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Health Care: Stock Presentation

Yishuo Chen Justin Mahida Dani Malnik Matt Maluchnik. Health Care: Stock Presentation. SIM Portfolio. Health Care Sector Action. Reduce weight by 100 bps Use of sector as a hedge Overweighting from strong performance Expectations on economic performance Impact of health care legislation.

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Health Care: Stock Presentation

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  1. Yishuo Chen Justin Mahida Dani Malnik Matt Maluchnik Health Care: Stock Presentation

  2. SIM Portfolio

  3. Health Care Sector Action Reduce weight by 100 bps • Use of sector as a hedge • Overweighting from strong performance • Expectations on economic performance • Impact of health care legislation

  4. Sector Stocks

  5. Recommendation We recommend liquidating Amgen (AMGN) and distributing the basis points among our other three holdings. Reduce weight in biotechnology Take advantage of movement of market towards generics High expectations from Johnson & Johnson

  6. Target Prices

  7. Gilead Sciences(GILD) Summary Gilead Sciences, Inc. (Gilead) is a biopharmaceutical company that discovers, develops and commercializes therapeutics. The Company has operations in North America, Europe and Australia. The company focuses on HIV/AIDS medications.

  8. Gilead Sciences(GILD) Recent Events

  9. Gilead Sciences(GILD) Valuation: DCF

  10. Gilead Sciences(GILD) Valuation: Multiples

  11. Gilead Sciences(GILD) Implied Volatility Min: 27.8% Implied volatility is calculated by applying the Black-Scholes formula to current prices on call and put options. Options used for this graph have a date of exercise of January 1, 2011 (221 days).

  12. Gilead Sciences(GILD) Catalysts and Risks HIV franchise accounts for 77% of sales Entrance into cardiovascular therapy Fewer royalties on Tamiflu Quad pill now in Phase III $200 million revenue lost due to Health Reform (2.8% of 2009 total revenue) Catalysts risks • Atripla sales remain strong • CDC recommendations for routine testing and earlier treatment of HIV • Minimal exposure to patent expirations • $5 billion share repurchase program in effect

  13. Amgen, Inc.(AMGN) Summary Amgen Inc. is an independent biotechnology medicines company that discovers, develops, manufactures and markets medicines for multipleillnesses. It focuses on human therapeutics and concentrates on medicines based on advances in cellular and molecular biology.

  14. Amgen, Inc.(AMGN) Recent Events

  15. Amgen, Inc.(AMGN) Valuation: DCF

  16. Amgen, Inc.(AMGN) Valuation: Multiples

  17. Amgen, Inc.(AMGN) Valuation: DCF

  18. Amgen, Inc.(AMGN) Implied Volatility Min: 26.3% Implied volatility is calculated by applying the Black-Scholes formula to current prices on call and put options. Options used for this graph have a date of exercise of January 1, 2011 (221 days).

  19. Amgen, Inc.(AMGN) Catalysts and Risks Recent clinical trials call into question the safety of ESA-class drugs CMMS reports that reimbursement rates for Epogen will be reduced in 2011 FDA approval of denosumab is delayed $200-250 million revenue lost due to Health Reform (1.4%-1.7% of 2009 total revenue) Catalysts risks • Five drugs with sales over $1 billion • Aranesp and Neulasta have successfully captured sales from now-generic Epogen

  20. Johnson & Johnson(JNJ) Summary Johnson & Johnson is a holding company with more than 250 operating companies conducting business across the world. Johnson & Johnson engages in the research, manufacture, and sale of various products in the health care field worldwide. Segments include consumer, pharmaceuticals, medical devices and diagnostics.

  21. Johnson & Johnson(JNJ) Recent Events

  22. Johnson & Johnson(JNJ) Valuation: DCF

  23. Johnson & Johnson(JNJ) Valuation: Multiples

  24. Johnson & Johnson(JNJ) Implied Volatility Min: 19.7% Implied volatility is calculated by applying the Black-Scholes formula to current prices on call and put options. Options used for this graph have a date of exercise of January 1, 2011 (221 days).

  25. Johnson & Johnson(JNJ) Catalysts and Risks Patent expiration exposure • Invega has not sufficiently outperformed Risperdal • Procrit has concerning side effects and reimbursement limitations Recent studies call into question the benefits of drug-eluting stents Recent drug recalls of Tylenol Impaired pricing power following health care legislation Catalysts risks • Control of top or number-two position in 70% of products • Strong pipeline of products across diseases and age groups • $10 billion share repurchase program in effect

  26. Johnson & Johnson(JNJ) DCF Model

  27. Teva Pharmaceuticals(TEVA) Summary Teva Pharmaceutical Industries Ltd., is the leader in generic pharmaceuticals. Teva specializes in the development, production and marketing of a wide range of generic products, innovative and branded pharmaceuticals, biogenerics and active pharmaceutical ingredients.

  28. Teva Pharmaceuticals(TEVA) Recent Events

  29. Teva Pharmaceuticals(TEVA) Valuation: DCF

  30. Teva Pharmaceuticals(TEVA) Valuation: Multiples

  31. Teva Pharmaceuticals(TEVA) Implied Volatility Min: 23.3% Implied volatility is calculated by applying the Black-Scholes formula to current prices on call and put options. Options used for this graph have a date of exercise of January 1, 2011 (221 days).

  32. Teva Pharmaceuticals(TEVA) Catalysts and Risks Copaxone faces competition from other branded pharmaceuticals Ability to generate cost savings from recent acquisitions is questionable Catalysts risks • Sales of generics projected to increase as a result of health care legislation • Well positioned to offer generic biologics • Backwards integration into raw materials allows for capture of upside

  33. Teva Pharmaceuticals(TEVA) DCF Model

  34. Recommendation We recommend liquidating Amgen (AMGN) and distributing the basis points among our other three holdings. Reduce weight in biotechnology Take advantage of movement of market towards generics High expectations from Johnson & Johnson

  35. If you ask questions, we will eat your babies

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