J.P. 摩根-美股-制药业-美国制药业2021年展望：健康的基本面再次成为关注的焦点？-2020.12-72页

North America Equity Research
December 2020
US Pharma 2021 Outlook

Healthy Fundamentals Back in Focus for the Majors?
Pharmaceuticals
Chris Schott, CFA AC Christopher Neyor Ekaterina Knyazkova Xiling Chen
(1-212) 622-5676 (1-212) 622-0334 (1-212) 622-9576 (1-212) 622-0364
christopher.t.schott@jpmorgan.com christopher.z.neyor@jpmorgan.com Ekaterina.v.knyazkova@jpmorgan.com Xiling.chen@jpmorgan.com
J.P. Morgan Securities LLC J.P. Morgan Securities LLC J.P. Morgan Securities LLC J.P. Morgan Securities LLC
See the end pages of this presentation for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan 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.
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Overall Positioning
Major Pharma
 We continue to see Major Pharma as well positioned with strong fundamentals driving healthy top’ and
bottom-line growth through at least the mid 2020s
 While a 2026-2028 patent cycle is increasingly top of mind for investors, consistent pipeline progression
over the past two years leaves us with flat top line for the sector over this time frame. Further we see an
upward bias to numbers based on a mix of further pipeline de-risking/capital deployment
 On stock performance, while 2020 was disappointing, we see an upward bias to 2021+ numbers, and it
is hard to envision further multiple compression relative to the S&P500
 Admittedly, pricing will remain controversial, with a “blue wave” scenario now behind us post elections,
we see minimal fundamental risk to estimates
 Our recommendations are skewed toward names with the longest runways for EPS growth (LLY) or
those trading at a steep discount to peers (ABBV, BMY)
 Favorite ideas: ABBV, LLY, BMY
Animal Health
 The sector exits the pandemic with improved companion animal health fundamentals. While COVID
disruptions could impact 2021 livestock sales, we view Animal Health longer-term fundamentals as the
most attractive in our coverage.
 Favorite ideas: ZTS, ELAN
Spec Pharma
 We still do not see a compelling reason to broadly own the group. That said, our branded coverage
offers several compelling stories trading at depressed valuations despite well-positioned assets and/or
a clear pathway to value creation
 Favorite ideas: BHC
2
Major Pharmaceuticals:
Healthy Growth Outlook Not Reflected in
Valuation
3
US Major Pharma: Healthy Fundamentals Increasingly
Disconnected from Valuation
We are constructive on US Major Pharma with solid core product and new launch trends
supporting mid-single-digit volume-driven top-line growth over the next 5-7 years
Positives:
 The group saw little impact from COVID-19 in 2020, and we see relatively healthy growth
ahead. US Pharma faces few major patent expirations through 2026, and we are forecasting a ~6%
sales/~10% EPS CAGR over the next five years.
 An ongoing new product cycle and ongoing pipeline success represent potential upside drivers
to our near- and long-term estimates. Broadly speaking, pipelines across the group improved in
2020.
 Beyond solid organic growth, we see major pharma companies with ample balance sheet capacity
for additional bolt-on acquisitions and dividend increases
 Major Pharma trades at near all-time low valuations relative to the S&P 500, which we see as
an opportunity for the sector
Overhangs:
 The sector faces a 2026-2028 patent expiration cycle, and investors are already very focused
on growth through this period. Continued pipeline traction should gradually ease these concerns.
 Pricing remains another key controversy, but we see significant reform as unlikely
(particularly based on the November election outcome) and see potential pricing risk as well
reflected in valuation
4
How We Would Position in the Space
We remain biased toward companies early in new product launch cycles and/or those trading at highly
depressed multiples
 ABBV (OW): Robust non-Humira growth at a highly attractive valuation
 LLY (OW): Derisked, best-in-class growth story trading at a discount to the broader markets
 BMY (OW): Solid pipeline progression not well reflected in valuation
 MRK (OW): Attractive long-term growth with significant capital deployment optionality
 JNJ (N): Pharma business well positioned and device recovery continues into 2021
 PFE (N): Vaccines rally overdone at this point
Major Pharma Growth and LOE Snapshot Major Pharma Growth vs LOE
9.0%
8.0% BMY
20-'25 CAGR Average LOE
Sales EPS 20-'25 20-'30 7.0%
LLY 8.9% 14.5% 2.3% 2.4% 6.0%
'20-‘30’ Avg LOE
ABBV 4.1% 6.1% 5.4% 5.3% 5.0% ABBV

MRK 6.9% 11.0% 2.3% 1.4% 4.0% PFE
BMY 4.2% 8.6% 5.3% 8.3% 3.0%
JNJ 4.4% 8.7% 2.2% 2.4% JNJ LLY
2.0%
PFE 6.5% 9.9% 0.8% 3.8% MRK
1.0%
0.0%
0.0% 5.0% 10.0% 15.0% 20.0%
'20-'25 EPS CAGR
5
Source: J.P. Morgan estimates, company reports
Major Pharma Underperformance in 2020 Appears at Odds with
Fundamentals
 In 2020, Major Pharma (+7%) underperformed the broader market (S&P 500 +17%) as well as
other HC sectors (Medtech, Biotech, etc.) with performance skewed toward names with upside
to out-year estimates.
 Pricing concerns/elections represents an overhang for the sector for much of the year.
 On specific company performance, LLY (+34%, Verzenio adjuvant/tirzepatide), ABBV (+24%,

Skyrizi/Rinvoq), and PFE (+5%, COVID vaccine) outperformed the group while BMY (+0%) and
MRK (-6%) lagged in performance.
2020 YTD Sector Performance 2020 YTD Stock Performance
Biotech (XNBI) 28% LLY 34%
S&P 500 (SPX) 17%

ABBV 24%
Medtech (S5HCEQ) 16%

JNJ 6%
S&P 500 HC (S5HLTH) 12%
PFE 5%
HC Services (S5HCPS) 10%
BMY 0%
Major Pharma 7%
Spec Pharma -11% MRK -9%
-30% -10% 10% 30% -30% -10% 10% 30% 50%

Source for both figures: Bloomberg Finance L.P. Last Updated price as of 12/17/2020 post close
6
Pharma Continues to Trade at a Discount to the S&P 500
25x
Trump tweet on drug

The last time the group prices Market decline amid
traded at a similar discount COVID-19
to the market was ahead of
20x a major patent cycle in
2009-2011
15x
Clinton's tweet on
high drug prices Pharma valuation gap
10x widens as Market
recovers from COVID
impact
5x
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Dec-07
Aug-08
Dec-08
Aug-09
Dec-09
Aug-10
Dec-10
Aug-11
Dec-11
Aug-12
Dec-12
Aug-13
Dec-13
Aug-14
Dec-14
Aug-15
Dec-15
Aug-16
Dec-16
Aug-17
Dec-17
Aug-18
Dec-18
Aug-19
Dec-19
Aug-20
Major Pharma S&P
Source: Bloomberg Finance L.P. Priced as of 12/17/2020. 7

Major Pharma 2020 YTD in Review
20%
Markets rally
following Biden
Market sell-off amid presidential win
COVID-19
Pfizer
10%
Ibrance
Adjuvant
Miss
0%
1/1
1/15
1/29
2/12
2/26
3/11
3/25
4/8
4/22
5/6
5/20
6/3
6/17
7/1
7/15
7/29
8/12
8/26
9/9
9/23
10/7
11/4
12/2
10/21
11/18
12/16
-10%
Solid 2Q20 results Pfizer BNT-

Major Pharma
from Major Pharma 162 Vaccine
performance trails
underpinned by hits first
the broader
-20% faster than expected interim with
markets amid fear
recovery from >90%
Major Pharma of "Blue Wave"
COVID efficacy
outperforms the election outcome
market with solid
-30% 1Q results (COVID
stocking)
-40%
S&P 500 Major Pharma
Source: Bloomberg Finance L.P. Priced as of 12/17/2020. 8

Thoughts on Major Pharma 2020 Underperformance
 Core product and pipeline updates did not drive underperformance in our view.
 The US Major Pharma sector will grow 2020 earnings by ~10% this year. And Street
expectations for 2021 EPS are largely unchanged relative to the start of 2020, which
implies 13% YoY growth
 S&P 500’s 2020 earnings will decline ~14% YoY, and Street expectations for 2021 EPS
have declined ~10% since the start of 2020
 And on the longer-term outlook, pipelines broadly speaking are in a better place today relative to
a year ago
 While US pricing concerns and the 2020 election cycle tempered pharma investor interest,
this appears to have been largely addressed with the November outcome
 Elections were close to a best case scenario for the group.
 We expect some volatility with the GA runoffs in January
 The US Major Pharma fwd earnings multiple modestly declined in 2020 (~5% YoY) despite a
significant decline in interest rates. At the same time, the S&P 500 fwd EPS multiple
significantly expanded (~22% YoY)
 Relative sector positioning played a major role in 2020 performance. S&P 500 growth (+31%)
significantly outperformed S&P 500 value (+0%). Top performing sectors were Tech,
Communications, and Consumer Discretionary, while defensive sectors (Healthcare, Consumer
Staples, and Utilities) all trailed the broader market
9
Why Will 2021 Be Any Different Than 2020 on Overall
Performance?
 Overall, we see Major Pharma well positioned to rebound after this year’s relative
underperformance
 We see multiple reasons to be optimistic on 2021 vs 2020 . . .
1. The sector trades at a lower fwd P/E multiple (~5% decline YoY) despite lower LT interest rates
(which should support multiple expansion)
2. Valuations are at a near record discount to S&P 500
3. US pricing concerns that have clearly receded after 2020 US election cycle
4. Pipelines that have consistently improved throughout the year, and the industry is clearly
making progress in addressing its out-year patent expirations
 However several unknowns remain . . .
1. Investors are focused on Georgia US Senate runoff (Jan 5). That said, major US drug price
reform appears unlikely even with narrow Dem. Senate control
2. A number of sectors will see a rapid rebound in results after a COVID-impacted 2020. This is
not the case with Pharma (where earnings were not impacted to a great extent from COVID-19)
and could impact relative positioning in the sector
3. While the industry’s pipeline has improved, investors remain very focused on the 2026-2028
LOE cycle.
10
Key Themes and Topics for 2021
1. New Launches Expected to Drive Strong Top-Line Growth over the Next
5-6 Years
2. How Are We Thinking about Key Products in 2021?
3. With Election Now Largely Behind Us (and No Blue Wave), We See

