1. B I O T E C H N O L O G Y BIOTECHNOLOGY AlyKhan Ladha Brian Peters Ryan Gardecki Taimur Ali Khan Weiwei Sun

2. B I O T E C H N O L O G Y Introduction Bio- Biological process Technology- To solve problems Growing crops and raising animals-10000 years ago Bread and Cheese- 6000 years ago Cells and biological molecules- 60’& 70’ The use of cellular and biomolecular processes to solve problems or make products

3. B I O T E C H N O L O G Y Cells and biological Molecules Cells have the same structure –DNA- Deoxyribonucleic Acid Cell construction Operations Coordinates activities –Protein Instruction to make proteins – directed by DNA Todays Biotechnology – Using technologies to create proteins by the means of DNA –Specific –Precise –Predictable

4. B I O T E C H N O L O G Y Uses of Biotech 325 Million – 155 Biotechnology drugs –Approval by FDA 370 drugs under clinical trials Medical diagnostic test Biotechnology Foods Environmental Biotechnology Industrial biotechnology application DNA fingerprinting

5. B I O T E C H N O L O G Y Industry 1,457 Companies 342 are publicly held Market capitalization - $206 Billion Revenues –1992  $8 Billion –2001  $34.8 Billion Approx. 191,000 Employees Research intensive –$15.7 Billion on research and development –Top 5  $133,000 Per employee in R&D Regulated by –FDA, EPA, USDA

6. B I O T E C H N O L O G Y Biotechnology Market Capitalization Source: Ernst & Young LLP and Bio World

7. B I O T E C H N O L O G Y PATENTS Biotech inventions are subject to the same rules as all other inventions What can be patented –Product –Method –Use Examples –DNA and RNA sequences – proteins, enzymes, antibiotics – antibodies, antigens – micro-organisms, cell lines, hybrids

8. B I O T E C H N O L O G Y Patents Granted Source: US Patent and Trademark office

9. B I O T E C H N O L O G Y Industry Statistics Year 200120001999199819971996199519941993 Sales 20.719.316.114.51310.89.37.77.0 Revenue 28.526.722.320.217.414.612.711.210 R&D Expense 15.714.210.710.69.07.97.77.05.7 No. of Public Companies 342339300316317294260265235 No. Of Companies 145713791273131112741287130813111272 Employees 191*17416215514111810810397 Source: Ernst & Young annual biotechnology industry Report 1993-2001 * In Thousands

10. B I O T E C H N O L O G Y Biotech Industry

11. B I O T E C H N O L O G Y Biotech Drug Process

12. B I O T E C H N O L O G Y FDA Food and Drug Administration Sets health and safety standards Drugs, food, medical devices, cosmetics products, and biologics Also monitor for proper production standards Ensure labeling is truthful and informative.

13. B I O T E C H N O L O G Y Brief History 1862 Abraham Lincoln created the Burro of Agriculture and appointed Charles Wetherill to head the chemistry department The FDA today has a budget of over 1.2 billion and a staff of over 9000 Highlights 1911—wonder cures illegal 1962—Thalidomide kept of US shelves 1992—FDA starts to charge an application and service fee

14. B I O T E C H N O L O G Y Pre Clinical Tests Tests on Isolated tissues Cell Cultures Animals To see the potential effects on humans

15. B I O T E C H N O L O G Y The IND Investigational New Drug Application Two Rolls Exemption from marketing application in order to transport the drug FDA review of Pre clinical drug information Takes as long as 30 days At this time patents are usually applied for, patents last generally for 20 years

16. B I O T E C H N O L O G Y Phase One Ranging from 1 to 3 years Begins to analysis the drugs safety profile How the drug is absorbed, metabolized and excreted Improves Chances of making it to market by 30%

17. B I O T E C H N O L O G Y Phase Two Ranging about 2 years Specifically tests the drugs safety and side effects Purpose is to set dosages Making it through phase two increase your chances of being approves by 60%

18. B I O T E C H N O L O G Y Phase Three Ranging between 3 and 4 years Verifies the drug is effective in its intended use Assessment of long term effects At this point the drug has a 70% chance of FDA approval. Processing of the NDA New Drug Application This can take be done in as little as 6 month or as long as 2 years Drugs are subject to ongoing review, making sure no adverse side effects appear from the drug. Insert timeline graph

19. B I O T E C H N O L O G Y Cont.. Cost : between 350 and 500 million to bring a drug through the FDA process All the testing is done in-house (that is by the companies with the FDA overseeing data) Only a small percentage of totally original drugs are produced every year.

