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TWST: Sergio, how do you see this issue, and what worries you most about the major drugs that are coming off patent? What can the companies do to extend patent protection or develop newer, more effective versions of these products?

Mr. Traversa: Let me tell you that I’m not that much worried about patent expirations because companies have shown that this issue can be managed in many cases. Merck (NYSE:MRK), for example, which is the company that is facing the major issue in terms of patent expiration, has demonstrated that developing new products, building good marketing infrastructure and anticipating the patent expirations with new launches have been able to manage the situation at least until now. I believe Merck will continue to do well also in its two most difficult years ahead, 2001 and 2002.

TWST: Give us an example of what Merck has done.

Mr. Traversa: Merck has chosen the most expensive, but also the most elegant way to avoid a major impact on its bottom line from patent expirations. Specifically, Merck has developed and launched several new products in the same therapeutic categories of the drugs that are losing patent protection and gradually replacing the old products. Two examples: Zocor for high cholesterol is replacing Mevacor, which is losing patent, and Cozaar for high blood pressure is replacing Vasotec, which has just lost patent protection in August 2000. Merck has been able to deliver good top-line performance until now and has demonstrated that they can sell new products and replace the old drugs in a very effective way.

TWST: Sergio, how important is it for these pharmaceutical companies as they consolidate, to develop genomics expertise given the role that genomics is expected to play in drug development, and how can they acquire this expertise?

Mr. Traversa: I totally agree with Jeffrey that consolidation will continue, and that genomics is one of the major reasons for companies to merge. Genomics is a big help, at least in the discovery process. However, to fully maximize the impact of this new and important instrument, companies need a large number of scientists and a large R&D budget. GlaxoSmithKline (NYSE:GSK) and Pfizer (NYSE:PFE) are very good examples. Their 5 billion in annual R&D budget is a large number, and companies with less than half of this investment will not be able to gain full benefit from the genomic effort. Companies can always outsource a lot of expertise. However, I see outsourcing as a temporary bridge on the road to building up the expertise in-house. I'm a believer in genomics as a very important tool for the future of the pharmaceutical industry, and consolidation will help the industry to fully leverage the genomic effort.

TWST: What sort of companies do you expect the major pharmas to acquire as they start to build up this expertise?

Mr. Traversa: I'm not a strong believer in cross-segment M&A activity, meaning big pharma buying biotech companies. It may happen in some specific case, such as Merck buying Sibia for a very specific reason (they needed a CNS platform), but I do not think we will see many of these transactions. I'm a strong believer in parallel M&A activity, meaning large pharma merging among themselves, and biotechnology companies merging or making acquisitions among themselves. In terms of names, I don't see many companies that are not in play.