Pharmaceuticals and Biotech’s

Brokerage	Recommendation	Sentiment
Merrill Lynch
Morgan Stanley

Abbott Laboratories (ABT) Abbott Park, IL CEO Miles D. White http://www.abbott.com/

Abbott Labs Units:

Nutritional Products (Ross Division)

· Ensure

· Pedialyte/Pediasure

· Similac/Isomic – Baby formula

Hospital Products - Hospira (HSP) – Hospira was spun off April 2004

· Anesthesia / Intravenous (IV) System

· Specialized electronic drug delivery systems (EDDS)

· Diagnostic imaging agents/ Pain management

Diagnostic

· HIV / Hepatitis

· Blood glucose / Hematology analysis

Chemical and Agriculture

· Biological pesticides and growth fertilizers

Abbott Labs Pharmaceuticals:

• Abbokinase – Clot dissolving agent

o Taken off the market in 1999 for poor manufacturing processes

o October 2002 – FDA approved to bring Abbokinase back to the market

o Made from kidney cells of newborns who have died

• Atrasentan – For prostate cancer

o Blocks the activity of endothelin protein and thus slowing down the growth rate

o Shown not effective in late stage clinical studies

o Abbott was looking for Atrasentan’s approval in late 2004 – a year earlier than expected and has fast track status

o Also looking at effectiveness in renal cell carcinomas, ovarian, breast and brain cancer with Atrasentan

• Biaxin – Antibiotic

o Faced tough competition from Pfizer's Zithromax and generic competition in 2005

• Depakote – CNS compound for seizures and bipolar disorder
• Erythromycin – Antibiotic
• Humira – Rheumatoid Arthritis

o Formerly called D2E7 – From Knoll – Costs patients $15,000 annually – Abbott started selling Humira in 2003

o TNF Inhibitor

o Testing for effectiveness with psoriasis, rheumatoid arthritis, juvenile arthritis and Crohn’s disease

o Who receives royalties? – Genentech, Serono, Peptech (Now settled), and Cambridge Antibody Tech Group

o Competes with Amgen’s Enbrel and J&J’s Remicade

o Crohn’s Disease – Phase III showing strong results – 78% of patients showed an improvements

o Had sales of $3.1 billion in 2007

• Hytrin – Alpha Blocker – Hypertension

· Lost patent protection

· Kaletra (combination of Lodinavir (ABT-378) and Norvir) – AIDS Drugs

o Produces undetectable amounts of AIDS in 83 out of 100 in a new study

o Pulled in $700M in annual sales in 2000

o 2002 - $338M in sales in 2002

o 2004 – Had $896M in sales and their third biggest drug in 2004

o Off patent protection in 2015

• Laftyl – Only outside of the US - to improve blood circulation
• Lupron – Wynthetic hormone for prostate cancer
• Meridia – Appetite Suppressant – Anti-obesity

o Sibutramine (Reductil in Europe)

o Side effect – increases heart rates and raises blood pressure

§ There have been 34 deaths and 397 incidents of serious side effects

o Feb. 2002 – Italy halted all sales due to 50 reports of health problems associated with the drug

o Public Citizens – March 2002 - filed a petition with the FDA to take it off the market

o Only one of two anti-obesity drugs on the market as of October 2004 (Roche’s Xenical is the other)

• Mobic – For Arthritis

o Mobic sales tripled in 4Q2004 after Pfizer’s Celebrex and Merck’s Vioxx came under major scrutiny

o Developed with Boehringer Ingelheim who receives a large portion of the sales

• Norvir - HIV protease inhibitor – works as a booster for other drugs
• Omnicef – Antibiotic
• Prevacid – Ulcers
• Reductil – Weight loss

· Launched in China in September 2001

• SaraFlox – Antibiotic for respiratory illness for poultry

· FDA investigating its long term effects on consumption – Abbott halted its production