20. B I O T E C H N O L O G Y AMGEN Amgen Inc. is a global biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology. It was founded in 1980, and commenced operation on January 21, 1981. It is headquartered in Thousand Oaks, California; Amgen conducts business in 19 countries and has research, manufacturing, distribution and sales facilities worldwide In July 2002, the Company completed its acquisition of Immunex Corporation, a biotechnology company dedicated to developing immune system science to protect human health

21. B I O T E C H N O L O G Y Mission and Values Mission Amgen is striving to be the best human therapeutics company. This means embracing constant change, pursuing innovation wherever it leads. It means developing today’s opportunities to their fullest, acting with speed and decisiveness. It means overcoming challenges when they arise with grace, determination, and courage. It means delivering on promises made, and committing to promises yet to be envisioned. Values ● Be science-based ● Compete intensely and win ● Create value for patients, staff, and stockholders ● Be ethical ● Trust and respect each other ● Ensure quality ● Work in teams ● Collaborate, communicate, and be accountable

22. B I O T E C H N O L O G Y Amgen Culture Amgen has over 10,000 staff members Amgen tries to nurtures a culture that encourages high standards of excellence, original thinking, a passion for the process of discovery, and a willingness to take risks. The company has sought to develop a work environment that is results-focused and team-oriented to cope with the rapidly changing environment.

23. B I O T E C H N O L O G Y Management Kevin Sharer (joined Amgen in 1992) Chairman of the Board, Chief Executive Officer and President, Amgen Inc. Dennis M. Fenton, Ph.D. (joined Amgen in 1982) Executive vice president of Operations Fabrozio Bonanni, Dr. Chem (joined Amgen in 1999) Senior Vice President, Manufacturing Hassan Dayem, Ph.D (joined Amgen in 2002) Senior Vice President and Chief Information Officer

24. B I O T E C H N O L O G Y Products Amgen's strategic approach for discovery research is organized around five therapeutic areas – 1.Hematology, 2.Oncology, 3.Inflammation, 4.Neurology, 5.Metabolic Disorders. These programs are enhanced and expanded through external research collaborations, acquisitions, and product licensing opportunities.

25. B I O T E C H N O L O G Y Product Pipeline X – Filed on Oct 10, 2003 Development Phase Therapeutic Areas Selected Products Phase Filed Approved and Product 123 Candidates Nephrology Anemia EPOGEN® (Epoetin alfa) Anemia Aranesp® (darbepoetin alfa) Secondary Cinacalcet hyperparathyroidism hydrochloride X

26. B I O T E C H N O L O G Y Product Pipeline Development Phase Therapeutic Areas Selected ProductsPhase Filed Approved and Product123 Candidates

27. B I O T E C H N O L O G Y Products Development Phase Therapeutic Areas Selected ProductsPhase Filed Approved and Product123 Candidates *

28. B I O T E C H N O L O G Y Selected Products Cinacalcet hydrochloride Amgen’s first small molecule therapeutic in development, entered phase 3 clinical trials in December 2001. Filed on Oct 10, 2003. Licensed from NPS Pharmaceuticals, Inc., it is an orally active compound that specifically binds and modulates the calcium-sensing receptor on the surface of the parathyroid gland, decreasing the secretion of parathyroid hormone. Excessive secretion of parathyroid hormone occurs in 85% of patients with end-stage renal disease and can result in a variety of serious medical complications.