Significant Pricing Reform as Unlikely
4. How Does the Sector Move Past the Mid-2020s Patent Cycle Overhang?
5. How We Would Position Heading into the New Year?
11
Theme 1:
New Launches Expected to Drive Strong Top-Line
Growth over the Next 5-6 Years
12
The Sector Is in the Midst of Healthy 2020-2026 Growth Cycle
 As 2019 represented the last year of major patent expirations until 2026/2027, we see major
pharma as well positioned for ~6% top-line growth and ~10% EPS growth over the next 5+
years
 We anticipate little to no net price increases for the group over time
 We see this growth underpinned by a healthy ramp of new product launches/pipeline as well as
a number of significant product line extensions
 In addition, we see upside potential to our out-year estimates based on further pipeline traction as
we view our estimates as generally conservative for these assets
US Major Pharma EPS and Sales CAGR US Major Pharma EPS Growth 2020-2025E
20% 20%
18% 18%
16% 15% 16% 15%
14% 14%
12% 11%
10% 12% 11% 11%
10%
10% 9% 9% 9% 10% 9%
8%
8% 7% 7% 8%
6% 6%
6% 4% 6% 5%
4% 4%
4% 4%
2% 2%
0% 0%
LLY MRK PFE JNJ BMY ABBV Wgt'd 2020E* 2021E 2022E 2023E 2024E 2025E
Avg
'20-'25 EPS '20-'25 Sales *: 2020E average excludes PFE
Source for both figures: Company reports, J.P. Morgan estimates. 13

Immunology Poised for Healthy Growth ex Humira with Many New
Launches Expected over the Next 2-5 Years
 We see the Immunology category positioned for solid growth and are forecasting ~$70+bn US
sales by 2025 (including Humira LOE Impact), up from ~$55bn today
 This growth is driven by a range of new agents launching in a variety of new indications and
expanding overall biologic penetration across several indications.
 We expect Psoriasis to remain a key driver of growth (IL23/IL17/TYK2) and highlight IBD
(Crohn’s/UC) as the next major growth opportunity for these new agents with a variety of new
mechanisms set to enter the market (IL23/JAKs/S1Ps) over the next several years.
Immunology Market US Sales by Indication (in $bn)

$80.0
$70.0 $1.5
$1.4
$1.6 $1.3
$60.0 $6.3 $10.2 $12.1
$1.3 $8.3
$4.6 $5.8
$1.1 $5.5 $5.9 $6.1
$50.0 $3.1 $5.0
$1.0
$2.0 $4.3 $10.3
$0.8 $9.8 $9.6 $9.8 $9.6
$0.8 $3.5
$40.0 $9.2 $2.4 $2.2 $2.3
$3.2 $8.7 $2.2 $2.2
$2.0 $6.0 $5.4 $5.4 $5.3
$7.4 $5.8
$30.0 $1.9 $5.6
$1.5 $5.3
$4.7 $17.1 $16.8
$19.1 $17.3
$20.0 $18.3
$17.3
$15.5 $16.4
$10.0
$12.0 $13.7 $14.3 $15.0 $15.6
$7.4 $8.6 $10.3
$0.0
2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E
PsO RA PsA AS CD UC AD Other
Source: J.P. Morgan estimates. 14
Skyrizi/Rinvoq Leading the Way on New Immunology Launches
 We have seen strong launches in several newer categories (IL-17, IL-23s and Rinvoq) and
expect further share gain for these newer, more efficacious agents at the expense of TNFs over
the next several years (similar to what we have seen in Psoriasis, where IL-23s are now a
preferred treatment class with shares approaching that of TNF’s)
 We expect this trend to be led by ABBV’s Skyrizi/Rinvoq (where we highlight significant runway of
growth) across several indications, as well as JNJ’s Tremfya (IL-23) and LLY’s Taltz (IL-17).
 On late-stage pipeline, we highlight BMY’s deucravacitinib (TYK-2), where we see multi-billion dollar
peak sales potential in PsO, as well as Zeposia (S1P) in UC/CD
Immunology Market US Sales by Category (in $bn)

$80.0
$1.0
$70.0
$0.1 $0.7
$0.5 $7.2
$5.3 $6.6
$60.0 $6.0
$4.7 $4.6 $8.7
$6.0 $7.3
$3.3 $5.2
$50.0 $4.0 $3.6
$3.2 $2.4 $6.7 $8.0 $9.3
$1.1 $2.5
$1.7
$40.0
$0.5 $16.1 $18.7
$1.4 $11.2 $13.4
$21.2 $23.2
$30.0 $7.4 $25.1
$4.3 $5.2 $5.8 $6.1
$3.5
$20.0 $6.2
$5.8
$4.7
$24.3 $25.5 $25.1 $25.2 $24.6
$10.0
$17.0 $15.1 $13.2
$0.0
2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E
TNF Stelara Other JAK IL-23 IL-17 TYK-2

The PD-1s Remain One of the Most Significant Growth Drivers in
the Space and We See More Room for Upside
 We continue to see upside to PD-1 market estimates (Keytruda and Opdivo) and are forecasting
$50+bn in peak sales for the category
 We have seen both faster than expected uptake as well as longer than expected duration of therapy
in most indications and see trend continuing in large indications such as NSCLC and RCC
 Adjuvant remains an under-appreciated opportunity for both Opdivo and Keytruda with encouraging
readouts in 2020 and more to come
 Further, we see a significant ex-US opportunity for these products and see a majority of category
sales coming from international sales over time
 Looking ahead, we forecast combined PD-1 market sales of ~$50bn by 2025 (vs current ~$27bn
run-rate), and we remain above consensus with both our Keytruda and Opdivo estimates
PD-1 Market Sales Estimates (in $bn)

$60.0
$51.4
$50.0 $48.0
$43.4
$14.5
$40.0 $38.4 $13.3
$33.1 $12.3
$5.2
$11.0 $4.1
$30.0 $27.0 $2.2 $2.3 $2.5
$9.4 $2.0 $1.9 $2.0
$23.3 $1.8 $4.6
$7.3 $4.3 $4.5
$20.0 $17.7 $5.4 $3.5
$4.0
$4.6 $4.6
$4.5 $4.5
$2.1 $2.8 $4.4
$10.5 $4.3 $4.3
$10.0 $6.3 $3.8
$16.3 $17.4 $18.0
$13.3 $15.1
$3.3 $10.3 $11.1
$2.9 $7.9
$2.5 $4.5
-
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
NSCLC Melanoma RCC H&N TNBC Adjuvant Other tumors

Keytruda Remains a Clear Market Leader; Opdivo Likely
Returning to Growth in 2021+
 For Merck, we continue to see Keytruda remaining market leader in NSCLC and remain above consensus
 Despite recent successful competitor studies, we see Keytruda maintaining its market-leading position in
lung underpinned by strong data from KN-189 & KN-407 (we expect ~70% metastatic share over time)
 We also highlight a number of adjuvant opportunities driving growth for Keytruda over time including
NSCLC, RCC, H&N, TNBC
 We forecast Keytruda sales of ~$17.5bn in 2021, increasing to ~$26bn in 2025
 For Bristol, we are increasingly confident in a return to growth in 2021+ on the back of its 1L NSCLC
launch and a string of successful study readouts in the past few quarters
 With sales having bottomed in 2020 on the back of 2L lung erosion, we expect Opdivo to return to growth in
2021 and beyond on the back of continued ramp in 1L NSCLC (which has been ahead of expectations with
mid- to high-single-digit US market share in 3Q20) as well as several new indications in 1H21
 We highlight a number of successful recent readouts (9ER in 1L renal as well as successful readouts in 1L
gastric, adjuvant esophageal, and adjuvant bladder) pointing to sharp acceleration in 2021 sales and
healthy Opdivo growth over time
 We forecast Opdivo sales of ~$8bn in 2021, increasing to ~$12bn in 2024
Opdivo Sales Ramp Keytruda Sales Ramp
30,000 30,000
26,250
24,750
25,000 25,000 22,475
20,000
20,000 20,000 17,400
14,438
15,000 12,300 15,000
10,800 11,700 11,084
9,250
10,000 6,735 7,204 6,929
7,800 10,000 7,169
4,948
3,774
5,000 5,000 3,808
942 1,402
566
0 0
2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Source: J.P. Morgan estimates 17

Next Wave of Pipeline Assets on the Horizon
 We continue to see solid progress in pipeline development for Major Pharma companies with many catalysts for the
next wave of pipeline assets over the next 12 months, which should support longer-term growth in the out years
Company Product Event Timing
Tirzepatide Full phase 3 readout Late 2020 -2021
Verzenio Adjuvant filing and launch 2021
LLY Mirikizumab UC Ph3 readout 1H21
LOXO-305 Phase 2/3 Initiation 2021
Alzheimer Antibodies Multiple studies readout Early 2021, 2H21
Skyrizi Ph3 data/submission in PsA and Crohn's 4Q20/2021
Rinvoq Approvals in AS, AD, and PsA and Ph3 data/submission in UC 2021
ABBV Vraylar Phase 3 data in Depression 2021
Navitoclax Phase 3 data in Myelofibrosis 2021
ABBV-154 (TNF-Steroid Conjugate) Phase 2b Initiation 1H21
TYK-2 Full phase 3 readout in Psoriasis 1H21
Mavacamten (MyoKardia) Filing/Launch Filing in 1Q21
BMY Zeposia Phase 3 readout in Crohn's and Filing/Approval in UC 2021
Factor Xla Initial Phase 2 data 2021
CELMoD assets Phase 1/2 Readouts 2021
Keytruda Adjuvant readouts (H&N/NSCLC) and approval (TNBC) 2021
V114 filing/approval in adults/pediatric 2020-2021
MRK MK-8591 Long acting HIV 2021
Molnupiravir (COVID-antiviral) Read out and filing/approval 2021
Vibostolimab (TIGIT antibody) Phase 3 initiation 2021
BNT-162 Additional Safety/efficacy data and Distribution 2021
20V Pneumococcal vaccine Approval in infant 2021
PFE
Abrocitinib Approval 2021
Hemophilia B gene therapy Phase 3 data Late 2021
Cital-cel (BCMA CAR-T) Filing 2021
Amivantamab Initial NSCLC approval / potential 2L phase 3 readout 2021/2022
JNJ Nipocalimab Initial Phase 3 data 2021
Factor Xla Initial Phase 2 data 2021
Ad26.COV2.S (COVID Vaccine) Initial Phase 3 data and Filing Early 2021
Source: J.P. Morgan estimates, company reports 18

