Corporate Presentation May 3, 2001 Page 1 Internal Use Only — Not For Redistribution FBR Healthcare Investment Banking HEALTHCARE GROUP January 17, 2003

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



The Case for a Capital Spending Recovery in 2003

Source: The Bank Credit Analyst

-4

-2

0

2

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6

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1995 1996 1997 1998 1999 2000 2001 2002

Annual

% C

hange

Nonfinancial Corporate Sector Equipment and Software Capital Stock

3

4

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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.



• 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



• 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



-100%

-50%

0%

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1/1

/1999

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Perc

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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%



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

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12/3

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/1999

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999

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000

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S&P 500 Biotech S&P Small Cap Biotech



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



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

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01

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$ m

m

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# o

f IP

Os

Amount Raised # of IPOs



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

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01

Apr-

01

May-

01

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1

Jul-01

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1

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1

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-01

Nov-

01

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01

Jan-0

2

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2

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02

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$ m

m

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# o

f Is

sues

Amount Raised # of Issues



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



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



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



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

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25

30

35

40

1982

1983

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1998

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2000

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2002

New Biotech Drug and Vaccine Approvals



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

Documents

Corporate Presentation May 3, 2001 Page 1 Internal Use Only — Not For Redistribution FBR Healthcare Investment Banking HEALTHCARE GROUP January 17, 2003