Cambrex Annual Analyst Meeting. The Harvard Club of New York City October 5, 2005

Transcription

1 Cambrex Annual Analyst Meeting The Harvard Club of New York City October 5,

2 Safe harbor statement Today s presentation and discussion will contain forward-looking statements including statements regarding future operating performance, financial or revenue growth targets, or client project pipelines. These statements may be identified by words such as expects, anticipates, intends, estimates, believes or similar expressions. These statements are based on Cambrex s current plans and expectations and involve risks and uncertainties that could cause actual outcomes and results to materially differ from those set forth in the forward-looking statements. For discussion of these and other risks and uncertainties, see the Forward-Looking Statements and Risk Factors That May Affect Future Results sections in the Annual Report Form 10-K for the period ending December 31, The Company undertakes no obligation to update forward-looking statements. For further information, please refer to Cambrex s reports and filings with the Securities and Exchange Commission. 2

3 Agenda 9:30 am 9:50 am 9:50 am 10:10 am 10:10 am 10:40 am 10:40 am 10:55 am 10:55 am 11:20 am 11:20 am 11:40 am 11:40 am 12:00 pm 12:00 pm 12:20 pm 12:20 pm 12:45 pm Human Health Gary Mossman, Chief Operating Officer Biopharma Steve Klosk, Chief Operating Officer, Cambrex Biopharma Working with Cambrex Andrew Grethlein PhD, Senior Vice President Pharmaceutical Operations, Tercica, Inc. Break 15 minutes Bioproducts Shawn Cavanagh, Senior Vice President and General Manager, Bioproducts Financial review and strategy Luke Beshar, Chief Financial Officer Cell therapy: next generation therapeutics Daniel R. Marshak PhD, Chief Technology Officer, Biotechnology Cell therapy business update Dave Smith, Vice President Bioservices Commercial Development Break for Lunch 12:45 pm 1:05 pm 1:05 pm 1:25 pm 1:25 pm 1:45 pm 1:45 pm 2:30 pm Technology for the production of protein biopharmaceuticals Chris Dale, Vice President, Technology, Biopharma Innovations in research products Markus Hunkeler, Director of Marketing, Research Products Bringing speed to microbial detection Shawn Cavanagh, Senior Vice President and General Manager, Bioproducts Closing remarks and Q&A John R. Leone, President and Chief Executive Officer and Management Team 3

4 Strategic Update John Leone 4

5 From fine chemicals to life sciences 2005E Gross Sales: ~ $452 - $465M Well positioned in healthcare industry Diversified technologies & capabilities Biopharma Contract manufacturing 11% Proven record of successful acquisition integration Outstanding regulatory compliance record Global manufacturing and distribution 31% Bioproducts Research & Therapeutic Applications 58% Human Health Small Molecule APIs and Intermediates Sound financials 5

6 Biosciences provides the growth engine 2005E Gross Sales: ~ $452 - $465M Leveraging strength of Bioproducts & Biopharma Synergies in technology and product offerings 42% Biosciences Bioproducts + Biopharma 58% Human Health Small Molecule APIs and Intermediates Customer oriented Integrated commercialization solutions 6

7 Bridging the pathway to 2009 $ Millions Sales Biopharma: New Business $439M 58% HH: Price HH: New Business Research Therapeutic Applications Cell Therapy RMD Testing 44% 11% ~$765M % 31% 45% E Bioproducts Human Health Biopharma 7

8 To life sciences and specialty therapeutics $ Millions Sales Biopharma 6% Specialty Therapeutics % HH: Price HH: New Business Research Therapeutic Applications Cell Therapy RMD Testing 41% 10% ~$815M % 31% 43% E Bioproducts Human Health Biopharma Specialty therapeutics 8

9 Building partnerships for rapid commercialization of our customers products Bioproducts and Biopharma Human Health Cell systems and cell lines Contract development and manufacturing biologics Generic APIs Custom development and manufacturing small molecule Electrophoresis and chromatography Bioassays Process development services (custom assays) Therapeutic media Fill/finish, testing services Rapid microbial detection (RMD) Commercialization solutions Proprietary products Specialized handling services Controlled substances, high containment, high energy Specialty therapeutics 9

10 Aligned for customer satisfaction Strategic Alignment Execution Alignment Financial Alignment Metrics Alignment 10

11 Outcome oriented To increase innovation, discover hidden opportunities, better alignment with customers priorities Creative innovation Empower employees with the freedom to find different solutions Cross-functional, cross-business resource utilization Focus on optimized, cost effective solutions 11

12 Drug discovery fundamentals IND submitted NDA submitted Drug discovery Pre-clinical Clinical trials FDA Review Large scale manufacturing/phase lv Phase I healthy volunteers Phase li patients Phase lil patients COMPOUNDS 250 COMPOUNDS 5 COMPOUNDS 1 FDA Approved Compound 5 years 1.5 years 6 years 2 years 2 years Synthesis 11.0% Screening Testing 15.5% Toxicology 4.9% Dosage formulation 8.0% Clinical evaluation Phase l lll 32.0% Process Development 9.1% Regulatory Process 4.5% Other 2.0% Clinical evaluation Phase lv 12.9% ~$1 billion Pharma R&D Budget Allocation 12 Sources: Pharma.org, Business Insights Interactive: The Pharmaceutical Market Outlook through 2005.

