Biotechnology M&A ConferenceOctober 4, 2006

Glen Y. SatoCooley Godward Kronish LLP

FIRM OVERVIEW

Cooley Godward is a premier national law firm that excels in high-stakes, complex business and litigation matters. We represent public and private companies of all sizes, across a broad industry spectrum with a special focus in the technology and life sciences areas. Our clients include both high growth and mature companies as well as entrepreneurs, venture capitalists and financial institutions.

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Offices in Palo Alto; San Diego; San Francisco; Broomfield, Colorado; Reston, Virginia; New York; and Washington, D.C.

Client-oriented, team-based approach.

Glen Y. Sato

Partner in the Life Sciences and Public Securities practice groups PDL-Affymax, ChemoCentryx and BiogenIdec recent deals

Prior to joining Cooley, served for more than five years as CFO for two publicly traded companies with diverse business development, legal, financial, operational and strategic planning responsibilities

Practice focused on corporate transactions, SEC reporting and compliance, disclosure issues, intellectual property licensing, general corporate counseling, insider trading compliance and working with Boards of Directors and audit committees on various risk and accounting related matters

Life Sciences Global Senior Team

NEW YORK

Est. 1880

LONDON

Est . 1871

PARIS

Est. 1852

STOCKHOLM MADRID

SYDNEYTOKYOLOS ANGELES CHICAGO HOUSTON ATLANTA ASIA

Offices in Hong Kong ,Singapore , Seoul

Banking – Europe/ Japan

Jeffrey Rosen – MD

Matthieu Bucaille – MDDavid Gluckman , M.D. – MD (a)

Yasu Hatakeyama – MD

Special Advisors

Dr. Paul Marks – President Emeritus , Memorial Sloan -Kettering

Dr. Guiseppe Vita – Former Chairman , Executive Board , Schering AG

Lazard Capital Markets

David Tashjian – Co -CEO

David McMillan – Managing Director , Head of Equity Syndicate

Bill Buchanan – Managing Director , Co-Head of Corporate Finance , Head of U .S. Capital Markets

Jeffrey Klein – Director

Robert Berger – VP

Equity Capital Markets

Richard Gormley – Managing Director , Head of Alternative Capital Finance Group

Geoff Goodman – Vice President

Alternative Capital Finance Group

Banking – US

New York

Stephen Sands – MD , Global Co -Head

Jason Bernhard – MD , Global Co -Head

Raj Alva – MD

Jonathan Biele – MD

Emily Rosen – Director

Mark Schneyer – Director

San Francisco

David Low – MD

Marie Roskrow , M.D., Ph.D. – Director

Eric Delbridge , M.D. – VP

Uniquely Provide World-Class Advice to both Innovators and Leaders

INDUSTRY LEADERS EMERGING GROWTH, FUT URE LEADERS

$4.3 billion $12.8 billion $5.4 billion Pending $195 million $46 million

HAS ACQUIRED THE VASCULAR

BUSINESS OF

Guidant

HAS AGREED TO BE MERGED WITH

Thermo Electron

HAS BEEN ACQUIRED BY

Indap AB

INITIAL PUBLIC OFFERING

JOINT BOOK -RUNNING MANAGER

HAS ESTABLISHED A COLLABORATION

WITH

Novartis

FOLLOW-ON

SOLE BOOK -RUNNING MANAGER

2006 Pending 2006 2006 2006 2006

$815 million $4.1 billion $6.6 billion $210 million $10/ $19 million $140 million

HAS ENTERED INTO A LICENSING AGREEMENT WITH

FibroGen

HAS MERGED WITH

American Pharmaceutical

Partners

HAS BEEN ACQUIRED BY

WellPoint

HAS AGREED TO BE ACQUIRED BY

AstraZeneca

PIPE/IPO

LEAD PLACEMENT

AGENT/LEAD MANAGER

&BOOKRUNNER

HAS MERGED WITH

Corgentech Pharmaceuticals

2006 2005 2005 2006 2005 2005

$1.8 billion $1.8 billion $525 million $85 million $595 million $209 million

HAS ACQUIRED

Vicuron Pharmaceuticals

HAS ACQUIRED

NeighborCare

HAS ENTERED INTO A ROYALTY

AGREEMENT WITH

Emory University

HAS ENTERED INTO A STRATEGIC

ALLIANCE WITH

Astellas

HAS ACQUIRED

ESP Pharma & Retavase

HAS ACQUIRED

aaiPharma’s Pharmaceutical

Division 2005 2005 2005

2005 2005 2005

Overview – Background for Transactions

Attractive assets are driving deals High level of activity Phase II and later assets most attractive Large Biotech competing with Pharma Biotechs are “more realistic” about funding