Theme 2:
How We Are Thinking about Key Products
19
ABBV: Robust Long-Term Growth Momentum for Skyrizi/Rinvoq
 Both Rinvoq and Skyrizi have consistently beaten expectations since launch, and we expect this strong
growth momentum to continue as the core RA/PsO indications ramp
 Further, we highlight a number of important new indications launching over the next 12-18 months, including
Atopic Derm, AxSpa, Psoriatic Arthritis, and Ulcerative Colitis for Rinvoq (all de-risked), as well as PsA and
Crohn's for Skyrizi (summarized below).
 We expect these to translate into an extended runway of growth for both products as well as
meaningful upside to our/Street estimates to the extent ABBV even comes close to replicating its
success in RA/PsO in these settings.
 Further, while we expect immunology market to remain highly competitive, the category remains under-
penetrated and under-diagnosed, and we expect these launches to drive continued market expansion
 Along these lines, we are forecasting combined sale of ~$2.3bn in 2020 to ~$14.4bn in 2025
Skyrizi and Rinvoq Late-Stage Line Extension Summary Skyrizi and Rinvoq Sales 2020-2025E
Product Indication
Progress Next Catalyst $16,000
Data from two Ph3 studies $14,000
PsA Phase 3
4Q20, submission in 2021
Skyrizi $12,000
Induction data 4Q20, 6,750
CD Phase 3
submission in 2021 $10,000
5,800
AS Submitted Approval in 1H21 $8,000

4,550
$6,000
AD Submitted Approval in 1H21 3,300
$4,000 7,650
Rinvoq 2,350
5,000
6,500
PsA Submitted Approval in 1H21 $2,000 1,595 3,350
1,850
$0 730
Maintenance data and 2020E 2021E 2022E 2023E 2024E 2025E
UC phase 3
submission in 2021
Global Rinvoq Global Skyrizi
20
Source: J.P. Morgan estimates
LLY: Tirzepatide De-Risked with Additional Readouts Likely Showing
Improved Profile
 For Lilly, Tirzepatide (GIP/GLP-1) phase 3 readouts remain in focus with the product demonstrating highly
encouraging top-line results from its first ph3 SURPASS trial
 We highlight best-in-class HbA1c improvement for the product as well as significantly improved tolerability
(particularly at the high dose) on the back of a slower titration schedule
 At the same time, we await further SURPASS readouts in 1H21 to address several points of controversy,
including higher dropout rate for 15mg (does not appear AE related) as well as differentiation between doses
 On Trulicity, core volume trends remain robust in 2020, we are anticipating solid US volume growth in 2021
(~17%), and we continue to see competitive dynamics with Novo’s GLP1s as manageable
 We expect Rybelus to expand the GLP-1 market with a focus on patients reluctant to switch to injectable
therapies and continue to see strong injectable GLP-1 market growth in 2021 (~20%)
 At the same time, we expect pricing to remain a headwind for Trulicity in 2021 given ongoing competitive
dynamics in the category as well as unfavorable channel mix
Injectable GLP-1 Scripts (ex-Rybelsus) Injectable GLP-1 Market Share (ex-Rybelsus)

35,000.0 100%
90%
30,000.0
80%
25,000.0 70%
60%
% share
EUTRx
20,000.0
50%
15,000.0 40%
10,000.0 30%
20%
5,000.0
10%
0.0 0%
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025
Byetta Franchise Victoza franchise Trulicity franchise Byetta Franchise Trulicity franchise Tirzepatide
Ozempic GIP/GLP franchise Victoza franchise Ozempic
21
MRK: Continued NSLC Growth with Adjuvant Emerging as the Next
Major Growth Opportunity for Keytruda
 For Merck, we see the Keytruda growth outlook as well as its ex-Keytruda pipeline buildout as key
topics for the story
 We expect Keytruda to maintain its leading market position in NSCLC despite recent competitor
launches (we forecast >70% metastatic share over time).
 Further, we highlight (neo)adjuvant indications as a significant opportunity for the product with
many phase 3 data readouts over the next few years (Melanoma, TNBC, RCC, NSCLC, etc.) that
are not well reflected in consensus estimates and can translate to further upside.
 As we look beyond Keytruda, we expect MRK to further build out its pipeline of next-gen growth drivers both
internally and externally (as it has done this year) to address growth outlook beyond the 2028/29 LOE
 The company has advanced a number of agents over the course of 2020 (TIGIT, ILT4, HIF-2a) as well
as built out its liquid tumor footprint with ArQule (BTK) in 2019 and more recent ADC transactions
 Further, M&A/bizdev remain a key focus point for the company, and we would not be surprised to see
the company further build out its pipeline through external bizdev
Keytruda Adjuvant/Neoadjuavnt Summary Keytruda Sales Ramp
Year Indication Note
30,000
13,250
2018 Adj Melanoma Approved 12,250
2019 Neo/Adj TNBC Submitted 25,000 10,725
9,250
2020 cSCC Locally Advanced Approved 20,000 7,900
2021 HNSCC Adj; NSCLC Adj 6,082
15,000
2022 Adj Melanoma; RCC Adj 4,779
Gastric & Esophageal Adj/Neo; 10,000
2023 3,020
HNSCC Adj/Neo
12,500 13,000
2024 NSCLC Neo 5,000 1,500 10,750 11,750
610 610 8,356 9,500
6,305
8 additional indications including 792
4,149
2025+ 792 2,308
Neo/Adj MIBC, HCC, etc 0
*: Neo = Neoadjuvant; Adj = Adjuvant. All future timeline based on 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
clinicaltrial.gov primary completion dates US EU
22
BMY: Opdivo Returning to Growth in 2021 and Deucravacitinib (TYK-
2) Represents a Key Pipeline Asset
 We expect Opdivo to see accelerating growth throughout 2021
 While sales have bottomed in 2020 as expected, the 1L NSCLC launch has been ramping ahead of
expectations (we forecast low-double-digit Opdivo share). Further, we see a number of successful studies
(9ER in 1L renal as well as 1L gastric, adjuvant esophageal, and adjuvant bladder readouts), suggesting a
clear acceleration in growth for the product as these are approved throughout 2021.
 Deucravacitinib (TYK-2) represents a key pipeline asset for BMY with multi-billion peak sales potential
 Deucravacitinib showed superiority to Otezla in its first phase 3 results with a safety profile consistent with
phase 2 (which was very clean). While we await details on the full efficacy/safety profile as well as a second
phase 3 readout in 1Q21, we see a clear role for the product as an oral agent with biologic-like efficacy.
 Along these lines, we expect share gains from both Otezla as well as injectable biologics, which should
translate to multi-billion dollar peak sales potential and drive a re-rating of BMY shares.
Opdivo Sales Ramp 2015A-2025E Deucravacitinib Sales 2020-2025E

14,000 5,500 2,000
5,100
12,000 4,600 1,800
1,600 500
3,750
10,000
3,000
1,400
8,000 2,860 2,847 1,200
2,496 1,000
6,000
1,846 800 250
1,110 1,400
4,000 600
6,200 6,600 6,800 50
5,500 400
2,000 119 4,239 4,344 4,082 4,800 650
2,664 3,102
200 300
823 100
0 0
2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2020E 2021E 2022E 2023E 2024E 2025E
US EU 23 US EU
COVID-19 Vaccine/Therapeutics Impacting Several Names in 2021
 Overall, Biopharma’s execution on COVID-19 vaccines/therapies has been impressive with
PFE/BNTX’s BNT-162 representing the first approved vaccine, LLY’s bamlanivimab the first
approved antibody, and several additional products in phase 2/3 development
 Key updates for the year include 1) the rollout of BNT-162 as well as Moderna’s mRNA vaccine, 2)
the roll that COVID antibodies and therapeutics will play in the market, and 3) several additional
clinical updates including phase 3 data from JNJ’s vaccine as well as MRK’s oral anti-viral
(molnupiravir) early in 2021
 As we think about sales oppty for these products, we see a sizable near-term sales oppty for several
of these assets but have a fairly conservative view on the longer-term potential of these therapies.
 A number of unknowns remain unanswered, including 1) duration of treatment effect and retreatment
rates, 2) the competitive landscape with other vaccines/treatments entering the market, as well as 3)
longer term pricing and volume dynamics.
Company Partner Candidate Mechanism Current Stage Next Steps/Notes
Vaccines
Distribution (50mm dose in 2020 and 1.3bn dose
PFE BioNTech BNT162b2 mRNA Vaccine Approved
in 2021 globally)
JNJ Emergent Biosolutions Ad26.COV2.S Viral Vector (AAV) Vaccine Phase 3 Phase 3 data in early 2021
Phase 1 interim data and potential Phase 2/3 trial

IAVI V590 rVSV Vaccine Phase 1
initiation in early 2021
MRK
Themis (acquired) V591 measles virus vector vaccine Phase 1 Immunogenicity data by end of 2020
Therapeutics
Ridgeback Molnupiravir (MK- Readout and million doses of manufacturing
MRK oral antiviral treatment Phase 2/3
Biotherapeutics 4482) capacity by end of the year
Bamlanivimab (LY-
AbCellera Virus neutralizing antibody Approved in US & EU Distribution (950k contracted with US)
CoV555)
LLY
Junshi Bioscience LY-CoV016 Virus neutralizing antibody Phase 2 Awaiting additional data

