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Looking into Future of the Genomics Discovery Industry

U.S. Bancorp Piper Jaffray Publishes Genomics Discovery Overview Report

NEW YORK, Aug. 12 /PRNewswire-FirstCall/ -- Select genomic drug discovery names should continue to outperform through the remainder of this year and into 2004, according to a recently published report titled, Genomics Discovery Industry Overview by U.S. Bancorp Piper Jaffray Senior Research Analyst Edward Tenthoff. Tenthoff believes fundamental progress including clinical milestones, Investigational New Drug (IND) filings and new collaborations will drive the industry.

According to Tenthoff, a separation of quality has occurred in the genomics sector that is only now beginning to reflect in the valuations of emerging winners. "We believe this valuation disconnect still offers investors with attractive entry points to build long-term positions in genomic discovery names that are providing the future targets to the drug industry," said Tenthoff.

In addition, Tenthoff analyzes the near-term future of the genomics industry, stating that he expects the remainder of 2003 to be a stock picker's environment with potential event-driven trading opportunities throughout the year. "While we believe the summer may represent a period of consolidation of recent gains in the sector, we expect several well-funded, differentiated discovery companies to be positioned for big returns in fourth quarter 2003 and into next year," said Tenthoff.

"We believe that target-discovery identification and drug development, though risky, offer the greatest potential return on genomic discoveries," said Tenthoff. "Investors should remain focused on high-quality, well-funded names with upcoming valuation drivers including clinical milestones, IND filings and collaborations."

Proteomics, a post-genomic discovery approach, is another key aspect of the genomics discovery industry. Tenthoff states that while most proteomics discovery companies are focused exclusively on the protein, most early genomics companies have subsequently built out extensive proteomic capabilities. He believes that integrated genomics and proteomics research will provide the best targets.

"We suggest that now is the time to buy genomic discovery names," said Tenthoff. "We see genomic and proteomic research providing the future targets and compounds for the drug industry. With the tide turning, we have seen some of these stars of tomorrow offering some of the biggest returns in the biotech industry."

Tenthoff currently covers Celera Genomics Group (CRA, #, $9.55) with an Underperform rating, Exelixis Inc. (EXEL, #>, $6.31) with a Strong Buy rating and a 12-month price target of $11 (12x 2004 revenues of $65 million), Human Genome Sciences Inc. (HGSI, #>, $12.45) with an Outperform rating and a 12- month price target of $15 (projected enterprise value of $800 million based on clinical pipeline) and Lexicon Genetics Incorporated (LEXG, #, $4.91) with an Outperform rating and a 12-month price target of $8 (10x 2004 revenues of $50 million).

To receive a copy of Genomics Discovery Industry Overview, clients and members of the media should contact Susan Beatty at susan.beatty@pjc.com or 612-303-5680.

U.S. Bancorp Piper Jaffray, a subsidiary of the consolidated group of U.S. Bancorp (NYSE: USB), is a focused securities firm comprised of two revenue- generating segments -- Capital Markets and Private Client Services. Clients of both segments are supported by Investment Research, an independent group reporting to the CEO. The firm provides a full range of investment products and services to individuals, institutions and businesses. The firm has over 124 offices in 25 states across the country. U.S. Bancorp offers a comprehensive range of financial solutions through U.S. Bank, U.S. Bancorp Asset Management, U.S. Bancorp Investments and U.S. Bancorp Piper Jaffray. For more information on U.S. Bancorp Piper Jaffray, visit www.piperjaffray.com .

Rating Definitions

Investment Opinion: Investment opinions are based on each stock's return potential relative to the overall market*, not on an absolute return.

Strong Buy: Expected to outperform the relevant broader market index over the next 6 to 12 months. An identifiable catalyst is present to drive appreciation.

Outperform: Expected to outperform the relevant broader market index over the next 12 to 18 months.

Market Perform: Expected to perform in line with the relevant broader market index over the next 6 to 12 months.

Underperform: Expected to underperform the relevant broader market index over the next 6 to 12 months.

* Broader market indices = Russell 2000 and S&P 500

Volatility Rating: Our focus on growth companies implies that the stocks we recommend are typically more volatile than the overall stock market. We are not recommending the "suitability" of a particular stock for an individual investor. Rather, it identifies the volatility of a particular stock.

Low: The stock price has moved up or down by more than 10% in a month in fewer than 8 of the past 24 months.

Medium: The stock price has moved up or down by more than 20% in a month in fewer than 8 of the past 24 months.

High: The stock price has moved up or down by more than 20% in a month in at least 8 of the past 24 months. All IPO stocks automatically get this volatility rating for the first 12 months of trading.

The following disclosures apply to stocks mentioned in this report if and as indicated: (#) U.S. Bancorp Piper Jaffray (USBPJ) was making a market in the Company's securities at the time this research report was published. USBPJ may buy and sell the Company's securities on a principal basis. (^) A USBPJ analyst who follows this Company or a member of the analyst's household has a financial interest (a long equity position) in the Company's securities. (@) Within the past 12 months, USBPJ was a managing underwriter of an offering of, or dealer manager of a tender offer for, the Company's securities or the securities of an affiliate. (>) USBPJ has either received compensation for investment banking services from the Company within the past 12 months or expects to receive or intends to seek compensation within the next three months for investment banking services. (~) A USBPJ analyst who follows this Company, a member of the analyst's household, a USBPJ officer, director, or other USBPJ employee is a director and/or officer of the Company. (+) USBPJ and its affiliates, in aggregate, beneficially own 1% or more of a class of common equity securities of the subject Company. (=) One or more affiliates of U.S. Bancorp, the ultimate parent company of USBPJ, provided commercial banking services (including, without limitation, loans) to the Company at the time this research report was published.

Nondeposit investment products are not insured by the FDIC, are not deposits or other obligations of or guaranteed by U.S. Bank National Association or its affiliates, and involve investment risks, including possible loss of the principal amount invested.

USBPJ research analysts receive compensation that is, in part, based on revenues of USBPJ Equities and Investment Banking, which include overall investment banking revenues. USBPJ research analysts who follow this Company report to the Head of Investment Research who, in turn, reports directly to the Chief Executive Officer of U.S. Bancorp Piper Jaffray.

This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as the primary basis of investment decisions. Because of individual client requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. It is not a representation by us or an offer or the solicitation of an offer to sell or buy any security. Further, a security described in this release may not be eligible for solicitation in the states in which the client resides. Officers or employees of affiliates of U.S. Bancorp Piper Jaffray, or members of their families, may have a beneficial interest in the Company's securities and may purchase or sell such positions in the open market or otherwise.

Notice to customers in the United Kingdom: This report is a communication made in the United Kingdom by U.S. Bancorp Piper Jaffray to market counterparties or intermediate customers and is exclusively directed at such persons; it is not directed at private customers and any investment or services to which the communication may relate will not be available to private customers. In the United Kingdom, no persons other than a market counterparty or an intermediate customer should read or rely on any of the information in this communication.

Securities products and services offered through U.S. Bancorp Piper Jaffray, member SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp.

Additional information is available upon request.

SOURCE U.S. Bancorp Piper Jaffray

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding U.S. Bancorp's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.



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