Scenario (US$) Our Grey Sky scenario associated with $1.8 B in peak sales for Repatha is $167/shareIn as we are trying to represent what would happen if outcomes results underperform expectations in terms of their ability to accelerate script writing and payer approval Share price performance A p r Ju l O c t Ja n A p r A M GN.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Blue Sky Grey Sky Analysis 5

6 How achievable is the Blue and Grey Sky scenarios? On the Blue Sky, we think that it comes down to Regeneron/Amgen court appeals situation which we should know in We think that the Grey Sky could take longer (maybe 2018) to fully appreciate whether growth is picking up for Amgen after outcomes data. If Regeneron's Praulent is pulled from the market, we would guess that Amgen would get all of their sales. We currently divide the PCSK9 market in half, and we think that is essentially what most investors assume. Our working assumption is that sales will likely not pick up until 2018 (after formulary decisions) and additional changes to the label and/or treatment guidelines. CS Thesis is focused on opportunities for the pipeline beyond what we model. We maintain our Neutral opinion as we do see some risks to base business beyond what we model. We give significant credit to pipeline opportunities ($20/share of our base case). With these two considerations, we estimate the stock should trade around $178. If Amgen were to acquire late stage assets, we think that would be a significant driver of upside and would likely get us closer to our Blue Sky scenario for Amgen of ~$200/share. Figure 2: Amgen Blue Sky / Grey Sky Analysis $210 $200 $199 $190 $180 $178 $170 $167 $160 $150 Grey Sky Base Case Blue Sky Grey Sky Base Case Blue Sky Company 2025 revenues Scenario assumptions $21.9 B $23.7 B $27.3 B 2025 $1.8 B Repatha Peak 2025 $3.6 B Repatha Peak 2025 $7.1 B Repatha Peak Figure 3: Upside / Downside from Base Case Target Price 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -6% Grey Sky 12% Blue Sky Blue Sky Grey Sky Analysis

7 Americas/United States Biotechnology Rating OUTPERFORM Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 96, Target price is for 12 months. Share price performance Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com A p r Ju l O c t Ja n A p r C ELG.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Celgene Corporation (CELG) FOCUS LIST STOCK Can CELG Achieve an Otezla Repeat Performance with their Upcoming I&I Assets? What does I&I add to our base case? Our valuation with I&I is $172 vs. $114 (upside and downside of 16% and 23% relative to our base case). Over the next months, we will get Ph3 data for Celgene's assets ozanimod and mongersen that they acquired from Receptos and Norga, respectively. From our conversations with investors, we get many questions around whether Celgene overpaid for these assets. From these deals, they acquired ozanimod that is being studied in Phase 3 studies for MS and ulcerative colitis. At the time when Revlimid starts to go generic, we estimate that these products could add ~$5.7B in revenues in 2022 (if they are all successful). Currently, we probability adjust revenues for MS, UC, and Crohn's at 50%, 50%, and 75% respectively. In our base case valuation, we assume $3.2B for adjusted sales for these three products in I&I 2022 revenues blue = $9.4B I&I 2022 revenues base = $7.2B I&I 2022 revenues grey= $4B Our bear case scenario suggests downside of 23% vs. our bull case which suggests 16% upside relative to our Target Price of $148/share Celgene valuation blue = $172/share (upside of 16% from our base case) Celgene valuation base = $148/share Celgene valuation grey = $114/share (downside of 23% from our base case) Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 11, , , ,198.1 EBITDA (US$ m) 3, , , ,035.1 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) 9,584 7,309 3,120-2,772 ROIC (%) Number of shares (m) IC (current, US$ m) 15, BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 7

8 Celgene Corporation (CELG) Price (31 Mar 2017): US$124.43; Rating: OUTPERFORM; Target Price: US$148.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 11, , , ,198.1 EBITDA 3,563 5,860 8,015 10,035 Depr. & amort. (396) (369) (345) (324) EBIT (US$) 3,167 5,491 7,669 9,711 Net interest exp (470) (445) (385) (327) PBT (US$) 2,373 4,994 7,285 9,384 Income taxes (373) (836) (1,202) (1,538) Profit after tax 1,999 4,157 6,083 7,846 Minorities Reported net income (US$) 1,999 4,157 6,083 7,846 Other NPAT adjustments Adjusted net income 1,999 4,157 6,083 7,846 Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT 3,167 5,491 7,669 9,711 Net interest (470) (445) (385) (327) Change in working capital (179) (353) (488) (528) Cash flow from operations 2,216 4,174 5,940 7,642 CAPEX (150) (150) (150) (150) Free cashflow to the firm 2,066 4,024 5,790 7,492 Aquisitions Divestments Cash flow from investments (150) (150) (150) (150) Net share issue(/repurchase) (2,279) (1,750) (1,600) (1,600) Dividends paid Cashflow from financing activities (2,279) (1,750) (1,600) (1,600) Changes in Net Cash/Debt (214) 2,274 4,190 5,892 Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents 4,667 6,440 9,228 14,615 Account receivables 1,724 2,041 2,502 2,947 Other current assets 2,806 3,013 3,313 3,603 Total current assets 9,602 11,973 15,633 21,856 Total fixed assets Investment securities Total assets 27,009 29,160 32,625 38,674 Liabilities Total current liabilities 2,705 3,851 3,339 5,146 Total liabilities 21,370 21,114 20,096 19,899 Shareholder equity 5,639 8,046 12,529 18,775 Total liabilities and equity 27,009 29,160 32,625 38,674 Net debt 9,584 7,309 3,120 (2,772) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) Net profit growth (%) EPS growth (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (14.8) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Celgene is a biotechnology company focused on the research, development and commercialization of therapeutics for cancer and inflammation and immunology (I&I). Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) In our blue sky scenario, we assume 100% success to ozanimod, GED-301 Our Grey Sky Scenario (US$) In our grey sky scenario, we assume 0% success to ozanimod, GED Share price performance 9 0 A p r Ju l O c t Ja n A p r C ELG.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Blue Sky Grey Sky Analysis 8