PFE: How We Are Thinking about BNT-162 Earnings Potential…
 Pfizer’s BNT-162 COVID-19 vaccine program represents first vaccine approved following impressive
execution of a rapid clinical/manufacturing development plan and >90% efficacy.
 As we think about commercial oppty for the vaccine, we expect significant sales (albeit at low
margins) for BNT162 in 2021 (~$11bn) and 2022 (~$9bn) with revenues declining from there.
 From a valuation standpoint, the vaccine is well reflected in PFE shares. We believe current
valuation (~$4-6 share of value) reflects something above our best case scenario for the vaccine
($4/share of value, ~$25bn of market value) with our base case estimates closer to ~$2/share,
~$10bn of value.
 More broadly on Pfizer, while the COVID-19 vaccine enhances near-term growth prospects, we see
a major 2026-208 patent cycle capping the company’s multiple pending further pipeline progression
(with data spread over the next 2-3 years).
PFE sales 2021-2025 PFE vaccine and core EPS

$80,000 $5.00
$70,000 $4.50
$4.00 $0.08
$60,000 $11,136 $9,883 $5,972 $2,935 $2,278 $0.11
$3.50 $0.36 $0.22
$0.41
$50,000 $3.00
$40,000 $2.50
$30,000 $2.00
$54,188 $3.35 $3.63
$49,013 $51,630 $1.50 $3.08
$20,000 $43,900 $46,175 $2.57 $2.79
$1.00
$10,000 $0.50
$0 $0.00
2021E 2022E 2023E 2024E 2025E 2021E 2022E 2023E 2024E 2025E
Core Pfizer Sales (Ex-BNT162) BNT162 Vaccine Sales Core Pfizer EPS (Ex-BNT162) BNT162 Vaccine EPS

JNJ: Above Market Growth for Pharma and Device Recovery
 We see 2021 as a recovery year for JNJ’s Device Biz and forecast double-digit YoY operational
sales growth for the segment
 Following a sizable COVID-19 impact on results this year, JNJ’s Medical Device segment recovered
ahead of expectations with 3Q sales only down <5% in 3Q (and return to growth in the US). While a
second COVID-19 wave will likely impacted 4Q/1Q results, we see trends further normalizing
as we move through 2021 with the segment generating double-digit growth globally
 On Pharma, we saw resilient performance this year with healthy growth despite COVID disruptions,
and we continue to see above-market growth for the segment going forward, led by Darzalex
 We forecast ~9% sales growth for the Pharma segment in 2021, which we expect to be led by
strong growth in Darzalex as well as its Immunology portfolio including Tremfya and Stelara
 More specifically on Darzalex, we see a long pathway of growth for the product given continued
momentum in 1L expansion (still early in launch) as well as its newly launched Faspro (subQ) dosing,
which should significantly expand the product’s market opportunity
JNJ Medical Device Sales 2019-2025E JNJ Pharma Sales 2020-2025E
$60,000 $60,000 $54,753 $55,869 $56,206

$52,175
$48,959
$50,000 $50,000 $44,929
$40,000 $40,000
$29,227 $30,246
$30,000 $25,962 $26,270 $27,202 $28,181 $30,000
$23,053
$20,000 $20,000
$10,000 $10,000
$0 $0
2019E 2020E 2021E 2022E 2023E 2024E 2025E 2020E 2021E 2022E 2023E 2024E 2025E
Weaker US Dollar Represents Sales Tailwind at Current Spot Prices
 The US dollar has declined meaningfully in the 2H/20, which represents a positive sales/EPS
tailwind in 2021 based on current spot rates
 As a reminder, US Major Pharma derives ~52% of global sales outside the US (ex-US
revenue). Broadly speaking, we see PFE and MRK benefit most from a lower USD while ABBV
and LLY have relatively smaller international footprints.
 Based on current spot rates, we expect this to translate to ~2% positive impact on total US
Pharma sales, which is not well reflected Street consensus. We also expect a bottom-line
benefit as well offset by some natural FX volatility hedges (eg net operating investments).
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020 8/1/2020 9/1/2020 10/1/2020 11/1/2020 12/1/2020
USD Spot Rate USD/EUR USD/GBP
Source: Bloomberg, company reports, J.P. Morgan. 27

Theme 3:
With Election Now Largely Behind Us (and No
Blue Wave), We See Significant Pricing Reform as
Unlikely
28
We See Significant Healthcare Reform Unlikely as “Blue Wave” Is
Now Unlikely
 With the Biden presidential win and Senate likely remaining Republican (or potentially a 50:50
split), significant structural reform is difficult to envision, which we see as a clear positive for
the sector.
 With a significant Democratic majority in the Senate not materializing with the elections, a worst
case scenario of a Blue Wave appears to be off the table, which should at least partially lift a
significant overhang on the sector.
 Further, biopharma innovation remains an important part of the solution to developing a

treatment/vaccine for COVID-19, which we expect to help improve sentiment for the group
 While pricing remains controversial, we believe it will be difficult to enact significant change
(which would require the alignment of the President, House, and Senate under the Democrats)
 The president has limited executive authority to unilaterally enact healthcare policy changes that
would have a meaningful impact on drug pricing
 Further, the Senate is likely to remain majority Republican (or a 50:50 split), while significant
healthcare legislation would likely require 60 votes
 We note that President Obama was unable to institute Medicare negotiations and drug
reimportation in 2009 even with the Democrats in control of both houses of Congress
 The Major Pharma group has been highly out of favor ahead of elections and despite the
November results still trades at a significant discount to the market
29
More Broadly, Pharma Payers Remain Fragmented
 The US payer system is fragmented with ~40% of US revenues paid for by US gov’t, ~40-45% by
private insurers, and ~10-15% from out-of-pocket costs
 This analysis is based on Major Pharma geographic mix and industry-wide payer mix. Individual
US Major Pharma or Biotech companies may be more/less exposed to Medicare/Medicaid
populations.
All other*
. 4%
Medicare
Out of
Part B
pocket Medicare
13% ~24%
31%
52% 48% Of the Of US
ex-US US US drug Medicare
industry: Private
spend: Medicare
Insurance Medicaid Part D
42% 10% ~76%
Assuming Major Pharma has a similar US reimbursement mix as the broader

industry:
~50% of revenues are from US Sales
~15% of revenues are exposed to US Medicare
~3.5% of revenues are exposed to US Medicare Part B and ~11% to Part D
30
Source: Company reports, CMS National Health Expenditure Accounts, Kaiser Family Foundation, J.P. Morgan estimates.
Major Pharma Payer Mix by Company
 As we consider potential reform as well as the impact from recent job losses to commercial
insurance, we would highlight the following payer mix by company
 The sector generates ~50% of its sales in the US with these revenues split between
commercial insurance, government programs such as Medicare Part B, Medicare Part D,
and Medicaid as well as other segments of the market including the VA as well as cash
pay patients.
 The sector remains most sensitive to Medicare Part D reform as we think about changes
to drug pricing
 On the commercial business and unemployment, while we expect the sector will face
some incremental pricing headwinds from mix (as commercial tends to be the highest
priced segment of the market), we do not see a significant impact to Pharma sales and
earnings from elevated unemployment rates.
US Pharma Sales Mix US / Int'l Sales Split

Commercial Part B Part D Medicaid Other Total US Total Int'l Notes
ABBV 52% 3% 21% 4% 21% 77% 23%
BMY 25% 15% 42% 2% 16% 63% 37%
LLY 40% <5% 20% <10% 20% 58% 42%
JNJ 40% 13% 24% 5% 18% 57% 43% Excludes Consumer & Medical Devices
PFE* 40% <5% 30% <5% 20% 52% 48% Other Includes Vaccines
MRK 30% 15% 10% 5% 40% 45% 55% Other Includes Vaccines, Animal health
*: PFE estimates excludes up-john sales for 2020
**: all estimates based on 2020 sales estimates
Source: IQVIA, J.P. Morgan estimates 31

On Pricing, We Have Seen Net Price Declines in 2019 and 2020
 Rebates have increased in the past 5-6 years as the gap between gross price increases (~8-10%
avg) and net pricing increases (~1-2% avg) widened
– The increased level of rebating resulted from mix, increased competition within therapeutic areas,
increased payer focus on formulary management, as well as payer consolidation
 With list price increases expected to slow, we expect the sector to have modest net price
erosion (low single digits) in 2021 as we have seen over the past few years
– We see volume and mix as key drivers to sales growth rather than price
Net Pricing Growth Is Slowing Faster Than List Pricing Growth, Reflecting Increased Payer Rebates
16.0%
13.5%
14.0%
12.0% 11.3% 11.2%
10.0%
10.0% 9.3%
8.8% 9.1% 8.7%
8.0% 7.1%
5.5%
6.0% 4.7% 4.3% 4.0%
4.0% 2.9%
2.1%
2.0% 1.6%
0.3%
0.0%
-2.0% -1.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019E
List Price Growth Net Price Growth
Source: J.P. Morgan estimates, IQVIA.

