HEALTHCARE SECTOR STOCK PRESENTATIONSP-35 Michael Mahaney Tianna Nguyen Edward Poitras Matthew Pry

SIM P ORTFOLIO SIM Portfolio Overview

H EALTHCARE SECTOR IN RE THE SIM PORTFOLIO Healthcare Sector Holdings

HEALTHCARE RECOMMENDATIONS Wellpoint Cardinal Health TEVA Hold Genentech Sell Johnson & Johnson Buy Stock Recommendations

GENENTECH RECOMMENDATION: SELL

G ENENTECH, I NC. DNA DNA – DCF Model Current Price: $73.92 DCF Target: $ % upside potential

G ENENTECH, I NC. DNA DNA - Valuation For comparable companies DNA had the highest forward P/E ratio, but also the highest expected growth rate.

GENENTECH, INC. DNA DNA – Growth Rate Growth rate estimates have steadily fallen since 2005 and so has Forward P/E Growing at 22.3% per year would make DNA the size of today’s JNJ in terms of sales in just 10 years

G ENENTECH, I NC. DNA DNA – Product Sales Three drugs make up over 50% of total revenues

GENENTECH, INC. DNA DNA – Pipeline In the short-term expect the FDA to approve existing DNA products to treat additional diseases New compounds will not make it to market for two to three years

G ENENTECH, I NC. DNA DNA – Summary Strong company with competitive advantage Pipeline full of projects for existing products New drugs some years away – uncertain outcome Expected growth rates seem too optimistic Conclusion: Sell and reinvest proceeds in better prospects

JOHNSON & JOHNSON RECOMMENDATION: BUY

J OHNSON & J OHNSON JNJ Current Price: $62.08 Intrinsic Value: $87.4 Upside Potential: 40.8% Dividend Yield: 2.7% Why it is cheap: MD&D’s largest division Cordis (drug- eluting stents) has seen an unexpected decline in sales. Pharma will loose patent protection on its #1 and #4 drugs and its #2 drug is experiencing a decline in sales. In all representing 19% of sales. Investment Thesis: All of the downside is priced into the current stock price. Several of the uncertainties surrounding JNJ have large potential upsides. Catalysts in the near future.

J OHNSON & J OHNSON Cordis sales of $4,088MM represent 7.6% of overall sales and 20.2% of MD&D sales. The world-wide PCI procedures are down 13% and the DES market is down 21% –Concern over late stent thrombosis in DES –Penetration is rebounding and should stabilize upward of 70% –Possible PCI recovery as drug therapy results mature Upside –Conor Med Systems Purchase –DES homogeneous test results in late Fall JNJ - Medical Devices & Diagnosis

J OHNSON & J OHNSON Top 3 drugs –#1 Risperdal off patent in June of Has successor in Invega. (schizophrenia) –#2 Procrit ODAC panel and CMS decisions down 14% (anemia) –#4 Topamax off patent in March of 2009 (epilepsy) Nature of Pharma –Procit (kidney) & Lipitor (example W&L) –On track for 10 to 13 new compounds by the end of JNJ - Pharmaceuticals

J OHNSON & J OHNSON September 9-12 ODAC Panel Full year of PCH integration 3 months of drug therapy in stable patients $10 BB stock buy back 1.3% workforce reduction JNJ - Catalysts

R ECOMMENDATIONS Healthcare Sector Recommendations Sell DNA – 2.19% position Add to Johnson & Johnson position – 0.5% Net decrease from 5.49% sector overweight position to 3.8%  Although we recommended to buy hospital facility stocks to better diversify inside the healthcare sector, bad debt expense, insurance, labor costs, and high P/E’s persuaded us otherwise at this time. SIM Holdings After Recommendation Conclusions TEVA CAH WLP Hold DNA Sell JNJ Buy

QUESTIONS

DCF MODELS

JNJ DCF

JNJ Segment Data

HOLD STOCKS

C ARDINAL HEALTH, I NC. CAH Price Paid – Current Loss – 5.66 or 8.45% Pros – Industry leader and business growth is still seeing double digits Cons – Tight margins and competition putting pressure on earnings Price Target – Current Price – Upside potential – 17%

W ELLPOINT, I NC. WLP Price Paid – Current Loss – 7.33 or 8.96% Pros – Growth in medicare/medicaid and booming demographic increases health benefit plan subscribers Cons – Competition, nationalized healthcare Current Price – 74.45

T EVA P HARMACEUTICALS TEVA: Prices and Current Holdings SU07 SIM Wt.4.85% SU 07 Dollar$1,231,152 Current Price $42.62 [ ] Price Target$46.02 Upside potential 3.41% DCF Model Reference Stock Prices: 3 months Pros Earnings reported and exceeded expectations Generic drug manufacturer that is a growing company Stock is an ADR Cons Risks associated with being an Israeli company High competition