BIOTECHNOLOGY Thomas Yip Natasha Sharma Alfred Li Elaine Yip Justin Hovis.

Presentation on theme: "BIOTECHNOLOGY Thomas Yip Natasha Sharma Alfred Li Elaine Yip Justin Hovis."— Presentation transcript:

1 BIOTECHNOLOGY Thomas Yip Natasha Sharma Alfred Li Elaine Yip Justin Hovis

2 Introduction Biotechnology –the use of cellular and biomolecular processes to solve problems or make useful products. –Collection of technologies that capitalize on the attributes of cells, such as their manufacturing capabilities, and put biological molecules, such as DNA and proteins, to work for us.

3 Biotechnology? Pharmaceutical? Two Distinctions 1.Business model Biotech: –Much smaller and limited resources to market drug –Use pharmaceutical companies to market their drugs –Just a research engine Pharmaceutical –Larger and market drug to market themselves 2.Field of Research Biotech: –Use “genetic engineering” Pharmaceutical –Use "empirical screening" to develop drugs

4 Cells and DNA Cells –Basic building blocks of life –have same basic design, use same construction materials and operate using similar processes DNA (deoxyribonucleic acid) –Genetic materials of all living species –Directs cell construction and operation to creates to proteins

5 Uses of Biotechnology Biotech drug products and vaccines –Ex. Alzheimer’s disease, heart disease, diabetes, multiple sclerosis, AIDS and arthritis Medical diagnostic tests –Ex. Home pregnancy tests Biotech foods Environmental and industrial biotechnology DNA fingerprinting

6 Global Industry 4,284 companies globally –622 publicly listed Revenues: $35 Billion (72% in US) R&D: $16 Billion Employed: 188,000 people Source: Ernst & Young, 2001

7 US Industry 1,466 companies –318 publicly traded Market capitalization: $311 billion Revenues: $29.6 billion R&D: $20.5 billion Employed: 194,600 people Sources: Biotechnology Industry Organization, 2004

8 US Biotech Industry Statistics Year:2002200120001999199819971996199519941993 Sales24.321.419.316.114.513.010.89.37.77.0 Revenues29.6 26.722.320.217.414.612.711.210.0 R&D Expense20.515.714.210.710.69.07.97.87.05.7 Net Loss9.44.65.64.44.14.54.64.13.63.4 No. of Public Companies318342339300316317294269265235 No. of Companies1466145713791273131112741287130813111272 Employees (in thousands)194.619117416215514111810810397

9 Biotech Index (5 year)

10 Biotech Index (1 year)

11 Biotech Index Figures Index Value536.56 Trade Time Nov 12 Change 2.06 (0.38%) Previous Close 538.62 Open 538.62 Day’s Range 528.75 - 539.47 52w Range 439.04 - 567.94

12 Market Capitalization NOTE: 2004 figure as of mid-March

13 Total Financing

14 Biotech Industry Financing, 2003

15 New Biotech Drug and Vaccine Approvals/ New Indication Approvals by Year

16 Drug Discovery Process

17 FDA What is the FDA? –Responsibilities of the FDA History of the FDA Evolution of US Drug Law –Food and Drugs Act (1906) –Federal Food, Drug, and Cosmetic Act (1938) –Thalidomide Crisis (1962)

18 Pre-clinical Research The beginning of the drug approval process Studies using the compound in cell cultures, isolated tissues, and laboratory animals are conducted Company decides whether to pursue human testing Patent Term Restoration Act (1984)

19 Total Biotech Patents Granted per Year

20 IND Filing Before testing on humans can begin, the company must file an Investigational New Drug (IND) application –FDA has 30 days to review the IND application The goal of the IND application is to provide pre-clinical data of sufficient quality to justify the testing of the drug in humans About 85% of all IND applications move on to begin clinical trials

21 Phase 1 Concentrates on developing the drug’s safety profile Sample in this phase is small (less than 100 patients) How the drug is absorbed, distributed in the body, metabolized, and excreted Testing ranges from one to three years

22 Phase 2 Consists of small, well- controlled experiments to evaluate the drug's safety and assess side effects Sample size of 100 – 300 patients who suffer from the disease This phase establishes the optimal dosage of the drug Phase 2 trials last an average of two years

23 Phase 3 Verifies the effectiveness of the drug against the condition that it targets Continues to build the safety profile of the drug and record possible side effects and adverse reactions resulting from long- term use Sample size of at least 1000 patients –Double-Blinded –Randomization Testing averages between three and four years