32
Volume Increasingly Driving Sales Growth
 We see the shift from price-driven growth to innovation-driven growth as a natural evolution of the
market as the sector enters a new product cycle
 Newer, distributive therapies are far better protected from price pressure and payer access
restrictions relative to older products
 The industry has seen a clear uptick in new product approvals, and we expect this higher level of
innovation to continue for the foreseeable future
 ~50-70 annual approvals expected relative to ~20-25 approvals for much of the past decade
80
70
60
50
NME Aprovals
40
30
20
10
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 YTD
Year
BLA NDA
Source: FDA and J.P. Morgan, last updated as of December 9, 2020 33
Theme 4:
How Can the Sector Move Beyond the 2026-2028
Patent Cycle?
34
Clear Visibility on Sector Growth Until the Mid 2020s . . .
 2019 represented the last year of major LOE headwinds for the Major Pharma group until
the mid 2020s
 We see at least 5 years of visibility on mid-single-digit top-line sales growth, which should
translate into high-single-digit EPS growth
 At the same time, we note that the next wave of LOE erosion starts to emerge in 2025+ with
average LOE erosion rising back up to >3.5% for the industry, peaking in 2029 at 7%
 Among our major pharma group, we see the highest LOE erosion for BMY followed by ABBV
Major Pharma LOE Erosion 2020-2027E (% of sales) US Major Pharma Average LOE 2020E-2030E
10.0% 10.0%
8.3%
8.0% 8.0%
6.0%
6.0% 6.0% 5.3%
4.9% 5.0%
4.0% 3.7% 3.9%
4.0% 3.8%
3.1% 3.1% 3.0% 4.0%
2.4% 2.2% 2.4% 2.4%
1.8%
2.0% 2.0% 1.4%
0.0% 0.0%
2020E2021E2022E2023E2024E2025E2026E2027E2028E2029E2030E MRK JNJ LLY PFE ABBV BMY Industry
Avg

. . .and We See Top Line Roughly Stable 2026-2029 Despite LOEs
 While the market is highly focused on mid 2020 LOEs, we see this impact as very
manageable, particularly with continued signs of pipeline productivity as well as significant
capital deployment optionality
Avg LOE
Company LOE Products Pipeline Drivers
(20'-30')
BMY 8.3% Eliquis, Revlimid, Opdivo TYK 2, Zeposia, Mavacamten
ABBV 5.3% Humira, Imbruvica Skyrizi, Rinvoq, Vraylar
PFE 3.8% Eliquis, Ibrance, Xeljanz Vyndaqel, JAK Portfolio
LLY 2.4% Jardiance Tirzepatide, Verzenio, Selpercatinib
JNJ 2.4% Stelara, Xarelto, Imbruvica CAR-T, nipocalimab, amivantamab (EGFR/MET)
MRK 1.4% Januvia, Janumet, Keytruda V114, Vibostolimab (TIGIT), MK-8591
Major Pharma Sales Breakdown 2020-2030E

34%
400 26% 36%
12% 18% 22%
9%
350 7%
6%
300 6%
3% 6%
6% 3% 3%
250 2%
3% 2%
200 4%
150 93% 91% 88% 82%

94% 94% 78% 74%
99% 66%
64%
100
50
-50
2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Core Products LOE Pipeline

We See M&A Helping to Address 2026+ with Deals Focused on
Innovation
 Following busy M&A years in 2018-19 with a number of very large transactions, we have seen
fewer deals announced in 2020 with focus on bolt-on acquisitions and R&D collaborations
 Given the emerging mid-2020s LOE cycle as well as depressed valuations for some large-cap
biopharma players, we saw a number of mega-deals (as well as a range of smaller sized acquisitions)
announced in 2019 as several companies repositioned themselves and build out longer-term pipelines
 On the contrary, 2020 has been a relatively quieter year in terms of M&A activity with announced deals
pivoting to smaller tuck-in acquisitions. We expect an uptick in activity in 2021 but would not be
surprised to see deals skewed toward smaller transactions
Major Pharma & Biotech 2019 YTD (>$1bn) Major Pharma & Biotech 2020 YTD M&A (>$1bn)
Announce Date Acquirer Target Value in $mm Announce Date Acquirer Target Value in $mm
1/3/2019 Bristol Celgene $89,000 1/10/2020 Eli Lilly Demira $1,100
1/7/2019 Eli Lilly Loxo Oncology $8,000 3/2/2020 Gilead Forty Seven $4,900
2/25/2019 Roche Spark Therapeutics $4,800 6/10/2020 AbbVie Genmab (collab) $750*
5/21/2019 Merck Peloton Therapeutics $1,050 8/17/2020 Sanofi Principia Biopharma $3,000
5/27/2019 Eli Lilly Centrexion (CNTX-0290) $1,000 9/13/2020 Gilead Immunomedics $21,000
6/17/2019 Pfizer Array $11,400 9/14/2020 Merck Seattle (collab) $1,600**
6/25/2019 AbbVie Allergan $84,000 10/5/2020 Bristol MyoKardia $11,000
7/14/2019 Gilead Galapagos $5,050 11/5/2020 Merck VelosBio $2,750
7/29/2019 Mylan Pfizer (Upjohn) $32,700 11/6/2020 Novo Nordisk Emisphere Technologies $1,400
8/26/2019 Amgen Otezla (Celgene) $13,400 11/27/2020 Biogen Sage (collab) $1,525
10/10/2019 UCB Ra Pharma $2,100 12/10/2020 Gilead MYR GmbH €1,150***
10/31/2019 Amgen Beigene (20.5% stake) $2,700 Average Deal Value ~$5,500
12/9/2019 Merck ArQule $2,700 *: $750mm upfront payment & total potential milestone payments of up to $3.15bn
12/9/2019 Sanofi Synthrox $2,500 **: $0.6bn upfront plus $1bn investment & potential milestone of up to $2.6bn
Average Deal Value ~16,000 ***: €1.15bn upfront payment plus potential milestone payments of up to €300mm
37
Source: Company reports, Bloomberg Finance L.P., J.P. Morgan estimates
Pharma Balance Sheets Remain Healthy
 While we expect biopharma to remain active in business development for 2021, we see more
focus on bolt-on acquisitions
 Most major pharma companies maintain significant capital deployment optionality with ~1.0x
2020E average net leverage (with higher net leverage companies further de-levering in 2021
after large transactions)
 At the same time, we see BD trending toward smaller deals as companies focus on building out
existing therapeutic verticals and adding mid-2020s new product opportunities through tuck-in
acquisitions vs larger deals
Major Pharma 2020E Net Leverage Major Pharma Dividend Yield

3.5x 6.0%
2.9x 5.0%
3.0x 5.0%
2.3x 2.3x 4.1%
2.5x
4.0%
3.1% 3.3%
2.0x
1.6x 3.0% 2.7% 2.6%
1.5x 2.0%
1.0x 2.0% 1.6%
1.0x 0.7x
1.0%
0.5x 0.2x
0.0x 0.0%
JNJ MRK LLY BMY PFE ABBV avg LLY JNJ BMY MRK PFE ABBV Pharma S&P
Index 500
38
Theme 5:
How Would We Position Within the Sector?
39
Our Top 3 Picks within the Major Pharma Group
 ABBV (OW): Robust Non-Humira-Driven Growth at Attractive Valuation
 ABBV represents one of our top ideas with the company emerging as a far more diversified (and more
broadly investable) story post the AGN acquisition with two major new launches (Skyrizi/Rinvoq) exceeding
expectations and Humira biosimilar risk appearing increasingly manageable.
 We see sustainable long-term growth driven by Skyrizi and Rinvoq where we see nearly $15bn in combined
sales by 2025 and peak sales of ~$20bn.
 Along these lines, we see meaningful upside for shares (trading at ~8.5x 2021 EPS and ~9x trough 2023
estimates) underpinned by multiple potential sources of upside to estimates and an industry high ~6%
dividend yield.
 LLY (OW): Diversified Growth and Robust Pipeline Optionality
 We see LLY as the best-positioned growth story in our coverage with above-industry ~8% top-line growth
and high-teens annual EPS growth through the late 2020s
 This strong momentum is underpinned by healthy base business growth (Jardiance/Verzenio), a growing
portfolio of new launches (Retevmo, Emgality) and next-generation pipeline assets (tirzepatide, mirikizumab,
Loxo-305, several Alzheimer’s call options) as well as a significant margin expansion story (high 30s%+
range over time).
 BMY (OW): 2020 Pipeline Progress Not Well Reflected; 2021 a Catchup Year for Shares?
 Bristol significantly advanced its mid/late-stage pipeline in 2020 and meaningfully addressed its 2026+ LOE
cycle. Despite this shares underperformed the group/market, and we see 2021 as a catchup year for the
stock.
 We see clear acceleration on Opdivo growth throughout the year driving upside to 2022+ EPS and expect
further data on core pipeline assets such as TYK-2 to support multiple expansion.
40
How We Are Thinking About Our Large-Cap Names
 MRK (OW): Healthy Growth Outlook
 We see a healthy longer-term outlook for Merck underpinned by solid top-line growth driven by Keytruda,
animal health, and vaccines as well as significant margin expansion opportunity (we are forecasting a
6.5%/12% top-line and EPS CAGR through 2025).
 Pipeline expansion represents a key driver for MRK shares from here, and the company made clear
progress on this front in 2020. We expect this trend to continue in 2021, and the company has ample
balance sheet capacity for deals to further accelerate this process.
 JNJ (N): Pharma Business Increasingly Well Positioned; Device Recovery a Focus for 2021
 We view JNJ’s Medical Device segment recovery as a key focus of the story over the coming quarters. While
the company’s near-term results could again be impacted by a rise in COVID-19 cases, we expect a strong
recovery in the business as we move through 2021 and forecast double-digit growth for the year.
 In addition, JNJ’s pharma biz remains well positioned with above-market growth over the next several years
driven by Darzalex, Tremfya as well as an expanded late-stage pipeline (Momenta acquisition, amivantamab,
CART, etc.).
 PFE (N): Shares Ahead of Fundamentals on Vaccine Progress

