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TWST: Larry, what stands out in your mind as you look back over the past year? Which companies exceeded your estimates, and which, if any, fell short?

Mr. Smith: I think that in general the managements of drug companies are doing a very good job of guiding investors to earnings targets and meeting those targets. Unlike technology, it is not a group in which actual earnings can vary wildly away from expectations, because this is a business that rarely changes dramatically in the short term. In contrast, many technology companies are dependent on the last week of a quarter to make or break the quarter, which leads to frequent earnings surprises. Hence, this is not a group that is characterized by dramatic changes in earnings expectations. I think the changes that affect drugs arise from changing perceptions of what is happening with the pipelines, or perceptions on what may be happening to in-line product growth in the future.

TWST: Does anyone have any other names that they would like to bring to the table?

Mr. Smith: I follow some of the smaller biotechs, and I follow some specialty companies also. One of the biotechs that I’m really interested in is a company called Immunomedics (Nasdaq:IMMU). In only three years, IDEC Pharmaceuticals’ (Nasdaq:IDPH) Rituxin has reached over 400 million of sales. This is a naked antibody to the CD-20 receptor site on B cells. In the case of non-Hodgkin’s B-cell lymphoma, Rituxan depletes many malignant B-cells, probably through compliment activation after binding. In any event, Rituxan has proven to be a blockbuster product. Immunomedics has a similar antibody called LymphoCide that binds to the CD-22 receptor site on B cells. It appears, with more limited data, to be as active in indolent forms of non-Hodgkin’s lymphoma as Rituxin, and in aggressive non-Hodgkin’s lymphoma appears to be more effective as a single agent. Actually, Rituxin has not demonstrated value as a stand-alone agent in aggressive NHL. LymphoCide, however, has produced dramatic responses in a number of aggressive NHL patients. We’ve seen some very significant complete responses, as well as strong objective responses with this product. It’s my feeling that before every non-Hodgkin’s lymphoma patient dies — and unfortunately all will die because these products don’t cure the disease — they will receive multiple doses of Rituxin and LymphoCide. I believe that LymphoCide has the potential to be as big as Rituxin. So Immunomedics is my home run bid.