24 NDA Filing Can contain up to 100,000 pages of data supporting the efficacy and safety of the drug At this point, the drug has better than a 70% chance of being approved by the FDA Approval of the NDA can take anywhere from two months to several years If approved the company may begin to market and distribute the drug

25 Phase 4 Observational studies in an ongoing evaluation of the drug's safety during routine use Monitor any usage of the drug for conditions other than the approved medical indication

26 For The Investor The clinical trial process is costly as well as time- consuming $350 - $500 million to bring a drug through all phases of the clinical trial process Consider companies that already have: –one or more successful products on the market –a large pipeline of candidate drugs –plenty of cash to fund the development of their new drug candidates

27

28 Company Background Stock Price: US $49.33 (on Nov. 15, 2004) Ticker Symbol: DNA – NYSE Workforce: 6226 people Location: San Francisco Outstanding Shares: 1,077,093,000

29 Company’s History 2nd largest biotech company founded in 1976 Robert A Swanson Dr. Herber W Boyer

30 Stock’s History On October 14,1980 –First 1 million shares were issued –Traded on NASDAQ, with ticker symbol (GENE) –Share price jumped from $35 to $88 within an hour In 1990, Roche acquired Genentech at $2.1Billion In 1999, Roche reissued Genentech shares –Genentech (ticker symbol DNA) returned to the NYSE –Started at $97 and closed at $127. –The largest public offering in the history of the US health care industry

31 Mission and Value “Our mission is to be the leading biotechnology company, using human genetic information to discover, develop, manufacture, and commercialize biotherapeutics that address significant unmet medical needs. We commit ourselves to high standards of integrity in contributing to the best interests of patients, the medical profession, our employees and our communities, and to seeking significant returns to our stockholders, based on the continual pursuit of scientific and operational excellence.”

32 Top Executives Chairman and CEO –Arthur Levinson, Ph D $2.41M joined in 1980 as senior scientist Executive VP – Louis Lavigne, Jr, CFO$809.00K Previously worked in Pennwalt Corp; joined Genentech in 1982

33 Top Executives Pres, Product Development Susan Desmond-Hellmann, M.D., M.P.H. $1.16M -Joined Genentech in 1995 as a clinical scientist Pres, Commercial Operations Myrtle Potter $1.74M -Spent 14 years in Merck & Co. then in Bristol Myers Squibb -Joined Genentech in 2000 Executive VP, Gen. Counsel, Sec. Stephen Juelsgaard, D.V.M., J.D -Joined Genentech in 1985 as Corporate counsel

34 1.Oncology -Cancel treatment 2.Immunology -Immune disorder 3.Vascular Medicine -Heart disease 4.Specialty Biotherapeutics -Other areas Manufacture and market 13 products in the U.S. Products as of 3 rd Quarter

35 Genentech’s Product Pipeline

36 Revenue Composition

37 Cost Composition

38 Operating revenue vs R&D

39 Recent News On May 13, Genentech had a 2:1 stock split In Aug, FDA approved the Biologics License Application for the manufacturing of Avastin bulk drug substance at Vacaville, Cali facility In late Sept, Genentech and Wyeth entered into a manufacturing agreement for Heceptin On Sept 28, Genentech announced the extension of its current stock repurchase program for up to an addition $1B of its common stock thru Dec 31, 2005

40 Highlights of 3 rd Qtr in 2004 Operating Revenues: $1.2 B (46.9%↑ ) Total Product Sales: $1.0 B (52.7%↑ ) GAAP Net Income: $230.9M (51.9%↑ ) GAAP EPS: $0.21 per share (50%↑ ) –↑ is mainly due to the sales growth in the BioOncology products (accounts for 74% of total product revenues)

41 (in thousands) 2004 (ended Sept)200320022001 Share Price (End of period)$52.42$93.57$33.16$54.25 Operating Revenues3,305,8573,300,3272,583,6582,044,032 R&D637,317721,970623,482526,230 Marketing, general & admin788,616794,845546,276446,906 Total costs and expenses2,467,8602,495,6122,661,7311,896,051 Net Income578,231562,52763,787155,874 Earning per share (diluted)0.531.060.120.28 Weighted average shares1,082,081528,810524,408535,291 Property, Plant and Equip1,922,3131,617,9121,068,734865,700 Goodwill1,315,019 Total Assets9,377,8468,736,1716,758,1197,146,800 Long-term debt1,310,422412,25000 Total Liabilities3,491,3222,215,8731,419,2351,860,800 Free Cash Flow419,600536,02115,910364,976 Financial Highlights