9 How achievable is the bull-bear in the next 12 months? We think that the bull thesis is achievable for Celgene since major I&I Ph3 studies readout , and this is why this stock remains a top-pick for us. Key timelines for Celgene related I&I catalysts are as follows 1) Full ozanimod data for MS presented at ECTRIMS Oct 25-28, 2) Ph3 ozanimod ulcerative colitis data in 2018, and 3) Ph3 mongersen Crohn's data in CS Thesis focuses on the fact Celgene has many shots on goal to diversify beyond Revlimid. We think Ph3 readouts/launches on I&I will be the first evidence for investors, and we think investors are more skeptical about commercial potential than us. We have an Outperform rating on Celgene because we think the company has been aggressive in working to replace their Revlimid patent cliff. Because I&I is relatively a new business for Celgene, we think investors are still skeptical whether the acquisitions will yield a large commercial platform. After I&I, we think Celgene still has time to find solutions in hematology to replace Revlimid. Figure 4: Celgene Blue Sky / Grey Sky Analysis $200 $180 $172 $160 $140 $120 $100 $80 $60 $40 $20 $114 $148 $0 Grey Sky Base Case Blue Sky Grey Base Blue Company 2025 sales $17.7B $21.2B $23.6B Scenario assumptions 0% success to Ozanimod, GED % success to Ozanimod, 75% succes to GED % success to Ozanimod, GED-301 Figure 5: Upside / Downside from Base Case Target Price 20% 15% 16% 10% 5% 0% -5% -10% -15% -20% -25% -23% Grey Sky Blue Sky Blue Sky Grey Sky Analysis

10 Americas/United States Biotechnology Rating OUTPERFORM Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 88, Target price is for 12 months. Research Analysts Alethia Young Eliana Merle Grant Hesser Gilead Sciences, Incorporated (GILD) What is the Company Worth Under Different HCV and Acquisition Scenarios? One of the most common questions is how do we think about the worst case valuation? Our worst case valuation is $58/share (downside of 27%). We agree that our base case certainly does not represent the worst case. Therefore, for our worst case analysis we have cut HCV revenues to $2B by 2020 vs. $5.4B in our base case and we have increased erosion on our HIV ex-us revenues to reflect greater generic risk HIV and HCV revenues blue = $14.8B for HIV and $5.4B HCV, but with an acquisition worth ~$3.5B in 2020 sales 2020 HIV and HCV revenues base = $14.8B for HIV and $5.4B HCV 2020 HIV and HCV revenues grey = $12.8B for HIV and $2B HCV Our bear case scenario suggests downside of 27% vs. our bull case of 8% suggest relative to our Target Price of $79/share: Gilead valuation blue = $85/share (upside of 8% to base case) Gilead valuation base = $79/share Gilead valuation grey = $58/share (downside of 27% to base case) Share price performance A p r Ju l O c t Ja n A p r GILD.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$94.12 Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 30, , , ,425.2 EBITDA (US$ m) 18, , , ,150.8 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) 9,583 5,399 3,137 1,077 ROIC (%) Number of shares (m) 1, IC (current, US$ m) 28, BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) 7.32 Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 10

11 Gilead Sciences, Incorporated (GILD) Price (31 Mar 2017): US$67.92; Rating: OUTPERFORM; Target Price: US$79.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 30, , , ,425.2 EBITDA 18,744 14,813 13,773 13,151 Depr. & amort. (1,112) (1,183) (1,192) (1,082) EBIT (US$) 17,632 13,629 12,581 12,069 Net interest exp (964) (1,060) (1,021) (1,001) PBT (US$) 17,096 12,997 11,988 11,496 Income taxes (3,609) (3,706) (3,046) (2,914) Profit after tax 13,487 9,291 8,942 8,581 Minorities Reported net income (US$) 13,500 9,291 8,942 8,581 Other NPAT adjustments (13) Adjusted net income 13,487 9,291 8,942 8,581 Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT 17,632 13,629 12,581 12,069 Net interest (964) (1,060) (1,021) (1,001) Change in working capital (730) 522 (187) (20) Cash flow from operations 13,870 10,997 9,947 9,643 CAPEX (608) (370) (323) (306) Free cashflow to the firm 13,262 10,627 9,625 9,336 Aquisitions Divestments Cash flow from investments (608) (370) (323) (306) Net share issue(/repurchase) (11,000) (4,000) (5,000) (5,000) Dividends paid (2,517) (2,443) (2,363) (2,276) Cashflow from financing activities (13,517) (6,443) (7,363) (7,276) Changes in Net Cash/Debt (256) 4,184 2,261 2,060 Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents 11,612 15,796 17,058 18,619 Account receivables 5,412 4,394 3,833 3,637 Other current assets 4,060 4,033 3,899 3,852 Total current assets 23,164 25,963 25,927 27,090 Total fixed assets 2,611 2,641 2,621 2,586 Investment securities Total assets 49,735 51,721 50,816 51,204 Liabilities Total current liabilities 7,817 7,955 5,971 7,549 Total liabilities 30,650 29,788 27,305 26,387 Shareholder equity 19,085 21,933 23,511 24,817 Total liabilities and equity 49,735 51,721 50,816 51,204 Net debt 9,583 5,399 3,137 1,077 Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) 1,358 1,319 1,277 1,231 CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) (6.9) (18.8) (12.8) (5.1) EBIT growth (%) (20.6) (22.7) (7.7) (4.1) Net profit growth (%) (25.4) (31.2) (3.8) (4.0) EPS growth (%) (8.3) (23.0) (19.8) (0.5) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Gilead is a biotechnology company focused on the development and commercialization of antiviral treatments. Their products include Sovaldi and Harvoni for hepatitis C and Stribild, Complera/Eviplera, Atripla, Truvad and Viread for HIV. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) In our Blue sky scenario, it requires the company to deploy their cash and invest externally in a pipeline. Base case HCV and HIV scenarios Company acquires a company with a $5B pipeline Our Grey Sky Scenario (US$) Significantly erode HCV sales and assume greater generics pressure for HIV in Europe Share price performance A p r Ju l O c t Ja n A p r GILD.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$94.12 Blue Sky Grey Sky Analysis 11

