www'AME'biz

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www.AME.biz
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Safe Harbor Statement
This presentation contains forward-looking
statements that are subject to risks and
uncertainties that could cause actual results to
differ materially from those set forth in the
forward-looking statements, including
uncertainties related to product development,
uncertainties related to the need for regulatory
or other government approvals, dependence on
proprietary technology, uncertainty of market
acceptance of AME's products, uncertainties
related to business opportunities, the receipt of
future payments, including royalties, the
continuation of customer relationships and other
risks cited in the Companys Annual Report on
Form 10-K for the year ended December 31, 2002,
and other SEC filings. These forward-looking
statements speak only as of the date hereof. AME
disclaims any intent or obligation to update
these forward-looking statements.
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AME Highlights

• Internal pipeline of optimized biotherapeutics
• AME-527 Next-generation Remicade
• AME-133 Next-generation Rituxan
• Collaborations with biotherapeutic leaders
• Lilly, Centocor, Chiron, MedImmune, Bristol-Myers
  Squibb, Seattle Genetics, CancerVax, Biosynexus
• Numax Next-generation Synagis
• Next-generation Vitaxin
• Anti-IL9
• Robust business model

Remicade is a registered trademark of Centocor
Rituxan is a registered trademark of IDEC
Pharmaceuticals, Inc. Synagis and Vitaxin are
registered trademarks of MedImmune and Numax is
a trademark of MedImmune.
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AME-527 Next-Generation Remicade

• Remicade
• Anti-TNF? MAb approved for treatment in multiple
  indications
• Rheumatoid Arthritis (RA)
• Crohns Disease
• 2003 estimated sales of 1.5 billion

Source CSFB, 2002
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Optimization of AME-527
Murine Framework
CDRs
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AME-527 Superior Potency Compared to Remicade
in Animal Model of RA

• Tg197 transgenic murine model of rheumatoid
  arthritis

Saline
Increase in Joint Width (mm)
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11
13
15
17
Time (weeks)
Single bolus IP dose
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AME-133 Next-Generation Rituxan

• Rituxan
• Anti-CD20 Mab approved for treatment of
• Low-grade Non-Hodgkins Lymphoma (NHL) in US
• Aggressive NHL (with chemotherapy) in Europe
• 2003 estimated sales of 1.4 billion

Source CIBC World Markets, 2002
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Optimization of AME-133

• frAMEworks
• Fully human germline framework
• Decreased risk of immunogenicity

• CDR optimization
• Increased affinity

Optimized CDRs
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AME-133 Superior Potency Compared to Rituxan in
Ex Vivo Model

• Antibody-dependent cellular cytotoxicity assay

Relative A490
IgG (µg/ml)
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AMEsystemOptimization of Biotherapeutics
Directed Molecular Evolution

• Create genetic diversity
• Generate novel proteins
• Screen for proteins withimproved function

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AMEsystem
DirectAME
ExpressAME
ScreenAME
Gene
Optimized Protein
DNALibrary
ProteinLibrary
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Potential Advantages of AMEsystem

• Improved safety, efficacy and potency
• Enhanced convenience
• Decreased manufacturing costs
• Broadened intellectual property

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Drug Development Landscape
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Corporate Collaborations

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AME Business Model
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Next-Generation Biotherapeutics
DirectAME
ExpressAME
ScreenAME
Optimized Biotherapeutic
FDA-approved Biotherapeutic
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AME Product Pipeline
Indication
Therapeutic
Collaborator
Phase I
Preclinical
Research
Phase II
MedImmune MedImmune MedImmune MedImmune CancerVax
CancerVax Lilly Lilly Biosynexus Chiron Seattle
Genetics Bristol-Myers Squibb Centocor/JJ Lilly L
illy Lilly
Vitaxin Oncology Vitaxin Arthritis Numax RSV Anti-
IL-9 Asthma HUI77 Oncology HUIV26 Oncology Lilly
1 Lilly 2 HU96-110 Staphylococcus Chiron
1 HBR96 Oncology Anti-CD40 Inflammation Centocor
1 Lilly 3 Lilly 4 Lilly 5 AME-527 Rheumatoid
Arthritis AME-133 Non-Hodgkins
Lymphoma AME-359 Cocaine Abuse AME 4 AME 5 AME
6 AME 7
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Subsidiary Novasite Pharmaceuticals

• Majority-owned and independently financed
  subsidiary of AME
• Leverages AMEs core technology to small molecule
  drug discovery and optimization
• Financing history
• 2.3 million in Series A financing
• 3.4 million in Series B financing
• 6.7 million in NIH grants
• Initial validating collaboration
• Aventis Pharmaceuticals

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2002 Financial Highlights
Applied Molecular Evolution Condensed
Consolidated Balance Sheet December 31, 2002
(audited)(In thousands)

• Assets
• Cash, Cash Equivalents and Short-term
  Investments 51,119
• Other Current Assets 1,370
• Restricted Cash 10,500
• Other Assets 16,982
• Total Assets 79,971
• Liabilities and Stockholders Equity
• Current Liabilities 3,785
• Other Liabilities 10,244
• Stockholders Equity 65,942
• Total Liabilities and Stockholders Equity
  79,971

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Balance Sheet

• Applied Molecular Evolution
• Condensed Consolidated Balance Sheet
• September 30, 2003 (unaudited)
• (In thousands)
• Assets
• Cash, Cash Equivalents and Short-term
  Investments 43,658
• Other Current Assets 3,090
• Other Assets 19,117
• Total Assets 65,865
• Liabilities and Stockholders Equity
• Current Liabilities 6,045
• Other Liabilities 6,357
• Stockholders Equity 53,463
• Total Liabilities and Stockholders Equity
  65,865

