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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: Peter, what has been most striking about the performance of the biotechnology or life sciences stocks, in the second half of 2000 and in 2001, year to date?

Dr. Drake: I would say the most striking observation one could make is that the group, in the midst of a secular upturn in earnings, has not participated on the upside to the degree that many of us had anticipated. It’s clear, looking on a relative basis, that the tech sector is in a cyclical downturn with regard to its fundamental outlook for earnings, and I think the 64,000 question is, when is the tech sector going to turn and become positive again with regard to the business cycle. In the midst of that, the biotech industry, or, as you termed it, the life sciences industry, has performed extremely well with regard to earnings last year and in particular Q1 and Q2 of this year. I personally am surprised that more tech money hasn’t come into biotech, more retail money hasn’t come into biotech, and that we haven’t had more sustainable, positive stock price performance. We have seen negative flow of funds into the dedicated healthcare mutual funds for most of this year after having been positive most of last year. We have seen, as a result of that and some other issues, the p/e to g on the biotech industry, currently trading at a discount to pharma, and that hasn’t been the case since Q4 of calendar 1999. I guess I’m surprised that we haven’t seen tech money come in and I’m surprised that we haven’t seen better stock price performance, given the overriding positive earnings fundamentals. The reason, of course, is primarily the fact that the FDA has not been as predictable or as friendly as we had come to expect over the course of the last few years.

TWST: Peter, what are the events and developments, the milestones, if you will, that have had a significant impact on biotechnology over the past 12 months?

Dr. Drake: I would say the foremost event has been the long-awaited sequencing of the human genome. This revived a lot of interest from investors as well as scientists who saw this as a significant technological achievement. We all know that that is just the first step in what is going to be a very long road toward commercializing that information, but I think that’s really the most notable one that comes to mind.

TWST: Peter, are there any other smaller caps that you would like to mention?

Dr. Drake: There are actually two names that I think are really quite interesting that I haven’t mentioned, or have, but only briefly. The first is Serono, a company based in Geneva, Switzerland. The second is ICOS (Nasdaq:ICOS), which is another buy-rated stock under my coverage. It’s a biotech company based in Bothell, Washington, that is building a scientific focus on inflammation. The company has a broad pipeline of products that target a diverse, if you will, range of conditions. Their lead product, Cialis has been submitted to the Food and Drug Administration for the treatment of male erectile dysfunction. Their partner in that effort is Eli Lilly (NYSE:LLY). The new management team under the leadership of Paul Clark, for whom we have a very high regard, has really, I think positioned this company for strong growth on a moving-forward basis.

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.