13 Drug discovery alignment IND submitted NDA submitted Drug discovery Pre-clinical Clinical trials FDA Review Large scale manufacturing/phase lv Phase I healthy volunteers Phase li patients Phase lil patients FDA Approved Compound Genericism Cells & Media Cell lines Electrophoresis Chromatography Cells & Media Bioassays Route selection Expression system selection Biologics, Cell therapy, Small molecule APIs Process development Process scale-up and optimization cgmp production Testing services Rapid microbial detection Commercialization services Specialty therapeutics Sources: Pharma.org, Business Insights Interactive 13

14 Growth strategy Organic Growth New Products, Technologies, Services, Strong Brand Specialty therapeutics Innovative solutions that improve therapeutics and accelerate commercialization Establish client relationships early, grow with the molecule Acquisitions/Alliances Products, Capabilities, Technology, Infrastructure Leading positions in niche markets through proprietary technology, specialized capabilities and regulatory excellence 14

15 Specialty therapeutic strategy Advance current partnerships in development Ortec International Acquire biopharmaceutical or cell therapy products or companies Branded Mid-to-late-stage clinical development Focus on wound care and dermatology products 15

16 Cell therapy market estimates vary significantly $6 $5 U.S. Estimated Market Size of Cell Therapy and Related Technologies CAGR 68% $U.S. Billions $4 $3 $2 Gene Therapy Cancer Vaccines Cell Therapy Cytokines Total $1 $0 2003E 2004E 2005E 2006E 2007E 2008E 2009E Source: Frost & Sullivan, Burrill & Company 16

17 but represent a significant opportunity Worldwide estimated cell therapy market size by indication* $ billions Skin and Wound Liver Disorders Diabetes Cardiovascular Cancer Bone and Joint Source: Jain Pharma Biotech Report 2004 and excludes certain categories of indications i.e. hematology

18 The dermatology market (includes wound care) Specialty market with less competition We have a specialty therapeutic: OrCel Management experience in dermatology and pharma World class expertise in PD and manufacturing of biologics and cell therapies Dermatology market : CAGR expected to be greater than 15% Approximately $3.0 billion market in Source: EvaluatePharma; Defined Health analysis. OrCel is a trademark of Ortec International.

19 We have what it takes to compete Cell Cell Know-How Know-How Cell Culture Media Established Established Supply Supply Chain Chain Biologics and Cell Manufacturing Specialty Therapeutics Testing Services Regulatory Regulatory Expertise Expertise Process Development Selling Selling Infrastructure Infrastructure 19

20 Our cell therapy expertise spans the entire product life cycle Cell therapy pipeline Phase I Phase Il Phase Ill Commercial Wound Healing (C3) Wound Healing Wound Healing (Ortec) Wound Healing Wound Healing (Keracure) Dermatological Immune Therapy Cardiovascular (BioHeart) Cardiovascular Cancer Parkinson s Disease Dermatological Cardiovascular (Mesoblast) Cardiovascular Ophthalmology Cardiovascular Spinal Cord Testing (Innovative BioSensor) 20

21 Our strategic pathway Building a specialty therapeutics pipeline Enter Specialty Therapeutics Acquire Specialty Therapeutics Company Build Specialty Therapeutics Franchise(s) Stage 1 Stage 2 Stage 3 Strategic Objective 0 18 Months Enter specialty pharma through product acquisition. Add products to leverage sales force Enter specialty therapeutics by acquiring a therapeutics company that has a pipeline. Build derm and wound care franchise by adding products Build a therapeutics franchise by acquiring a cell based company Capability Building Build sales organization either through acquisition, CSO or selective hiring Build clinical development organization either through acquisition, hiring or alliance Build additional functions required to become fully integrated therapeutics company 21

22 Specialty therapeutics can drive improved growth and financial performance Unique opportunity to leverage Cambrex competencies in cell therapy and biologics manufacturing to establish a novel business model Market has yet to be exploited by other specialty pharma companies whose focus remains typically on small molecules Will shift our business from services to products delivered to patients Expect increased growth of sales and profit with more predictable financial performance 22

23 Human Health Gary Mossman 23

24 Human Health fundamentals The segment has continued to grow in a challenging market and now has 120 APIs Excluding the Other category, APIs and intermediates grew 9.5% and achieved operating profit of over 19.5% in Building Market Share $ millions % +7.2% A 200 A A P 150 P P I I I s 100 s s Human Health outperformed the general market growth of ~5% in Intermediates Other The Other category includes agricultural, animal health and specialty chemical products

25 Pharma R&D investment drives growth Pharma R&D Investment $B $49.3B Biotech Pharma Source: PHRMA.org 25

26 The challenging market environment The outsourcing trend depends on who you ask Large pharma companies have different strategies Delayed and fewer NCE approvals Safety concerns Price moderation as the US government becomes a more powerful spender (Medicare Modernization Act) More price competitive Broad base of suppliers, foreign competition Ninety-six FDA approved sites in Asia Excess industry capacity of 20-30% Indian generic drug companies are acquiring facilities in Europe and the US and are competing with our client base Source: CMR, March 2005, company sources 26

27 The competitive environment still offers growth opportunities Effective strategies that provide customers added value Use expanded capabilities and core technologies to focus on areas where there is less competition Cambrex s proprietary products and world class regulatory record provides market differentiation Increase customer contact and brand/market awareness through co-marketing and cross-functional team selling Efficient operations allow for competitive pricing, improved customer service and cash flow 27

28 Growth drivers Custom development Custom development success garners long-term custom manufacturing contracts Custom manufacturing Utilize strategic alliances to provide additional capabilities, facilities, a broader based project/product feeder system and new customers Six new clients 28

29 Growth drivers Product line extension Leverage polymeric drug delivery, taste masking, polymorph, high energy and biocatalysis technologies with existing APIs to develop new products and business, including branded generics Continued focus on cost reductions to remain price competitive 29

30 Proprietary product: Camouflage polymeric taste masking process + Dissolvable strips + = Liquid suspension API Camouflage oral polymeric drug delivery Camouflage with API Capsule or tablet Simple to use Cost effective Colorless Tasteless, taste masking Sugar free High drug loading Dissolves rapidly Non-systemic absorption of polymer Enhances stability Used in approved products 30

