First Read: US Pharmaceuticals & Biotechnology "BIIB/DNLI: LRRK2 misses ..."

Research evidence excerpt

First Read: US Pharmaceuticals & Biotechnology "BIIB/DNLI: LRRK2 misses ..."

Valuation Method and Risk Statement

Industry-specific risks include: (1) underwhelming drug product launches, (2) clinical trial

failure or discontinuation, (3) potential regulatory setback. For valuation, we use PE or EV/

sales multiple methodologies, supported by DCF frameworks.

Large Cap Biopharma: Potential downside risks to large cap biotechs are: (1) political and

geopolitical impacts to healthcare related policies (e.g. pricing, tariff, FDA organizational

changes etc.), (2) similarly, other changes in the US healthcare system, which provides a large

portion of revenues for most biopharmaceuticals companies, (3) disappointing launches or

commercial performance of marketed products, (4) FDA and EMEA regulatory decisions on

clinical candidates or approved products that are both on the market and in clinical

development, (5) potential biogeneric competition in the upcoming years for products that

have lost/will lose patent protection.

Biogen: Our valuation is based on a 1yr forward P/E multiple, supported by a DCF framework.

Upside risks include 1) approval, reimbursement and market uptake of anti-amyloid mAbs, 2)

lower than expected competitor pressure in the MS market, 3) slower than expected Spinraza

decline, and 4) success/approvals of assets in the clinical pipeline. Downside risks include 1)

continued restricted coverage by CMS for anti-amyloid mAbs, 2) increased pricing and/or

competitive pressure across MS, 3) increased competitive pressure on Spinraza, and 4)

discontinuation/failure of assets in the clinical pipeline.

Denali: We value the company using a peak sales multiple applied to probability adjusted

sales across its pipeline programs.