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Corporate PresentationMay 3, 2001Page 1
Internal Use Only — Not For RedistributionFBRHealthcare Investment Banking
HEALTHCARE GROUP
January 17, 2003
Nelson Campbell
Biotechnology GroupJanuary 17, 2003Page 2
F R I E D M A N B I L L I N G S R A M S E Y
Refinancing Driving Consumer Spending in 2001 and 2002
Key Trends:Key Trends:• Interest rates had allowed consumers to extract record
amounts of equity via cash-out refinancing.
• Increase in available cash drove consumer spending
despite 6% unemployment.
In 2002, the U.S. economy grew 3%, broadly in line with its long-term trend
Total Single Family Mortgage Originations
Single Family Refinance Refinance Cash-Out % Cash-OutOriginations Share Originations of Refinances Originations
1988 $446 21% $94 82% $771989 $453 24% $109 86% $931990 $458 26% $119 86% $1021991 $562 45% $253 62% $1571992 $894 51% $456 47% $2141993 $1,020 58% $592 34% $2011994 $769 27% $208 47% $981995 $640 22% $141 50% $701996 $785 30% $236 54% $1271997 $859 31% $266 59% $1571998 $1,512 52% $786 48% $3771999 $1,306 33% $431 59% $2562000 $1,047 21% $220 79% $1742001 $2,067 57% $1,178 52% $612
2002* $2,182 58% $1,266 50% $633
Source: Freddie Mac, HUD
* Freddie Mac Forecast
Figures in billions of dollars
Biotechnology GroupJanuary 17, 2003Page 3
F R I E D M A N B I L L I N G S R A M S E Y
The Case for a Capital Spending Recovery in 2003
Source: The Bank Credit Analyst
-4
-2
0
2
4
6
8
10
1995 1996 1997 1998 1999 2000 2001 2002
Annual
% C
hange
Nonfinancial Corporate Sector Equipment and Software Capital Stock
3
4
5
6
7
8
1995 1996 1997 1998 1999 2000 2001 2002
Annual
% C
hange
Average Return on Capital Weighted Average Real Cost of Capital
-10
-5
0
5
10
15
1995 1996 1997 1998 1999 2000 2001 2002An
nu
al
% C
han
ge
Nonfinancial Corporate Sector Fixed Investment
Nonfinancial Corporate Sector Cash Flow
• Outside of telecom, fears of a broad-based capital stock overhang are overstated.
• In 2002, the value of capital stock registered its first annual decline in the post WWII era.
• Return on capital is historically high relative to the real cost of capital.
• Cash flow growth has recovered while capital spending has not.
Biotechnology GroupJanuary 17, 2003Page 4
F R I E D M A N B I L L I N G S R A M S E Y
• The economy will not slide back into recession
• Corporate profits will increase
• Monetary and fiscal policy will remain very stimulative (the Federal Reserve will not raise
interest rates any time soon).
Looking Forward
Biotechnology GroupJanuary 17, 2003Page 5
F R I E D M A N B I L L I N G S R A M S E Y
• Liquidity is explosive
• Many measures of sentiment have reached depressed levels
• Many indicators suggest the economy and corporate earnings are set to recover in the next
six months
• Stocks led economic rebounds by an average of 4.5 months during the past eight market cycles
Most of the Pieces are in Place for a Classic Cyclical Bull Market
Biotechnology GroupJanuary 17, 2003Page 6
F R I E D M A N B I L L I N G S R A M S E Y
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
1/1
/1999
3/1
/1999
5/1
/1999
7/1
/1999
9/1
/1999
11/1
/1999
1/1
/2000
3/1
/2000
5/1
/2000
7/1
/2000
9/1
/2000
11/1
/2000
1/1
/2001
3/1
/2001
5/1
/2001
7/1
/2001
9/1
/2001
11/1
/2001
1/1
/2002
3/1
/2002
5/1
/2002
7/1
/2002
9/1
/2002
11/1
/2002
1/1
/2003
Perc
en
tage C
han
ge
NASDAQ Composite S&P 500 NASDAQ Biotech Index Dow Jones Industrial Average
The State of The Public Market
Key Trends:Key Trends:• The NASDAQ Composite
is down 71.3% since its peak, and down 34.0%
since 1/1/99
• The NASDAQ Biotech Index is down 67.3% since
its peak, but up 18.2% since 1/1/99
Selected Market Indices
Source: Bloomberg
As of: 1/10/03
-34.0%-24.5%-4.3%18.2%
Biotechnology GroupJanuary 17, 2003Page 7
F R I E D M A N B I L L I N G S R A M S E Y
Small Cap vs. Large Cap Biotech Stocks
Key Trends:Key Trends:• When the capital markets are
weak, investors prefer large cap biotech stocks to small and middle market biotech
firms.