31 Growth drivers New generic API development Previously, European generic drug companies had to develop APIs in the US Technical Center Cambrex Charles City Now, EU legislation allows us to develop generic alternatives for patented products at our EU facilities as well Supplements on current APIs Strengthens customer relationships and increases market share as they shrink supplier base to primary and secondary sourcing 31

32 Margin improvement Product line rebalancing from more mature APIs and fine chemicals to custom development and manufacturing, proprietary products and controlled substances Focus new projects and new product introductions in areas where there is less competition Proprietary products Controlled substances High potency High energy Biotransformations 32

33 Lean Six Sigma and cost reduction Lean Six Sigma Since introduction in 2004, $2+ million in cash savings Cost reduction Waste minimization Supply chain sourcing Third party outsourcing Preventive maintenance programs 33

34 Results of strategic initiatives and integration of sales organization in the US, EU and Asia Client projects YTD 09/ Preclinical/ Phase l Phase ll Phase lll Total

35 Small molecule APIs IND submitted NDA submitted Drug discovery Pre-clinical Clinical trials FDA Review Large scale manufacturing/phase lv FDA Approved Compound Genericism Route selection Pre-clinical Process development & optimization Scale-up cgmp manufacturing Taste masking Over 120 APIs cgmp manufacturing Taste masking Generic APIs APIs: Active pharmaceutical ingredients 35

36 Human Health Summary Outperformed the market Successfully launched plans to mitigate price and margin pressure Current project portfolio and proprietary technologies have us well positioned in the market, short term and long term 36

37 Biopharma Steve Klosk 37

38 The biologics market The market for contract development & manufacturing of biologics is between $1.5 and $2.0 billion (1) The market is expected to grow 15-20% per year through 2010 (1) Over 1000 biologics are in development worldwide Approximately 800 in the US (55%) and EU(30%) (1) Biologics in Development in the US and EU (2) Preclinical Phase l/ll Phase lll 38 (1) Market sources and company estimates (2) Investigational drug database

39 Biopharma fundamentals Our strongest new business pipeline; it has doubled in the past 18 months This year, one late phase project was approved, two are pending approval, three additional late phase projects added Expect to breakeven in Q and be profitable thereafter Expect marginal contribution of 70% on incremental volume $ millions Sales

40 Building a portfolio with predictable performance Increase the number of licensed products to reach a target of 50% of revenue to mitigate earnings lumpiness Increase the number of late-phase projects to feed commercial objective Increase the number of earlier phase projects to drive long-term growth and fill short-term available capacity 40

41 Building a portfolio with predictable performance Market broadest service offering to leverage synergies of microbial fermentation, cell culture, and transgenic purification with protein conjugate expertise, cell culture media, fill/finish, cell-based assays and testing services Proven ability to produce US and EU licensed products Leverage for new business development 41

42 Clinical development process of a biopharmaceutical IND submitted NDA submitted Drug discovery Pre-clinical Clinical trials Phase I Phase li Phase lil FDA Review Large scale manufacturing/ Phase lv Expression system defined Primary definition process Refine process operational control parameters Finalize process control parameters Validated process FDA Approved Compound Process scalability Development of scale down process Fixed, defined process and product Well characterized process Process outer limit definition Pivotal process validation & characterization studies Sources: Pharma.org, Business Insights Interactive 42

43 Late stage clients Licensed Pre-registration Phase lll Client 1 Client 2 Client 3 Biodefense 43

44 Building our Biopharma project portfolio YTD 09/ Preclinical/ Phase I Phase ll Phase lll Pre-registration Licensed Total

45 Building Biopharma commercial momentum Two licensed products Two pre-registration products Three phase lll Stronger early phase pipeline Breakeven is in sight Excellent marginal contribution on incremental volume Underlying market is robust 45

46 Working with Cambrex Andrew Grethlein PhD Tercica, Inc 46

47 Bioproducts Shawn Cavanagh 47

48 Bioproducts performance Continued growth in research and therapeutic applications New markets $M 160 Sales % +14% New products New geographies CAGR: 20% Over 1800 products and 14,000 customers worldwide T o t a l Therapeutic Applications Research Products 48

49 The Vision for Bioproducts Strong, differentiated positions in mid-sized, high growth markets for research products and therapeutic applications World leadership positions In cell-based research and high throughput screening (HTS) tools In therapeutic applications, bioservices and rapid microbial detection (RMD) products 49

50 Cross-business segment and cross-functional synergies target growing markets Products Services Specialty therapeutics Rapid Microbial Detection Therapeutic Media Research Products Process Development Testing Services Fill & Finish Advanced Wound Care Advanced Burn Care Other Cell Therapies Cell Therapy Manufacturing Biopharma Manufacturing 50

51 Bioproducts Gene Discovery Gene/ Protein Function Cell Function Drug Screening ADME/ Tox Clinical Trials I III Commercial Production Nucleic Acid Electrophoresis Protein Electrophoresis Primary Cells & Media Bioassays Cell Model Systems Conditionally Immortalized Cells RMD: Endotoxin, Pathogen and Mycoplasma Detection Cell Therapy Manufacturing PD/Testing Services Fill/Finish Services Therapeutic Media Therapeutic Commercialization Services 51

52 Research market Growth being driven by the scientists desire to study increasingly more complex biology using tools that provide more relevant, quantitative and high speed results Large pharma is continuing to increase investment in R&D Industry consolidating but significant opportunities exist in niche areas 200,000 researchers worldwide 52

