Rbc on BIIB 0617

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RBC Capital Markets, LLCMichael J. Yee (Analyst)(415) [email protected] Chung (Associate)(415) [email protected]

Adnan Butt (Analyst)(415) [email protected]

Sector: Biotechnology

OutperformNASDAQ: BIIB; USD 388.28Price Target USD 525.00

WHAT'S INSIDE

Rating/Risk Change Price Target Change

In-Depth Report Est. Change

Preview News Analysis

Scenario Analysis*

DownsideScenario

314.0019%

CurrentPrice

388.28

PriceTarget

525.0035%

UpsideScenario

565.0046%

*Implied Total Returns

Key StatisticsShares O/S (MM): 235.6Dividend: 0.00

Market Cap (MM): 91,479Yield: 0.0%Avg. Daily Volume: 1,274,706

RBC EstimatesFY Dec 2014A 2015E 2016E 2017EEPS, Ops Diluted 13.83 16.65 19.30 22.07P/E 28.1x 23.3x 20.1x 17.6xRevenue 9,703.0 10,997.0 12,060.0 12,904.0

EPS, Ops Diluted Q1 Q2 Q3 Q42014 2.47A 3.49A 3.80A 4.09A2015 3.82A 4.06E 4.36E 4.43ERevenue2014 2,130.0A 2,421.0A 2,511.0A 2,641.0A2015 2,555.0A 2,742.0E 2,827.0E 2,873.0EAll values in USD unless otherwise noted.

June 16, 2015

Biogen Idec Inc.Tysabri SPMS data wrapping up in June; data couldbe soonOur view: Recent update suggests that Tysabri SPMS data could comeearly in 2H:15. Given current valuation and very low Street expectations,we believe risk/reward is skewed to the upside. We continue to view BIIBas a top large cap idea over the long term given significant pipeline upside,huge Alzheimer's call options over next few years, and growing balancesheet and cash balance (capital deployment/M&A options).

Key points:Clinicaltrials.gov changed the Phase III Tysabri SPMS estimated studycompletion date to June 2015, so data could be released this summervs. expectations for later this year and old status suggesting Fall '15.This is consistent with the enrollment completed in July 2013, so two-year treatment protocol implies that all patients are done by next month.Bottom line is expectations are very low on Tysabri and we see a 3035%probability of success (vs. buyside consensus 2025% or lower), whichwould lead to up to $12B revenue upside and $4 or more of EPS accretion(royalty is also paid out to PRGO). Thus, $4 accretion x 20 P/E multipleimplies up to $80 or 20% upside to the stock value over time, whichisn't unreasonable given a new growth driver for this pipeline stock. Wesee some modest 15%+ chance of a "mixed" result, e.g., a big subset of"responders" gets great benefit and BIIB might still try to file with FDAgiven the unmet medical need. We see 50% probability there's not enoughsignal to file but minimal downside given it's not in Street estimatesbecause it's viewed as a high-risk study. Bottom line is we like BIIB alsofor upcoming Alzheimer's data in July as well as more pipeline catalystscoming including LINGO in early 2016.

We do see this as a call option but reasons it could work include: 1)unique composite endpoint designed with experience from prior SPMSstudies and objective timed 25F walk test; 2) registry data and Phase IIdata show improvement in ambulation and walking speeds; 3) dramaticreduction in key CSF inflammation markers (e.g., cytokine CXCL13 seeliterature and data inside); 4) 10%+ off-label use and some KOLs thinkit does work for some pts and there are "responders" who could drivebenefit for the whole group. See inside for much more details.

Separately, Phase II Tysabri stroke coming soon interestingopportunity: 1) mechanism and science make sense whereby blockingT-cells into brain could protect against stroke damage; 2) Gilenya workssimilarly and reduced brain damage in preclinical models (but has acuteCV side effects in MS, so can't be developed here); 3) Tysabri might havelonger window to work than current drugs and Phase II is testing withinnine hours of onset. Stroke has been a graveyard for development, withmany failures, so this is only a call option. If treating only 100k of the 12Mstrokes per year WW, this could be a $500M+ to $1B opportunity ($2030/share upside).

