Specialty Pharma Stock Picks For Q4 2009

• On 3:18 pm EST, Tuesday November 10, 2009

67 WALL STREET, New York - November 10, 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 - Traditional Chinese Medicine VS. Western Medicine In Chinese Pharma

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, an award winning equity analyst 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: What's your take on the recent earnings season?

Mr. Amsellem: Just going into earnings, it strikes me as interesting that for the most part, investors are paying less attention to the quarter and more attention to deal activity in terms of cultivating and expanding R&D pipelines, and also important clinical and regulatory events that can give investors greater visibility to cash flows. So I think that the key theme is that there are a number of companies that are certainly cash-flow positive but are really dependent on some important clinical and regulatory events in terms of what that means for stock price movements. I would argue that those are the kind of events that will give investors more or less comfort on the sustainability of the business longer term.

TWST: When you talk to investors, do you find many are interested in this space? If so, are they looking for a trading opportunity or more of a long-term investment?

Mr. Amsellem: I think there is a ton of interest in this space precisely because of the kinds of uncertainties that are inherent in these business models. There are opportunities for long and short investors. There are opportunities for near-term trades on clinical and regulatory events, and on just general volatility. There are opportunities for long-term investors, particularly value-oriented investors, who are looking to take a position in names that are trading at depressed valuations, where the market perceives a gap in terminal value due to patent expirations, but in reality the company has actually taken steps to shore up its business over the long term and that hasn't filtered through to the share price. I think those kinds of opportunities are available to the longer-term investor. I also see some opportunity for longer-term investors in spec pharma, in high-growth stocks where you don't see significant patent expirations being an issue, where investors are willing to pay a high P/E for high growth. There are a few opportunities like that in this space, particularly now that the uncertainties over health care reform and the impact on pharmaceutical seem to have passed. It seems that the higher P/E names that are offering high growth could be good defensive names to own, particularly if there is an overall market correction.

TWST: You say the threat of health care reform seems to have passed. Would you speak to how much of an issue that is at this point?

Mr. Amsellem: I think I would rephrase the issue as more along the lines of health care insurance reform. I think this latest round of health care reform debate and dialogue is very, very different from, say, 15 years ago with the Clinton Administration in the context that for the most part, the administration and pharma have essentially come to a consensus on what is mutually acceptable. So there was a period earlier this year where it was not clear what kind of impact health care reform would have on pharma, but I think we have an understanding of that now. There seems to be a consensus that pharma is going to be making more concessions in terms of Medicaid pricing and expanding the roles of Medicaid. As pharmaceutical investors know, the value of a prescription in Medicaid tends to be lower than the value of a prescription for a private insurance patient because of mandatory rebating. We're going to see more of that. There will be another concession with pharma partially funding the Medicare Part D donut hole. These are items that have been hashed out with the administration. But in exchange for that, there will be millions of new patients that will be insured. Those are patients that will be brought under the insurance umbrella, and I think when you net that out against the pricing concessions, I think you can say that the net-net is something of a neutral to pharmaceuticals. So I think the whole health care debate really should boil down to a battle between the health insurance industry and the administration. I think there is a consensus between the pharma industry and the administration, at least as it relates to the drug space. That's why I'd say that the uncertainties over health care reform, at least for this group of companies, has largely passed.

Note: Opinions and recommendations are as of 10/09/09.

DAVID AMSELLEM

Principal & Senior Research Analyst

Piper Jaffray & Co.

245 Park Ave.

33rd Floor

New York, NY 10167

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 .

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