12 How achievable is the bull and bear case? On the blue sky, it requires a deal most likely and on the bear side we see greater risk to 2018 estimates vs For Gilead, we think the bull case requires the company to deploy their cash and invest externally in a pipeline. We would guess shares are range-bound until we learn what this company is doing on a deal front. CS Thesis focus remains on building a pipeline; it can be internal of course but at this point we expect an external pipeline to emerge. We maintain our Outperform rating which includes $66 to their base business and $9 to the pipeline (and $4/sh in cash) for our $79/sh target price. Figure 6: Gilead Blue Sky / Grey Sky Analysis $90 $80 $70 $79 $85 $60 $58 $50 $40 $30 $20 $10 $0 Grey Sky Base Case Blue Sky Company 2025 sales Scenario assumptions 16 to '20 Top and Bottom Line CAGRs Grey Base Blue $15B $24B $29B Significantly erode HCV sales and assume greater generics pressure for HIV in Europe Revenue: -15% EPS: -18% Base case HCV and HIV scenarios Company doesn t make a major acquisition Revenue: -9% EPS: -9% Base case HCV and HIV scenarios Company acquires a company with a $5B pipeline Revenue: -6% EPS: -8% Figure 7: Upside / Downside from Base Case Target Price 10% 8% 5% 0% -5% -10% -15% -20% -25% -30% -27% Grey Sky Blue Sky Blue Sky Grey Sky Analysis

13 Americas/United States Biotechnology Rating NEUTRAL Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 59, Target price is for 12 months. Share price performance Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com A p r Ju l O c t Ja n A p r BIIB.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Biogen, Inc. (BIIB) What is the floor valuation with no pipeline? What is a fair acquisition price? One of the most common questions is what is Biogen worth with no pipeline (aka no credit to aducanumab)? Our grey sky scenario would suggest $262/share. We have also ran another scenario that looks at what if base business revenues were ~10% lower starting 2018 vs our base case and no pipeline and the result is $246/sh. We have gotten a lot of questions recently thinking about base business MS risk for Biogen as we see new competitors and potentially generics coming to the market. Interestingly, if aducanumab were to fail, but we apply M&A synergies to our model (SG&A and R&D cuts of 50% and 20%) our valuation is $337 vs. $347 for aducanumab at 100% and no M&A synergies sales Super Grey = $8.2B 2025 sales Grey= $8.7B 2025 sales Base= $9.6B 2025 sales Blue = $11B 2025 sales M&A Blue= $11.5B Our bear case scenario suggests downside of 11% vs. our bull case which suggests upside of 17% relative to our Target Price of $296/share Biogen valuation blue = $347/share (upside of 17%) Biogen valuation base = $296/share Biogen valuation grey = $262/share (downside of 11%) Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 11, , , ,857.9 EBITDA (US$ m) 5, , , ,695.3 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) 5,226 4,012 2,209-1,156 ROIC (%) Number of shares (m) IC (current, US$ m) 17, BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 13

14 Biogen, Inc. (BIIB) Price (31 Mar 2017): US$273.42; Rating: NEUTRAL; Target Price: US$296.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 11, , , ,857.9 EBITDA 5,994 5,940 6,435 6,695 Depr. & amort. (389) (389) (385) (382) EBIT (US$) 5,605 5,551 6,050 6,313 Net interest exp (152) PBT (US$) 5,384 5,347 5,846 6,109 Income taxes (1,237) (1,284) (1,443) (1,496) Profit after tax 4,147 4,063 4,403 4,613 Minorities Reported net income (US$) 4,154 4,071 4,411 4,621 Other NPAT adjustments (7) (7) (7) (8) Adjusted net income 4,147 4,063 4,403 4,613 Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT 5,605 5,551 6,050 6,313 Net interest (152) Change in working capital (1,143) (31) (115) (106) Cash flow from operations 2,942 4,422 4,673 4,890 CAPEX (650) (448) (461) (474) Free cashflow to the firm 2,292 3,974 4,212 4,415 Aquisitions Divestments Cash flow from investments (1,850) (1,708) (1,871) (474) Net share issue(/repurchase) (1,099) (1,500) (1,000) (1,050) Dividends paid Cashflow from financing activities (1,099) (1,500) (1,000) (1,050) Changes in Net Cash/Debt (7) 1,214 1,802 3,365 Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents 1,309 2,518 3,740 7,106 Account receivables 1,411 1,380 1,421 1,462 Other current assets 3,380 3,351 3,388 3,425 Total current assets 7,170 8,328 9,742 13,300 Total fixed assets 2,712 3,013 3,312 3,609 Investment securities Total assets 21,435 23,912 26,812 30,462 Liabilities Total current liabilities 1,904 2,397 1,894 3,481 Total liabilities 9,464 9,377 8,874 8,961 Shareholder equity 11,972 14,535 17,938 21,501 Total liabilities and equity 21,435 23,912 26,812 30,462 Net debt 5,226 4,012 2,209 (1,156) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) 6.4 (2.3) EBIT growth (%) 14.6 (1.0) Net profit growth (%) 17.1 (2.0) EPS growth (%) 31.0 (5.9) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (5.4) Interest coverage ratio (X) 36.8 Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Biogen is a biotechnology company focused on developing and manufacturing therapies for neurological, autoimmune and hematologic disorders. Biogen s main diseases of focus include multiple sclerosis and hemophilia A and B. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) In our Blue Sky scenario, we assume 100% probability of success to aducanumab Our Grey Sky Scenario (US$) In our Grey Sky scenario, we assume 0% probability of success to aducanumab Share price performance A p r Ju l O c t Ja n A p r BIIB.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Blue Sky Grey Sky Analysis 14