Priced as of prior trading day's market close, EST (unless otherwise noted).For Required Conflicts Disclosures, see Page 10.

Target/Upside/Downside ScenariosExhibit 1: Biogen Idec Inc.

20m15m10m

5m

J F M A M J J A S O N2013

D J F M A M J J A S O N2014

D J F M A M2015

J

UPSIDE 565.00TARGET 525.00CURRENT 388.28DOWNSIDE 314.00

Jun 2016

540440390340

290

240

190

140

125 Weeks 23JAN13 - 16JUN15

BIIB Rel. S&P 500 COMPOSITE MA 40 weeks

Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target

Target price/base caseOur $525 price target is based on a 27x P/E our 2016E EPS.This is also possible based on DCF analysis that values the basebusiness ($314/share) including Tecfidera and hemophiliaprograms. For various pipeline programs, we add probabilityadjusted value of ~$211/sh total for Tysabri SPMS, ANTI-LINGO, BIIB037 (5060% POS), $SMNRx, IPF, and ANTI-TWEAK.

Upside scenarioOur upside scenario of $565 is based on similar assumptions asour base case for the core business (Avonex, Rituxan, Tysabri),Tecfidera and the new hemophilia franchise (Eloctate,Alprolix). We assign greater probability adjusted value for thepipeline (515% higher for each of the six opportunities) aswe gain visibility on their prospects in next 12 months. Keydrivers in 2015 would be data readouts from Anti-LINGO andTysabri SPMS, which if both are positive may drive shareshigher toward our upside scenario and increase probability ofsuccess.

Downside scenarioOur downside scenario of $314 is based on DCF analysison only the existing core business (Avonex, Rituxan, Tysabri)plus the contribution from Tecfidera and recently launchedhemophilia franchise (Eloctate, Alprolix). We do not includeany pipeline opportunities as data is limited and many arehigh-risk. This is also possible based on a 16x P/E on our 2016EEPS, at the lower end of the peer group comparables.

Investment summaryWith $10B+ of pipeline data reading out in the next 12months or more, we would own BIIB for favorable risk/reward.Tysabri SPMS $2B opportunity isn't in consensus, and if itworks, it could be $4+ accretive to earnings, in our view. Thesecond opportunity is BIIB037 (robust Phase Ib Alzheimersdata recently presented at ADPD). This is relatively early-stage,with Phase III to begin in 2015 and more data from the ongoing6mg/kg group coming in H2:15. Furthermore, anti-LINGO MSdata are due in mid-2016. Long-term, we are keenly trackingthe continued uptake of Tecfidera, which may slow down asit enters its third year of launch, and generic Copaxone couldenter the MS market in 2015. However, we do believe thepositive pipeline events will likely outweigh any slowdown inits core MS business.

Potential catalysts for the stockSeries of positive pipeline data: Several of BIIBs key late-stageblockbuster pipeline drugs are expected to read out in thenext 1218 months, beginning with: 1) Tysabri SPMS in theH2:15; 2) BIIB037 Phase III initiation and more data from 6mg/kg dosing in H2:15; and 3) Anti-LINGO in MS in mid-'16. Risk/reward currently favors the upside, in our view, and if any ofthese data are positive, the stock could move 10% or more.

Risks to our investment thesisDisappointing Tecfidera sales: Outperformance in the stock inthe last two years has largely been driven by the impressivelaunch and uptake of its oral MS drug, Tecfidera. In Q3:14,it missed consensus estimates for the first time and alsoreported its first case of a PML-related death. If it continues tomiss estimates or new safety signals emerge, this could weighdown the stock.

IP litigation overhang: Tecfidera is protected until 2028 onits dosing patents, but given that several different companies(FWP, XNPT, ALKS) are working on different formulations ofthe active ingredient DMF, BIIB could get pulled into lengthypatent litigations with any of these companies, which maycreate an overhang on the stock as Tecfidera is a significantcontributor to BIIBs top and bottom lines.