53 Molecular biology Traditional nucleic acid electrophoresis growing ~3-5% Expect to capture share through pre-cast electrophoresis technologies Chromatography currently growing in the low singledigits but could increase with downstream processing of biologics New products will enable some growth acceleration FlashGel system 53

54 Cells, cell systems and cell models A $150 million market growing at 10 15% per year Cambrex has the broadest line of cell systems available Clonetics and Poietics normal human cells Progenitor cells: hematopoietic cells, mesenchymal stem cells 54

55 Clonetics conditionally immortalized cell lines New in 2005 Acquisition of IP and key technology licenses New technology enables use of primary cells in high throughput applications for drug discovery Addresses an unmet need Greater relevance using primary cells Eliminate poor drug candidates earlier Focus on promising candidates earlier Licenses to support drug discovery programs 55

56 Bioassays Target markets are high throughput screening, high content screening and ADME/Tox Strength in luminescence (ATP) Quantitative and relevant to address Cell health Cell function High throughput screening 56

57 Research product launches in New in 2005 FlashGel system Clonetics renal epithelial cells Clonetics normal human melanocytes Clonetics conditionally immortalized cell lines PowerCHO CD serum-free media Transport protein delivery reagent MycoAlert mycoplasma control set PDELight universal camp phosphodiesterase assay G-Protein coupled receptors (GPCR) 57

58 Bioproducts Gene Discovery Gene/ Protein Function Cell Function Drug Screening ADME/ Tox Clinical Trials I III Commercial Production Nucleic Acid Electrophoresis Protein Electrophoresis Primary Cells & Media Bioassays Cell Model Systems Conditionally Immortalized Cells RMD: Endotoxin, Pathogen and Mycoplasma Detection Cell Therapy Manufacturing PD/Testing Services Fill/Finish Services Therapeutic Media Therapeutic Commercialization Services 58

59 Rapid microbial detection Improving product viability and patient safety with rapid release testing products Endotoxin detection is the base platform with reagents, kits, automated equipment and software KineticQCL is the best product on the market PyroGene recombinant factor C and PyroSense on-line endotoxin detection EndoTrap Endotoxin Removal Products WinKQCL Software v. 3.00, 21 CFR Part 11 Compliant TVO (total viable organism) testing in five hours 2006 launch MicroAlert TVO detection kit MycoAlert mycoplasma detection for regulated applications in twenty minutes New in 2006 New in 2006 Major expansion phase with potential to triple the size of the business in the next five years EndoTrap is a registered trademark of Profos AG 59

60 Therapeutic media Demand is driven by growth in mammalian cell-based production ~$900 million market with growth expected to be 12-15% per year through % commodity, 20% serumfree media Industry moving towards NAO & chemically defined media New in 2005 Optimized media for cell therapy and our contract services Improving cost base with automation and scale PowerCHO Media Boosts Protein Production in CHO Cells 60

61 Bioservices New in 2005 Integrated services for biotherapeutic companies Cell therapy contract manufacturing services Process development, testing and fill/finish services Future commercial therapeutic sales 61

62 Cell therapy a new therapeutic model demands Cambrex expertise Cell therapy compared to traditional drug paradigm Unique Cambrex positioning Regulatory Current Good Tissue Practices (cgtp) in 05/2005 Safety and communicable diseases Product identity and efficacy Excellent regulatory record in Walkersville and Verviers - long history of cgmp manufacturing Expertise in bioassay development and testing Logistics More important when packaging/transporting live cells Cambrex has years of experience shipping live and cryopreserved cells We supply therapeutic media and can optimize process conditions Raw material sourcing The donor as vendor The patient as vendor - lot sizes of one Cambrex has an established tissue acquisition infrastructure Smaller lot sizes create valuable growth opportunity for bioassays and testing services 62

63 Process development, testing and fill/finish services Process Development Develops, validates and performs bioassays Cell proliferation Cytotoxicity Cell differentiation Drug potency Apoptosis Other biological parameters Tissue acquisition Specialized cell isolations Media development and optimization Testing Services Testing services in an integrated cgmp/glp environment Molecular biology Virology Cell biology Microbiology Sterility Endotoxin Mycoplasma Analytical services New in 2005 Fill/finish: FDA regulated aseptic filling and lyophilization for clinical trials 63

64 First steps to commercialization of specialty therapeutics Initial focus on the wound care market with the launch of OrCel Opportunity The traditional wound care market is declining The shift in demographics to an older, overweight population leading to increased rates of diabetic foot ulcers and venous leg ulcers An increase in the number of innovative products Better wound care treatments can decrease the total cost of treatment Leverage our expertise in cell therapeutics for wound care OrCel is a trademark of Ortec International. 64

65 Financial review and objectives Luke M. Beshar 65

66 Year-to-date June 2005 performance For continuing operations YTD 06/2004 YTD 06/2005 Change Year over Year Sales $222.5M $226.6M 2% Gross Profit $87.5M $83.5M -5% Gross profit as % of sales 39.3% 36.9% Operating Profit $28.1M $20.0M -29% Operating profit as % of sales 12.6% 8.8% Capital Expenditures $18.1M $18.1M --- Cash Flow from Ops $20.8M $10.3M -51% EPS reported $0.53 $ % EPS before special items $0.53 $0.30 (1) -43% (1) Excludes tax benefit of $3.2 million or $0.12 per diluted share principally due to a favorable Swedish court decision in Q

67 Cambrex performance From 2002 to 2004, operating margins have gone from ~18% to ~11% Under-utilization of biopharma facilities A more competitive API market and lower Human Health plant utilization Partially offset by Bioproducts operating margin that has improved from ~14% to ~20% $ million 80 Operating Income (1) % Operating Income Operating Margin % 25 (1) 2003 operating profit excludes a special pre-tax charge of $11.3 million, recorded in operating expenses, for the settlement of certain lawsuits involving Mylan Laboratories operating profit excludes $48.7 million goodwill impairment recorded in operating expenses for a Biopharma site. 67