15 How achievable is the bull and bear case? We note that the recent pullback has stock trading close to worst case scenarios. However, we think that the company needs to acquire or perhaps restructure for efficiencies on the operating expense line. Beyond that, key data remains upside to potential peak revenues from Spinraza. We estimate at peak that Spinraza sales are ~$2.5B (2025). CS Thesis remains focused on the company building a pipeline and margin expansion. We maintain our Neutral rating as we believe we give significant credit to Aducanumab with $2.2B in adjusted sales in our model. We do model some erosion from MS competitors over time, but we do think there is the potential for further risk in 2019 and beyond depending on Gilenya generics. We also model that Ocrevus takes share from Tysabri but not Tecfidera. Again, we think that the company should acquire last stage assets to diversify their pipeline which is more or less all focused on Alzheimers. Figure 8: Biogen Blue Sky / Grey Sky Analysis $450 $417 $400 $350 $300 $250 $246 $262 $296 $347 $200 $150 $100 $50 $0 Super Grey Grey Sky Base Case Blue Sky M&A Blue Super Grey Grey Base Blue M&A Blue Sky Company 2025 sales $8.2B $8.7B $9.6B $11B $11.5B Scenario assumptions 0% success to aducanumb ~10% lower sales from the 0% success to aducanumb MS business 40% success to aducanumab 100% success to aducanumab 100% success to aducanumab Acquired with 50% SG&A synergies and 20% R&D synergies Figure 9: Upside / Downside from Base Case Target Price 20% 17% 15% 10% 5% 0% -5% -10% -15% -11% Grey Sky Blue Sky Blue Sky Grey Sky Analysis

16 Americas/United States Biotechnology Rating OUTPERFORM Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 41, Target price is for 12 months. Share price performance Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com A p r Ju l O c t Ja n A p r REGN.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Regeneron Pharmaceuticals, Inc. (REGN) What is the Grey Sky risk associated with RTH258 from Novartis? What are the sensitivities around REGN's Eylea? We expect Novartis data for RTH258 coming down the pike in May We think that this limits some upside for shares until this overhang is limited. Our grey sky scenario attempts to proxy greater competition for Eylea and lower Dupi sales. We think the sell-side broadly has higher expectations for Dupixent vs. the buyside. If model a decrease in Eylea due to competition ($1.3B in 2025 sales vs. $3.1B peak) and Dupixent sales of $2B in 2023, our grey sky scenario is $318. Our blue sky scenario of $540 maintains our optimistic Dupixent assumptions and assumes minimal share loss for Eylea sales blue sky scenario: $9.7B total, $5B Dupixent (pre-split w/sny), $4.2B Eylea/ophthalmology franchise 2025 sales base case: $8.5B total, $5B Dupixent (pre-split w/sny), $3.1B Eylea 2025 sales grey sky scenario: $5.3B total, $2.5B Dupixent (pre-split w/sny), $1.3B Eylea Our bear case scenario suggests downside of 34% vs. our bull case of which suggests 11% upside relative to our Target Price of $485/share REGN valuation blue = $540/share (upside of 11% to our base case) REGN valuation base = $485/share REGN valuation grey = $318/share (downside of 34% to our base case) Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 4, , , ,141.5 EBITDA (US$ m) 1, , , ,190.7 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) -1,098-1,718-2,935-4,848 ROIC (%) Number of shares (m) IC (current, US$ m) 3, BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 16

17 Regeneron Pharmaceuticals, Inc. (REGN) Price (31 Mar 2017): US$387.51; Rating: OUTPERFORM; Target Price: US$485.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 4, , , ,141.5 EBITDA 1,444 1,820 2,385 3,191 Depr. & amort. (113) (181) (196) (383) EBIT (US$) 1,331 1,639 2,189 2,808 Net interest exp (0) PBT (US$) 1,330 1,646 2,198 2,822 Income taxes (434) (691) (760) (885) Profit after tax ,438 1,937 Minorities Reported net income (US$) ,438 1,937 Other NPAT adjustments Adjusted net income ,438 1,937 Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT 1,331 1,639 2,189 2,808 Net interest (0) Change in working capital 128 (91) (117) (107) Cash flow from operations 1,137 1,045 1,517 2,213 CAPEX (575) (425) (300) (300) Free cashflow to the firm ,217 1,913 Aquisitions Divestments Cash flow from investments (575) (425) (300) (300) Net share issue(/repurchase) Dividends paid Cashflow from financing activities 90 (0) (0) (0) Changes in Net Cash/Debt ,217 1,913 Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents 1,461 2,081 3,298 5,211 Account receivables 1,465 1,653 1,912 2,152 Other current assets Total current assets 3,586 4,420 5,924 8,101 Total fixed assets 2,056 2,300 2,404 2,321 Investment securities Total assets 6,742 7,820 9,428 11,521 Liabilities Total current liabilities 958 1,081 1,251 1,408 Total liabilities 2,101 2,224 2,394 2,551 Shareholder equity 4,641 5,596 7,034 8,970 Total liabilities and equity 6,742 7,820 9,428 11,521 Net debt (1,098) (1,718) (2,935) (4,848) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) Net profit growth (%) EPS growth (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (23.7) (30.7) (41.7) (54.0) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Regeneron is a biotechnology company that develops and manufactures medicines across a wide range of serious medical conditions. The company has products that treat eye diseases, colorectal cancer, inflammatory conditions as well as others. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) Our blue sky scenario of $540 maintains our optimistic Dupixent assumptions and assumes minimal share loss for Eylea. Minimal share loss in wamd or DME (so a next generation compound e.g. ang2 works) Our Grey Sky Scenario (US$) Our grey sky scenario attempts to proxy greater competition for Eylea and lower Dupi sales. Dupi sales are half the size we project ($2.2B vs. $4.5B in 2023) Greater share loss in wamd and DME Share price performance A p r Ju l O c t Ja n A p r REGN.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Blue Sky Grey Sky Analysis 17

