Yishuo ChenJustin MahidaDani MalnikMatt Maluchnik

S&P Weight

SIM Weight

Change

Consumer Discretionary 10.55% 10.44% -0.11%

Consumer Staples 10.91% 11.71% 0.80%

Energy 11.18% 9.76% -1.43%

Financials 16.47% 11.41% -5.07%

Health Care 11.55% 14.63% 3.07%

Industrials 10.76% 13.10% 2.34%

Information Technology 18.91% 20.18% 1.27%

Materials 3.45% 1.64% -1.82%

Telecommunication 2.73% 3.70% 0.98%

Utilities 3.48% 2.10% -1.38%

Reduce weight by 100 bps

Use of sector as a hedgeOverweighting from strong

performanceExpectations on economic

performance Impact of health care legislation

Symbol Industry Price

Consensus

Upside

Volatility

FRX Drug Mfr. $26.12 $31.65 21% 29.2%SYK Hospitals $52.70 $63.68 21% 23.1%ZMH Med. Equip. $55.83 $67.11 20% 24.0%CFN Biotech $24.72 $29.67 20% 28.4%BDX Med. Instr. $71.49 $85.65 20% 19.5%CI Health Care Plans $32.65 $39.10 20% 40.1%AGN Health Care Plans $58.05 $69.43 20% 23.6%HUM Health Care Plans $44.71 $53.33 19% 34.9%PDCO Med. Equip. $29.58 $35.18 19% 22.3%JNJ Drug Mfr. $60.88 $72.11 18% 12.8%ESRX Health Care Plans $100.59 $118.80 18% 26.3%PKI Drug Mfr. $22.01 $25.93 18% 28.2%CAH Drugs Wholesale $33.21 $39.11 18% 41.6%DVA Med. Lab. $61.28 $71.65 17% 21.0%HSP Drug Delivery $50.65 $59.13 17% 23.4%BIIB Biotech $48.98 $56.45 15% 24.5%ABC Drug Mfr. $30.83 $35.47 15% 20.9%LH Med. Lab. $76.00 $86.47 14% 18.8%BCR Med. Instr. $79.57 $90.00 13% 19.3%LLY Drug Mfr. $33.12 $37.43 13% 19.2%BMY Med. Instr. $22.97 $25.86 13% 19.6%MCK Drugs Wholesale $68.33 $76.45 12% 23.7%ISRG Med. Equip. $321.08 $358.75 12% 41.5%WPI Drugs, Generic $42.87 $47.18 10% 20.6%MIL Drug Mfr. $106.30 $103.00 -3% 28.5%

Symbol Industry Price

Consensus

Upside

Volatility

PFE Med. Instr. $15.40 $22.09 43% 23.2%WLP Med. Instr. $51.25 $72.69 42% 30.7%GILD Biotech $36.57 $51.85 42% 25.3%BAX Med. Instr. $40.67 $57.36 41% 25.8%THC Med. Instr. $5.37 $7.53 40% 58.2%KG Drug Mfr. $8.56 $11.89 39% 31.2%MRK Med. Instr. $32.04 $43.21 35% 26.0%ABT Drugs Wholesale $46.96 $63.12 34% 16.6%MHS Med. Equip. $56.08 $74.54 33% 22.4%UNH Med. Equip. $28.70 $38.13 33% 33.5%AET Drug Mfr. $28.74 $37.82 32% 37.2%CVH Health Care Plans $20.00 $26.18 31% 39.8%AMGN Biotech $52.44 $68.50 31% 24.5%CELG Med. Instr. $56.15 $72.63 29% 31.4%VAR Med. Instr. $48.52 $62.29 28% 27.3%LIFE Biotech $48.10 $61.23 27% 23.6%BSX Drug Mfr. $6.24 $7.86 26% 37.4%TMO Health Care Plans $50.86 $63.09 24% 24.2%STJ Med. Equip. $37.18 $45.72 23% 29.4%MDT Drugs Wholesale $40.33 $49.46 23% 22.6%MYL Drugs, Generic $19.51 $23.87 22% 31.9%GENZ Biotech $49.41 $60.40 22% 30.4%DGX Med. Equip. $52.25 $63.75 22% 19.1%XRAY Health Services $33.06 $40.33 22% 23.7%WAT Health Care Plans $65.50 $79.50 21% 23.8%

We recommend liquidating Amgen (AMGN) and distributing the basis points among our other three holdings.

