For definitions and the distribution of analyst ratings, and other disclosures, please refer to page 32 - 35 of this report Michael G. King, Jr. 212.430.1750 mking@rodmanandrenshaw.com Christopher S. James, MD 212.430.1748 cjames@rodmanandrenshaw.com Bhavesh K. Patel, MD 212.430.1761 bpatel@rodmanandrenshaw.com Dmitriy Shapiro, MBA 212.847.7356 dmitriyshapiro@rodmanandrenshaw.com LIFE SCIENCES April 14, 2008 Rodman & Renshaw Biotechnology Balance Sheet Biotech Group Valuation The BTK index had a change of -0.51% last week, closing at 768.75, compared to the NASDAQ’s change of -3.41%. The profitable biotechs* trade at 24.2 times the FY08 and 19.4 times the FY09 consensus EPS estimates, vs. the historical mean of 44.6 times forward earnings. The PEG on FY08 and FY09 earnings is 1.4 and 1.2 respectively, marginally below the historical mean of 1.6 but well below the historical high of 2.9. The group’s 2008-2011 CAGR is 19.0%. Our View on Upcoming Performance There is a line in the Queen song “Bohemian Rhapsody” that reminds us of our group’s behavior of late: “anyway way the wind blows……..” The group got pummeled on Friday in conjunction with GE’s (GE, Not Rated) earnings miss and lowered guidance. Small-cap stocks took it particularly hard, as can be seen by the performance chart on page 7 of this note. The BTK’s performance last week may not have accurately reflected the performance of the entire space, and clearly benefitted the larger caps and the index to the detriment of the smaller guys as PDLI and Millennium both added performance to the BTK. Speaking of Millennium, it remains to be seen if takeover activity continues as a trickle or a flood. We are usually skeptical of the takeover-begetting-takeover theory; after all, Novartis’ (NVS, Not Rated) takeover of Chiron neither unleashed a wave of takeovers nor was it fundamentally bullish for our sector (neither was Astra Zenceca’s [AZN, Not Rated] acquisition of MedImmune). At the risk of making the “this time it’s different” argument, we have spoken to a number of our CEOs of late who have indicated that foreign buyers are stepping up their level of interest in our space due to the undervalued nature of the US dollar. In the 1980’s it was Rockefeller Center and Pebble Beach; maybe it’s our biotech assets now? Meanwhile, a number of recent or upcoming PDUFA dates could remind investors of the continued risks associated with FDA approval. Recall that Amgen’s (AMGN, Market Perform) Nplate PDUFA date was pushed out by three months last week, while Endo (ENDP, Not Rated) withdrew its application for Frova for migraine associated with pre-menstrual syndrome when the FDA moved the goalposts. Let’s not forget Pfizer’s (PFE, Not Rated) update of the Exubera label. Those upcoming PDUFAs that investors need to be mindful of include those by Pozen (POZN, Not Rated), Progenics (PGNX, Not Rated) and Sucampo (SCMP, Not Rated). Meanwhile, Gilead’s earnings and outlook, due on Wednesday, could give investors something to smile about. Upcoming Rodman & Renshaw Events • Poniard (PARD, Market Outperform) presents an expert discussion on picoplatin, April 14th, 6AM PT, at the American Association for Cancer Research 2008 Annual Meeting, The Hilton Gaslamp, 401 K Street, San Diego, CA • Rodman & Renshaw and MedKnowledge host Huntington’s on the Horizon Clinical Preview Conference Call, April 14th, 10 AM ET, 866-463-4554, Pwd: 354581 • Rodman & Renshaw and MedKnowledge host Measuring the Might of the MassARRAY Conference Call, April 17th, 12 PM ET, 877-879-6217, Pwd: 8948554 • Sequenom (SQNM, Market Outperform), Road Show, April 17th – April 18th, New York • Redpoint Bio Corporation (RPBC, Not Rated), Road Show, May 5th – May 7th, San Francisco, Texas, New York • XOMA (XOMA, Market Outperform), Road Show, May 8th – May 9th, Zurich, Switzerland and London, UK • Rodman and Renshaw 5th Annual Global Health Care Conference, May 19th – May 20th, Monaco