requirements and capabilities required to be FIPCOs Tight capital markets More mature management teams Time is of the essence

Overview – Background for Transactions (cont’d)

Pharma and large Biotech are leading the way Aggressive, competitive views in accessing assets

Phase II Deals are all over the map Situational approach “Auction” is always best

VC’s see M&A as a viable alternative to IPO’s Parallel tracking Alternative financing choices Structured finance products Equity lines, project financing deals

Recent IPOs = Exit for Investors

’03–’05 IPO Class: 44 Companies

(a) 27 companies have completed secondary offerings

67%

33%

57%

16%

27%

46%

14%

40%

Share Price Relative to IPO Pre Money Value atCurrent Share Price

Years of Cash Remaining

100% = 44 Companies

Above

Below

>$200m

$100-$200m

< $100m

3+ Years

2-3 Years

< 2 Years

(a)

Recent IPOs = Exit for Investors

LTM Class: 19 Companies

(a) 6 companies have completed secondary offerings

84%

16%

53%

42%

5%

32%

32%

36%

Share Price Relative to IPO Pre Money Value atCurrent Share Price

Years of Cash Remaining

100% = 19 Companies

Above

Below

>$200m

$100-$200m

< $100m

3+ Years

2-3 Years

< 2 Years

(a)

What are Biotechs Looking For?

Cash, cash and more cash Complementary capabilities Retained commercial rights Significant downstream control Booking sales “Try it on for size” deals

Biotech vs. Pharma Innovation Trends

Most Innovative Drugs in Development Most Innovative Drugs in Development Predominantly Come From Biotech Predominantly Come From Biotech

Rather than PharmaRather than Pharma

Biotechs are Partnering Fewer of Biotechs are Partnering Fewer of These Innovations to PharmaThese Innovations to Pharma

Source: R&D Directions 2003-2006; Lazard Analysis

However Those That are Partnered However Those That are Partnered Primarily End Up in the Hands of Primarily End Up in the Hands of

PharmaPharma

25%35%

65%75%

100% = 81 Products 100% = 28 Products

Pharma

Biotech

No

Yes

Partnered? Partner

Biotech: Increasingly Important Source of Pipeline/Products

Source: R&D Directions, March 2003-2006, Lazard Analysis

Top 100 Innovative Drugs under Development

70% 76% 81% 81%

30% 24% 19% 19%

2003 2004 2005 2006

100% = 100 Products

Originator

Pharma

Biotech

Pharma-Biotech % of Respondents

All (N=128)

Pharma (N=47)

Biotech (N=63)

75% 83%

70% 70%

49% 35%

23% 46%

19% 24%

42%

39%

20%

14%

72%

80%

19%

13%

Key Consolidation Drivers: Pharma-Biotech

Rank Order of Importance, % of Respondents Selected as a Top 3 Choice

Source: Lazard Survey, 2006 Preliminary Results

Late Stage

Early Stage

Rank

’05 ’06

1 1

3 3 Strengthen or Acquire IP/Technology

4 4 Investors Seeking Exit

NA 5 Pharma’s Desire to Use Repatriated Earnings/Cash

NA 6 Increasing Cost/Risk of Gaining FDA Approval

2 2 2 2

Strengthen Strengthen PipelinePipeline

Intra-Biotech % of Respondents

All (N=128)

Public Biotech (N=41)

Private Biotech (N=22)