Old New Change

AMGN 246 0 -246

GILD 388 414 26

JNJ 365 465 100

TEVA 463 483 20

Reduce weight in biotechnology

Take advantage of movement of market towards generics

High expectations from Johnson & Johnson

Stock

Current Price

(05/21/2010)

Our Target Price

Projected Upside

Historical Volatility

Consensus Analyst Price

(Median)AMGN

$52.44 $68 29.6% 25.29% $70

GILD $36.57 $52 42.2% 24.49% $53JNJ $60.88 $79 29.8% 12.78% $71TEVA $54.59 $70 28.2% 19.82% $70

Current price $36.57

52-wk range $37.16 - $50.00

Market Capitalization

$33.6 billion

Shares outstanding

902 million

FY 2009 revenue $7.01 billion

FY 2009 earnings $2.64 billion

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.

Summary

5/11 Announces $5bn share repurchase program

4/27 Completion of bioequivalence testing for Truvada and TMC278 regimen

4/20 Lowers FY 2010 revenue guidance

4/19 Terminates Phase II trial of GS 9450 (Hepatitis C )

4/12 Initiates Phase III trial for Quad Regimen

4/7 Receives FDA warning over direct-to-consumer advertising with misleading information

2/22 Receives FDA approval for Cayston (Cystic Fibrosis)

Recent Events

6.65% 7.60% 8.55% 9.50% 10.45% 11.40% 12.35%

3.15% $63.42 $51.74 $44.06 $38.60 $34.49 $31.28 $28.68

3.60% $69.22 $54.95 $46.04 $39.90 $35.40 $31.93 $29.16

4.05% $77.03 $58.97 $48.41 $41.42 $36.43 $32.66 $29.69

4.50% $88.10 $64.17 $51.31 $43.21 $37.61 $33.48 $30.29

4.95% $105.04 $71.13 $54.93 $45.36 $38.99 $34.42 $30.96

5.40% $134.17 $80.93 $59.59 $47.98 $40.62 $35.50 $31.71

5.85% $196.08 $95.78 $65.79 $51.24 $42.56 $36.76 $32.57

Valuation: DCF

Valuation: Multiples

High Low Median CurrentTarget

Multiple

Target Metric

per Share

Target Price

P/Forward E

94.4 11.2 26.5 11.2 18.9 3.38 63.88

P/S 425.8 4.8 24.3 4.8 6.1 8.78 53.55P/B 23.6 1.6 8.7 5 4.4 8.12 35.73P/EBITDA 131.04 8.38 25.33 8.38 13.57 4.84 65.68P/CF 135.5 11.2 33.8 11.2 15.2 3.62 55.02

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).

Implied Volatility

Catalysts and Risks

CATALYSTS

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

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)

Current price $52.44

52-wk range $48.20 - $64.76

Market Capitalization

$50.2 billion

Shares outstanding

958 million

FY 2009 revenue $14.4 billion

FY 2009 earnings $4.61 billion

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.

Summary

5/17 Citigroup analysts upgraded Amgen Inc. to buy based on their view that the risk/reward is now more compelling.

5/14 Amgen, Inc. announced the submission of a Biologics License Application to FDA for denosumab.

4/26 Robert A. Bradway, the current Chief Financial Officer, was appointed to serve as President and Chief Operating Officer and Michael A. Kelly, the current Chief Accounting Officer, was appointed to the additional position of Acting CFO.

4/18 Amgen, Inc. announced detailed results from a new biomarker analysis of the pivotal Phase 3 "408" trial of Vectibix (panitumumab) plus best supportive care (BSC) compared to BSC alone.

3/12 Amgen, Inc. reaffirmed fiscal 2010 guidance and expects revenues of $15.1-$15.5 billion and earnings per share (EPS) of $5.05-$5.25.

3/9 Amgen, Inc. sold $1 billion senior notes.

2/16 Amgen, Inc. and Centocor Ortho Biotech Products, L.P. announced that FDA has approved the Risk Evaluation and Mitigation Strategy for erythropoiesis-stimulating agents, which include Aranesp (darbepoetin alfa), EPOGEN (Epoetin alfa) and PROCRIT (Epoetin alfa).