• Simdax – Heart Drug that relaxes blood vessels and strengthen the heart – Has showed little benefit in studies
• Survanta – For respiratory distress syndrome in premature babies
• Sythriod – Synthetic thyroid hormone developed in 1955 for hypothyroidism – Never FDA approved – got through the cracks

o Novartis and Mylan making a generic version

• Tosuxacin – Only in Japan

· Tricor – Heart drug for those with diabetes and other heart problems. Has shown to lower triglycerides but has had weak results

· Failed to reduce heart-related deaths and non-fatal heart attacks or show statistical significant reduction – 2005 study

· Zemplar – Vitamin D therapy

o For people with Kidney Disorders

o Oral version approved May 2005 – previously only used during dialysis

· Zyflo

Abbott Labs Pipeline:

· ABT 510

o An Angiogenesis Inhibitor – Doesn’t allow tumors to develop a new blood supply

o Inhibits the growth of bladder-cancer tumors

· ABT 874 - For Crohn’s disease –

o 50% of patients responded to the drug (25% responded to placebo)

o Reduced symptoms in two-thirds of the subjects – Announced November 2004

· Atrasentan – Delayed prostate cancer by 20% (asymptomatic metastatic prostate cancer)

· Humira (D2E7) – For rheumatoid arthritis (From Knoll Pharmaceuticals)

o Found to reduce arthritis swelling and joint tenderness in 66% of the studies patients

o One injection lasts two weeks

o Now called Humira

· J-695 - MS and Crohn’s disease

· Levosimendan (Simdax outside of the US) – For heart failure – been showing poor results in clinical trials

· Xience – drug coated stent that will be reviewed by the FDA in 2008.

· Xinaly – Prostrate Cancer – FDA is reviewing the drug but drug had two failed studies in its report

Abbott Labs Acquisitions & Ventures:

· Abbott Labs Acquisitions:

· Knoll Pharmaceutical

· Acquired Knoll Pharmaceutical (unit of BASF) – for $6.9B in March of 2000

· Knoll projects:

· Makes Meridia – obesity treatment with $400M in annual sales

· Makes Sythroid – Thyroid drug – has $150M in annual sales

o Now having problems with the FDA

o It’s a 40 year old drug that apparently was never approved by the FDA

· Knoll had drugs in development for advanced pain, psychosis, heart disease, asthma, and lupus

· Humira for rheumatoid arthritis was in development at the time of purchase

· Through Knoll – now owns Hokuriku Seiyaku Co. – purchased the other 33.3% it already didn’t own

· TAP Pharmaceuticals

· 50/50 joint venture with Takeda Chemical Industries of Japan

· Lupron – For prostate cancer – had sales of $786.1M in 2000

· Working with Takeda for new drug for gout

· Bought a 3% stake in Millennium Pharmaceutical for $250M

· Now has a 5 year venture with Millennium for drugs related to obesity and diabetes

· See MLN 4760 below under Millennium Pharmaceuticals

· Increased stake to 5.3%

· Vysis Inc

· Acquired Vysis Inc. for $355M – makes advanced diagnostic tests for cancer

· i-Stat

· i-Stat provides diagnostic systems analyzing blood

· Therasense

· Acquired Therasense for $1.2B – January 2004

· Makes blood glucose monitoring test and equipment

· Now will be No.3 in the glucose monitoring market

· EAS

· Acquired EAS For $320M – October 2004

· EAS makes nutritional bars and will be consolidated into Abbot’s Ross Nutritional division

· Abbot Labs Stakes and Ventures:

· Bought the commercial rights to Aventis’ Trandolapril/Verapamil - 2004

· Bought Jomed’s (Dutch) coronary-peripheral intervention business for $71.2M – May 2003

· Spun off Hospital Products Division (Hospira - HSP) - April 2004

· 85% of Hospira’s revenue is from the US

Abbott Labs General Info:

· Abbott founded in 1988 by Dr. Wallace Calvin Abbott

· Abbott Notables:

· In 2000 - 18.5% of their revenue was from actual drug sales

· $14B in total sales but only $2.6B from drugs

· Segment breakdown: 1Q2005

· Pharmaceuticals – 58% of sales

· Nutrition – 23% of sales

· Diagnostics - 16% of sales

· Increased R&D budget from $600M in 2000 to $1B in 2001

· Diagnostic Products Division:

· FDA and safety violations with Diagnostic Products Division

o FDA pulled diagnostics products from the market – Has had problems with their equipment manufacturing process since 1999 – in 2001 still pulled

o 125 different types of diagnostic kits were pulled

o Rival companies swooped in and took over Abbott’s command

o Abbott was still able to sell kits that were crucial to public health and by the end of 2003 had paid the government a total of $340M – the Government took 16% of the kits sales

o Abbokinase – taken off the market in 1999 for poor manufacturing processes

o December 2003 - FDA cleared the Chicago plant for its previous safety violations lifting a huge dark cloud over its diagnostic testing kits

§ Abbott will now market 70 new diagnostic kits

· Trying to rebuild the Diagnostic Product Division after three years (2001-2004) of FDA compliance problems

· 13 tests that were once delayed are now approved – April 2004

· Has a multiyear contract with 76 blood centers

· Diagnostic Product and Nutritional Product division pulled in roughly 38% of revenue in 2004

· Making Stents for Medtronic – using ABT-578 to coat the stents – will launch in 2004

· Has a patent license for a HIV-2 test

· With OraSure – releasing a quick 20 minute HIV test

· Abbott to sell to hospitals and physicians and OraSure to Public Health and Criminal Justice

· Manufacturing problems – Found mold and paper products in intravenous products

· Diabetes – Has a 19% market share in the diabetes market

· Busted - $622M settlement for criminal and civil investigation with their Ross Nutritional Unit (CG Nutritional)

· Salespeople telling doctors how to overcharge the government

· Defrauded Medicare and Medicaid – Unit not be able to participate in the programs going forward

· Unit makes liquid nutrition, the pumps, and tubing used to deliver it

· In race with Medtronic’s MiniMed unit for developing an artificial pancreases that monitors blood glucose and pump insulin when needed

· In court case with Cambridge Antibody Tech Group over Humira – 2004

· Cambridge Antibody Tech Group gets 5% of royalties on Humira – Abbott wants that reduced to 2%

· Stems from Deal with Knoll which Abbott acquired in 2001

· December 2004 – Lost in UK High Court over royalty argument with Cambridge

· Abbott will pay Cambridge past royalties - Abbott has been paying them only 2% since 2003

· “They can’t fix the margin pressures with new drugs, so they’re looking to squeeze more profitability out of their current drugs” – Matthew Dodds, Smith Barney Citigroup – November 2004

· Considered to have a diverse product line which helps even out the rough spots with the lifecycle of individual drugs and downtrends/pricing

Advanced Magnetics Biotech (AVM) Cambridge MA CEO Leonard Baum http://www.advancedmagnetics.com/

· MRI, magnetic resonance imaging, enhancement techniques

· Feridex - for enhancing MRI w/ liver tumors – Used predominantly in Japan – Japan has high incidence of liver cancer

· Gastromark - Highlights the intestinal loops and bowel

· Code 7228 – Iron replacement for patients who receive Erythropoientin – in Phase II – Cytogen will market

· Combidex – MRI for Lymph nodes

· Uses and Iron Oxide agent to detect if the lymph nodes are healthy or cancerous – produces a black or white result

· Application for prostate cancer to see if the cancer has spread to the lymph nodes – currently only able to tell through surgery and physical removing the lymph nodes

· Will cost $100 to $200 for the test – current cost for removing the lymph nodes is $43,000

· Not FDA approved – received FDA approval letter June 2000 but needed more data

· In 80 patient study – technique found to be 100% effective in identifying if the cancer had spread to the lymph nodes – June 2003