18 How achievable is the bull and bear case? 2017 is a very important year for REGN in thinking about the bull or bear case. Key catalysts for REGN include 1) Novartis RTH258 in 2Q, 2) ANG2 data expected 2H 2017, 3) Quarterly results, 4) PCSK9 court case updates potentially in 2017, 5) Dupixent Phase 3 data in asthma in 2H 2017 CS Thesis is focused on the Dupixent launch, and we do think Novartis data is an overhang in the near-term. We think there is likely little upside to sell-side expectations, but we think a strong launch will increase buy-side confidence in this asset. The challenge is that expectations are very high. We were encouraged from the call that it seems REGN/Sanofi have worked on the front end to make sure payers are comfortable with the pricing dynamics. Figure 10: Regeneron Blue Sky / Grey Sky Analysis $600 $500 $485 $540 $400 $300 $318 $200 $100 $0 Grey Sky Base Case Blue Sky Grey Base Blue Company 2025 revenues $5.4B $8.4B $9.8B Scenario assumptions Dupi sales are half the size we project ($2.2B vs. $4.5B in 2023) Greater share loss in wamd and DME Some share/price loss in wamd and DME Probability adjusted Dupi sales Minimal share loss in wamd or DME (so a next generation compound e.g. ang2 works) Figure 11: Upside / Downside from Base Case Target Price 20% 10% 11% 0% -10% -20% -30% -40% -34% Grey Sky Blue Sky Blue Sky Grey Sky Analysis

19 Rating OUTPERFORM Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 27, Target price is for 12 months. Share price performance Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com A p r Ju l O c t Ja n A p r A LXN.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Americas/United States Biotechnology Alexion Pharmaceuticals Incorporated (ALXN) How far are we from the worst case/significant biosimilar risk to the base business? The stock is under significant pressure what level represents an opportunity with significant amount of downside baked in? Our grey sky valuation for Alexion is $101 (downside of 38% from our base case). In our grey sky valuation, we model significant competition from biosimilars and others and assume 1210 grows up to be a $1B drug vs. $2.1B in our base case. Of course, if we assumed 1210 is a zero, there would be another ~$23/share of downside to our grey sky (our base case models 75% success). If we modelled no risk for Soliris, 1210 is successful, and MG is approved this adds $700M to Soliris sales and our blue sky scenario is $8.3B in 2025 sales and $211 in valuation total revenues blue sky: $8.3B; $3.7B Soliris and $2.8B total revenues base case: $6.3B; $2.4B Soliris and $2.1B total revenues grey sky: $3.5B; $800M Soliris and $1B 1210 Our bear case scenario suggests downside of 38% vs. our bull case which suggests upside of 30% relative to our Target Price of $164/share ALXN valuation blue = $211/share (upside of 29% to our base case) ALXN valuation base = $164/share ALXN valuation grey = $101/share (downside of 38% to our base case) Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 3, , , ,479.0 EBITDA (US$ m) , , ,914.3 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) 2,973 2,668 2,186 1,381 ROIC (%) Number of shares (m) IC (current, US$ m) 11, BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 19

20 Alexion Pharmaceuticals Incorporated (ALXN) Price (31 Mar 2017): US$121.24; Rating: OUTPERFORM; Target Price: US$164.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 3, , , ,479.0 EBITDA 931 1,190 1,521 1,914 Depr. & amort. (271) (269) (268) (266) EBIT (US$) ,254 1,649 Net interest exp (97) (91) (86) (81) PBT (US$) ,168 1,568 Income taxes (181) (174) (265) (311) Profit after tax ,257 Minorities Reported net income (US$) ,257 Other NPAT adjustments Adjusted net income ,257 Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT ,254 1,649 Net interest (97) (91) (86) (81) Change in working capital (257) (81) (155) (194) Cash flow from operations ,015 1,329 CAPEX (247) (240) (233) (224) Free cashflow to the firm ,105 Aquisitions Divestments Cash flow from investments (247) (240) (233) (224) Net share issue(/repurchase) (531) (300) (300) (300) Dividends paid Cashflow from financing activities (531) (300) (300) (300) Changes in Net Cash/Debt (376) Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents ,526 Account receivables ,010 1,166 Other current assets Total current assets 2,196 2,468 3,026 3,953 Total fixed assets 903 1,091 1,264 1,419 Investment securities Total assets 12,880 13,122 13,645 14,531 Liabilities Total current liabilities ,043 Total liabilities 4,765 4,650 4,571 4,499 Shareholder equity 8,116 8,472 9,075 10,032 Total liabilities and equity 12,880 13,122 13,645 14,531 Net debt 2,973 2,668 2,186 1,381 Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) Net profit growth (%) EPS growth (%) (5.7) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Alexion is a biotechnology company focused on researching, developing and commercializing therapeutics for rare diseases. Alexion's drug Soliris is used to treat patients with complement mediated disorders and other products include Strensiq and Kanuma. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) If we modelled no risk for Soliris, 1210 is successful, and MG is approved this adds $700M to Soliris sales and our blue sky scenario is $8.3B in 2025 sales and $211 in valuation. Our Grey Sky Scenario (US$) In our grey sky valuation, we model significant competition from biosimilars and others and assume 1210 grows up to be a $1B drug vs. $2.1B in our base case Share price performance A p r Ju l O c t Ja n A p r A LXN.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$ Blue Sky Grey Sky Analysis 20

21 How achievable is the bull and bear case? 1210 data likely mid to 2H 2018 is likely a major turning point in considering the bull bear thesis. However, in the near-term, we think MG gets approved on a global basis. We think the stock should trade up $5-10/sh with this approval (what 25-50% success to MG is worth in our model). We also note the importance of solid operating performance at the quarter. From our conversations, this stock still remains a show me story for most investors at this point. CS Thesis is focused on the fact that we think a lot of bad news is baked in at this level and our confidence in MG approval and 1210 further defending the complement business long-term. Alexion is a top-pick for the platform but acknowledge the sentiment is weak on this name. We think that if Alexion can meet their 2017 guidance and they are approved for MG that the stock should likely trade closer to our target price of $164/sh. If clinical execution timelines for 1210 remain on track, enrollment will be complete for both PNH and ahus studies by year end and we should be on track for data in 2H We remain skeptical of significant competitive threats and are more focused on biosimilar risk. Figure 12: Alexion Blue Sky / Grey Sky Analysis $250 $200 $150 $164 $210 $211 $100 $101 $50 $0 Grey Sky Base Case M&A Valuation (on base case) Blue Sky Grey Base Blue M&A Valuation (base case) Company 2025 sales $3.5B $6.3B $8.3B $6.3B Scenario assumptions 1210 is a $1B drug (vs. $2.1B base) Soliris decreases by 75% from 2017 to 2025 Competition takes 15% share; Price cut 20% No competitor and no biosimilar 1210 and MG work Base case assumptions Company is acquired with 50% SG&A synergies and 25% R&D synergies Figure 13: Upside / Downside from Base Case Target Price 40% 30% 29% 20% 10% 0% -10% -20% -30% -40% -50% -38% Grey Sky Blue Sky Blue Sky Grey Sky Analysis