Recent Events

6.65% 7.60% 8.55% 9.50% 10.45% 11.50% 12.64%

2.10% $122.63 $101.33 $86.32 $75.17 $66.56 $59.10 $52.62

2.40% $128.52 $105.01 $88.77 $76.88 $67.79 $60.00 $53.26

2.70% $135.30 $109.14 $91.47 $78.74 $69.13 $60.95 $53.94

3.00% $143.20 $113.80 $94.46 $80.77 $70.56 $61.97 $54.67

3.30% $152.51 $119.12 $97.79 $83.00 $72.12 $63.07 $55.44

3.60% $163.66 $125.23 $101.53 $85.45 $73.82 $64.25 $56.27

3.90% $177.24 $132.33 $105.75 $88.17 $75.67 $65.52 $57.15

Valuation: DCF

Valuation: Multiples

High Low Median CurrentTarget

Multiple

Target Metric

per Share

Target Price

P/Forward E

23.7 10 13.6 11.6 13.6 14.5 197.2

P/S 9.1 3.2 4.4 3.8 4.4 5.1 22.4P/B 5.2 2.4 3.6 2.4 2.4 3 7.2P/EBITDA 24.7 7.79 12.9 7.81 7.79 12.2 95.083P/CF 27.1 7.7 11.6 9.4 7.7 8.5 65.45

Valuation: DCFYear 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Revenue 15,247 15,669 16,164 16,649 17,148 17,663 18,193 18,738 19,301 19,880 20,476 % Growth 2.8% 3.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Operating Income 6,480 6,722 7,209 7,492 7,717 7,948 8,187 8,432 8,685 8,946 9,214 Operating Margin 42.5% 42.9% 44.6% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%

Interest Income (305) (313) (404) (416) (429) (442) (455) (468) (483) (497) (512) Interest % of Sales -2.0% -2.0% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5%

Taxes 803 1,025 1,157 1,423 1,548 1,594 1,728 1,780 1,834 1,889 1,945 Tax Rate 13.0% 16.0% 17.0% 18.0% 19.0% 19.0% 20.0% 20.0% 20.0% 20.0% 20.0%

Net Income 5,372 5,383 5,648 5,652 5,740 5,913 6,004 6,184 6,369 6,560 6,757 % Growth 0.2% 4.9% 0.1% 1.6% 3.0% 1.5% 3.0% 3.0% 3.0% 3.0%

Add Depreciation/Amort 1,067 1,097 1,131 1,165 1,200 1,236 1,273 1,312 1,351 1,392 1,433 % of Sales 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%Plus/(minus) Changes WC (285) (222) (232) (250) (257) (265) (273) (281) (290) (298) (307) % of Sales -1.9% -1.4% -1.4% -1.5% -1.5% -1.5% -1.5% -1.5% -1.5% -1.5% -1.5%Subtract Cap Ex 686 862 1,051 1,082 1,115 1,148 1,183 1,218 1,255 1,292 1,331 Capex % of sales 4.5% 5.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5%                       Free Cash Flow 5,468 5,397 5,497 5,486 5,569 5,736 5,822 5,996 6,176 6,361 6,552 % Growth -1.3% 1.9% -0.2% 1.5% 3.0% 1.5% 3.0% 3.0% 3.0% 3.0%

NPV of Cash Flows 34,328 52%

NPV of terminal value 31,715 48% Terminal Value 87,648 Projected Equity Value 66,043 100%

Free Cash Flow Yield 10.78% Free Cash Yield 7.48%

Current P/E 9.4 9.4 9.0 Terminal P/E 13.0 Projected P/E 12.3 12.3 11.7

Current EV/EBITDA 8.6 8.3 7.8 Terminal

EV/EBITDA 9.6 Projected EV/EBITDA 10.6 10.2 9.6

Shares Outstanding 967

Current Price $ 52.44 Implied equity value/share $ 68.30 Upside/(Downside) to DCF 30.2%

Debt 16,962 Cash 2,884 Cash/share 2.98

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).

Implied Volatility

Catalysts and Risks

CATALYSTS

Five drugs with sales over $1 billion

Aranesp and Neulasta have successfully captured sales from now-generic Epogen

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)

Current price $60.88

52-wk range $53.86 - $66.20

Market Capitalization

$167 billion

Shares outstanding

2.76 billion

FY 2009 revenue $61.8 billion

FY 2009 earnings $12.2 billion

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.

Summary

Recent Events

May 1st J&J recalled medicines like Tylenol, Motrin, Zyrtec and Benadryl because of manufacturing deficiencies.