· March 3 2005 – FDA advisory panel votes 15-4 against the drug

· Stock stumbles

· March 30 – FDA rejects Combidex for approval and wants more studies and data

Brokerage	Recommendation	Sentiment
Piper Jaffray
Smith Barney
JP Morgan

Affymetrix (AFFX) Santa Clara, CA CEO Stephen Fodor http://www.affymetrix.com/

Focus: Makes DNA sequencing chips (GeneChip) used to analyze gene sequences

· Affymetrix GeneChips will hold a person’s genetic code and gene micro arrays

· Makes equipment used to extract and decipher DNA

· Bought Neomorphic for $70M - makes software that puts twists and tweaks DNA info to obtain a variety of different outcomes

· Won an appeal against Oxford Gene Technology on their micro array chips – Oxford claimed that it was their patent

· Jury in Delaware found that their gene chip is infringing on a patent from Oxford Gene Therapy

· New gene chip to analyze mouse activity was recalled

· Recalled due to errors in the public domain mouse genome data that they used to make the chip

· Amplichip – Diagnostic test

· Developing with Roche

· Check how well a patient will respond to different drugs by examining their DNA

· Will allow doctors to customize the prescribe regime and make more certain decisions on which drug may produce better results per patient

· Looking for approval late 2004 and cost labs $350-$400

· Predicts sales to reach $100M annually by 2008

· SNP’s – Single-Nucleotide Polymorhines

· Studying SNP’s in the Asian population with HUGO (Human Genome Organization) chapter in Asia for use in Affymetrix gene chips

Agouron Pharmaceuticals (AGPH) (WLA) (PFE) San Diego, CA http://www.agouron.com/

· Viracept - For AIDS – First AIDS drug to win FDA approval

· Shares profits with Japan Tobacco

· Bought by Warner Lambert (Pfizer)

Agouron Drugs and R&D

· A67088 drug for common cold, nasal spay

· Inhibits the action of a natural viral enzyme 3c protease – which virus use to reproduce

· 30% better than placebo

· Pringmastat - lung - prostate cancer

· Carpavirine - AIDS

· Remune - AIDS

Brokerage	Recommendation	Sentiment
Prudential
Morgan Stanley
AG Edwards

Amgen (AMGN) Thousand Oaks, CA CEO Kevin Sharer http://www.amgen.com/

· World’s largest Biotech

Amgen Drugs:

· Denosumab

· Trial that test its effectivnes against Merck’s Fosamx showed improved bone material density superior to Fosamx.

· Enbrel (etanercept)

· For Rheumatoid Arthritis, psoriasis

· From Immunex – First Bioengineered drug to target an autoimmune disease

· FDA approved Enbrel for Psoriatic Arthritis – 1998

· Costs patients $12,000 to $14,000 a year - 1M people have the disease

· Patients needed to get on a waiting list to get the drug when it first came out. The drug was hard to make (biotech drug) and short supply

o Enbrel at first couldn’t make the drug fast enough

o November 2003 – No longer a waiting list for Enbrel

o Genentech started manufacture Enbrel in 2004 thus improving its supply

· Is a natural human protein that shuts down overactive (cytokine proteins) in the immune system that attack joint tissue

· Produced from a hamster’s ovary cells and put in human genes to produce the protein

o Take three weeks to harvest the hamster’s ovary cells then another three weeks while the cells produce trillions of copies of a single protein

· Competitor is Remicade from Centocor (JNJ) – but needs be used with another drug that cause lung and liver damage