 Pfizer’s progress on COVID-19 vaccine (BNT-162) has been impressive, and we continue to see a relatively
healthy near-term growth outlook for the company (~7%/10% top-line/EPS CAGR through 2025, which is
enhanced by the COVID-19 vaccine).
 We see this growth balanced against a major patent cycle on the horizon in 2026+ with ~35% of sales at risk
to generic competition in 2026-2028 (and where we see the vaccine playing less of a role). While PFE has a
number of late-stage pipeline opportunities, we do not see enough yet in the portfolio to address these
patent expirations.
41
How We Are Thinking About Our Large-Cap Names
 RPRX (N): Strong Biz Dev Progress Solidifying Dominant Position in Biopharma Royalty
Acquisition Space
 Royalty Pharma’s capital deployment (a key value driver for shares) is running ahead of our expectations
with ~$2.2bn of capital deployed in 2020. Further, recent deal have maintained RRPX’s diversified mix of
development-stage and in-market transactions and we estimate will generate healthy double-digit IRRs for
the company.
 We expect RPRX to remain the dominant player in an attractive biopharma royalty acquisition space with the
company positioned to be one of the fastest growing diversified biopharma stories over the next 5 years.
However, this favorable market position appears well reflected in current valuation.
42
Animal Health:
Healthy Long-Term Fundamentals Despite Near-
Term COVID Headwinds
43
The Animal Health Industry Remains Well Positioned
 Companion animal continues to support strong top-line growth for the industry
 While COVID-19 lockdowns in April/May depressed results, veterinary visits have since rebounded
and practices adapted to the new environment via curbside pickup & telemedicine.
 Further, working from home has 1) resulted in a spike of pet adoptions (particularly among
millennials), and 2) brought pet owners closer to their pets, leading them to seek a higher standard
of care. We see these tailwinds as largely sustainable tailwinds for the industry
 In addition, innovation in companion animal, led by ZTS, is continuing at a rapid pace, with next-gen
parasiticides (Simparica Trio) and monoclonal antibodies (NGF in pain) launching/ramping in 2021-
2022.
ZTS’s Dermatology and Flea/Tick Portfolio Companion Sales for ZTS

1,400 5,000 4,620
1,227
1,137 4,500 4,138
1,200
1,048
1,019 4,000 3,589
1,000 911 3,500 3,145
754 789
800 3,000 2,613
593 577 2,500
600 510
2,000
400 1,500
1,000
200
500
0 0
2018 2019E 2020E 2021E 2022E 2018 2019 2020E 2021E 2022E
Apoquel & Cytopoint Parasiticides ZTS
44
The Animal Health Industry Remains Well Positioned (Con’t)
 Livestock growth remains depressed in the near term, although the longer-term outlook
remains resilient.
 Meat processing capacity outages and reduced services demand have obviously been
headwinds for the industry, which we expect to carry over into 1H2021. However, we
continue to expect results to normalize & recover by 2022.
 Further, while ASF represented a substantial headwind in 2019, with Chinese farms
rebuilding their herds, pork outlook could be a bright spot in 2021.
Livestock Revenues for Stand-Alone ELAN, ZTS
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2018 2019 2020 2021 2022 2023
ZTS Livestock Elanco legacy livestock
45
ZTS: Clean Growth Story; Ideally Positioned in an Attractive Vertical
 Sustained innovation is supporting best-in-class revenue.
 Zoetis launched Simparica Trio earlier this year, and the product is gaining traction despite obvious
COVID-19 limitations (sales reps virtually marketing, etc.). Zoetis will also be first-to-market with its
injectible NGF pain products, which are expected to launch in 2021.
 We see these launches, and several others (ProHeart 12 etc.), combined with continued growth for
core franchises like Apoquel and Cytopoint as well as ZTS’s expansion into diagonstics supporting
sustainable high-single-digit top-line growth for the company (well above the ~5% growth rate for the
sector)
 While valuation is far from cheap, we see shares continuing to work from here.
 ZTS shares trade at a premium valuation at ~40x 2021E EPS. However, between a sustainable 13-
15% EPS CAGR and an upward bias to estimates, we see share continuing to work from here
ZTS Top-Line and EPS Growth

18% 16%
16% 14%
14%
12% 11%
10% 9%
7% 8%
8%
6% 5%
4%
4%
2%
0%
2019 2020 2021 2022
Revenue Growth EPS Growth

46
ELAN: Recovery Play with Significant Margin Expansion over Time
 2020 has been a messy year, but results should look better in 2021
 Admittedly, Elanco had a tough year with a number of controversies including 1) a disproportionate
impact from COVID-19 (due to its outsized livestock biz), 2) an inventory work-down due to a new
distribution approach, and 3) unknowns around the Bayer integration
 However, as we think about 2021, we believe mgmt has set expectations appropriately. We see an
upward trajectory to our 2021 estimates and even more normalized results as we look out to 2022+
 While top-line growth will be more muted in the near term, synergies and manufacturing
efficiencies will generate ~20% EBITDA growth over the next few years.
 With lingering competition on key product lines and a pipeline that is expected to gradually build over
the next few years, we expect ELAN top-line growth in the 3-4% range
 However, GM expansion (ELAN is targeting 60% by 2023-2024 vs ~55% today) and synergy capture
are expected to translate into significant EBITDA expansion, supporting 20%+ growth.
 Valuation for shares remains attractive
 ELAN shares continue to trade at a steep discount vs ZTS, particularly as you look at more
normalized 2022+ results. While some discount is clearly appropriate, we see a path for Elanco’s
multiple to re-rate as the company delivers on its top-line and margin targets.
47
Specialty Pharmaceuticals:
A Story of the “Haves” and the “Have Nots”
48
A Few Hidden Gems within an Out-of-Favor Sector
Specialty pharma continued to underperform the broader markets in 2020, and while we do
not see a strong case for broadly owning the group, we see several attractive opportunities
emerging within the branded specialty space
 The group has been underperforming markets over the past several years on the back of challenging
Gx fundamentals (pricing headwinds) as well as several other issues including litigation liabilities, high
leverage, etc.
 While Gx fundamentals have broadly stabilized, we still see a challenging pathway to growth given
increasing competition for high-value new launches and (at times) difficult payer dynamics for
complex products.
 Further, leverage remains an issue for the sector (particularly with some names still facing opioid
liabilities), limiting companies’ ability to invest in pipeline and pursue bizdev opportunities.
 Along these lines, we remain cautious on exposure to more traditional and pure-play Gx companies
 However, as we think about the branded side of our midcap coverage, we see several
interesting names trading at depressed valuations despite well positioned assets and/or a
clear pathway to value creation
 These include HZNP (Tepezza positioned for healthy long-term growth as capacity recovers), BHC
(clear path to value creation through B&L spin), as well as PRGO (consumer fundamentals remain
strong and clarity on tax will be clear positive for shares)
49
Specialty Pharma 2019-2020YTD Performance and Key Events
20%
Market recovery and solid spec Markets rally
1Q20 results with varied following Biden
COVID-19 impact with presidential win
tailwind/stocking benefit for
10% several players (PRGO, ENDP,
TEVA) while headwind for
others (BHC)
0%
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
-10%
BHC Separation
-20% announcement
with 2Q20 results
Market sell-off Viatris

amid COVID- transaction
-30% 19 (varied close
impact on spec
Unfavorable PRGO
companies)
tax ruling followed by
3Q20 results
-40%
S&P 500 Spec Pharma
Source: Bloomberg Finance L.P., J.P. Morgan estimates, last updated as of 12/17/2020 50
Specialty Pharma 2020 YTD Performance in Review
 In 2020, Spec Pharma (-11%) underperformed the broader market (S&P 500 +17%) as well as
other HC sectors (Medtech, Biotech, etc.)
 On specific company performance, HZNP (+91%) and ENDP (+17%) outperformed as the
companies’ portfolio benefited from the impact of COVID-19 while BHC (-30%) lagged on COVID-
19 headwinds.
2020 YTD Sector Performance 2020 YTD Stock Performance
Biotech (XNBI) 28% HZNP 91%
S&P 500 (SPX) 17% ENDP 17%
Medtech (S5HCEQ) 16% TEVA 5%
S&P 500 HC (S5HLTH) 12% AMRX -7%
HC Services (S5HCPS) 10% PRGO -7%
Major Pharma 7% VTRS -12%
Spec Pharma -11% BHC -30%
-30% -10% 10% 30% -50% -30% -10% 10% 30% 50% 70% 90% 110%
51
Source for both figures: Bloomberg Finance L.P.. Last Updated price as of 12/17/2020 post close
Key Spec Events/Controversies We Are
Watching for 2021
52
BHC: All Eyes on B&L Separation
 As a reminder, earlier this year BHC announced its intention to separate its eye care business from the rest of
the company, which would create a pure-play eye care company (“Spin Co”, ~1/3 of BHC’s EBITDA) and a specialty
pharma portfolio focused on GI and dermatology (“Remain Co”, ~2/3 of EBITDA)
 However, the timing of the separation pathway remains a key debate with mgmt. noting target leverage of
~4x/~5.5x SpinCo/RemainCo and a base case delevering pathway (20% B&L equity raise, no asset sales) that
implies a 2H22 separation timing. However, a larger equity raise and/or asset sale would accelerate this timeline.
 More broadly on the separation, we see this as a significant value creating event with current BHC valuation
not appropriately reflecting its attractive, high multiple eye care franchise.
 Using 2022E EBTIDA and assuming a ~13.5-15x EV/EBITDA multiple for SpinCo (~15-20% discount to ALC and
COO) and a ~6.5-7x multiple for RemainCo as well as a ~$2bn equity raise implies fair value for BHC shares of
~$27-35/share, or ~30-70% upside from current levels (see summary below)
 Beyond the separation, we see BHC as a levered COVID-19 recovery play, and we expect results to normalize for
the company’s eye care and GI franchises throughout 2021
BHC SOTP Valuation Scenario Analysis

Bear Case Base Case Upside Case
2022 2022 2022 2022 2022 2022

EV EV EV
EBIT DA EV/EBIT DA EBIT DA EV/EBIT DA EBIT DA EV/EBIT DA
Spin Co 961 12.0x 11531 Spin Co 961 13.5x 12972 Spin Co 961 15.0x 14413
Remain Co 2809 5.5x 15452 Remain Co 2809 6.5x 18262 Remain Co 2809 7.0x 19666
Total 3770 26983 Total 3770 31233 Total 3770 34079
EV of SpinCo + RemainCo 26983 EV of SpinCo + RemainCo 31233 EV of SpinCo + RemainCo 34079