Biogen Idec Inc.Biotechnology

June 16, 2015 Michael J. Yee, (415) 633-8522; [email protected] 2

Tysabri for SPMS (Phase III ASCEND readout: early 2H:15)

Background: Tysabri is approved as monotherapy in Crohns disease, as well as in RRMS, with heralded best efficacy (% ARR of 67%) in reduction of risk of relapse with clinical signs of slowing of disability accumulation. Tysabri binds to the alpha 4 integrin of adhesion molecules found on lymphocytes, which prevents its interaction with endothelial cells. Tysabris overall effect is driven by preventing migration of auto-reactive leukocytes into target organs, which then exacerbates inflammation.

SPMS (along with PPMS, which is more rare) make up to 40% of MS patients for whom there are limited treatment options. Patients experience continual axonal damage (neurofilament light chain in CSF) and demyelination (myelin basic protein) along with widespread, systemic inflammation (osteopontin, CXCL13 and MMP9 in CSF).

This Phase III study (n=856) examines Tysabris ability (vs. placebo, both IV Q4W of 300mg or currently marketed dose in RRMS) to slow relapse-independent disability progression in patients with secondary progressive MS over 96 weeks (24 months). The primary endpoint is a composite of EDSS, T25FW, and 9-Hole Peg Test.

Exhibit 2: Study overview of Tysabri in patients with SPMS (ASCEND study)

Study Design Phase III, multicenter, international, randomized, double-blind, placebo-

Primary Endpoint The proportion of subjects experiencing confirmed progression of

disability as measured by a composite endpoint (Expanded Disability

Status Scale (EDSS), Timed 25-Foot Walk (T25FW), or 9-Hole Peg Test

(9HPT)

Key Inclusion Criteria SPMS 2 years with EDSS 3.0 to 6.5 (inclusive)

Key Exclusion Criteria RRMS & PPMS

Est. Primary Completion Date June 2015

Source: Company reports, RBC Capital Markets estimates, clinicaltrials.gov

Four key reasons that Tysabri could work in SPMS:

1. In an open-label Phase IIa (n = 17) 60-week study, decrease in CSF markers of inflammation, axonal damage, and demyelination (osteopontin, neurofilament, myeline basic protein) was observed alongside reduction in MRI atrophy endpoints at wk 12 from baseline. An improvement in EDSS (lowering of score) was also observed (p = 0.01) at wk 60 vs. baseline. These signs of efficacy in reduction of inflammation and tissue damage suggest that Tysabri might reduce intra-thecal inflammation and axonal damage in progressive forms of MS, although we note the very small number of patients in trial.



Exhibit 3: 60 weeks of Tysabri treatment showed reduction of chemokines CXCL13 and MMP9, key CSF markers of inflammation in SPMS and PMS patients

Source: J Christensen et al, ESTRIMS 2012

2. In a retrospective analysis of two Phase I and II clinical trials of Tysabri in SPMS patients, an improvement in walking was observed as assessed by the timed 25-foot walk (T25FW) test. Even though this ad-hoc analysis is limited by the small sample size and short duration of therapy, if these observations play out in the Phase III study, it would increase the chance of hitting the primary endpoint as it is a composite endpoint that includes the T25FW test.

3. KOLs indicate that Tysabri is used widely off-label for SPMS already. Based on our discussion with various KOLs, up to 15% of Tysabri use is for SPMS patients, as this is the best option they have so far. In order to get around the reimbursement hurdle, docs mentioned that these patients are diagnosed as RRMS so that reimbursement can be approved. In terms of the Phase III ASCEND study, physicians generally agreed that there is good chance for it to hit on the T25W endpoint.

4. Mild EDSS entry criteria may also increase chance of Tysabri showing a benefit. One of the key inclusion criteria for the ASCEND study is the EDSS score of 3.0 to 6.5. Baseline data indicate that approximately one-third of enrolled patients have EDSS score between 3.0 and 5.5. These patients are generally milder SPMS patients who do not require assistance for walking. KOLs believed that these milder patients are more likely to have inflammatory lesions, which is the mechanism that Tysabri targets. Thus, we believe Tysabri is more likely to benefit these milder patients and potentially show a meaningful difference in the T25FW or EDSS endpoint.



