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Four analysts, two experts and top management from thirty-seven sector firms examine the Biotechnology sector in this special 179-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info423.htm

TWST: Michael, what impact do drug launch delays have on companies and on their stock prices?

Mr. King: It’s significant. Mary Ann put it very succinctly: one has to ratchet up the risk factor; the risk-adjusted rate of return needs to go up just to keep the stock price the same. That’s because the problem with the FDA right now is that if they were being more cautious in an objective sense, then companies could adjust their behavior accordingly and, hopefully, provide the FDA with the data they require to receive approval in a timely manner. But that doesn’t seem to have been the case. The FDA has reverted, in many ways, back to not being clear in its communication as to what it will take from a sponsor, i.e., a biotech or pharmaceutical company, to allow that drug to be approved. The other effect that it’s having, is almost perverse. We keep track of the products that are in the FDA late-stage clinical development or in the final throes of FDA approval, and typically, putting your money in those companies that have drugs coming onto the market that are finishing Phase III clinical trials is the best way to invest in biotechnology. Now it’s almost the best way to short stocks.

TWST: Michael, what are the new product launches that you’re most excited about for 2002?

Mr. King: Maybe that’s a good way to pick up on what Mary Ann was talking about. I think the two most exciting areas, in terms of new therapeutic approaches, are cancer and psoriasis. In cancer, clearly, the approach has been to be more targeted and more selective. Rather than poisoning the entire body in the pursuit of a relatively small number of cells that are misbehaving, the approach is now (and antibodies are well suited to this, as well as small molecule approaches) targeted to the growth factors that are responsible for the aberrant growth of tumors, or the blood vessels that supply them. So those are very exciting approaches.

TWST: Michael, what in your view will drive the biotechnology stocks over time?

Mr. King: Simply put, products. I think Elise did a great job in pointing out the important meetings coming up, and they’re not just meetings where they’re sitting around talking about new academic theories. As she points out, these are critical meetings for late-stage product development. The big pharma companies still are significantly short of the new product candidates necessary to drive their growth at historical rates.

TWST: Michael, you threw out several names among the large caps and the mid-caps. Which two would you identify as your best investment ideas at this point?

Mr. King: Let me just say that I like Peter’s picks. So not to be redundant, I guess at this point we would say MedImmune (Nasdaq:MEDI) and I would add Genentech (NYSE:DNA). I think MedImmune, at least until the other day, had one of the lowest p/e to g ratios among the big cap biotech companies, despite having one of the highest forecast forward growth rates. We’re coming into the favorable part of the year for them. Their lead product, Synagis, is a seasonal product, and that typically gets its legs starting in the next month or two, and continuing out until next May. And then, I think what will drive multiple expansion is the visibility of the pipeline. MedImmune has been a very successful company, but for the most part, a one-product company. I think now that the visibility of the pipeline, with such things as MEDI-507 for the treatment of psoriasis coming along, the multiple should undergo significant upward revision.

This special issue includes:

1) Biotechnology - In an in-depth (13,900 words) Analyst Roundtable, Peter Drake, Managing Director at Prudential Securities, Inc., Mary Ann Gray, Analyst focusing on both public and private healthcare investments at Federated Kaufman Fund, Michael King, Jr., Managing Director at Robertson Stephens and Elise Wang, Managing Director at Salomon Smith Barney, examine the outlook for the sector including new approaches to diseases, outlook for tools and technology companies and share specific stock recommendations.

2) Searching for Executive Leadership in Biotechnology - In an in-depth (2,600 words) Expert Interview, Robert Hennessy, Managing Director at The Hennessy Group, examines the outlook for the sector.

3) The Biotechnology Transformation - In an in-depth (2,500 words) Expert Interview, John Rhodes, Managing Partner for Pharmaceuticals and Life Sciences at Deloitte & Touche, examines the outlook for the sector.

4) The TWST confidential Off-The-Record survey of management performance at nineteen sector firms asked market insiders about the ability of management teams to create shareholder value.

5) CEO and Sponsored interviews (average 2,500 words). Top management of thirty-seven sector firms examine the outlook for their firm and the sector.