22 Rating OUTPERFORM Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 27, Target price is for 12 months. Share price performance Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com A p r Ju l O c t Ja n A p r V RT X.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$79.15 Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Americas/United States Biotechnology Vertex Pharmaceuticals Incorporated (VRTX) What is the Company Worth with Full Success to the Triplet Opportunity? Vertex: 661 moves the company closer to the triplet so now what is the set up. Our blue sky scenario which reflects 100% success for the triplet is $148 and would assume Vertex CF franchise sales are $5.5B vs. our base case of $4.8B in In our grey sky scenario, we model what is the risk if the triplet is not successful. Realistically, we agree with Vertex that it is more of a matter of when they find the right triplet combination vs. IF. We think based on the 661 data that we have greater confidence in the preclinical platform to discern triplets going forward. The company will also have readouts on four triplet combinations in the next 12 months (3 readouts in the next 6 months) total revenues blue sky: $6.4B 2025 total revenues base case: $5.25B 2025 total revenues grey sky: $4.1B Our bear case scenario suggests downside of 35% vs. our bull case which suggests upside of 37% relative to our Target Price of $108/share: Vertex M&A blue valuation - $157/share - $194/share (upside of 45-80%) Vertex valuation blue = $148/share (upside of 37% to target price) Vertex valuation base = $108/share (target price) Vertex valuation grey = $70/share (downside of 35% to target price) Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 1, , , ,198.3 EBITDA (US$ m) ,142.9 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) ,773 ROIC (%) Number of shares (m) IC (current, US$ m) BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 22

23 Vertex Pharmaceuticals Incorporated (VRTX) Price (31 Mar 2017): US$109.35; Rating: OUTPERFORM; Target Price: US$108.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) 1, , , ,198.3 EBITDA ,143 Depr. & amort. (86) (80) (75) (73) EBIT (US$) ,070 Net interest exp (81) (81) (81) (81) PBT (US$) (68) Income taxes (17) Profit after tax (85) Minorities (28) Reported net income (US$) (113) Other NPAT adjustments Adjusted net income (113) Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT ,070 Net interest (81) (81) (81) (81) Change in working capital (1) Cash flow from operations ,062 CAPEX (34) (37) (51) (64) Free cashflow to the firm Aquisitions Divestments Cash flow from investments (34) (37) (51) (64) Net share issue(/repurchase) Dividends paid Cashflow from financing activities 0 0 (0) (0) Changes in Net Cash/Debt Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents ,306 2,304 Account receivables Other current assets Total current assets 1,575 1,546 2,210 3,354 Total fixed assets Investment securities Total assets 2,615 2,543 3,183 4,318 Liabilities Total current liabilities ,016 Total liabilities 1,607 1,391 1,544 1,691 Shareholder equity ,485 2,474 Total liabilities and equity 2,615 2,543 3,183 4,318 Net debt (40) (263) (775) (1,773) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) Net profit growth (%) EPS growth (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) (4.0) Net margin (%) (6.7) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) P/E (x) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) (12.6) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (4.0) (22.8) (47.3) (67.5) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Vertex is a biotechnology company that researches, develops and commercializes small molecule drugs. Its focus has been in Cystic Fibrosis, with products Kalydeco and Orkambi. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) Our blue sky scenario which reflects 100% success for the triplet is $148 and would assume Vertex CF franchise sales are $5.5B vs. our base case of $4.8B in 2022 Our Grey Sky Scenario (US$) In our grey sky scenario, we model what is the risk if the triplet is not successful Share price performance 7 0 A p r Ju l O c t Ja n A p r V RT X.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$79.15 Blue Sky Grey Sky Analysis 23

24 How achievable is the bull and bear case? We will definitely learn a lot in 2H 2017; we think Vertex still has their most important catalyst ahead of them which is the triplet data readouts in Ph1/2 coming over the 2H Additionally, we will be watching for Galapagos timelines around starting their triplet mid-year and then their early data late We think Vertex has one of the most important catalyst set-ups over CS Thesis has always been that this company will maintain their competitive advantage and continue to develop CF combinations that allow them to treat more CF patients. It remains a top pick for our franchise. Currently Vertex treats around ~10K patients out of the current addressable opportunity of 30K with their current products. The triplet regimen would open up the opportunity to treat another 24K patients. At times, it has been painful over 2016 as numbers were lowered around the Orkambi franchise and there were limited catalysts related to their clinical development. However, we are increasingly confident that this company develops a triplet program that will open the door to roughly double their treatable market opportunity. Figure 14: Vertex Blue Sky / Grey Sky Analysis $250 $200 $194 $150 $148 $100 $50 $70 $108 $0 Grey Sky Base Case Blue Sky M&A DCF Company 2025 sales Scenario assumptions Grey Base Blue M&A DCF (on blue sky) $4.1B $5.25B $6.4B $6.5B 0% success to the triplet 50% success to the triplet 100% success to the triplet 100% success to the triplet 50% SG&A cuts 25% R&D cuts Figure 15: Upside / Downside from Base Case Target Price 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% 45% 37% -35% Grey Sky Blue Sky M&A Blue Blue Sky Grey Sky Analysis

