euro adhoc: BB Biotech AG / Annual Reports / Preliminary Annual Report as at December 31, 2002 (E)

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Promising prospects after a difficult year

The year 2002 was characterized by generally weak market conditions. Indeed, global stock markets declined for a third year in a row and most indices suffered significantly. BB BIOTECH was not exempted, with the BB BIOTECH Net Asset Value (NAV) and share price decreasing by 46.5% and 54.8% (in CHF), respectively. Of note, however, is that the NAV declined less than all major biotech indices. The difference between the BB BIOTECH share price and its underlying NAV (i.e. discount), increased to 17% by the end of the year. Given the solid structure of the BB BIOTECH balance sheet, its long-term track record, the investment strategy and the quality of our portfolio companies, we don’t think this discount is justified.

Amidst the global stock market weakness, some biotech products yielded a strong performance, further validating the business plan of many biotech companies. These included Amgen’s Aranesp and Neulasta, IDEC’s Rituxan and Actelion’s Tracleer. In addition, one of our core holdings, IDEC Pharmaceuticals, received approval from the US Food and Drug Administration (FDA) for its new drug Zevalin, which became the world’s first radio-labeled therapeutic drug for the treatment of refractory non-Hodgkin’s lymphoma (NHL). The FDA advisory committee also recommended for approval MedImmune’s FluMist, which may become the first approved nasal influenza vaccine in the USA, providing a convenient alternative to the injectable products currently on the market.

In 2002, we significantly increased our positions in Amgen due to the anticipated strong performance of its key products. We also entered into several new participations including Serono, due to the improved prospects of its key product Rebif for treatment of multiple sclerosis following an early FDA ruling; Shire Pharmaceuticals, based on the strong performance of its key product Adderall XR for treatment of Attention Deficit and Hyperactivity Disorder (ADHD); Ligand Pharmaceuticals, due to the potential of Avinza for the treatment of severe pain; and Enzon, due to its strong technology platform based on pegylation of proteins. We sold our positions in ImClone, Third Wave Technologies, Titan Pharmaceuticals and GenVec, following a disappointing performance. Several of our portfolio companies, including Neurocrine, EyeTech and Theravance, closed significant collaborations with large pharmaceutical partners to develop and market their drugs. These deals bode especially well for our private equity investments EyeTech and Theravance and might help to bring those companies public.

We are optimistic about the prospects for 2003 and expect new, innovative products from our portfolio companies to enter and perform well in the marketplace, such as MedImmune’s FluMist. Given the long-term growth prospects of the companies in the biotech industry, we value the current share prices in this sector as attractive, both in terms of historical comparisons as well as in comparison with other industries. If one puts the current Price/Earnings ratio into context with the growth rate of earnings (PEG-ratio), biotech companies are actually cheaper than most companies of other industries. We expect M&A activities to continue at these valuations throughout the entire healthcare sector; consolidations should lead to more diversified, stable and product-oriented companies.

This is the composition of BB BIOTECHs’ Portfolio as at December 31, 2002:

Amgen 27.9%
IDEC Pharmaceuticals 16.3% MedImmune 12.8%

Serono 5.8% Actelion 4.0%
The Medicines Company (TMC) 3.7% Neurocrine Biosciences 2.7%
CV Therapeutics 2.7% Adolor 1.7%
Shire Pharmaceuticals 1.6% Ligand Pharmaceuticals 1.1%
Pozen 1.1% Cubist Pharmaceuticals 0.7% 3-Dimensional Pharmaceuticals 0.7%
Enzon Pharmaceuticals 0.7%
Endo Pharmaceuticals 0.7% Virologic 0.6%
Cell Therapeutics 0.5% Transkaryotic Therapies 0.5% Durect 0.4% Regeneron Pharmaceuticals 0.3% Theravance (vormals Advanced Medicine) 1) 2.0% EyeTech Pharmaceuticals 1) 1.6%

Liquid funds 9.3% Total securities and Liquid funds: CHF 1 769.9 mn

1) unlisted company

The preliminary annual report is available on The full annual report will be published mid of March.

Further inquiry note:
Bellevue Asset Management, Grafenauweg 4, 6301-Zug, Switzerland
Dr. Christian Lach or Edwin van der Geest, Tel. +41 41 724 59 59 Tel: +41 41 724 59 59
FAX: +41 41 724 59 58

end of announcement euro adhoc

Emittent: BB Biotech AG
Vordergasse 3
CH-8200 Schaffhausen
Tel: +41 41 724 59 59
FAX: +41 41 724 59 58
ISIN: CH0001441580
WKN: 888509
Indizes: Investment Index (IGSP), Nemax All Share
Börsen: Neuer Markt Frankfurter Wertpapierbörse; official dealing SWX Swiss Exchange
Branche: Biotechnology
Sprache: Englisch