Positive Phase III Data On XIFAXAN Will Drive Transformation Of Small GI Company According To Award Winning Piper Jaffrey Analyst

• On 5:43 pm EST, Monday November 2, 2009

67 WALL STREET, New York - November 2, 2009 - The Wall Street Transcript has just published its Pharmaceuticals Report offering a timely review of the sector to serious investors and industry executives. This 76 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small-Cap Specialty Pharma - Patent Expiration - Pending Health Care Reform - Cultivating And Expanding R&D Pipelines - Chinese Drug Manufacturers - Brisk M&A Activity - Indian Pharma VS. U.S. Pharma - Competition From Generics - FDA Approval Process - Clinical Research Outsourcing Market - Stem Cell-Based Technology - Cancer Radiation Therapy - Expansion Into Asian Markets - Terminal Values For Pharmaceutical VS. Biotech Companies

Companies include: Aeolus Pharmaceuticals (AOLS.OB); Nutra Pharma (NPHC.OB); Quick-Med Technologies (QMDT.OB); Abbott Labs (ABT); Alexza Pharmaceuticals (ALXA); AmexDrug Corporation (AXRX.OB); Aurobindo Pharma (AUROBINDOP.BO); BioClinica (BIOC); BioPharm Asia (BFAR.OB); Biocon (BIOCON.BO); Cephalon (CEPH); China Sky One Medical, Inc. (CSKI); Claris Lifesciences (CLARICH.BO); Cortex Pharmaceuticals (COR); Daiichi Sankyo (DSKYF.PK); Dr.Reddy's (RDY); Elan (Elan); Eli Lilly (LLY); Forest (FRX); GeoPharma (GORX); Glaxo (GSK); Glenmark (GLENMARK.BO); Johnson & Johnson (JNJ); Lupin (LUPINSL.BO); Mannatech (MTEX); Matrix Laboratories (ATRIXLAB.BO); Medical Nutrition (MDNU); Merck KGaA (MKGAY.PK); Mylan (MYL); NeoStem (NBS); Novartis (NVS); Pfizer (PFE); Piramal Healthcare (PIRAMALHE.BO); Provectus Pharmaceuticals (PVCT.OB); Ranbaxy (RANBAXY.BO); Salix Pharmaceuticals (SLXP); Shire (SHPGY); Telik (TELK); Winston Pharmaceuticals (WPHM.OB).

In the following brief excerpt from just one of the in depth interviews in the 76 page report, this equity analyst expert discusses the outlook for the sector and for investors.

David Amsellem is a Principal and Senior Research Analyst at Piper Jaffray who covers specialty pharmaceuticals. Prior to joining Piper Jaffray in 2008, Mr. Amsellem spent five years at Friedman Billings Ramsey, where he was a Senior Research Analyst covering small- and mid-cap pharmaceuticals from 2006 to 2008, and a Senior Associate on the biotechnology equity research team from 2003 to 2006. Mr. Amsellem was recognized as the number one-ranked analyst in North America for accuracy of earnings estimates in the pharmaceuticals sector in the 2008 Financial Times/StarMine "Best Brokerage Analyst" survey. He graduated from Cornell University with a bachelor's degree in industrial relations.

TWST: Where are you pointing investors now?

Mr. Amsellem: In terms of names that I like, one of my favorite sort of mid- to mid-cap idea is Shire (SHPGY). This is an interesting company in the sense that it is a company that this year is working through the loss of a key product called Adderall XRs for ADHD. Adderall went generic this year, and so this is a down year for the company. But beyond this year, this is a company that has a very diverse product portfolio and a deep product pipeline, and is really well positioned to see EPS growth in the double digits for both for next year and beyond. The company has a thriving and growing biologics business, which makes them, I think, very unique among their peers. A number of years ago, they acquired a company called Transkaryotic Therapeutics. In early 2010, we'll see an approval of a drug called Velaglucerase. This is for a rare genetic disorder called Gaucher disease, which will be an important top-line growth driver over the next several years. The company has a number of other ADHD products that are growing - a product called Vyvanse, which is a next-generation product that is doing quite well. They are launching another ADHD drug in November called INTUNIV, which we think can be a meaningful contributor. The company, I think, has done a nice job of holding down expense growth this year. So I think the net-net is that you have a company that's trading at a fairly rich multiple, but I think investors should be willing to pay for pretty robust earnings growth - 15% to 20% a year - with a business that doesn't face significant patent expiry issues beyond this year. I think that's a good position for a specialty pharma company to be in.

TWST: Are there other names that you like?

Mr. Amsellem: Yes, another name on the smaller-cap side is Salix Pharmaceuticals (SLXP). This is a stock that has done spectacularly well this year. But I think this is one of the few companies that really is on the cusp of a major transformation, and it's hard to find those kind of companies these days in the pharma space. This is a GI-focused company; they have a base business of over $200 million in sales, but they have a drug, an antibiotic called XIFAXAN, which has been on the market for about five years. It was approved in travelers' diarrhea, but the company successfully completed two major expansion programs for the drug. One is in a condition called hepatic encephalopathy, or HE, which is a liver disease. These are patients who basically have liver damage, and the liver cannot process toxins and the toxins go to the brain. It could be fatal, and this is an antibiotic that prevents that from happening or prevents hospitalization. The other market is irritable bowel syndrome, which is very common, with millions of patients and significant opportunity. The company just recently announced positive data from two Phase III studies. What does this all mean? It means that you have a drug that could expand to well over $500 million in sales. The drug has right now $100 million in sales. So you're talking about a major transformation in a company here that's kind of been kind of a small GI company, but now I think, with this potential blockbuster, could be the target of acquisition speculation, given that so many companies are looking for assets to bolster their pipeline. This is exactly the kind of company that larger pharmaceutical companies would want to look at. So even though this is a name that has performed well, I think that there's still room for significant growth. And I'm pretty confident about the drug's patent estate, which means that if it's going to do peak sales well north of $500 million, exclusivity will be maintained for many years. From the market cap right now, just over $1 billion, it really is still very, very attractive in that context. This is my favorite smaller-cap idea. I think this is a really exciting company and a very exciting transformation point in this company's history.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 76 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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