Tysabri for acute ischemic stroke (Phase II ACTION readout: mid-2015)

In ischemic strokes, blockage in blood vessels to the brain may lead to cerebral infarctions and cause local death of the tissue. This in turn would lead to loss of neurologic function. T lymphocytes play an important role in acute ischemic strokes because these T cells are important to the evolution of brain infarctions and the accompanying neurological deficit. It is thought that T lymphocytes start to migrate and accumulate in the ischemic brain during the first five days and thus trigger tissue damage through secretion of proinflammatory cytokines.

Exhibit 4: T lymphocytes infiltrate and accumulate in the ischemic brain during the first five days (mouse model)

Source: Shichita et al., Nature Medicine 2009

The ability of T lymphocytes to migrate across the blood-brain barrier and infiltrate the brain is dependent on the interplay between very late antigen-4 (VLA-4) and vascular cell adhesion molecule-1 (VCAM-1) on endothelial cells. Therefore, agents that modify VLA-4 function may have an effect in treating acute ischemic stroke. Tysabri (natalizumab), a humanized monoclonal antibody used in treating multiple sclerosis and Crohnss disease, can block VLA-4, and thus it may also be effective at treating acute ischemic stroke. However, there are contradictory animal studies on the effectiveness of treating stroke through inhibiting T cell migration across the blood-brain barrier.



Supporting evidence from animal model

In a mouse study of Gilenya, which inhibits T cell migration into inflammatory tissues, positive results were seen (Nature Medicine, August 2009). Mice intravenously treated with Gilenya showed significantly reduced infarct volume and reduced number of infiltrating T lymphocytes after focal brain ischemia was induced. This supports the hypothesis that immunomodulatory agents may treat ischemic brain injury by preventing the infiltration of T lymphocytes and thus may even extend the therapeutic time window for neuroprotection.

Exhibit 5: In mouse models, Gilenya (FTY720) significantly reduced infarct growth and the number of infiltrating T cells

Source: Shichita et al., Nature Medicine 2009



Controversial evidence from animal models However, there is also controversial data from animal studies that do not support the use of T cell-migration-inhibitory agents in treating acute ischemic stroke. In a recent paper (Stroke, June 2014), animals treated with a monoclonal anti-CD49d antibody that blocks 4-integrin (Tysabri blocks 4 integrin and does not have Gilenyas acute CV side effects in MS) had reduced T cell invasions (fewer CD3+ T lymphocytes) by day 5. However, that did not correspond to a positive effect on stroke outcome. Therefore, more studies are needed in order to determine if certain immunomodulatory agents such as Tysabri may treat acute ischemic stroke through preventing T lymphocyte migration.

Exhibit 6: In another mouse model, fewer T lymphocytes did not translate to improved stroke outcome

Source: Langhauser et al., Stroke 2014



ValuationOur $525 price target is based on a 26.6x P/E our 2016E EPS. This is also possible based onDCF analysis that values the base business ($314/share) including Tecfidera and hemophiliaprograms. For various pipeline programs, we add probability adjusted value of $211/sh totalfor Tysabri SPMS, ANTI-LINGO, BIIB037 (5060% POS), $SMNrx, IPF, and ANTI-TWEAK.

Price target impedimentsRisks to our thesis are disappointing Tecfidera growth and sales, worse than expected erosionof Avonex/Plegridy franchise, and less than projected growth in Tysabri. However, we thinkthat competition, market share loss, and new oral MS drugs are well known already by theStreet and reflected in estimates. Failure of BIIB's pipeline programs (ANTI-LINGO for re-myelination, Tysabri for SPMS, as well as autoimmune and fibrotic diseases) to have successfuldata readouts in the next 13 years would also contribute to downside, given that BIIB'spremium valuation to peers reflects some expectation of success in continued generations ofblockbuster therapies.

