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Biotech / Medical : analysts and calls -- ML

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From: tom pope	3/30/2006 4:18:39 PM
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ALTUS - (1)Summary and (2) near term catalysts from the body of the report Altus Pharmaceuticals Inc Initiating with BUY;$31 Price Objective Initiating Coverage with BUY and $31 Price Objective We are initiating coverage of Altus Pharmaceuticals with a BUY rating and 12- month price objective of $31. Altusdevelops improved protein-based therapies for chronic metabolic and gastrointestinal disorders, and we believe it offers a compelling combination of two promising late-stage product candidates, plus a proprietary protein crystallization platform that can be leveraged to produce more. Proprietary Technology for BetterProtein Therapies Altus applies its patented crystallization and cross-linking technology to existing proteins to develop potentially more stable, more effective, and more convenientprotein-based therapies. Its two clinical candidates, ALTU-135 and ALTU-238, potentially offer significant advantages over existing products. ALTU-135and ALTU-238 Offer Advantages Over Current Rx ALTU-135 is a pancreatic enzyme product (PEP) in pre-phase III development for patients with conditions such as cystic fibrosis where pancreatic enzymes are deficient. In addition to potentially better stability and consistency, it offers a much lower pill burden.ALTU-238 is a once-weekly growth hormone in phase II that would be a big improvement over the current once-daily injectables. Price Objective and Risks Our price objective of $31 is based on a probability adjusted sum-of-the-parts net present value (NPV) analysis. Key risks arefailure to successfully commercialize ALTU-135 or ALTU-238 and potential competition. (2)Catalysts in 2006 We expect a number of potential catalysts for Altus in 2006. The company expects to begin a pivotal phase III trial for ALTU-135 in cystic fibrosis patients with malabsorption due to exocrine pancreatic insufficiencyin the second half of 2006, most likely in September or October. We expect positive phase II data for ALTU-238 for the treatment ofgrowth hormone deficiency (GHD) in the first half of 2006 and Altus expects to begin a phase III trial in adults and a phase II/III trial in children of ALTU-238 in GHD in the second half of 2006. We also expect Altus to announce a partnership deal for ALTU-238 in 2006.

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