(less) RemainCo debt (15452) (less) RemainCo debt (15452) (less) RemainCo debt (15452)
(less) SpinCo debt (3844) (less) SpinCo debt (3844) (less) SpinCo debt (3844)
(less) equity raise (or sale) (2000) (less) equity raise (or sale) (2000) (less) equity raise (or sale) (2000)
Equity 5687 implied Equity 9938 implied Equity 12784
shares 359 shares 359 shares 359
Price/share $15.82 Price/share $27.65 Pri ce/share $35.56
53
Source: Bloomberg Finance L.P., J.P. Morgan estimates. Last updated price as of 12/10/2020 post close.
HZNP: Tepezza Well Positioned over Time Despite Short-Term
Supply Shortages
 Horizon’s Tepezza has exceeded expectations since launch, and we see this trend resuming in 2Q21 once
supply issues have been resolved
 With only a small portion of acute TED patients currently receiving Tepezza (~2k patients have been treated,
implying ~12% penetration rate into the 15-20K annual incidence of patients), we see room for further uptake for
the product as the company continues to ramp commercial activity and patient awareness continues to grow.
 Admittedly the product is facing some short-term issues including 1) supply constraints as COVID-19 vaccine
production orders have restricted manufacturing capacity available for the product (primarily a 1Q issue) and 2)
the first wave of patients completing therapy and new starts needed to replace this volume
 That said, we remain constructive on the product’s longer-term sales potential as capacity starts to normalize
after 1Q (HZNP is seeking to increase production scale) and the company’s aggressive marketing efforts
continue to increase patient awareness and drive further penetration. Along these lines, we continue to forecast
healthy growth for the product in 2H2021 and beyond.
Tepezza Symphony Sales by Month

$100
$88
$90
$81
$80 $74
$70 $63
$60
$51
$50
$40 $32
$30 $24
$20
$11
$10 $2
$0
Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
54
Source: Bloomberg Finance L.P., J.P. Morgan estimates
PRGO: Watching Consumer Trends and Updates on Tax Litigation
 We see a favorable setup on tax litigation with Perrigo aiming to favorably resolve the dispute
 Following the Irish high court ruling against Perrigo in the tax assessment dispute, the company has noted it is
aiming to favorably resolve the dispute (vs “stalling” the process). Along these lines, we would not be surprised to
see a settlement on this issue at some point (and we note PRGO has a fairly strong case). Any clarity on tax short
of a full payment on the dispute would be a clear positive for the story and enable valuation to better reflect the
company’s core consumer franchises.
 More broadly on PRGO, shares trade at a significant discount to consumer peers, and we see a path to a
more normalized multiple over time
 We see more consistent execution on the consumer side driving multiple expansion over time, particularly
with a blended consumer/generic peer group trading at a significant premium to PRGO’s current valuation
Consumer Comp Sheet

EPS (calendar, USD) P/E Ratio
Company Ticker 2020E 2021E 2022E CAGR 2020E 2021E 2022E
Proctor & Gamble PG 5.46 5.73 6.26 10% 25.3x 24.1x 22.1x
Colgate CL 3.04 3.23 3.45 4% 28.1x 26.5x 24.8x
Reckitt Benckiser RB/ 4.41 4.32 4.73 1% 19.8x 20.3x 18.5x
Kimberly-Clark KMB 7.66 7.82 8.26 6% 17.8x 17.4x 16.5x
Clorox CLX 9.24 7.41 8.54 9% 21.9x 27.3x 23.7x
Beiersdorf BEI 3.30 3.92 4.29 3% 34.8x 29.3x 26.8x
Church & Dwight CHD 2.82 3.06 n/a 10% 30.9x 28.5x n/a
T reeHouse Foods THS 2.73 3.01 n/a 11% 15.5x 14.1x n/a
Lancaster Colony Corporation
LANC 4.62 n/a n/a -7% 37.3x n/a n/a
Helen of T roy HELE 11.05 n/a n/a 18% 20.1x n/a n/a
Prestige Consumer Healthcare
PBH 3.23 3.21 n/a 6% 11.2x 11.3x n/a
B&G Foods BGS 2.33 2.30 n/a 7% 12.6x 12.8x n/a
Edgewell EPC 2.42 2.75 2.93 -6% 14.9x 13.1x 12.3x
Consumer Average 7.4% 24.9x 23.5x 20.5x
PRGO Consumer-Only 2.95 3.22 3.38 7.0% 15.9x 14.6x 13.9x
55
Source: Bloomberg Finance L.P. estimates, last priced on 12/17/20 after close
VTRS: Highly Inexpensive with Clarity on Dividend, Guidance
Representing Upcoming Catalysts
 We are increasingly comfortable with our 2021 estimates.
 Management has talked about ~$18bn top line/$7bn EBITDA as unofficial targets for 2021. We see this target
as reasonable (especially following the Aspen transaction), with our estimates factoring in significant VBP-
driven erosion in China and assuming steep erosion for Lyrica in Japan
 On the dividend, we assume an ~$700-800mm distribution, implying a ~4-5% yield.
 VTRS’s dividend has emerged as a key controversy in the story (improved shareholder return was one of the
key selling points of the transaction), and the company’s dividend announcement will be closely watched by
investors
 VTRS shares remain highly inexpensive at just ~6x pro forma 2021E EBITDA and clarity on dividend and
guidance should support valuation closer to peers (~7.5-8x).
VTRS Revenue and EBITDA
$20,000 $18,051 $18,078 $18,296
$15,000
$10,000
$6,990 $7,247 $7,547
$5,000
$0
2021 2022 2023
Sales EBITDA
56
Source: Bloomberg Finance L.P., J.P. Morgan estimates
Theme 2:
Gx Fundamentals Have Largely Stabilized, but
Growth Outlook Remains Anemic
57
Generic Industry Is (Still) Not a Great Place to Be
 Following an extended cycle of significant price erosion in 2017-2018, commentary from
management over 2019-2020 suggest base business pricing has largely normalized
 At the same time, between the increasing competition for high-value new launches and (at times)
difficult payer dynamics for complex products, the “new normal” leaves little room for growth
for most manufacturers
 In this environment, we see Gx performance as a function of:
A) Being able to launch high-value (complex generics, biosimilar, etc.) new products to offset
pressures in the base portfolio
B) Having exposure to more attractive channels or product types (hospital, injectibles, etc., as
opposed to traditional retail)
C) Having reliable and consistent supply (“failure to supply” penalties have become an issue for
a few players in the industry)
D) Having a low cost base/efficient manufacturing infrastructure
 Putting these factors together, PRGO (resilient base biz) and VTRS (large non-Gx
franchises, scale, efficient manufacturing) appear best positioned, followed by TEVA
(scale)
 On the other hand, AMRX (niche, more-concentrated retail portfolio) and ENDP (high
leverage, opioid exposure, longer-term Vasostrict LOE issue) appear poorly positioned
58
IQVIA Trends Suggest Slower Rates of Erosion
AMRX IQVIA Sales ENDP IQVIA Sales
300 500
2020 launches 2020 launches
450
250 400
350
200 2017 launches 2017 launches
300
150 250
Levothroxine gVoltaren gel
200
gTamiflu gLovaza
100 150
gAggrenox Hydrocodone
100 lidocaine
50 gVoltaren gel
50 Vasostrict
Yuvafem
- gAdderall - other injectibles
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
oxymorphone adj base
TEVA IQVIA Sales VTRS IQVIA Sales

1,600 800
1,400 700
2020 launches
2020 launches
1,200 2019 launches 600
gAdvair
1,000 gCialis 500 2019 launches
2018 launches
800 400 2018 launches
2017 launches
2017 launches
600 2016 launches 300
2016 launches
400 Aderall XR 200
gConcerta
budesonide
200 100 gCopaxone
gConcerta
adj base biz
- adj base biz -
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Source: Company reports, J.P. Morgan estimates, IQVIA

59
Biosimilars Represent a Growth Opportunity for the Sector
 Thus far, biosimilar adoption in Europe has moderately exceeded adoption in the US, largely
due to payer/access dynamics that have allowed originators to limit biosimilar uptake in certain
markets
 At the same time, US biosimilars have been successful in certain oncology markets
(Neupogen, Herceptin, Rituxan) as well as in the insulin market (LLY’s basaglar), suggesting
that not all markets are created equal
 Overall, we expect uptake to vary market by market, determined by a combination of

factors such as product characteristics (i.e., chronic vs acute, etc.), commercialization
strategy, and the originator’s response
 Greatest exposure to biosimilar growth in our coverage: CHRS (bNeulasta launched

2019 and Lucentis, Humira, and Eylea pending), VTRS (broad development portfolio),
and TEVA (bRituxan ramp in 2020)
 We will be watching bLucentis (CHRS, 2022), bEylea (CHRS, 2025), bHumira (VTRS,
CHRS, 2023) over the next several years
60
Select Biosimilar Market Snapshots
Remicade Market – Biosimilars ~15% share Neupogen Market – Biosimilars ~60% share
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% renflexis 50% zarxio
40% inflectra 40% granix
30% remicade 30% neupogen
20% 20%
10% 10%
0% 0%
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Jun-16
Dec-16
Mar-17
Jun-17
Dec-17
Mar-18
Jun-18
Dec-18
Mar-19
Jun-19
Dec-19
Mar-20
Jun-20
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Neulasta Market – Biosimilars ~25% share Lantus Market – Biosimilars ~30% share
100% 100%
90% 90%
80% 80%
70%
70%
60%
60%
Ziextenzo 50% basaglar
50%
udenyca 40%
40% lantus +
fulphila 30% solstar
30%
neulasta 20%
20%
10%
10%
0%
0%
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20

61
Select Biosimilar Market Snapshots
Rituxan Market – Biosimilars ~30% share Herceptin Market – Biosimilars ~50% share
100% 100%
90% 90%
80% 80%
70% 70%
60% Truxima 60% Trazimera
50% 50% Ogivri
40% Ruxience 40%
Kanjinti
30% 30%
Rituxan Herzuma
20% 20%
10% 10% Herceptin
0% 0%
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Jan-18
Mar-18
Sep-18
Nov-18
Jan-19
Mar-19
Sep-19
Nov-19
Jan-20
Mar-20
Sep-20
May-18
Jul-18
May-19
Jul-19
May-20
Jul-20