29. B I O T E C H N O L O G Y Selected Products Aranesp (darbepoetin alfa) Amgen’s latest anemia treatment, was approved in 2002 in the United States, Europe, and Australia for the treatment of chemotherapy-related anemia. Aranesp is a recombinant erythropoietic protein(a protein that stimulates production of oxygen-carrying red blood cells). Aranesp has shown to increases red blood cell count and maintain target hemoglobin levels in cancer patients undergoing chemotherapy where anemia is due to the effects. Aranesp has a long half-life (approximately three times longer than Epoetin alfa) allowing treatment with less-frequent dosing.

30. B I O T E C H N O L O G Y Sales by Product

31. B I O T E C H N O L O G Y Growth Amgen’s top line grew 42% in 2002 as a result of : a 24% increase in the combined sales of Amgen’s anemia therapeutics EPOGEN and Aranesp; a 37% increase in the combined sales of the company’s infection-fighting therapeutics NEUPOGEN and Neulasta; and the addition of $362 million in sales of *ENBREL, Amgen’s new inflammation therapeutic acquired in mid-2002 with the company’s acquisition of Immunex Corporation. *note: new developments in Enbrel have recently been shown to work against psoriasis (scaly skin condition that affects up to 7.5 million Americans released Nov 19,2003)

32. B I O T E C H N O L O G Y Growth Amgen anticipates continued strong growth in product sales through 2005 as the company’s newest therapeutics gather momentum The company indicated that has almost 40 development programs They intend to expand their lines through approval of new products, and the continued investment in new product development. Amgen will continue to use significant amounts of cash for the company’s capital expenditure requirements, as well as for its share repurchase program. Its strong cash flow will also be used to fund potential product candidates in-licensing opportunities

33. B I O T E C H N O L O G Y Opportunities Abroad Total Sales $5,523.2 Total Sales $767.3 Market penetration internationally 3Q Sales 2003

34. B I O T E C H N O L O G Y Threats Must obtain regulatory approval Face substantial competition, to discover, develop, acquire or commercialize products before others. Dependent on third parties for a significant portion of supply and fill and finish of many products. Side affects may arise on products reducing sales May be required to pay law suits

35. B I O T E C H N O L O G Y Revenue and R&D Amgen’s expanding product line delivered strong sales growth in 2002, Amgen’s total research and development spending in 2002 rose 29%, exceeding $1 billion for the first time in company history.

36. B I O T E C H N O L O G Y Financials 2003 3Q’s20022001200019991998 Total Rev$6,009.70$5,523.00$4,015.70$3,629.40$3,340.10$2,718.20 growth0.090.380.110.090.23 Total 5 year growth1.21 Net Income1,712.601,391.901,119.701,138.501,096.40863.20 EPS Basic$1.33($1.21)$1.07$1.111.070.85 Diluted$1.28($1.21)$1.03$1.051.020.82

37. B I O T E C H N O L O G Y Fundamentals Price Nov 16, 2003 Last: US$ 58.250 52 Week Range $ 44.430 - $72.37 Shares Outstanding1.3 Bil Market Capitalization76.12 Bil Earnings/Share*1.5 Book Value/Share15.08 * trailing 12 month Instit. Ownership 68.8%

38. B I O T E C H N O L O G Y Fundamentals Net profit margins (%) Company 2003 9months28% Company 5-Yr Avg.15% Industry4.5% CompanyIndustry Debt/equity ratio0.16 0.24 No Dividends Are Paid Out P/B3.86 P/E38.83 ROE*10.02% * trailing 12 month

39. B I O T E C H N O L O G Y Cash 200220012000 CFO2248.801480.201634.60 -FCInv2167.60441.80437.70 + Net Borrow2824.700.00 FCFE2905.901038.401196.90 Cash and Cash Equivalents 3 rd Q $5025 Mil Plans to spend between $1.3 and $1.5 billion in 2003.

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42. B I O T E C H N O L O G Y Amgen’s Price History

43. B I O T E C H N O L O G Y Amgen vs. Nasdaq Biotech

44. B I O T E C H N O L O G Y Recommendation Amgen is growing!! Strong investment in R&D EPS has accelerated in current year Third Quarter results were very positive D/E ratio above industry average Amgen’s overall balance sheet strong Positive Horizontal integration with Immunex Shares under heavy accumulation by financial institutions BUY!!!!!!