Company descriptionBiogen Idec is one of the world's leading biotech companies, with a focus on neurology,oncology, and autoimmune diseases. The company's key products include Rituxan for non-Hodgkin's lymphoma, Avonex for multiple sclerosis, and Tysabri for multiple sclerosis. Biogenhas significant manufacturing capabilities and an extensive worldwide sales and marketinginfrastructure.



Biogen Idec, Inc.

Annual and Quarterly Income Statement Michael J. Yee (415) 633-8522

($ in millions, except per share) FYA FYA 1QA 2QA 3QA 4QA FYA 1QA 2QE 3QE 4QE FYE FYE FYE

Fiscal Year Ends December 2012 2013 Mar-14 Jun-14 Sep-14 Dec-14 2014 Mar-15 Jun-15 Sep-15 Dec-15 2015 2016 2017

Avonex + Plegridy 2,913 3,005 761 774 745 777 3,058 755 769 766 752 3,041 3,080 3,150

Tecfidera 876 506 700 787 916 2,909 825 907 978 1,035 3,745 4,301 4,749

Rituxan + Gazyva 1,138 1,127 297 303 291 305 1,195 331 342 343 359 1,374 1,424 1,514

Tysabri - US Transfer revenue 388 113 - - - - - - - - - - - -

Tysabri - US revenue - 701 234 250 275 266 1,025 273 285 290 285 1,133 1,201 1,261

Tysabri - Ex-US sales 748 713 207 283 226 218 935 190 245 235 220 890 985 1,050

Fampyra - Ex-US sales 57 74 19 22 20 19 80 20 22 24 24 90 98 105

Eloctate - - - - 22 37 58 54 70 80 85 289 400 475

Alprolix 10 25 40 76 48 53 55 199 225 250

Oral fumarate (Psoriasis) 60 60 16 16 17 14 62 14 15 18 18 65 76 80

Contracts and other sales 44 78 52 22 36 18 128 32 20 20 20 92 80 80

Royalties 169 186 38 40 67 31 177 20 20 20 20 80 190 190

Total Revenues 5,516 6,932 2,130 2,421 2,511 2,641 9,703 2,555 2,742 2,827 2,873 10,997 12,060 12,904

Cost of goods sold 545 858 279 292 303 297 1,171 312 334 338 334 1,318 1,416 1,504

Research and development 1,323 1,440 527 446 416 499 1,888 461 521 537 603 2,122 2,352 2,516

Sales, general & administrative 1,273 1,707 509 540 569 573 2,191 560 603 608 603 2,375 2,533 2,581

Collaboration profit (loss) sharing 318 85 - - - - - - - - - - - -

Total Operating Expenses 3,469 4,104 1,318 1,282 1,291 1,375 5,266 1,337 1,461 1,486 1,543 5,827 6,312 6,613

Operating Income 2,091 2,845 808 1,143 1,224 1,271 4,447 1,218 1,284 1,344 1,333 5,179 5,766 6,314

Other Income (net) (1) (8) (6) 5 (16) (9) (26) (17) (3) (3) (3) (25) (10) 5

Pretax Income 2,090 2,837 803 1,148 1,208 1,262 4,421 1,201 1,281 1,341 1,330 5,154 5,756 6,319

Provision for taxes 524 694 215 309 304 297 1,125 304 333 335 319 1,292 1,381 1,428

Net Income 1,566 2,136 587 838 899 965 3,288 897 948 1,006 1,011 3,863 4,374 4,891

Net income adjusted for diluted EPS calculation 1,566 2,136 587 829 900 966 3,281 900 948 1,006 1,011 3,863 4,374 4,891

EPS - Basic (Non-GAAP) $6.58 $9.01 $2.48 $3.50 $3.81 $4.10 $13.91 $3.82 $4.08 $4.38 $4.45 $16.71 $19.38 $22.20

EPS - Diluted (Non-GAAP) $6.53 $8.96 $2.47 $3.49 $3.80 $4.09 $13.83 $3.82 $4.06 $4.36 $4.43 $16.65 $19.30 $22.07

Shares outstanding - basic 238.0 236.9 236.8 236.7 236.2 235.5 236.4 235.0 232.4 229.8 227.3 231.1 225.7 220.3