68 Cambrex performance Biopharma margins have diluted overall results Biopharma is the biggest short term opportunity to positively impact operating profit performance % Operating Margin YTD 2005 Bioproducts Biopharma Human Health CBM 68

69 Year-to-Date June 2005 Biopharma performance For continuing operations YTD June 2004 $million YTD June 2005 $millions Change Year over Year Biopharma sales % Gross profit NA Gross profit as % of sales 6.9% -13.8% Operating profit % Operating profit as % of sales -18.7% -42.2% Capital expenditures % Plant utilization has been running 40 50% Expect business to breakeven in the Q Primary objective: increase plant utilization and add more Phase lll and commercial projects 69

70 Year-to-Date June 2005 Human Health performance For continuing operations YTD June 2004 $millions YTD June 2005 $millions Change Year over Year Human Health sales % Gross profit % Gross profit as % of sales 36.6% 34.6% Operating profit % Operating profit as % of sales 21.2% 17.8% Capital expenditures % First half lumpy due to lower demand, following 20%+ growth in Q Additional capital required for compliance Primary objectives: Revenue growth from opportunities through niche products and differentiated technologies. Margin stabilization through Lean Six Sigma, cost reductions, and new higher margin products 70

71 Year-to-Date June 2005 Bioproducts performance For continuing operations YTD June 2004 $millions YTD June 2005 $millions Change Year over Year Bioproducts sales % Gross profit % Gross profit as % of sales 54.3% 53.2% Operating profit Operating profit as % of sales 22.7% 19.9% Capital expenditures % $3 million operating profit in YTD 06/2004 from a one-time contract termination Nine quarters of double digit growth Higher capital investment throughout 2005 Entering exciting growth phase with new products and services 71

72 Long term financial targets Segments Revenue Gross Margin Operating Profit % CAGR 2004 actual 2009 target 2004 actual 2009 target Bioproducts 20% 55% 53 56% 19% 22 26% Biopharma 15% 12% 35-40% <11%> 23-27% Human Health 5% 35% 34-38% 20% 19 21% Total 12% 39% 43 46% 11% 16-18% EPS (before special items) ROCE 2004 Actual $ % 2009 Target $ % Excludes specialty therapeutics 72

73 Financing strategy for acquisitions Use existing business to support acquisitions Bank lines of credit expected to be primary source of funding Leverage ratio ceiling generally < 3.0 Strategic or unique opportunity may be partially funded with stock and/or justify higher leverage ratios Expect to use cash from operations to reduce bank lines to target leverage ratio of <

74 Capital structure $269M revolving credit facility expires in November 2006 Approximately $95M outstanding as of June 30, 2005 $40 million cash results in net bank debt of approximately $45 million Intend to renegotiate before maturity Private placement $75 million 7 year note at 5.31% due 06/2010 $25 million 10 year note at 7.05% due 10/2013 Gross long-term debt was $199.6 million as of June 2005 $154 million net of cash on hand 74

75 Cash management and priorities Most cash is currently generated in Europe American Jobs Creation Act of 2004 Repatriated ~$50 million of earnings from foreign subsidiaries and recorded the related additional tax expense of $0.2 million Evaluating further opportunities to maximize benefit over the balance of the year Cash priorities Pay down debt Acquisitions/licensing/investments 75

76 Tax Cambrex effective tax rate has been highly volatile Due to shifts in geographic mix of income Currently in a US pre-tax loss posture Tax benefit of losses not recognized for GAAP reporting Causes volatility based upon increase/decrease in the loss from quarter-to-quarter Cambrex has approximately $90 million US NOL carry forwards that are not reflected in the GAAP balance sheet US profitability expected to trigger A one time pick up for the US NOL GAAP effective tax rate to become less volatile Next $90 million of US income to be tax-free Effective tax rate to be 30 33% 76

77 Cell Therapy: Next Generation Therapeutics Daniel Marshak PhD 77

78 Cell Therapy Next generation therapeutics Potentially curative Localized delivery of therapeutic at target Regenerative rather than palliative Addresses problem not just symptoms Neurology cell transplants for Parkinson s disease Cardiovascular muscle cells to replace damaged tissue Address problems with organ transplant Limited organ availability Organ rejection Lifetime of immunosuppressive therapy 78

79 Cell Therapy Why Now? Regulatory Opportunity FDA established a separate office within CBER to review and approve cell therapies (OCTGT) Technology Opportunity New methods allow for more viable products (fresh & frozen) Automation for improved scale-up and manufacturing processes Release testing (rapid microbial testing, custom assays) 79

80 Evolution of Pharmaceuticals Salicylate Natural Product Ibuprofen Synthetic Chemical Arthritis COX2 Inhibitors TNF Inhibitors Synthetic Chemical Recombinant Protein Time Antibodies Recombinant Protein Chondrocytes Cell Therapy Human Stem Cells Regeneration 80

81 Evolution of Surgical Intervention Amputation Limb Prosthetics Natural Products Orthopaedics Plates, Screws Artificial Joints Metal, Ceramic Metal, Plastic Time Tissues Body Parts Growth Factors Biologicals Cell Therapy & Tissue Engineering Regeneration 81

82 Convergence of Therapeutic Paths Regenerative Medicine Underlying Disease Cell Therapy & Tissue Engineering Cells Biologics Tissue/Organ Damage Natural Product Protein Chemical Ceramics Metal, Plastic Natural Product 82

83 Major Hurdles to the Industry Product definition Drugs, biologics or devices Clinical development Clinical indications and endpoints Commercial manufacturing Complexity and cost-of-goods equation Formulations & delivery systems Geographic variables Regulatory pathways Marketing & reimbursement Ethical considerations 83