67%

63%

53%

43%

20%

16%

76%

68%

54%

34%

29%

5%

68%

68%

64%

32%

14%

23%

Key Consolidation Drivers: Intra-Biotech

Source: Lazard Survey, 2006 Preliminary Results

Rank Order of Importance, % of Respondents Selected as a Top 3 Choice

’05 ’06

1 1 Strengthen Pipeline

3 2 Financial Flexibility/Enhance Access to Cash

4 3 VC Investors Seeking Exit

2 4 Achieve Critical Mass

5 5 Forward Integration

6 6 Strengthen or Acquire IP/Technology

Rank

Biotech M&A

127

107

5

3

11

5

3

4

720

14

28

12

2003 2004 2005 2006YTD

M&A Activity(# Transactions > $50m)

Source: Lazard Analysis

Preclinical Phase I Phase II Phase III NDA / Marketed Product

$527M (a) $210M $373M $667M $999M

= 2005 Transactions

Average Valuation

M&A Transaction Values by Stage of Development

(a) Pfizer/Angiosyn transaction was primarily comprised of milestone payments and compared more to a licensing deal than an acquisition.

GSK/ ID Biomedical

Pfizer/ Vicuron

Cephalon/ CIMA Labs

Genzyme/ Bone Care

Salix/ Inkine

OSI Pharma/ Eyetech

GSK/ Corixa

JNJ/ Peninsula

Valeant/ Xcel

Novartis/ IdenixPfizer/ Idun

JNJ/ TransFormCephalon/ SalmedixSosei/ Akrakis

Takeda/ Syrrx

Pfizer/ Angiosyn

Chiron/ Powderject

ICN/ RibapharmRoche/ IGEN

Genzyme/ Sangstat

AstraZeneca/ KuDOS

Amgen/ Abgenix

PDL/ ESP Pharma

Genzyme/ ILEX

QLT/ Atrix

MGI Pharma/ Guilford

Cell Therapeutics/Novus Pharma

Amgen/ Tularik

UCB/ Celltech

Dendreon/ Corvas

Pfizer/ Esperion

0

400

800

1,200

1,600

$2,000

($ in millions)

GSK/ ID Biomedical

Pfizer/ Vicuron

Cephalon/ CIMA Labs

Genzyme/ Bone Care

Salix/ Inkine

OSI Pharma/Eyetech

GSK/ Corixa

JNJ/ Peninsula

Valeant/ Xcel

Novartis/ IdenixPfizer/ Idun

JNJ/ TransFormCephalon/ SalmedixSosei/ Akrakis

Takeda/ Syrrx

Pfizer/ Angiosyn

Chiron/Powderject

ICN/ RibapharmRoche/ IGEN

Genzyme/ Sangstat

AstraZeneca/ KuDOS

Amgen/ Abgenix

PDL/ ESP Pharma

Genzyme/ ILEX

QLT/ Atrix

MGI Pharma/ Guilford

Cell Therapeutics/Novus Pharma

Amgen/ Tularik

UCB/ Celltech

Dendreon/ Corvas

Pfizer/ Esperion

0

400

800

1,200

1,600

$2,000

($ in millions)

Pharma-Biotech

41%Intra-Biotech

38%

Spec. Pharma-Biotech

21%

18 Deals$5.6

19 Deals$13.3

100% = 47 deals

10 Deals$2.6

9

6

4

Total StrengthenLate Stage Pipeline

StrengthenEarly Stage Pipeline

Access IP/TechnologyCapabilities

Number of Deals by Type

100% = 19 deals

47%

21%

32%

Memo: Total Trans. Value $13.3bn $1.7bn$8.6bn $3.0bn

Characterization of Recent Pharma-Biotech Transactions

Biotech Acquisitions Over $50 million last 24 months(a)

($ in billions)

Source: Lazard Analysis(a) 9/2004–8/2006

Spec. Pharma-Biotech

21%

Intra-Biotech

38%

Pharma-Biotech

41%

18 Deals$5.6

19 Deals$13.3

100% = 47 deals

10 Deals$2.6

Characterization of Recent Intra-Biotech Transactions

Biotech Acquisitions Over $50 million last 24 months(a)

($ in billions)