25 Americas/United States Biotechnology Rating OUTPERFORM [V] Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 8, Target price is for 12 months. [V] = Stock Considered Volatile (see Disclosure Appendix) Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com Tesaro, Inc. (TSRO) What is the Company Worth if All PARPs Take Equal Share? What is M&A Value in That Case? Tesaro: Investors are focused on upcoming ARIEL3 Clovis readout and recent filing for second-line by Astrazeneca's olaparib. Our blue sky scenario revenues for Zejula (niraparib) are $3.7B vs. our base case of $3B. Our grey sky scenario assumes Zejula revenues for $2B. For our Tesaro scenario analysis, we have two cases for the company which include one for M&A and one excluding M&A: We have gotten many questions around what is our valuation excluding M&A. Our base case would be $131/share excluding M&A. Our grey scenario is $104/share which could be a non M&A value if share were equal across all the lines of therapy due to multiple competitors. Our blue sky scenario suggests that Tesaro maintains a differentiated label and is worth $160/share. Our non-m&a Blue Sky / Grey Sky scenario for Tesaro is $160 vs. $104 (see page 27 for the assumptions behind this analysis) Our M&A Blue Sky / Grey Sky scenario for Tesaro is $239 vs. $160 (see page 27 for the assumptions behind this analysis) Share price performance A p r Ju l O c t Ja n A p r T SRO.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$44.72 Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) EBITDA (US$ m) OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) ROIC (%) Number of shares (m) IC (current, US$ m) BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 25

26 Tesaro, Inc. (TSRO) Price (31 Mar 2017): US$153.87; Rating: OUTPERFORM [V]; Target Price: US$198.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) EBITDA (367) (578) (460) (242) Depr. & amort. (4) (5) (6) (7) EBIT (US$) (371) (583) (466) (250) Net interest exp (15) (14) (14) (14) PBT (US$) (386) (597) (480) (264) Income taxes (1) Profit after tax (387) (597) (480) (264) Minorities Reported net income (US$) (387) (597) (480) (264) Other NPAT adjustments Adjusted net income (387) (597) (480) (264) Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT (371) (583) (466) (250) Net interest (15) (14) (14) (14) Change in working capital Cash flow from operations (172) (429) (361) (152) CAPEX (5) (6) (7) (7) Free cashflow to the firm (176) (435) (369) (160) Aquisitions Divestments Cash flow from investments (5) (6) (7) (7) Net share issue(/repurchase) Dividends paid Cashflow from financing activities Changes in Net Cash/Debt 462 (135) (119) 40 Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents Account receivables Other current assets Total current assets Total fixed assets Investment securities Total assets Liabilities Total current liabilities Total liabilities Shareholder equity (190) (253) Total liabilities and equity Net debt (570) (436) (317) (357) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS (5.88) (8.63) (5.89) (1.90) Prev. EPS (US$) Dividend (US$) Free cash flow per share (3.19) (7.53) (6.09) (2.55) Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) (57.1) (57.4) Net profit growth (%) (54.0) (54.2) EPS growth (%) (3.8) (46.7) EBITDA margin (%) (818.8) (578.4) (111.1) (29.7) EBIT margin (%) (827.1) (583.4) (112.6) (30.6) Pretax margin (%) (860.7) (597.3) (115.9) (32.3) Net margin (%) (864.0) (597.3) (115.9) (32.3) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) (20.9) (13.5) (17.2) (32.6) EV/EBIT (x) (20.7) (13.4) (17.0) (31.6) P/E (x) (26.2) (17.8) (26.1) (81.2) Price to book (x) (43.8) (34.1) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) (182.4) (315.9) ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (168.9) (1078.2) Interest coverage ratio (X) (25.0) (42.1) (33.6) (18.0) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Tesaro is an oncology-focused biotechnology company that develops and manufactures medicines and therapies that target cancer and its underlying symptoms. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) Add more sales for PARP expansion (NSCLC, prostate, SCLC) and 65% market share in 1L and 2L. Our Grey Sky Scenario (US$) Assume 35% market share across all lines of therapy Share price performance 0 A p r Ju l O c t Ja n A p r T SRO.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$44.72 Blue Sky Grey Sky Analysis 26

27 How achievable is the bull and bear case? Important catalysts with competitor in mid-2017 that will help us frame market share potential for Zejula. We also think that M&A remains a likely scenario for Tesaro over We think the Zejula launch will be important to watch over 2017 as well. Clovis ARIEL3 study should help give investors more clarity around potential bull and bear scenarios. We also think Tesaro will likely not be acquired until after the Clovis data readout. CS Thesis remains potential for M&A and best strategy in developing niraparib that will lead to biggest market opportunity. We think Tesaro's development plans have allowed them the potential for a broad label. We will have to see if Clovis can succeed in Ph3 with a broad clinical success as well. We think PARPs remain scare assets in oncology with blockbuster potential. In previous research we reiterated our thesis of M&A in our analysis called "Raising TP to $198 we expect much interest in this late stage cancer asset" Figure 16: Tesaro non-m&a Blue Sky / Grey Sky Analysis $180 $160 $160 $140 $131 $120 $100 $104 $80 $60 $40 $20 $0 Grey Sky Base Case Blue Sky Non M&A Grey Non M&A Base Non M&A Blue Zejula 2023 sales $2.1B $3B $3.7B Scenario assumptions Assume 35% market share across all lines of therapy Assume 50-65% across first and second line therapy 35% in 3L Add more sales for PARP expansion (NSCLC, prostate, SCLC) And 65% market share in 1L and 2L Figure 17: Tesaro M&A Blue Sky / Grey Sky Analysis $300 $250 $239 $200 $198 $150 $160 $100 $50 $0 Grey Sky Base Case Blue Sky M&A Grey M&A Base M&A Blue Zejula 2023 sales $2.1B $3B $3.7B Scenario assumptions Assume 35% market share across all lines of therapy Assume 50-65% across first and second line therapy 35% in 3L Add more sales for PARP expansion (NSCLC, prostate, SCLC) And 65% market share in 1L and 2L Blue Sky Grey Sky Analysis