45. B I O T E C H N O L O G Y

46. B I O T E C H N O L O G Y Protein Design Lab (PDL) About PDL Located in Fremont, CA Ticker is – PDLi – on the NASDQ Employ’s roughly 460 people 108 R&D, 90 in Clinical/Preclinical trials Current Price opening on Friday Nov. 21 st $13.17

47. B I O T E C H N O L O G Y PDL…..  Protein Design Labs, Inc. is a leader in the development of humanized monoclonal antibodies to treat various disease conditions.  Currently have antibodies in clinical development for:  autoimmune  inflammatory conditions,  asthma and cancer.

48. B I O T E C H N O L O G Y Board of Directors Laurence Jay Korn, Ph.D. Chairman Protein Design Labs, Inc.Laurence Jay Korn, Ph.D. Karen A. Dawes Principal Knowledgeable Decisions, LLCKaren A. Dawes Jürgen Drews, M.D. Director Protein Design Labs, Inc.Jürgen Drews, M.D. L. Patrick Gage, Ph.D. Director Protein Design Labs, Inc.L. Patrick Gage, Ph.D. George M. Gould, Esq. Of Counsel Gibbons, Del Deo, Dolan, Griffinger & VecchioneGeorge M. Gould, Esq. Max Link, Ph.D. Director Protein Design Labs, Inc.Max Link, Ph.D. Mark McDade Chief Executive Officer Protein Design Labs, Inc.Mark McDade Cary L. Queen, Ph.D. Senior Vice President Protein Design Labs, Inc.Cary L. Queen, Ph.D. Jon S. Saxe, Esq. President Saxe AssociatesJon S. Saxe, Esq.

49. B I O T E C H N O L O G Y Core Technology Monoclonal antibody is PDL's core technology. Monoclonal antibodies are identical proteins that bind specifically to a receptor or other target on the surface of cells in order to produce a desired therapeutic effect. For a variety of technical reasons, many monoclonal antibodies are initially developed in mice

50. B I O T E C H N O L O G Y Products Developing over 40 cancer and autoimmune antibodies Primary focus in 2003 will be their portfolio of 3 main antibodies –Inflamatory bowel disease –Treatment of asthma –Solid tumor – Colitis

51. B I O T E C H N O L O G Y Product Pipeline

52. B I O T E C H N O L O G Y 3 year Price Movement

53. B I O T E C H N O L O G Y 5 year Price Movement

54. B I O T E C H N O L O G Y PDL vs NasDaq Biotech

55. B I O T E C H N O L O G Y Share Information Shares Outstanding: 93,715 (000) Market Value: 1,199,669 ($000) No Anuual Dividend Last Quarter Sales: 8.8 ($Mil.) Last Quarter Net Income: - 18.9 ($Mil.) Last Quarter EPS: -.20

56. B I O T E C H N O L O G Y Company Ratio’s CompanyIndustry Price/Sales18.909.21 Price/Book Value2.284.44 Price/Cash Flow Ratio-21.1075.80 Quick Ratio22.93.6 Current Ratio23.24.4 Debt/Equity Ratio0.790.27 Return On Assets-6.70.7 Return On Assets (5- Year Avg.) -1.2-3.0

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60. B I O T E C H N O L O G Y Cash Burn Analysis Avg # of years from Preclinical to market = 10 years Avg cost to bring a product through all stages = $800,000,000

61. B I O T E C H N O L O G Y Recommendation!!!! PDL is still a growing company They spend more on R&D then make in Revenue FCF is neg – financed by equity issue P/B is 2.28 – Market price is 13.17 Negative ROA But this is the nature of the industry Underperforms Biotech Index Has plenty of Cash and equivalent in the Bank Has the possibility to hit a HomeRun but not within the next couple of years

