Biotechnology Sector Expected to Benefit from Heavy Consolidation Activity in 2000, Says U.S. Bancorp Piper Jaffray.

Business Editors

MINNEAPOLIS---(BUSINESS WIRE)--Jan. 24, 2000

Expect the biotechnology sector to outperform the market in 2000 due to a continued consolidation trend, says a new report authored by U.S. Bancorp Piper Jaffray Senior Analyst Peter Ginsberg. The report, &uot;Biotechnology 2000: the Year of Consolidation,&uot; states that an upsurge in consolidation during 1999 was a major factor in the biotechnology sector's 111 percent stock price increase during the year. &uot;We believe that biotechnology stocks will be driven even higher this year as a result of what we expect will be by far the most consolidation activity ever in the sector,&uot; says Ginsberg.

Ginsberg estimates that there were 91 biotechnology combinations in 1999, with a total value of $16.7 billion -- 175 percent more than the value of consolidated biotechnology companies in 1998. 1998 had been a record year for consolidation in the sector, but in 1999 total transaction value eclipsed that of 1998 as a result of increased deal values. Examples include the Johnson &Johnson(a) (NYSE:JNJ, CLOSE) acquisition of Centocor and the Warner Lambert acquisition of Agournon.

Consolidation in 2000 to Outpace 1999

Ginsberg expects heavy takeover activity again in the biotechnology sector in 2000. He sites four drivers of M& activity in 1999 that persist today:

- Pharmaceutical firms seeking to maintain double-digit earnings

per share (EPS) growth rates are increasingly looking to biotech

companies to energize their product portfolios in the face of

patent expirations, pricing inflexibility and weak internal

pipelines;

- The success of numerous biotechnology companies in the past two

years has validated the biotech concept and increased the level

of competition to associate with companies in the biotech

industry;

- The number of large-cap biotech companies (companies with more

than $1 billion market value) has tripled from nine in 1997 to 27

at the end of 1999, creating a whole new set of potential

acquirers;

- Biotechnology managements generally have become more comfortable

with selling their companies as an exit strategy.

Strong Stock Performance Followed Consolidation Announcements

Ginsberg projects the strong stock performance consolidated biotechnology companies saw in 1999 to continue in 2000. &uot;We find it worthwhile to seek out companies that are likely targets for acquisition, although assessing potential takeout valuations is somewhat speculative,&uot; says Ginsberg. In the report he defines several themes that ran through most of the major acquisitions in 1999, saying that these can be useful in determining the most likely candidates for acquisition in this year.

End of Pooling Accounting Could Trigger Acquisitions Before Next Year

Another reason Ginsberg predicts a surge in consolidation activity in 2000 is the upcoming elimination of pooling accounting. &uot;One of the key drivers of the expected heightened M& activity in 2000 is likely to be the looming expiration of pooling accounting,&uot; says Ginsberg in the report. &uot;Acquisitions announced after the new accounting standards are finalized, which is expected at the end of 2000, will require purchase accounting, thereby generating a significant negative income statement impact for the acquirer in many cases.&uot;

Finally, the report assesses likely acquisition candidates for 2000 based on Ginsberg's criteria. He names 35 biotechnology companies that are the most likely candidates for acquisition.

How to Receive the Report

&uot;Biotechnology 2000: the Year of Consolidation,&uot; is available to the media and clients of U.S. Bancorp Piper Jaffray. For more information on receiving reports, call the Report Hotline at 612 342-8850. Nonclients may become clients by calling U.S. Bancorp Piper Jaffray, 612 342-6000, and asking for &uot;the broker of the day.&uot;

U.S. Bancorp Piper Jaffray, a subsidiary of Minneapolis-based U.S. Bancorp, provides a full range of investment products and services to businesses, institutions and individuals. The company's investment banking business has grown exponentially in the last several years by focusing on the needs of growth companies in the health care, technology, financial institutions, consumer and industrial growth sectors. U.S. Bancorp Piper Jaffray has a national reputation for its expertise in fundamental research and equity and debt financing. U.S. Bancorp offers a comprehensive range of financial solutions through U.S. Bank, First American Asset Management, U.S. Bancorp Libra Investments and U.S. Bancorp Piper Jaffray. For more information, visit our Web site at www.piperjaffray.com.

(a) U.S. Bancorp Piper Jaffray Inc. makes a market in the company's securities.