5

2

3

8

Total StrengthenPipeline

Enhance Scale/Achieve

Critical Mass

Access IP/Technology

Capabilities

StrengthenBalance

Sheet

Number of Deals by Type

100% = 18 deals

28%

11%

44%

17%

Memo: Total Trans. Value

$5.6bn $1.3bn$3.6bn $0.2bn $0.5bnSource: Lazard Analysis(a) 9/2004–8/2006

BuyAlly

+ Shared Risk of Approval+ Payments Timed to Progress+ Less Wall Street Downside with Failure– Impact of Periodic Milestone Payments– Shared Economics– Alliance Management Issues

Ally vs. Buy Tradeoff

+ Purchase Accounting Treatment+ Current Valuations+ 100% of Economics+ Control Over Clinical Trials and IP– Assume Risk of Approval Up Front– Retention of Key Employees/R&D

Relevant for Private Companies Provide Upfront Cash on Cash Return

for Investors Real Visibility on Earn-out/Back-end

Payments Align Interests/Motivations of Both

Acquiror and Management

Structured Acquisitions

What are Collaborators Interested In?

Advanced ( Phase II) products Complementary assets

Therapeutic area match

Filling pipelines Locking up interesting technologies or assets “Earn outs”

Industry Metrics for Collaborations

According to Recap, Phase II Pharma deals continue to

increase in payment size, from 2003 – mid-year 2006:

Upfront: median $19M, mean $32M

R&D Funding: median and mean: $26M

Milestones: median, $187M, mean $244M

Equity: median, $18M, mean $30M

Examples of Structured Deals

UPFRONT OTHER KEY TERMS/CONSIDERATIONS

n $129 million consisting of: n $109 million for a

13% equity stake n $20 million cash

n Exclusive option on additional compounds/ programs n Research support on GSK in-licensed program n Milestone and royalties of $162 million to $240 million per

program n Put/ call options on shares

n $245 million for 100% of equity shares

n Antibiotic PPI-0903 spun off to Peninsula shareholders prior to acquisition

n $300 million consisting of: n $225 million for a

51% equity stake n $75 million cash

n Up to $35 million in additional milestones n US and EU co-promotion n Option to co-develop a third product n Full research funding for telbivudine and valtorcitabine

n $145 million n Earnouts based on regulatory filings, approvals and product sales

n Small double digit payment

n Total earnouts of $527 million

/

/

/

/

/

Source: WallsStreet Research.

Recent Representative Examples

Larger deals

Fibrogen-Astellas; Affymax-Takeda; and

ChemoCentryx-GSK

Phase II assets

“Extraordinary” Bio$ deals

Background

Each of the deals was an auction scenario

Fibrogen and Affymax were for superior EPO

Each involved existing collaborators

Recent Representative Examples

Fibrogen-Astellas--$2+Billion Deal

Anemia treatments (hypoxia-inducible factor and

prolylhydroxylase)

Europe, CIS, Middle East and South Africa

Licensing fee $300M; equity $50M

Development milestones $465M

Fibrogen keeps No. Am. Rights

Shared development costs ROW; Fibrogen No. Am.

Built on existing Japan deal

Recent Representative Examples

Affymax-Takeda--$535M Deal

Hematide and back-ups

Upfront fee $105M

Milestones, $280M development; $150M commercial and ROW

50:50 co-promotion in U.S.

Takeda bears first $50M of development expenses and 70% of

U.S. development costs

Affymax manufactures; holds NDA

In U.S., Affymax leads anemia; Takeda leads oncology

Takeda responsible for ROW

Built on existing Japan deal

Recent Representative Examples

ChemoCentryx --$1.5+B Deal

4 targets, 6 worldwide exclusive product options; lead

chemokine in Phase II

Upfront payments $63.5M (fee and equity)

Milestones all products $1.5+B

Royalties to ChemoCentryx

Co-promotion rights in certain indications

GSK leads development, holds regulatory filings after existing

studies

Final Thoughts

Understand the market and who is really a potential collaborator/buyer

Do your homework-- understand the partners and have a strategy and goals

Control and be thoughtful about the process, particularly timing

Be willing to walk away or choose a different path