84 Cell therapy market size estimates can vary significantly $6 U.S. Estimated Market Size of Cell Therapy and Related Technologies $5 $U.S. Billions $4 $3 $2 Gene Therapy Cancer Vaccines Cell Therapy Cytokines Total $1 $0 2003E 2004E 2005E 2006E 2007E 2008E 2009E Source: Frost & Sullivan, Burrill & Company 84

85 but represent a significant opportunity Worldwide estimated cell therapy market size by indication* $ billions Skin and Wound Liver disorders Diabetes Cardiovascular Cancer Bone and Joint Source: Jain Pharma Biotech Report 2004 and excludes certain categories of indications i.e. hematology

86 Potential Cell Therapies for Disorders Neurological disorders: Parkinson s disease, Spinal cord injury Cardiovascular disorders: Myocardial infarction, Congestive heart failure Insulin dependent Diabetes mellitus Osteoarthritis Immune and hematological disorders Burns and wounds Disorders of the liver Macular degeneration Osteoporosis; Bone defects Muscular dystrophy Neurons Heart muscle cells (Cardiomyocytes) Pancreatic Islet cells Cartilage cells (chondrocytes) Blood cells Skin cells Liver cells (hepatocytes) Retinal cells Bone cells Skeletal muscle cells 86

87 Cell Therapy Technologies Traditional Basic Technologies Minimally Manipulated Technologies Moderately Manipulated Technologies Complex Manipulation Technologies Blood Transfusion Ex: American Red Cross Bone Matrix Ex: Lifecell, Cryolife Scaffold + Cell Fragments or Growth Factors Ex: Neocutis Autologous:Bone Marrow Transplant Ex: Cancer Centers Autologous: PBSC Transplant Ex: Cancer Centers Autologous: Topical or Peripheral Ex: Isolagen, C3 Autologous: Critical Organ Ex: Bioheart, Genzyme Allogeneic: PBSC + Purification Ex: Fred Hutchinson, Baylor, Rush, Hopkins Auto or Allo: Devices + Living Cells Ex: Ortec, Nephros Allogeneic: Homologous Cells Ex: Osiris, Mesoblast CNS Therapeutic Ex: Reneuron, Cythera, ProNeuron Allogeneic: Non Homologous Cells Ex: Geron, Schering Immunotherapy Cancer Vaccines Ex: Dendreon, Argos Vector or Cell Based Gene Therapy Ex: Introgen, Avigen 87 Regulatory Scrutiny, Risk, and Time

88 Cambrex Cell Manufacturing Human Cells Research Assays Therapy 88

89 Traditional Therapeutics Natural Product Synthetic Chemical Genes & Proteins Cells & Tissues Infection Cardiac Cancer Arthritis 89

90 Target-Driven Therapeutics Disease Target Chemicals Protein & DNA Cells & Tissues Oral Parenteral Topical Antibody Cytokine Vaccine Cell Therapy Gene Delivery Tissue Repair 90

91 Cell Therapy Business Dave Smith 91

92 Contract manufacturing services -- cell therapy Intersection of two core competencies: cell biology and contract manufacturing CMO client base often utilized Clonetics /Poietics cell products for their research Limited competition - high barriers to entry Leverage existing infrastructure and skills Tissue acquisition Sources Media/serum and other key raw materials Cell system optimization and cell-based assays Delivery of cell-based products worldwide 92

93 4Q05 3Q05 2Q05 1Q05 Cell therapy evolution 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q Q02 3Q02 2Q02 1Q CT Business Unit Established: 1 Suite, 280 Sq Ft Total CT Clients

94 First mover advantage Total CT Clients Establish CT (EU): 4 Suites, 600 Sq ft CT Business Unit Established: 1 Suite, 280 Sq Ft 2 0 Expansion I (US): 3 Suites, 1175 Sq Ft 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 94

95 First mover advantage Set standards for clinical cell processing facilities in US and Europe State-of-the-art cgmp compliant production suites 95

96 Moving to commercial contracts Total CT Clients Establish CT (Eur): 4 Suites, 600 Sq ft CT Business Unit Established: 1 Suite, 280 Sq Ft First Commercial CMO Contract 2 0 Expansion I (US): 3 Suites, 1175 Sq Ft 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 96

97 16 Unmet client needs drive new services and suites Total CT Clients Establish CT (EU): 4 Suites, 600 Sq ft CT Business Unit Established: 1 Suite, 280 Sq Ft Process Development Business Unit Established First Commercial CMO Contract 2 0 Expansion I (US): 3 Suites, 1175 Sq Ft Expansion II (US): 2 Suites, 1350 Sq Ft 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 97

98 Unmet client needs drive new services and suites Expansion ll Increase production capacity for late phase products Doubled production space Quadrupled incubator space Process development (PD) services established to address clients need for validated assays, scale-up and process optimization 98

99 Moving closer to the patient Total CT Clients Establish CT (Eur): 4 Suites, 600 Sq ft CT Business Unit Established: 1 Suite, 280 Sq Ft Process Development Business Unit Established First Commercial CMO Contract First Commercial Sales Agreement 2 0 Expansion I (US): 3 Suites, 1175 Sq Ft Expansion II (US): 2 Suites, 1350 Sq Ft 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 99

100 New customers, new services 16 Total CT Clients Establish CT (Eur): 4 Suites, 600 Sq ft CT Business Unit Established: 1 Suite, 280 Sq Ft Process Development Business Unit Established First Commercial CMO Contract Testing Service Business Unit Established First Commercial Sales Agreement Testing Service Labs Completed 2 0 Expansion I (US): 3 Suites, 1175 Sq Ft Expansion II (US): 2 Suites, 1350 Sq Ft 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 100