April 20th

J&J’s top- selling prescription drugs

April 20th

J&J’s first quarter earnings higher than expected

April 13th

FDA Approves Johnson & Johnson's New Drug Application For PANCREAZE

March 30th

Johnson & Johnson's Receipt Of Offer To Purchase Breast Care Business

March 2nd

Johnson & Johnson Reiterates FY 2010 EPS Outlook-Conference Calls

6.65% 7.60% 8.55% 9.50% 10.45% 11.40% 12.35%

2.10% $121.55 $100.31 $85.33 $74.21 $65.63 $58.81 $53.26

2.40% $127.42 $103.97 $87.78 $75.92 $66.87 $59.73 $53.96

2.70% $134.19 $108.09 $90.47 $77.78 $68.20 $60.71 $54.70

3.00% $142.07 $112.75 $93.46 $79.80 $69.63 $61.76 $55.49

3.30% $151.37 $118.05 $96.78 $82.03 $71.19 $62.89 $56.33

3.60% $162.49 $124.15 $100.51 $84.48 $72.88 $64.10 $57.22

3.90% $176.04 $131.24 $104.73 $87.19 $74.73 $65.41 $58.19

Valuation: DCF

Valuation: Multiples

High Low Median CurrentTarget

Multiple

Target Metric

per Share

Target Price

P/Forward E

21.7 11.0 16.0 14.0 16.0 4.92 78.72

P/S 4.3 2.2 3.3 2.9 3.3 23.65 78.04P/B 6.4 3.2 4.3 3.5 4.1 18.58 76.17P/EBITDA 13.45 6.94 11.17 8.95 10.5 7.26 76.23P/CF 18.0 9.0 13.6 11.5 13.0 5.65 73.45

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).

Implied Volatility

Catalysts and Risks

CATALYSTS

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

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

DCF Model

Year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Revenue 64,992 67,592 69,619 71,708 73,859 76,075 78,357 80,708 83,129 85,623 % Grow th 5.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Operating Income 18,004 19,231 20,330 20,795 21,271 21,757 22,253 22,760 23,276 23,803 Operating Margin 27.7% 28.5% 29.2% 29.0% 28.8% 28.6% 28.4% 28.2% 28.0% 27.8%

Interest Income (100) (100) (100) (100) (103) (107) (110) (113) (116) (120) Interest % of Sales -0.15% -0.15% -0.14% -0.14% -0.14% -0.14% -0.14% -0.14% -0.14% -0.14%

Taxes 4,160 4,543 4,807 5,015 5,130 5,247 5,367 5,489 5,614 5,742 Tax Rate 23.5% 24.0% 24.0% 24.0% 24.0% 24.0% 24.0% 24.0% 24.0% 24.0%

Net Income 13,543 14,387 15,223 15,881 16,245 16,617 16,996 17,383 17,778 18,182 % Grow th 6.23% 5.81% 4.32% 2.29% 2.29% 2.28% 2.28% 2.27% 2.27%

Add Depreciation/Amort 2,918 3,035 3,126 3,220 3,316 3,416 3,518 3,624 3,732 3,844 % of Sales 4.49% 4.49% 4.49% 4.49% 4.49% 4.49% 4.49% 4.49% 4.49% 4.49%

Plus/(minus) Changes WC 854 -337 -263 -359 -369 -380 -392 -404 -416 -428 % of Sales 1.31% -0.50% -0.38% -0.50% -0.50% -0.50% -0.50% -0.50% -0.50% -0.50%

Subtract Cap Ex 2,913 2,954 2,941 2,958 2,973 2,986 2,997 3,006 3,013 3,018 Capex % of sales 4.48% 4.37% 4.22% 4.12% 4.02% 3.92% 3.82% 3.72% 3.62% 3.52%

Free Cash Flow 14,403 14,131 15,144 15,784 16,219 16,666 17,126 17,597 18,082 18,580 % Grow th -1.89% 7.17% 4.23% 2.76% 2.76% 2.76% 2.75% 2.75% 2.75%

NPV of Cash Flows 100,497 46%NPV of terminal value 118,804 54% Terminal Value 294,422Projected Equity Value 219,301Free Cash Flow Yield 8.1% Free Cash Yield 6.3%

Current P/E 13.2x 12.1x 11.1x Terminal P/E 16.2x Projected P/E 16.2x 14.9x 13.7xCurrent EV/EBITDA 8.3x 7.6x 7.0x Terminal EV/EBITDA 10.5x Projected EV/EBITDA 10.2x 9.4x 8.7x

Shares Outstanding 2,748 2,686 2,608

Current Price $65.02Implied equity value/share $79.80Upside/(Downside) to DCF 22.7%

Debt 14,540Cash 19,430 Cash/share $7.07

Current price $54.59

52-wk range $43.90 - $64.95

Market Capitalization

$49.3 billion

Shares outstanding

931 million

FY 2009 revenue $13.9 billion

FY 2009 earnings $2.00 billion

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.