· Is a shot which provides a greater convenience than J&J’s Remicade

· Tried to market it for Heart Failure – test failed

· FDA approved May 2004 for psoriasis - Applied July 2003

• Epogen/Aranesp/Procrit

· Recombinant protein that stimulates red blood cell production in bone marrow

· Anti-anemia drug and used with cancer patients

· Produces roughly ½ of Amgen’s revenue

· First produce Epogen in 1989 and had orphan drug status

· Used as a kidney dialysis drug - for anemia which is a shortage of O2 rich red blood cells that cause weakness and fatigue

o People with kidney failure can’t make enough red blood cells

· Most successful drug they have ever made

· Kirin sells Epogen in Japan

· Off patent protection 2010

· Has to pay J&J $200M over Epogen (Enythropoiestin), J&J helped design it in 1985

o Sold rights to J&J in 1985 – Amgen only has rights to the US kidney dialysis market

o J&J sells Epogen under the name Procrit

· Epogen had sales of $2.7B in 2002 and represent 48% of Amgen’s sales

· UK Government reversed patent protection on Epogen saying that the awarded patent was too broad in range – October 2004

o US has not followed the same coarse

· Medicare Reimbursement question of 2005:

o Changes in Medicare may hurt Amgen with regards to how Medicare will address “supportive care” and its reimbursement which will effect Aranesp

· Aranesp

· New version of EPO – J&J will have no ties to the drug

· Changed six amino acids and compounds thus enabling the drug to remain in the body six times longer

· FDA approved September 2001

· Novel Erythropoiesis Stimulating Protein (NESP)

· Expected to have sales of $8B-$9B in the next five years

· Still an anemia treatment for cancer patients and people on kidney dialysis

· “Epogen and Neupogen are growing very slightly less than we expected” – CEO Kevin Sharer remarks Oct. 2000

· Had $416M in sales in 2002

· Amgen’s third Blockbuster – January 2003 to October 2003 had $1.04B in sales

· Early 2004 – making big inroads in J&J’s Epogen and is gaining ground

• G-CSF (Granulocyte Colony Stimulating Factor)

· Stimulates white blood cells

· Next generation called Nulasta

• Infergen – For treating Hepatitis C

· Kineret – Rheumatoid Arthritis

· Less effective than Immunex’s Enbrel

· Used by people who don’t respond to other drugs

· Focuses on a different protein linked to arthritis

• Lepitin – Weight loss drug – lackluster results
• Nulasta – Second generation for fighting infections in cancer patients

• See G-CSF above

• Neupogen – Recombinant protein that selectively stimulates the production of white blood cells

• Cancer chemotherapy drug

• Sensipar – for kidney disorder

• FDA approved March 2004
• For secondary kidney hypocalcaemia in patients with parathyroid cancer
• First drug in a new class to adjust levels of calcium and related hormones by regulating the body’s sensitivity to calcium
• Vectibix – Amgen’s first cancer drug

Amgen’s Pipeline and R&D:

· Abarelix – Reduces testosterone in men and women – In phase III

· ABX-EGF – In Phase II for colon cancer – study will be out 2004 – with Abgenix

· AMG162 – For osteoporosis

o Huge hope for Amgen, could be Amgen next $1B drug – Injection every six months

o Being tested for effectiveness with bone cancer

o In Phase III trials in 2005

· BDNF – Lou Gehrig's Disease – In phase ½

· Calcimimetic –– For kidney and dialysis problems - In phase II

· Cincalcet HCI – for secondary hyperparathryoidism – kidney problems

o Hyperparathryoidism – Where high levels of the parathryoidism hormone makes the bones weak and produces the calcification of the bloodstream

o Found effective in treating kidney failure

· GDNF – Stimulates the growth and production of dopamine – For Parkinson’s disease

o Halt drug trials due to poor results – February 2005

· KGF – For reducing oral and stomach lining damage from chemotherapy - In phase ½

· Il-1RA – Protein for anti-inflammatory for rheumatoid arthritis - In phase II/III

· Nevroimmunophilins –– Nerve regeneration and repair – For Parkinson’s disease – In phase II

· OPG – Protein for regulation of bone mass - In phase I

· Plaifermin – for oral mucositis – a chemotherapy related problem

· Pienaxis – FDA rejected