101 Latest expansion 16 Total CT Clients Establish CT (Eur): 4 Suites, 600 Sq ft CT Business Unit Established: 1 Suite, 280 Sq Ft Process Development Business Unit Established First Commercial CMO Contract Testing Service Business Unit Established First Commercial Sales Agreement Testing Service Labs Completed 2 0 Expansion I (US): 3 Suites, 1175 Sq Ft Expansion II (US): 2 Suites, 1350 Sq Ft Expansion III (US): 2 Suites, 1350 Sq Ft 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 101

102 Our cell therapy expertise spans the entire product life cycle Cell therapy pipeline Phase I Phase Il Phase Ill Commercial Wound Healing (C3) Wound Healing Wound Healing (Ortec) Wound Healing Wound Healing (Keracure) Dermatological Immune Therapy Cardiovascular (BioHeart) Cardiovascular Cancer Parkinson s Disease Dermatological Cardiovascular (Mesoblast) Cardiovascular Ophthalmology Cardiovascular Spinal Cord Testing (Innovative BioSensor) 102

103 Cell therapy summary First to enter and industry leader Addressed unmet needs with full service offering to clients developing cell therapies Cell sourcing infrastructure and logistics cgmp manufacturing Clinical and commercial First Class B production area Quality and regulatory expertise PD services Testing services 103

104 Technology for the production of protein biopharmaceuticals Christopher Dale PhD 104

105 Selected topics Platforms for expression of recombinant protein biopharmaceuticals Acceleration of microbial process development Manufacturing capacity: Developments that impact manufacturing capacity and throughput Emerging alternatives to mammalian cell culture for the production of therapeutic proteins and next generation products mab: monoclonal antibody 105

106 Biopharmaceutical manufacturing: expression systems Recombinant protein biopharmaceuticals expressed in bacteria, yeast, insect and mammalian cells Emergence of transgenic expression systems : goat, cow, corn, tobacco, duckweed Biopharmaceutical manufacturing Cell culture : 50-60% Microbial : 40% Other : <5% Market summary Dominance of Escherichia coli Strong interest in Pichia pastoris Other expression systems available but little market penetration (yet) Microbial expression still a major opportunity Cambrex commitment to microbial fermentation platforms Investment in new large scale fermentation infrastructure 106

107 Accelerating process optimisation of microbial expression systems High throughput molecular biology screen Acceleration of microbial process development through new technologies Clone selection High throughput fermentation screen Multi-factorial studies Identification of poor performance and risk factors Selection of high expression permutations High throughput analysis Confirmatory studies at pilot scale Scale-up & manufacturing 107

108 Control of expression: future developments High throughput (miniature) fermentation Fermentation by design : design of experiments approach for optimisation Map boundaries of fermentation control parameters Integrate high throughput analysis to compliment output of fermentation systems (Image courtesy of BioProcessors Corp.) Rapid screening of full factorial matrices Reduce the number of permutations for screening at bench-scale Predictive tool 108

109 Manufacturing capacity: Impact of technology? Various models to address # of products, market demand and manufacturing capacity Predictions of capacity shortage, excess and cross-over scenarios Technology will drive reduction in batch volume through greater productivity Mammalian cell culture Microbial fermentation Transgenic 5-10g/L 2-10g/L 2-6g/L Reduction in process volume Greater productivity $ / COG Purification becomes production bottleneck? 109

110 Downstream processing: developments Column chromatography Improvements to existing functional chemistries (base stable protein A affinity resins, high capacity/flow ion exchange media, flourohydroxyapatite) Increased capacity and solids rejection for capture chromatography resins Improved hardware for automated packing, sanitary operation Membrane based unit operations Charged membranes: Efficient reduction in endotoxin and DNA contamination Single-use membrane assemblies (pre-fabricated disposable units) Improvements in solids handling/flux characteristics Cambrex : Development of collaborative relationships with chromatography resin and membrane manufacturers ( beta test site) : Leading edge technologies capable of implementation in a GMP manufacturing environment 110

111 mab products Mammalian cell culture market dominated by monoclonal antibodies (mab) 18 approved mab (FDA/EMEA) 6 mab : Sales >$500M each product (2004) Dominance of mammalian cell culture Next generation of mab products : Conjugation of mab Emerging niche market for targeted therapies Covalent linkage of mab with effector (low molecular weight) molecule Selectivity of mab for target binding followed by cytotoxic activity of effector 111

112 Alternative and emerging expression systems for mab products Antibody fragments may be expressed in existing bacterial expression systems Fermentation systems attractive from COG and production scenarios Yeast systems : Emergence of yeast systems to express fully assembled structures with core or human-like glycosylation patterns. Cell culture Yeast Bacteria Engineered yeast Heterogeneity of glycoforms Excessive glycosylation Mannosylation O glycosylation No glycosylation Precise control of glycosylation to mimic human glycoforms 112

113 Control of expression: Impact of emerging technology Engineered yeast systems (Pichia pastoris) may offer high precision of control of glycoforms Benefits: Therapeutic advantage (lower dose regime) due to minimum heterogeneity High expression levels / attractive COG Established production scenarios Cambrex commitment to microbial expression systems as vehicle to penetrate mab market through investment in infrastructure and know-how 113

114 Alternatives to mammalian cell culture : Transgenic systems Expression of recombinant biopharmaceuticals in the milk from transgenic goats Cambrex : Manufacture of pivotal clinical material for first potential transgenic licensed product (ATryn) First CMO to implement large-scale GMP processing of goat milk Substantial experience in separation and purification technologies applied to milk 114

