1. Global Health and Biotechnology Fund
David Asplin
June, 2001

2. Why invest in Health? Superior long term capital growth
Defensive earnings
Hedge against future liabilities

3. Medicine - a healthy investment prospect
Ageing
Populations
Exceptional long-term growth
Biotechnology
revolution

4. Elderly on the increase
Number of people aged over 65 in US (m)
Source: US Census Bureau

5. Sales growth driven by volume demand, not price
Source: IMS, Pharmaceutical Pricing Index Update

6. Drugs save costs: ulcer treatment
Annual Costs per Patient
Surgery Drugs
1970
First ulcer drug invented
Only option
Not available
1974
Surgery reduced by 80%
1980
$28,000
$900
(Tagamet Zantac)
1990
Antibiotics combination treatment
$140

7. Medicine - a healthy investment prospect
Ageing
Populations
Exceptional long-term growth
Biotechnology
revolution

8. Biotechnology: what is it?
New(ish) area of medical research:
Based more on biology than chemistry
Companies sell:
Drug discovery technologies (“tools”)
Drugs

9. Biotechnology then and now
Run by academics
Capital constraints
Few drugs
Celebrated implosions
Investor fatigue
Now
Experienced management
10yrs of capital inflows
Technologies and products generating cash flows
Strong balance sheets
Demonstrated medical benefits
Explosive growth phase just begun

10. New technologies grow exponentially Genomics at an earlier stage than computing
Transistors/Sequences (m)
Source: Intel, Genbank (US NIH), Colonial First State

11. Biotechnology: commercial growth drivers
Big Pharma facing R&D productivity gap
Pipelines too thin to sustain historic growth rates (viz. GSK, Roche)
Huge demand for late-stage (Phase II/III) drugs
Biotechnology companies striking tougher deals
Traditional pharma research methods inefficient
95% failure rate for drugs
$70bn market for providers of the new bio-technologies

12. Biotechnology: commercial growth drivers - continued…..
Genomics / proteomics drives uptick in drug opportunities
Previous century: 500 drug targets
Next five years: 5000 new drug targets
Focus now on sifting new targets to find which are “drugable”
Some new drugs already produced (cancer, arthritis, sepsis, lymphoma)

13. Biotechnology is already profitable

14. Colonial First State Investments Global Health & Biotechnology Fund

15. GHAB fund sub-sectors

16. GHAB performance (+22.4% in first 10 months)
160
150
140
130
120
110
100 90
Jun 00
Jul 00
Oct 00
Jan 01
Apr 00
May 00
Aug 00
Sep 00
Nov 00
Dec 00
Source: Colonial First State, MSCI

17. GHAB versus All Ordinaries
Source: Colonial First State, MSCI

18. GHAB versus benchmark 90 100 110 120 130 140 150 160 Apr 00 May 00
Jun 00
Jul 00
Aug 00
Sep 00
Oct 00
Nov 00
Dec 00
Jan 01
MSCI Healthcare Index $A
Colonial First State
Source: Colonial First State, MSCI

19. GHAB versus benchmark and biotech index90
100
110
120
130
140
150
160
Apr 00
May 00
Jun 00
Jul 00
Aug 00
Sep 00
Oct 00
Nov 00
Dec 00
Jan 01
MSCI Healtcare index $A
NASDAQ Biotech index $A
Colonial First State
Source: Colonial First State, MSCI

20. Biotech decoupling from Nasdaq?
From 19 January 1998 To 12 February 2001
Weekly Rebased
1998
1999
2000
2001
1000
3000
4000
5000
6000
7000
8000
9000
NASDAQ COMPOSITE - PRICE INDEX
NASDAQ BIOTECHNOLOGY - PRICE INDEX
Source: Datastream

21. Pharma stocks (Av. CAGR 15-17%)
We look for:
Strong Revenue Growth
Innovative drugs
US exposure
Strong R&D Pipeline
Low profit margin risk
Low patent risk
Divestments rather than M&A

22. World leading blue chip
Impressive drugs portfolio
7 drugs > $1bn
5 drugs > $500m
No patent expiries for 5 yrs
Global R&D
World-class sales force
From 11 February 2000 TO 12 February 2001
Daily
FEB
APR
JUN
AUG
OCT
DEC 30 32 34 36 38 40 42 44 46 48 50
HIGH / 7/00 LOW / 3/00 LAST 46.12
Source: DATASTREAM

23. King: mid-cap “specialty” pharmaceuticals
KING PHARMS.
From 11February 2000 To 13 February 2001 Daily
Adds value to mature drugs
Acquired 36 branded drugs since 1993
Big pharma co.s set to sell more
Focus on promotion-sensitive drugs
Big hit with heart drug - Altace
Only ACE drug to reduce death rate
Big marketing partner (AHP)
Expect growth of 34% in
Acquired Jones Pharmaceuticals
Expanded sales force
Improved Balance Sheet
FEB
APR
JUN
AUG
OCT
DEC 20 25 30 35 40 45 50 55
HIGH /12/00 LOW / 3/00 LAST 44.02
Source: DATASTREAM

24. Biotechnology stocks (Av. CAGR 24%)
We look for:
Partnerships with big cap pharma
Platform technology
Products
Services
Upfront payments
Milestones
License fees
Royalties

25. GHAB Biotech holdings (at 22/01/01)

26. Millennium: world-class genetic “tools”: company
MILLENNIUM PHARMS.
Contract genomics R&D
boosts client’s R&D productivity
$1.8bn fees from Big Pharma
In-house drug development
5 products in clinical testing
Leukaemia, stroke, asthma
Leader “predictive medicine”
From 11 February 2000 To 12 February 2001
Daily
FEB
APR
JUN
AUG
OCT
DEC 20 30 40 50 60 70 80 90
HIGH /11/00 LOW / 4/00 LAST 41.31
Source: DATASTREAM

27. IDEC: drug-producing biotechnology company
Profitable
First antibody (smart- bomb) for cancer (Rituxan)
Radioactive version soon
Good marketing partner - Genentech
Good R&D pipeline
5 drugs in clinical development
Focus on immune disorders
IDEC PHARMACEUTICALS
From 11 February 2000 To 12 February 2001
Daily 80 70 60 50 40 30 20 10
FEB
APR
JUN
AUG
OCT
DEC
FEB
HIGH /12/00 LOW / 4/00 LAST 61.75
Source: DATASTREAM

28. Global health & biotechnology shares in an investment portfolio

29. A long-term history of strong returns
Annual investment returns of MSCI Health Care index to 31 December 2000
in Australian dollars
Source: Morgan Stanley Capital International

30. An attractive risk/return profile
Source: IRESS, MSCI. Calculated for period - 10 years to 31 December 2000

31. Global health & biotechnology enhances returns from Australian shares
Source: Colonial First State, MSCI, IRESS. Calculated for period 10 years to 31 December 2000

32. Global health & biotechnology enhances returns from global shares
Annual return (%pa)
Annualised standard deviation (%pa)
Source: Colonial First State, MSCI, IRESS. Calculated for period 10 years to 31 December 2000

33. Summary: health stocks offer
Enormous long-term growth potential
Defensive, stable earnings
Revolutionary technology
A hedge against future liabilities

34. Disclaimer
This information has been prepared without taking into account your particular financial situation. Before making an investment decision based on this advice, you should assess your own position, and if appropriate, seek the assistance of a financial adviser.