Shares outstanding - diluted 239.7 238.3 237.8 237.4 237.0 236.3 237.2 235.6 233.4 230.8 228.3 232.0 226.7 221.6

Detailed Sales Summary FYA FYA 1QA 2QA 3QA 4QA FYA 1QA 2QE 3QE 4QE FYE FYE FYE

($MM) 2012 2013 Mar-14 Jun-14 Sep-14 Dec-14 2014 Mar-15 Jun-15 Sep-15 Dec-15 2015 2016 2017

Avonex

US 1,794 1,902 476 498 482 501 1,957 479 484 469 446 1,878 1,600 1,500

RoW 1,119 1,104 285 276 260 235 1,056 214 208 203 199 824 880 800

Worldwide Sales 2,913 3,006 761 774 745 777 3,057 755 769 766 752 3,042 3,080 3,150

Tecfidera

US 866 460 585 638 743 2,426 648 712 760 800 4,392 3,270 3,532

RoW 10 46 115 149 173 483 177 195 218 235 921 1,031 1,217

Worldwide Sales - 876 506 700 787 916 2,909 825 907 978 1,035 5,313 4,301 4,749

Tysabri

US 885 958 234 250 275 266 1,025 273 285 290 285 1,133 1,201 1,261

RoW 745 715 207 284 226 218 935 190 245 235 240 910 985 1,050

Worldwide Sales 1,630 1,673 441 534 501 484 1,960 463 530 525 525 2,043 2,186 2,311

Y/Y Growth (%) 2012 2013 Mar-14 Jun-14 Sep-14 Dec-14 2014 Mar-15 Jun-15 Sep-15 Dec-15 2015 2016 2017

Revenue 9% 26% 50% 40% 37% 34% 40% 20% 13% 13% 9% 13% 10% 7%

EPS 11% 37% 25% 52% 61% 74% 54% 55% 16% 15% 8% 20% 16% 14%

Note: Sales summary for Tysabri is reported sales; Biogen books US transfer revenues in income statement above which differs from actual reported sales

Source: Company reports and RBC Capital Markets estimates.



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Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in,this report. To access current conflicts disclosures, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza,29th Floor, South Tower, Toronto, Ontario M5J 2W7.

RBC Capital Markets, LLC makes a market in the securities of Biogen Idec Inc..

RBC Capital Markets is currently providing Biogen Idec Inc. with non-securities services.

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The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poors Financial ServicesLLC (S&P) and is licensed for use by RBC. Neither MSCI, S&P, nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or impliedwarranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warrantiesof originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing,in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special,punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Disclaimer

RBC Capital Markets is the business name used by certain branches and subsidiaries of the Royal Bank of Canada, including RBC Dominion Securities Inc., RBCCapital Markets, LLC, RBC Europe Limited, RBC Capital Markets (Hong Kong) Limited, Royal Bank of Canada, Hong Kong Branch and Royal Bank of Canada, SydneyBranch. The information contained in this report has been compiled by RBC Capital Markets from sources believed to be reliable, but no representation or warranty,express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its affiliates or any other person as to its accuracy, completeness or correctness. Allopinions and estimates contained in this report constitute RBC Capital Markets' judgement as of the date of this report, are subject to change without notice andare provided in good faith but without legal responsibility. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investmentadvice. This material is prepared for general circulation to clients and has been prepared without regard to the individual financial circumstances and objectives ofpersons who receive it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independentinvestment advisor if you are in doubt about the suitability of such investments or services. This report is not an offer to sell or a solicitation of an offer to buyany securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. RBC CapitalMarkets research analyst compensation is based in part on the overall profitability of RBC Capital Markets, which includes profits attributable to investment bankingrevenues. Every province in Canada, state in the U.S., and most countries throughout the world have their own laws regulating the types of securities and otherinvestment products which may be offered to their residents, as well as the process for doing so. As a result, the securities discussed in this report may not beeligible for sale in some jurisdictions. RBC Capital Markets may be restricted from publishing research reports, from time to time, due to regulatory restrictions and/or internal compliance policies. If this is the case, the latest published research reports available to clients may not reflect recent material changes in the applicableindustry and/or applicable subject companies. RBC Capital Markets research reports are current only as of the date set forth on the research reports. This report isnot, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is notlegally permitted to carry on the business of a securities broker or dealer in that jurisdiction. To the full extent permitted by law neither RBC Capital Markets norany of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the informationcontained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC Capital Markets.