62
Adjusted for Liabilities, Traditional Generic Names Are Not That
Cheap
While valuation for the group continues to screen cheap at just ~7.5x 2021E EBITDA (vs the broader
market at ~21x), we do not see a compelling reason to own the group for the following reasons:
 Sizable liability overhangs on most names, and after taking opioid/price-fixing exposure into account,
the valuation gap narrows, with spec pharma trading at ~8.0x on an adjusted basis
 While Gx fundamentals have largely stabilized, the “new normal” leaves little room for growth...and
spec pharma branded pipelines leave much to be desired (many companies have relied on M&A in
the past to build their spec and branded portfolios)
 Lastly, leverage remains elevated (>4x 2020E net debt/EBITDA), greatly complicating companies’
ability to deal with opioids/price fixing liabilities as well as limiting companies’ options to diversify or
consolidate (with financial distress a distinct possibility for some names…)
Spec Pharma Adj. Debt amd EV/EBITDA

EV/EBITDA Adj EV/EBITDA
Mkt. Cap Curr Debt Curr EV Liab. Adj EV
2020E 2021E 2022E 2020E 2021E 2022E
Amneal 1,220 2,419 3,639 100 3,739 8.0x 7.4x 7.3x 8.2x 7.6x 7.5x
Endo 1,226 6,650 7,876 1,000 8,876 6.0x 6.1x 6.1x 6.7x 6.9x 6.8x
Viatris 20,808 23,491 44,299 1,500 45,799 6.3x 6.1x 6.6x 6.3x
Perrigo 6,564 2,960 9,525 1,354 10,879 10.5x 10.0x 9.5x 12.0x 11.4x 10.9x
Teva 11,291 24,932 36,223 3,000 39,223 7.5x 7.3x 7.1x 8.1x 7.9x 7.7x
Bausch 7,367 22,651 30,018 0 30,018 9.1x 8.2x 7.7x 9.1x 8.2x 7.7x
Average 8.3x 7.3x 7.0x 8.8x 7.7x 7.4x
Debt/EBITDA Adj Debt/EBITDA
Curr Debt Liab. Adj. Debt. Comments
2020E 2021E 2022E 2020E 2021E 2022E
Amneal 2,419 100 2,519 PrFx, O 5.4x 4.7x 4.3x 5.6x 4.9x 4.5x
Endo 6,650 1,000 7,650 PrFx, O 5.1x 4.9x 4.5x 5.9x 5.6x 5.3x
Viatris 23,491 1,500 24,991 PrFx 3.0x 2.5x 3.2x 2.7x
Perrigo 2,960 1,354 4,314 PrFx, tax 2.7x 2.1x 1.5x 4.2x 3.5x 2.8x
Teva 24,932 3,000 27,932 PrFx, O 4.7x 4.2x 3.5x 5.3x 4.8x 4.1x
Bausch 22,651 0 22,651 none 6.6x 5.6x 4.7x 6.6x 5.6x 4.7x
Source: Company reports, J.P. Morgan estimates, last priced as of 12/13/2020 63

Theme 3:
How We Would Position within the Group
64
Names We Like in Spec (BHC, HZNP, VTRS, PRGO)
 BHC (OW): COVID-19 recovery play in 2021 with longer-term separation optionality
 We see the separation of B&L as a significant value-creating event with our base-case SOTP suggesting
value in the low $30s. While the process will take more time than we initially expected, the company also
has several levers to pull to accelerate timelines, including asset sales or spinning a bigger piece of B&L.
 Beyond the separation, we see Bausch as the biggest beneficiary of normalizing economic behavior in
our spec pharma coverage as we look ahead to a COVID-19 vaccine in 2021 and beyond.
 HZNP (OW): Tepezza and Krystexxa support a long runway for growth
 While 1H results will be impacted by supply shortages (due to COVID-19 vaccine-related manufacturing
capacity shortages), we see long runway for Tepezza growth as patient and physician awareness grows
(only a small 10-15% of the 15-20K patients with acute TED currently receive Tepezza). In addition, we
see a >$1bn opportunity for the product in chronic TED (~70k patient pool) and await additional data in
this setting, now expected in early 2022.
 Beyond Tepezza, we see an attractive setup for Krystexxa (immunomodulation, nephrology) and capital
deployment optionality in the story.
 VTRS (OW): Shares too cheap to ignore as we look at the prolife of the new Viatris
 We are increasingly comfortable with mgmt’s ~$18bn top line/$7bn EBITDA targets for 2021. And with
shares trading at just ~5.5x pro forma 2021E EBITDA, we see valuation as unsustainably low at current
levels.
 Up next, we await near- and long-term guidance (expected in March 2021) as well as a dividend
announcement as potential catalysts for VTRS shares.
65
Names We Like in Spec (Cont)
 PRGO (OW): Consumer product trends looking increasingly solid, not well reflected in
discounted valuation
 Perrigo’s consumer business has benefitted from COVID-19 purchasing dynamics as well as improved
execution at the company. Underlying drivers in both the US and international markets remain solid, and
we forecast low-single-digit (~3%) sustained growth for the portfolio.
 While the company’s Irish tax dispute remains an overhang, we believe Perrigo has multiple avenues
available to favorably resolve the issue. Either way, final resolution of the case likely remains years away.
 With shares now trading at just ~11x 2021E EPS (vs consumer peers at ~25x), PRGO appears very
inexpensive at these levels
66
Disclosures
Companies Discussed in This Report (all prices in this report as of market close on 18 December 2020)
AbbVie(ABBV/$104.45/OW), Amneal Pharmaceuticals, Inc.(AMRX/$4.40/UW), Bausch Health Cos Inc(BHC/$20.73/OW), Bristol-Myers

Squibb Company(BMY/$63.12/OW), Elanco Animal Health Inc.(ELAN/$30.01/OW), Eli Lilly & Company(LLY/$171.40/OW), Endo International
PLC(ENDP/$5.57/UW), Horizon Therapeutics(HZNP/$69.68/OW), Johnson & Johnson(JNJ/$154.51/N), Merck & Co., Inc.(MRK/$79.53/OW),
Perrigo Company(PRGO/$46.09/OW), Pfizer Inc.(PFE/$37.68/N), Royalty Pharma(RPRX/$44.40/N), Teva Pharmaceuticals(TEVA/$10.01/N),
Viatris Inc(VTRS/$17.75/OW), Zoetis(ZTS/$163.63/OW)
67
Disclosures
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72
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North America Equity Research

US Pharma 2021 Outlook

 Favorite ideas: ABBV, LLY, BMY

 Favorite ideas: ZTS, ELAN

 Favorite ideas: BHC

 BMY (OW): Solid pipeline progression not well reflected in valuation

 PFE (N): Vaccines rally overdone at this point

ABBV 4.1% 6.1% 5.4% 5.3% 5.0% ABBV

 On specific company performance, LLY (+34%, Verzenio adjuvant/tirzepatide), ABBV (+24%,

2020 YTD Sector Performance 2020 YTD Stock Performance

Biotech (XNBI) 28% LLY 34%

S&P 500 (SPX) 17%

Medtech (S5HCEQ) 16%

Spec Pharma -11% MRK -9%

-30% -10% 10% 30% -30% -10% 10% 30% 50%

Trump tweet on drug

Source: Bloomberg Finance L.P. Priced as of 12/17/2020. 7

Solid 2Q20 results Pfizer BNT-

S&P 500 Major Pharma

Source: Bloomberg Finance L.P. Priced as of 12/17/2020. 8

 Elections were close to a best case scenario for the group.

 We expect some volatility with the GA runoffs in January

 We see multiple reasons to be optimistic on 2021 vs 2020 . . .

2. Valuations are at a near record discount to S&P 500

 However several unknowns remain . . .

2. How Are We Thinking about Key Products in 2021?

3. With Election Now Largely Behind Us (and No Blue Wave), We See

5. How We Would Position Heading into the New Year?

Source for both figures: Company reports, J.P. Morgan estimates. 13

Immunology Market US Sales by Indication (in $bn)

Immunology Market US Sales by Category (in $bn)

Source: J.P. Morgan estimates. 15

PD-1 Market Sales Estimates (in $bn)

Source: J.P. Morgan estimates. 16

Source: J.P. Morgan estimates 17

Source: J.P. Morgan estimates, company reports 18

AS Submitted Approval in 1H21 $8,000

Injectable GLP-1 Scripts (ex-Rybelsus) Injectable GLP-1 Market Share (ex-Rybelsus)

Opdivo Sales Ramp 2015A-2025E Deucravacitinib Sales 2020-2025E

Phase 1 interim data and potential Phase 2/3 trial

Source: J.P. Morgan estimates, company reports 24

PFE sales 2021-2025 PFE vaccine and core EPS

Source: J.P. Morgan estimates, company reports 25

$60,000 $60,000 $54,753 $55,869 $56,206

Source: Bloomberg, company reports, J.P. Morgan. 27

 Further, biopharma innovation remains an important part of the solution to developing a

Assuming Major Pharma has a similar US reimbursement mix as the broader

US Pharma Sales Mix US / Int'l Sales Split

Source: IQVIA, J.P. Morgan estimates 31

Source: J.P. Morgan estimates, IQVIA.

Source for both figures: Company reports, J.P. Morgan estimates. 35

Major Pharma Sales Breakdown 2020-2030E

150 93% 91% 88% 82%

Core Products LOE Pipeline

Source for both figures: Company reports, J.P. Morgan estimates. 36

Major Pharma 2020E Net Leverage Major Pharma Dividend Yield

 LLY (OW): Diversified Growth and Robust Pipeline Optionality

 PFE (N): Shares Ahead of Fundamentals on Vaccine Progress

ZTS’s Dermatology and Flea/Tick Portfolio Companion Sales for ZTS

Livestock Revenues for Stand-Alone ELAN, ZTS

ZTS Livestock Elanco legacy livestock

ZTS Top-Line and EPS Growth

Revenue Growth EPS Growth

 Valuation for shares remains attractive