42 Key Statistics over years 20032002200120001999 P/B3.761.592.423.773.29 P/E44.13138.1796.86-291.07-14.88 ROE0.090.010.03-0.01-0.22 Profit margin0.170.020.07-0.05-0.90 Diluted EPS1.060.120.28-0.14-2.26 FCF (in millions)914.98264.87267.28276.10-971.80 Debt to Equity ratio0.340.270.210.190.24

43 Financial Snapshot GenentechIndustry Price as of Nov 15, 2004US $49.33 52 week range41.00 - 68.25 P/B (mrq)7.55 Beta1.188 Market Capitalization52.30B147.91M Net income (ttm)704.96M(6.75M) P/E (ttm)76.3130.54 EPS (ttm)0.653-0.28 P/S (ttm)12.419.13

44 Genentech vs NASDAQ Biotech over 5 years Obtained from www.globeinvestor.com

45 Stock Price Performance: 1 Year

46 Stock Price Performance: 5 Years

47 Recommendation Pros: Strong financial performance Performance above industry’s average Good development in the product pipeline Anticipate the launch of Tarceva in Jan 2005 Cons: High volatility in the industry (possibly due to speculation) Firm specific risk (reliance on FDA approval)

48

49 Protein Design Labs Current Stock Price: $19.39 Stock Symbol: PDLI – NASDAQ Workforce: 549 people  157 in R&D Location: Fremont, CA Construction of a new manufacturing plant, slated for completion in 2007. Outstanding Shares: 95,198,000

50 Financial Highlights of 2003 Revenue$66,686,000.00 Net Income($129,652,000.00) R&D$82,732,000.00 EPS-1.40

51 Business Profile Technology Overview - Humanizing monoclonal antibodies -use structural information from promising mouse antibodies to capture the benefits of those antibodies while overcoming many of their limitations in treating humans Collaborations -In-Licensing -Out-Licensing -Humanization Collaborations -Venture Development

52 Mission and Goals Mission Statement: –To be a premier biotechnology company that creates, develops, manufactures and markets humanized antibodies to alleviate serious human diseases. Building on our core technologies, we will discover a new generation of therapeutics Future Goals: Utilize growing royalty stream to selectively develop antibody pipeline Market proprietary drugs in U.S. by ’07 Partner clinical programs outside U.S. and CAN Continue out-licensing efforts to maximize humanization technology potential

53 Top 5 paid executives Mark McDade – Chief Executive Officer, Director since 2002 – MBA from Harvard, had been CEO of Signature BioScience, co-founded Corixa Max Link, Ph.D. –Director since 2003 –Chairman since 2004 Glen Sato –Chief Financial Officer, Senior Vice President since 2003 Douglas Ebersole – Senior Vice President since 1992 Steven Benner, M.D. – Chief Medical Officer, Senior Vice President since 2002

54 Therapeutic focus: Autoimmune Inflammatory conditions, asthma Cancer 7 US marketed drugs licensed under PDL patents Mylotarg ® Products Development

55 * Marketed as Zenapax ® by Roche in kidney transplantation Zenapax ® (daclizumab/anti-CD25) Pre- Clinical I / IIIIIIIMarketedI * F200 (Anti-α 5 β 1 integrin Fab) M200 (Anti-α 5 β 1 integrin) HuZAF™ (fontolizumab/ anti-gamma Interferon) Nuvion ® (visilizumab/anti-CD3) Severe refractory ulcerative colitis Moderate to severe Crohn’s disease Solid tumors AMD Moderate to severe persistent asthma Prevention of renal allograft rejection following kidney transplantation ** * * Partnered exclusively with Roche for asthma and other respiratory diseases

56 Revenue and R&D

57 Recent News Reported 3rd Q earnings for the second time this year, raised revenue guidance for 2004  up 40% over last year's Increasing royalty payments from Genentech's drugs - Avastin

58 Company’s Ratio 20032002200120001999 P/B 3.75 1.39 5.2 3.544.10 D/E0.660.320.310.320.11 Current Ratio14.342.052.157.617.8 ROE-29%-3%0.4%0.1%6% Profit Margin-195%-31%6%1%-36% EPS-1.4-0.160.030.01-0.14

59 Recent Key Statistics P/B*4.48 D/E*0.611 Current Ratio*9.162 ROE**24.62% *most recent quarter **trailing twelve month

60 Free Cash Flow 20032002200120001999 CFO(22,965)(5,071)2,5886,827(10,719) - Capital Expendit ure91,11834,7868,7163,35518,815 FCF(114,083)(39,857)(6,128)3,472(29,534)

61 Financial Snapshot Price Nov 15, 2004 US$19.39 Beta1.11 52 Week Range High/Low $ 27.58 / $ 12.34 Shares Outstanding95,198,000 Market Capitalization$ 1,862,072,880 Book Value per Share (most recent quarter) 4.557

62 10 year Stock Price Movement

63 PDL VS Nasdaq Biotech

64 1 year Stock Price Movement

65 Recommendation PDL is still growing –Spend more on R&D than revenue FCF is negative Negative Profit Margin, ROE, EPS Underperforms Biotech Index Current Ratio is decreasing D/E is increasing Cash Burn Company Might hit a HomeRun but not within the next couple of years.