62. B I O T E C H N O L O G Y What should you Do? DON’T BUY !!!!! - there are better Biotech companies, as we’ve seen

63. B I O T E C H N O L O G Y Questions ?????????????

64. B I O T E C H N O L O G Y

65. B I O T E C H N O L O G Y Security Facts Symbol:DNA Traded on: New York Stock Exchange (NYSE) Trading history: –Oct. 14, 1980 1 million shares offered at $35.00 on NASDAQ (symbol GENE) Share price $35 →$88 within an hour $35m profit Largest stock run-ups ever –1999 Began to trade on NYSE under symbol DNA

66. B I O T E C H N O L O G Y Company Highlights World’s 2nd largest biotechnology company The first biotechnology venture, founded in 1976 Two founders: Robert A. Swanson —Venture Capitalist Herbert W. Boyer ---- Biochemist Cohen-Boyer’s patent Dr. Boyer and his colleague, Cohen, have published the world-first report on “recombinant DNA technology” in 1973

67. B I O T E C H N O L O G Y Company Highlights (cont’d) Year 1980: went public –Successfully raised $35 million for Genentech. Year 1990: –Acquired by Roche Holding (Switzerland) Now: –Healthy growth for 27 years with 5,252 employees and 12 marketed products –5X5 goal expected to be achieved by 2005 –Carrying diverse product portfolio

68. B I O T E C H N O L O G Y Management

69. B I O T E C H N O L O G Y Products (in market) Products Categories (existing in market): –Oncology ---- focusing on Cancer –Immunology ---- focusing on Immune Disorder (June, 2003) (October, 2003) –Vascular Medicine ---- focusing on heart disease –Specialty Therapeutics ---- other focus area 6 products in market

70. B I O T E C H N O L O G Y Developing Products

71. B I O T E C H N O L O G Y Products (cont’d)

72. B I O T E C H N O L O G Y Revenue Break-down

73. B I O T E C H N O L O G Y Financial Analysis Tour Income Statement –Total revenue is $2,719.3 –Sales growth is 21.01% –Net profit margin = 2.8% (higher than the industry average) –High depreciation cost –Big gap between year 2001 and 2002 Due to repurchase of Capital stock

74. B I O T E C H N O L O G Y Financial Analysis Tour Balance Sheet: –No long-term debts –D/E ratio and D/A ratio are zero Lower than the industry average (18%) Cash Flow Statement: –Negative cash flows –No dividend paid out –Big gap between 2001 and 2002 for financing activities

75. B I O T E C H N O L O G Y Stock Analysis Symbol: DNA Current Price: $82.66 (close price on Nov. 21) Number of outstanding Shares: 514.69million Book value per share: $10.37

76. B I O T E C H N O L O G Y Fundamental Ratios P/E = 69.96 P/B = 7.97 ROE = 10.76% Beta = 1.17 52-Week High (19-Sep-03): $88.00 52-Week Low (14-Mar-03): $31.53

77. B I O T E C H N O L O G Y Stock Price

78. B I O T E C H N O L O G Y Valuation No dividend paid –DDM does not work Always get (-) Cash Flow –FCF analysis ? Suitable method: Cash Burn Model –cash burn rate assessment

79. B I O T E C H N O L O G Y Cash Burn Rate Cash burn rate permits a length of time before additional financing, usually another equity issue, is required. Genentech’s research and development cost are only 1/3 of its revenue. The increase in revenue is double the increase in R&D expenses. ---- It is a good trend. Genentech’s diverse product portfolio ensure it has the biotech industry’s most extensive track record in all phases of the long and resource-intensive process of bringing new disease treatments to patients.

80. B I O T E C H N O L O G Y Growth(products p.o.v)

81. B I O T E C H N O L O G Y Sales Analysis

82. B I O T E C H N O L O G Y Research & Development Cost

83. B I O T E C H N O L O G Y Recommendation Strong financial support Strong production support (R&D power) Good fundamental ratios Great cash burn rate New products just come into market Firm specific risk ---- FDA approval Speculation are there for DNA (biotechnology industry) High volatility involved Pros:Cons: !!!!BUY !!!! If had sufficient money, then trade biotech call options!!!