28 Rating OUTPERFORM [V] Price (31-Mar-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 4, Target price is for 12 months. [V] = Stock Considered Volatile (see Disclosure Appendix) Research Analysts Alethia Young alethia.young@credit-suisse.com Eliana Merle eliana.merle@credit-suisse.com Grant Hesser grant.hesser@credit-suisse.com Americas/United States Biotechnology Alnylam Pharmaceuticals, Incorporated (ALNY) What is the company worth on successful FAP data and will that drive further platform credit? For Alnylam we evaluate blue sky grey sky scenarios related to upcoming FAP readouts for Alnylam and their competitor Ionis. Our bear case assumes if Ionis has a very efficacious and safe therapy that it could get the more dominant share vs Alnylam patisiran. Our blue sky scenario assumes if Alnylam has the dominant therapy or is the only player on the market. Our super blue sky case for Alnylam is assigning additional credit to platform assets along with success in FAP Blue sky patisiran revenues in 2023 = $1.1B Base case patisiran revenues in 2023 = $800M Grey sky patisiran revenues in 2023 = $540M Our bear case scenario suggests downside of 40% vs. our bull case of 116% suggest relative to our Target Price of $50/share. ALNY valuation Blue = $108/share ALNY valuation Base = $50/share ALNY valuation Grey = $30/share Share price performance A p r Ju l O c t Ja n A p r A LN Y.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$64.79 Quarterly EPS Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) n.m Revenue (US$ m) EBITDA (US$ m) OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) ROIC (%) Number of shares (m) IC (current, US$ m) BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates Blue Sky Grey Sky Analysis 28

29 Alnylam Pharmaceuticals, Incorporated (ALNY) Price (31 Mar 2017): US$51.25; Rating: OUTPERFORM [V]; Target Price: US$50.00; Analyst: Alethia Young Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) EBITDA (409) (333) (279) (51) Depr. & amort. (15) (17) (37) (54) EBIT (US$) (425) (351) (316) (105) Net interest exp PBT (US$) (410) (345) (310) (99) Income taxes Profit after tax (410) (345) (310) (99) Minorities Reported net income (US$) (410) (345) (310) (99) Other NPAT adjustments Adjusted net income (410) (345) (310) (99) Cash Flow 12/16A 12/17E 12/18E 12/19E EBIT (425) (351) (316) (105) Net interest Change in working capital 15 (25) (4) (21) Cash flow from operations (308) (270) (192) 20 CAPEX (65) (150) (150) (150) Free cashflow to the firm (372) (420) (342) (130) Aquisitions Divestments Cash flow from investments 143 (150) (150) (150) Net share issue(/repurchase) Dividends paid Cashflow from financing activities Changes in Net Cash/Debt (42) (130) Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents Account receivables Other current assets Total current assets Total fixed assets Investment securities Total assets 1,113 1,290 1,370 1,360 Liabilities Total current liabilities Total liabilities Shareholder equity 920 1,157 1,232 1,219 Total liabilities and equity 1,113 1,290 1,370 1,360 Net debt (194) (273) (231) (102) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS (3.91) (2.83) (2.27) (0.13) Prev. EPS (US$) Dividend (US$) Free cash flow per share (4.35) (4.53) (3.45) (1.31) Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) (43.4) Net profit growth (%) (41.4) EPS growth (%) (34.4) EBITDA margin (%) (868.2) (326.6) (150.7) (11.8) EBIT margin (%) (900.3) (343.5) (170.8) (24.4) Pretax margin (%) (869.6) (337.5) (167.5) (22.9) Net margin (%) (869.6) (337.5) (167.5) (22.9) Valuation 12/16A 12/17E 12/18E 12/19E EV/Sales (x) EV/EBITDA (x) (10.3) (12.4) (15.0) (85.0) EV/EBIT (x) (9.9) (11.8) (13.2) (41.1) P/E (x) (13.1) (18.1) (22.6) (404.9) Price to book (x) Asset turnover Returns 12/16A 12/17E 12/18E 12/19E ROE stated-return on (%) (37.5) (33.2) (25.9) (8.0) ROIC (%) (0.6) (0.4) (0.3) (0.1) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (21.0) (23.6) (18.8) (8.3) Interest coverage ratio (X) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Alnylam Pharmaceuticals is a biotechnology company researching and developing RNAi (ribonucleic acid interference) based therapeutics. Its lead products include Patisiran and Revusiran for the treatment of TTR-mediated disorders. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) Our blue sky scenario assumes if Alnylam has the dominant therapy or is the only player on the market. Our Grey Sky Scenario (US$) Our bear case assumes if Ionis has a very efficacious and safe therapy that it could get the more dominant share vs Alnylam patisiran. Share price performance A p r Ju l O c t Ja n A p r A LN Y.O Q S& P IN D EX On 31-Mar-2017 the S&P 500 INDEX closed at Daily Apr01, Mar31, 2017, 04/01/16 = US$64.79 Blue Sky Grey Sky Analysis 29

30 Figure 18: Blue/Base/Grey sky patisiran revenues 2023 Patisiran revenues $1,200 $1,100 $1,000 $800 $800 $600 $540 $400 $200 $0 Patisiran 2023 Grey Sky Patisiran 2023 Base Sky Patisiran 2023 Blue Sky Our bear case scenario suggests downside of 40-57% vs. our bull case of 116% suggest relative to our Target Price of $50/share. Although investors are very focused on FAP now, long-term Alnylam could have similar value as the blue sky if all their other late stage programs work We note that if Alnylam can get 1-2 of their other programs to work that the worst case is around $30/share. In the chart below, we assume 0% success for FAP but include 100% for some of different late stage programs including hemophilia, porphyria, and PCSK9. These assets are on a later generation platform than FAP that is more potent Figure 19: Valuation scenarios for Alnylam Hemophilia $1.8B peak Porphyria $600M peak PCSK9 $150M to ALNY in peak royalties Alnylam FV 100% success 100% success 100% success $91/share 100% success 0% success 100% success $59/share 0% success 100% success 100% success $33/share Blue Sky Grey Sky Analysis

31 Figure 20: Alnylam Blue Sky / Grey Sky Analysis Figure 21: Blue Sky / Grey Sky Upside Downside from Base Case Target Price Blue Sky Grey Sky Analysis 31