Additional information is available on request.

To U.S. Residents:This publication has been approved by RBC Capital Markets, LLC (member FINRA, NYSE, SIPC), which is a U.S. registered broker-dealer and which acceptsresponsibility for this report and its dissemination in the United States. Any U.S. recipient of this report that is not a registered broker-dealer or a bank acting ina broker or dealer capacity and that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report, shouldcontact and place orders with RBC Capital Markets, LLC.To Canadian Residents:This publication has been approved by RBC Dominion Securities Inc.(member IIROC). Any Canadian recipient of this report that is not a Designated Institution inOntario, an Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) andthat wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report should contact and place orders with RBCDominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada.To U.K. Residents:This publication has been approved by RBC Europe Limited ('RBCEL') which is authorized by the Prudential Regulation Authority and regulated by the FinancialConduct Authority ('FCA') and the Prudential Regulation Authority, in connection with its distribution in the United Kingdom. This material is not for generaldistribution in the United Kingdom to retail clients, as defined under the rules of the FCA. However, targeted distribution may be made to selected retail clients ofRBC and its affiliates. RBCEL accepts responsibility for this report and its dissemination in the United Kingdom.To Persons Receiving This Advice in Australia:This material has been distributed in Australia by Royal Bank of Canada - Sydney Branch (ABN 86 076 940 880, AFSL No. 246521). This material has been preparedfor general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting onthis material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition



or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that productand consider that document before making any decision about whether to acquire the product. This research report is not for retail investors as defined in section761G of the Corporations Act.To Hong Kong Residents:This publication is distributed in Hong Kong by RBC Capital Markets (Hong Kong) Limited and Royal Bank of Canada, Hong Kong Branch (both entities which areregulated by the Hong Kong Monetary Authority ('HKMA') and the Securities and Futures Commission ('SFC')). Financial Services provided to Australia: Financialservices may be provided in Australia in accordance with applicable law. Financial services provided by the Royal Bank of Canada, Hong Kong Branch are providedpursuant to the Royal Bank of Canada's Australian Financial Services Licence ('AFSL') (No. 246521). RBC Capital Markets (Hong Kong) Limited is exempt from therequirement to hold an AFSL under the Corporations Act 2001 in respect of the provision of such financial services. RBC Capital Markets (Hong Kong) Limited isregulated by the HKMA and the SFC under the laws of Hong Kong, which differ from Australian laws.To Singapore Residents:This publication is distributed in Singapore by the Royal Bank of Canada, Singapore Branch, a registered entity granted offshore bank licence by the MonetaryAuthority of Singapore. This material has been prepared for general circulation and does not take into account the objectives, financial situation, or needs of anyrecipient. You are advised to seek independent advice from a financial adviser before purchasing any product. If you do not obtain independent advice, you shouldconsider whether the product is suitable for you. Past performance is not indicative of future performance. If you have any questions related to this publication,please contact the Royal Bank of Canada, Singapore Branch. Royal Bank of Canada, Singapore Branch accepts responsibility for this report and its disseminationin Singapore.To Japanese Residents:Unless otherwise exempted by Japanese law, this publication is distributed in Japan by or through RBC Capital Markets (Japan) Ltd., a registered type one financialinstruments firm and/or Royal Bank of Canada, Tokyo Branch, a licensed foreign bank.

. Registered trademark of Royal Bank of Canada. RBC Capital Markets is a trademark of Royal Bank of Canada. Used under license.Copyright RBC Capital Markets, LLC 2015 - Member SIPC

Copyright RBC Dominion Securities Inc. 2015 - Member CIPFCopyright RBC Europe Limited 2015

Copyright Royal Bank of Canada 2015All rights reserved



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