Summary

4/7 FDA approves generic versions of Hyzaar and Cozaar, with 180 days of rights to exclusive marketing

4/1 Patent infringement case over oxaloplatin dismissed

3/18 Announced agreement to acquire Ratiopharm

2/8 Amended marketing and distribution agreement for oral laquinimod

Recent Events

6.65% 7.60% 8.55% 9.50% 10.45% 11.50% 12.64%

2.80% $109.00 $86.88 $72.10 $61.53 $53.61 $46.92 $41.21

3.20% $118.35 $92.31 $75.54 $63.85 $55.25 $48.07 $42.03

3.60% $130.15 $98.82 $79.54 $66.49 $57.07 $49.34 $42.92

4.00% $145.52 $106.79 $84.25 $69.51 $59.12 $50.75 $43.89

4.40% $166.36 $116.75 $89.86 $73.00 $61.45 $52.32 $44.95

4.80% $196.20 $129.55 $96.67 $77.09 $64.10 $54.07 $46.13

5.20% $242.51 $146.61 $105.11 $81.94 $67.15 $56.05 $47.43

Valuation: DCF

Valuation: Multiples

High Low Median CurrentTarget

Multiple

Target Metric

per Share

Target Price

P/Forward E

42.8 12.6 20.9 13.7 15 4.47 $67.05

P/S 7.1 .7 3.5 4.2 4.2 17.99 $75.55P/B 12.3 1.3 4.3 3 3.2 20.51 $65.63P/EBITDA 35.03 4.96 15.05 12.85 13 4.79 $62.27P/CF 45 10.7 19.2 14.3 15 4.3 $64.50

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).

Implied Volatility

Catalysts and Risks

CATALYSTS

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

RISKS

Copaxone faces competition from other branded pharmaceuticals

Ability to generate cost savings from recent acquisitions is questionable

DCF Model

Year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Revenue 16,123 18,058 19,683 21,454 23,278 25,140 26,900 28,648 30,224 31,735 33,005 % Growth 12.0% 9.0% 9.0% 8.5% 8.0% 7.0% 6.5% 5.5% 5.0% 4.0%

Operating Income 4,676 5,237 5,511 5,900 6,401 6,914 7,397 7,878 8,312 8,727 9,076 Operating Margin 29.0% 29.0% 28.0% 27.5% 27.5% 27.5% 27.5% 27.5% 27.5% 27.5% 27.5%

Taxes 813 910 921 1,062 1,152 1,244 1,332 1,418 1,496 1,571 1,634 Tax Rate 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%

Net Income 3,702 4,146 4,196 4,838 5,249 5,669 6,066 6,460 6,816 7,156 7,443 % Growth 12.0% 1.2% 15.3% 8.5% 8.0% 7.0% 6.5% 5.5% 5.0% 4.0%

Add Depreciation/Amort 967 1,083 1,181 1,287 1,397 1,508 1,614 1,719 1,813 1,904 1,980 % of Sales 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%Plus/(minus) Changes WC (1,987) (919) (772) (1,609) (1,746) (1,886) (2,017) (2,149) (2,267) (2,380) (2,475) % of Sales -12.3% -5.1% -3.9% -7.5% -7.5% -7.5% -7.5% -7.5% -7.5% -7.5% -7.5%Subtract Cap Ex 967 903 984 1,287 1,397 1,508 1,614 1,719 1,813 1,904 1,980 Capex % of sales 6.0% 5.0% 5.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Free Cash Flow 1,714 3,408 3,621 3,229 3,503 3,784 4,048 4,312 4,549 4,776 4,967 % Growth 98.8% 6.3% -10.8% 8.5% 8.0% 7.0% 6.5% 5.5% 5.0% 4.0%

Note: Sudden Cashflow growth due to acquisition.

NPV of Cash Flows 24,380 39%NPV of terminal value 37,900 61% Terminal Value 93,925 Projected Equity Value 62,280 100%Free Cash Flow Yield 3.47% Free Cash Yield 5.29%

Current P/E 13.4 11.9 11.8 Terminal P/E 12.6 Projected P/E 16.8 15.0 14.8 Current EV/EBITDA 11.0 9.8 9.3 Terminal EV/EBITDA 9.6 Projected EV/EBITDA 13.3 11.8 11.2

Shares Outstanding 896

AnalystsCurrent Price $55.19 TargetImplied equity value/share 69.51$ 70.00$ Upside/(Downside) to DCF 25.9%

Debt 14,551 Cash 1,995 Cash/share 2.23

We recommend liquidating Amgen (AMGN) and distributing the basis points among our other three holdings.

Old New Change

AMGN 246 0 -246

GILD 388 414 26

JNJ 365 465 100

TEVA 463 483 20

Reduce weight in biotechnology

Take advantage of movement of market towards generics

High expectations from Johnson & Johnson