• The NASDAQ Biotech Index was down 0.6% in 2001, but was down 45% in 2002 and
reached its lowest level since 1999
Source: Bloomberg
50
100
150
200
250
300
350
400
12/3
1/1
999
3/1
9/1
999
6/4
/1999
8/2
0/1
999
11/5
/1999
1/2
1/2
000
4/7
/2000
6/2
3/2
000
9/8
/2000
11/2
4/2
000
2/9
/2001
4/2
7/2
001
7/1
3/2
001
9/2
8/2
001
12/1
4/2
001
3/1
/2002
5/1
7/2
002
8/2
/2002
10/1
8/2
002
1/3
/2003
S&P 500 Biotech S&P Small Cap Biotech
Biotechnology GroupJanuary 17, 2003Page 8
F R I E D M A N B I L L I N G S R A M S E Y
Recent Drug Failures
GenVec - BioBypass, Phase II, Missed Primary Endpoint in peripheral arterial disease
Cook/Guidant - Missed Primary Endpoint in restenosis
Icos Corp. - Pafase, Phase III, Failed to Show Benefit in severe sepsis
Eli Lilly - Ruboxistaurin, PhaseII/III, Missed Primary Endpoint for diabetic retinopathy
ConjuChem - CJC-1008, Phase II, Missed Primary Endpoint
Transkaryotic Therapies - Replagal, Phase III, Missed Primary Endpoint in renal function
Neurogen - NGB97-1, Failed to Show Therapeutic Effect in Treatment of Alzheimer’s disease
Alexion Pharmaceuticals - Eculizumab, Phase II Missed Primary Endpoint of proteinura reduction
Endo Pharmaceuticals - MorphiDex, Phase III, Missed Primary Endpoint
Immune Network - Dapsone, Phase II data Not Significant
Schering AG - Estradiol, Non-Approvable Letter
Transkaryotic Therapies - Replagal, FDA Meeting Delayed
IntraBiotics Pharmaceuticals - Iseganan, Missed Primary Endpoint for oral mucositis during chemotherapy
Genmab A/S - HuMax-CD4, Missed Primary Endpoint for rheumatoid arthritis
Incara Pharmaceuticals - Deligoparin, Phase II/III trial Missed Primary Endpoint
9/02 to PresentSource: BioCentury, company
reports
Date Order - Most Recent First
Biotechnology GroupJanuary 17, 2003Page 9
F R I E D M A N B I L L I N G S R A M S E Y
Tapping the Public Market: Biotech IPOs
Key Trends:Key Trends:• The spike in financing in 2000
was an anomaly
• In 2000, there were 53 biotechnology IPOs which
raised $4.2 billion
• In 2001, there were 5 biotechnology IPOs which
raised $304 million
• In 2002, there were 4 biotechnology IPO which
raised $592 million
Biotech IPOs and the Amount Raised
Source: CommScan EquiDesk
$0
$50
$100
$150
$200
$250
$300
$350
Jan-0
1
Feb-0
1
Mar-
01
Apr-
01
May-
01
Jun-0
1
Jul-01
Aug-0
1
Sep-0
1
Oct
-01
Nov-
01
Dec-
01
Jan-0
2
Feb-0
2
Mar-
02
Apr-
02
May-
02
Jun-0
2
Jul-02
Aug-0
2
Sep-0
2
Oct
-02
Nov-
02
Dec-
02
$ m
m
0
1
2
3
# o
f IP
Os
Amount Raised # of IPOs
Biotechnology GroupJanuary 17, 2003Page 10
F R I E D M A N B I L L I N G S R A M S E Y
Tapping the Public Market: Biotech Secondaries
Key Trends:Key Trends:• In 2000, there were 57 biotechnology secondary
offerings which raised $16.4 billion
• In 2001, there were 29 biotechnology secondary
offerings which have raised $2.93 billion
• In 2002, there were 11 biotechnology secondary
offerings which raised $544.3 million
Biotech Secondaries and the Amount Raised
Source: CommScan EquiDesk
$0
$100
$200
$300
$400
$500
$600
$700
Jan-0
1
Feb-0
1
Mar-
01
Apr-
01
May-
01
Jun-0
1
Jul-01
Aug-0
1
Sep-0
1
Oct
-01
Nov-
01
Dec-
01
Jan-0
2
Feb-0
2
Mar-
02
Apr-
02
May-
02