115 Summary : How Cambrex is positioned to exploit new technologies in biopharmaceutical manufacturing Opportunity mab expression in engineered yeast Conjugation technology Transgenic expression systems Experience Expertise in yeast fermentation development Handling of cytotoxic materials. Manufacture of mab conjugates Large scale transgenic milk processing Asset base Process Development GMP Fermentation Process Development GMP Purification GMP Purification Manufacture of ATryn L High potency capabilities 115

116 Innovations in Research Products Markus Hunkeler 116

117 Research products Molecular biology Nucleic acid electrophoresis Protein electrophoresis Cell biology Primary cell systems Conditionally immortalized cells Bioassays Cell health and function HTS Cell culture Media and sera 117

118 Nucleic acid electrophoresis market Electrophoresis market: ~$120M (US) Protein, nucleic acid 60,000 researchers perform nucleic acid electrophoresis (US) ~4-5% market growth Precast gels 15-20% growth Market drivers toward precast gels PCR Speed Convenience Three key players Invitrogen, BioRad, Cambrex 118

119 Nucleic acid electrophoresis market Market leader in nucleic acid electrophoresis Agarose and precast agarose gels Markers and ladders Buffers and stains To capitalize on the growing need for speed and convenience, developed an integrated system: Gel, buffer, stain, visualization Result: 5-minute experiment 119

120 FlashGel system New in 2005 Launched September Real-time analysis - watch DNA migration as it happens The fastest way to separate DNA Results in 2 7 minutes Eliminate UV light Dark Reader technology Proprietary fluorescent dye increased sensitivity Proprietary agarose blend one size fits all 120

121 FlashGel system FlashGel system cassettes require no prep time FlashGel System Dock Precast, prestained gels and buffer The FlashGel System dock is an electrophoresis apparatus with build in transilluminator for separation and detection 121

122 FlashGel Video 122

123 Cell based assays for HTS Researchers evaluate a large number of compounds for efficacy and toxicity Over 60% of drug candidates fail because of problems with ADME and toxicology Tools are needed to facilitate HTS screening earlier in the drug discovery process Eliminate poor drug candidates early Focus on more promising candidates Cell based assays offer the potential to screen out compound failure earlier in the discovery and development life cycle $M Cell Based Assays Market HTS: High Throughput Screening 123

124 Cell based assays for HTS Cell based platforms offer improved biological relevance Primary cells offer the highest level of biological relevance but suffer from small lot sizes and donor variability Cell lines (immortalized cells) generate large homogeneous cell populations but do not behave like normal cells Conditional Immortalization allows production of high volumes of uniform primary-like cell populations Unique technology to enable high throughput cell based screening Primary cell expertise Multiple licenses Addresses the unmet need Higher biological relevance High throughput 124

125 Clonetics conditionally immortalized human cells 125 Licensed telomerase technology for immortality Temperature sensitive switch for proliferation By changing temperature, cells stop dividing, allowing for differentiation and expression of normal function and phenotype Results: large supply of differentiated cells of the same genotype For functional cell-based assays and long-term gene expression studies New in 2005

126 Clonetics conditionally immortalized human cells Conditionally immortalized human skeletal muscle cells derived from normal human skeletal muscle Differentiate into well developed myotubes that have morphological characteristics of differentiated muscle and phenotypic characteristics of muscle including creatine kinase activity and insulin induced glycogen synthesis 126

127 Clonetics conditionally immortalized human cells Launched conditionally immortalized skeletal muscle cells - March 2005 Conditionally immortalized human adipocytes in Q Plans to launch another two cell lines each year Intestinal epithelial cells Cardiomyocytes Large Artery endothelial cells Hepatocytes Licensing programs Licensed skeletal muscle cells to Chugai Pharmaceuticals Several other pharma/biotech in active negotiations 127

128 Bringing Speed to Microbial Detection Shawn Cavanagh 128

129 Rapid microbial detection (RMD) FDA s Process Analytical Technology (PAT) Initiative Cost containment in manufacturing industries Rapid testing technologies for the pharma, medical and other consumer industries Endotoxin detection MicroAlert TVO detection MycoAlert mycoplasma detection 129

130 Endotoxin detection Endotoxins are pyrogens that may cause fever, shock or even death if high levels are introduced into the body Products routinely tested in the medical device, pharmaceutical, dialysis and bioresearch industries Market size ~$60 70 million and growing 3 4% (1) Growth opportunities in automation (1) Company sources 130

131 Firsts in endotoxin detection Providing the total solution In quality and compliance Innovation With quantitative chromogenic LAL 21 CFR Part 11 compliant software PyroGene recombinant factor C assay Pyrosense on-line system for to measure endotoxin in water for injection systems 131

132 MicroAlert TVO detection kits Measures total viable organisms (TVO) in less than 5 hours rather than days or weeks Differentiated, high-tech solution with an expandable platform for Environmental monitoring Bioburden testing Preservative efficacy testing Water testing Sterility testing Food Reduces costs by quickly reducing hold times The end of an era? 132

133 Market Size and Growth Rates $ millions Worldwide Total Micro. Testing Total TVO TVO Rapid Methods Total Micro Growth Rapid Methods Growth Pharma % 10% Personal Care % 10% Food/ beverage % 7% Total Source: Overall market size from Strategic Consulting.

134 MicroAlert TVO detection kits Acquired technology in Q Real-time PCR based methodology Beta tests to start in Q Time to Result of < 5 hours System throughput of 64 samples per shift Applications testing with customer samples will form part of the beta trials High level of interest from large pharma, biopharma and consumer products companies First sales expected mid

135 MycoAlert mycoplasma detection kit Mycoplasma detection as quick as twenty minutes vs. current accepted method of 28 days Validated assay being developed for release testing Collaborating with regulatory agencies for expedited approval Product for validated applications launch in mid