66

67 Amgen Founded:1980 Headquarters: Thousand Oaks, California Staff:13,000 (2003) Chairman/CEO: Kevin W. Sharer

68 Overview Operating Revenue: $8.4B Product Sales:$7.9B Net Income:$614.5M Diluted EPS:$0.46 R&D Investment:$1.7B Stock:Nasdaq: AMGN Index:Nasdaq 100 S&P 500 Sector:Healthcare Industry:Biotechnology Stock Info 2003 Highlights

69 Mission, Aspirations, Values “World’s largest biotech company” Mission: “to serve patients” Aspiration: “to be the best human therapeutics company” Values: science-based, patient-focused, team-oriented, collaborative, and ethical organization

70 Business Profile Pioneers of the development of innovative products based on advances in recombinant DNA and molecular biology Human Therapeutics Oncology (supportive cancer care) Inflammation (rheumatoid arthritis) Hematology & nephrology (anemia, kidneys) Neurology (brain, nervous system) Metabolic Disorders (autoimmune diseases, viruses)

71 Top 5 Paid Execs Kevin Sharer (1992) $3.8M Chairman of the Board, CEO and President George J. Morrow (2001) $2.2M Executive Vice President, Global Commercial Operations Roger M. Perlmutter, M.D., Ph.D (2001)$2.2M Executive Vice President, R&D Dennis M. Fenton, Ph.D. (1982) $1.9M Executive Vice President, Operations and Corporate Compliance Officer Richard D. Nanula (2001) $1.7M Executive Vice President, Finance Strategy and Communications, and CFO

72 ProductsONCOLOGY For treatment of chemotherapy induced anemia and infections in cancer patients undergoing chemotherapy NEPHROLOGY For treatment of dialysis patients and patients suffering from chronic renal failure INFLAMMATION For treatment of rheumatoid arthritis patients

73 2003 Product Pipeline 5 4 8 1 2 3 Totals: 5 4 8 1 2 3

74 Cost Composition Amgen – 2003 Annual Report

75 Sales & Revenue - (2003 Annual Report) Amgen – 2003 Annual Report

76 Revenue – Geographic Breakdown Amgen – 2003 Annual Report

77 Collaborations –Tularik Inc: $1.3B (Q3 2004) –Immunex Corp: $16B (2002) EPS decreased by 61% –From $0.46 to $0.18 (Acquired in process R&D write off from Tularik = $554M) R&D rose by 24% (Additional R&D personnel from Tularik) Product sales growth = 23% –Led by Aranesp & Enbrel Company Growth (Q3 2004)

78 Financial Ratios Sep 2004 200320022001 P/B3.844.113.334.99 P/E (tailing)35.6836.61(41.32)54.21 D/E0.1570.160.320.31 Current Ratio1.3053.2954.1873.847 ROE8.45%11.38%(7.61%)21.46% Profit Margin22.24%36.99%(14.20%)38.13% EPS1.6811.75(1.21)1.07

79 Free Cash Flow Sep 2004200320022001 CF Operations$2,587$3,566.6$2,248.8$1,480.2 - Purchase of Property, Plant & Equipment(1,040)(1,356.8)(658.5)(441.8) FCFE$1,547.0$2,209.8$1,590.3$1,038.4 Note: All figures in millions of US Dollars

80 Financial Snapshot Price Nov 15, 2004 US$59.92 Beta0.647 52 Week Range: High - Low$52.00 - $66.88 Shares Outstanding1.27B Market Capitalization76.17B Book Value per Share (most recent quarter) $15.59 Institutional Ownership68% Insider Ownership10%

81 5 Year Trend - AMGN

82 5 Year Trend – AMGN vs Nasdaq (NBI)

83 1 Year Trend - AMGN

84 1 Year Trend – AMGN vs Nasdaq (NBI)

85 Recommendation FDA Approvals –2 products approved –3 new products already in market Low D/E ratio Increased Product Sales Better than industry Tularik Collaboration High Goodwill Press Releases: –Nov 11 04: Amgen Ventures Fund ($100M) –Nov 01 04: Landmark Trial Evaluating Anemia Treatment on CVD Risk