Jun-0
2
Jul-02
Aug-0
2
Sep-0
2
Oct
-02
Nov-
02
Dec-
02
$ m
m
0
1
2
3
4
5
6
7
8
# o
f Is
sues
Amount Raised # of Issues
Biotechnology GroupJanuary 17, 2003Page 11
F R I E D M A N B I L L I N G S R A M S E Y
U.S. Venture Capital - Biotechnology Investments vs. Total
Domestic investments only
$16.36$21.63
$55.54
$41.94
$16.92$7.72
$11.69
$107.31
$0.85 $1.25 $2.14 $1.56 $2.27$3.24$4.30$2.22$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
1995 1996 1997 1998 1999 2000 2001 Q1-32002
($'s
- B
illi
ons)
All Industries Biotechnology
Source: PWC Money Tree
Biotechnology GroupJanuary 17, 2003Page 12
F R I E D M A N B I L L I N G S R A M S E Y
Financing Summary
Q1-Q3 Q1-Q32001 2002 2001 2002
Public
IPOs $304 $592 $225 $592Secondaries $2,932 $544 $1,691 $459
PrivateVenture Capital $3,439 n/ a $2,149 $2,272PIPEs $7,222 n/ a $4,461 $5,499
Biotechnology and Specialty Pharmaceutical Investments
Biotechnology GroupJanuary 17, 2003Page 13
F R I E D M A N B I L L I N G S R A M S E Y
Recent Mergers and Acquisitions in the Biotech Field
Chiron/Matrix Pharmaceutical 1/7/02 $61MM
deCODE genetics/MediChem Life Sciences 1/8/02 $83.6MM
Collateral Therapeutics/Schering AG 3/20/02 $140.9MM
Tibotec-Virco NV/Johnson & Johnson 3/22/02 $320MM
Ethypharm/Biovail 4/1/02 $127.8MM
Rhein Biotech/Berna Biotech 5/1/02 $225MM
Pharmacia/Pfizer 7/15/02 $60 Billion
Genset/Serono 7/16/02 $107MM
Visible Genetics/Bayer AG 7/23/02 $61.4MM
Variagenics/Hyseq 11/11/02 $55.9MM
Synaptic/H. Lundbeck 11/21/02 $121MM
Triangle/Gilead 12/4/02 $464MM
Zentaris/Aeterna 1/1/03 $51.7MM Source:
MergerStat
Acquirer/TargetAcquirer/Target Announcement DateAnnouncement Date ValueValue
Biotechnology GroupJanuary 17, 2003Page 14
F R I E D M A N B I L L I N G S R A M S E Y
Growth in New Drug Approvals
Key Trends:Key Trends:• There are currently more than
130 biotechnology drug products and vaccines on the
market.
• There are more than 350 biotechnology drug products and vaccines, targeting more than 200 diseases, in clinical
trials.
• 30% of biotech companies have less than 1 year of cash
and equivalents.
• 22% of biotech companies are trading below cash (i.e., their
market caps are below the cash on their balance sheets)
• The growth in drug approvals from the biotechnology industry points to strong
fundamentals.
Source: Biotechnology Industry Organization
New Biotech Drug and Vaccine Approvals
0
5
10
15
20
25
30
35
40
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
New Biotech Drug and Vaccine Approvals
Biotechnology GroupJanuary 17, 2003Page 15
F R I E D M A N B I L L I N G S R A M S E Y
Source: Ernst & Young Annual Biotechnology Industry Reports, Biotechnology Industry Organization
Growth in Biotechnology Sales and Revenues
Key Trends:Key Trends:• With the growth in drug approvals comes increased drug sales and increased leverage in collaboration
negotiations
Biotechnology Industry Annual Product Sales and Total Revenues
$11.2$12.7
$14.6$17.4
$20.2$22.3
$25.0
$18.1$16.1
$14.5$13.0
$10.8$9.3$7.7
0
5
10
15
20
25
30
1995 1996 1997 1998 1999 2000 2001
$ -
Bil
lions
Product Sales Total Revenue
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