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2003 Financial Projections
Applied Molecular Evolution Financial Projections
and Results (Consolidated) For the Twelve Months
Ending December 31, 2003 (in thousands, except
Per Share Data)
Q2P 1,500 8,070 (6,570) 630 (5,940)
(0.29)
Q1P 3,100 7,670 (4,570) 930 (3,640)
(0.18)
Revenue Expenses Loss from
Operations Other Income Net Loss Net Loss
per Share
Q3P 1,500 8,110 (6,610) 390 (6,220)
(0.30)
Q4P 3,900 8,350 (4,450) 280 (4,170)
(0.20)
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AME Projected Revenues
7.9A
10.0P
7.0P
Millions of Dollars
3.6A
3.5P
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AME 2003 Goals

• Announce animal model results on internal
  development program
• One next-generation biotherapeutic
• Enter into two corporate collaborations for
  biotherapeutics
• Produce clinical-grade AME-527 in AME Phase I/II
  GMP facility
• File IND on AME-527

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AME 2003 Year End Projected Pipeline
Collaborator
Phase II
Preclinical
Indication
IND or Phase I
Therapeutic
Vitaxin Rheumatoid Arthritis MedImmune Vitaxin Me
lanoma MedImmune Vitaxin Prostate
Cancer MedImmune Vitaxin Psoriasis MedImmune Numax
RSV MedImmune Anti-IL9 Asthma MedImmune AME-527 R
heumatoid Arthritis AME AME-133 Non-Hodgkins
Lymphoma AME AME 4 TBA in 2003 AME AME-359 Cocaine
Abuse AME
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www.AME.biz
Additional Science Support Slides to Follow
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2002 Financial Highlights
Applied Molecular Evolution Financial Projections
and Results (Consolidated) For the Twelve Months
Ending December 31, 2002
Revenue Expenses Loss from
Operations Other Income Net Loss Net Loss
per Share
EPS rounded quarterly to nearest cent
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AME-359 Optimized Butyrylcholinesterase

• Butyrylcholinesterase (BChE)
• Naturally occurring human serum enzyme
• Catalyzes the breakdown of cocaine
• Potential market
• 3.5 million cocaine addicts in U.S.
• 75,000 admissions to U.S. emergency rooms each
  year related to acute cocaine toxicity

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Optimization of AME-359

• AMEsystem engineering of a therapeutic enzyme
• Over 100-fold greater cocaine hydrolase activity
  compared with non-optimized BChE
• Mammalian cell expression system
• 1.03 million NIH SBIR Grant
• Federally funded optimization and animal model
  validation

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AME-359 Prevention of Lethal Cocaine Toxicity

• Rat model of acute cocaine toxicity

gt250-fold increased potency
Survival
BChE
10
100
Dose (mg/kg)
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First-Generation Vitaxin

• Anti-angiogenic MAb for cancer and arthritis
• Developed and optimized by AME
• First-generation Vitaxin Phase I
• Safe in 50 patients No immunogenic reaction
• Licensed to MedImmune
• Challenge High manufacturing cost

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Next-Generation Vitaxin

• Decreased costs of goods
• 300 improvement in manufacturing yield
• 90-fold higher affinity
• Phase II
• Cancer
• Arthritis
• Additional Phase II trials expected to begin in
  2003

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Synagis

• MedImmunes flagship product
• Anti-Respiratory Syncytial Virus (RSV) antibody
• Sales (01-02 RSV season) 605 million
• Challenges related to potency
• High manufacturing costs
• Use limited to high-risk infants
• Can only be administered by injection

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Next-Generation Synagis Numax

• Numax Next-generation Synagis
• Increased potency by over 10-fold
• Potential advantages
• Increase efficacy in current patient population
• Expand market to include elderly population
• Enable inhaled formulation
• Enhance intellectual property
• IND submitted in 2003

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Directed Molecular Evolution of Proteins
Expressed in Mammalian Cells
Protein with enhanced characteristics
Select protein and function of interest

• Post-translational modifications
• Protein folding
• Disulfide bond formation

Select expression system
Identify beneficial mutations(DNA sequencing)
Introducediversity
Screen
Iteration

• Biotherapeutic proteins often require mammalian
  cell expression
• Directed molecular evolution in mammalian cells
  is hindered bytransformation limitations
• Low efficiencies
• Multiple copies per cell

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DirectAME Gene SynthesisGenerating Optimal
Diversity

Thoroughness Ensured
Extent of Change Precisely Regulated
Location Fully Defined

• Changing codons (amino acids) is more efficient
  than changing individual bases due to the
  genetic code
• Ten changes that require three base changes

Phe Gln, Lys, Glu Met Tyr, Cys, Asp Trp His,
Asn, Asp Cys Glu
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DirectAME Precise Control of the Three Key
Parameters of Genetic Diversity
Precise control of three key parameters of
genetic diversity
LOCATION
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DirectAME Gene Synthesis
wild-type codon
random codon
pool
pool
pool
single mutations
double mutations
triple mutations
wild-type
randomized
unique variants
1 190 16,245
823,080 6.13 x 1012
More Focused
Less Focused
Example of a library focused on a discrete ten
amino acid region
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Beneficial Variations in Synagis
Distinct changes identified for improving koff
versus kon
Heavy Chain
T S G M S V G D I W W D D K K D Y N P S L K
S S M I T N W Y F D V S A S S S V G Y M H
D T S K L A S F Q G S G Y P F T
CDR1 CDR2 CDR3 CDR1 CDR2 CDR3
Light Chain