2018 Wells Fargo Healthcare Conference

Transcription

1 2018 Wells Fargo Healthcare Conference September 5, 2018 Shawn Cavanagh Executive VP & COO

2 Forward-Looking Statements & Non-GAAP Financial Measures Statements in this presentation regarding the future financial and operating results, outlook, growth, prospects, business strategies, future market position, future operating environment and goals of Cambrex Corporation (the Company ), including statements of expectation with respect to the acquisition of Halo Pharma ( Halo ) and expected benefits therefrom, consolidated or product category sales, EBITDA or Adjusted EBITDA, depreciation and amortization, capital expenditures, and the type of acquisitions, divestitures, collaborations, or other expansion opportunities the Company may consider, as well as any other statements that are not related to present facts or current conditions or that are not purely historical, constitute forward-looking statements. These forward-looking statements are based on the Company's historical performance and its plans, estimates and expectations as of the date of this presentation. The words anticipates, estimates, believes, expects, may, plans, will and similar expressions are intended to identify forward-looking statements, although not all forwardlooking statements contain these identifying words. Forward-looking statements are not guarantees that the future results, plans, intentions or expectations expressed or implied by the Company will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different than those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include: customer and product concentration, the Company s ability to renew to win new customer contracts and renew existing contracts on favorable terms, pharmaceutical outsourcing trends, competitive pricing or product developments, government legislation and regulations (particularly environmental issues), the possibility that the conditions to closing the Halo Pharma transaction could not be met, that the closing could be delayed, or that the benefits from the acquisition may not be as anticipated, tax rates, interest rates, technology, manufacturing and legal issues, including the outcome of outstanding litigation, changes in foreign exchange rates, uncollectible receivables, the timing of orders, loss on disposition of assets, cancellation or delays in renewal of contracts, lack of suitable raw materials or packaging materials, the Company s ability to receive regulatory approvals for its products and continued demand in the U.S. for late stage clinical products or the successful outcome of the Company s investment in new products; and the other factors set forth in Part I, Item 1A. Risk Factors in the Company's most recent Annual Report on Form 10-K, as may be amended or updated in the Company's Quarterly Reports on Form 10-Q or subsequent filings with the SEC. Except as required by law, the Company specifically disclaims any obligation to update any forward-looking statements as a result of developments occurring after date of this presentation, even if its estimates change, and statements contained herein are not to be relied upon as representing the Company's views as of any date subsequent to the date of this presentation. EBITDA and Adjusted EBITDA are non-gaap financial measures. The Company defines EBITDA as operating profit plus depreciation and amortization expense and Adjusted EBITDA excludes the impact of any potential acquisitions and restructuring activities. These financial non-gaap measures also exclude the adoption of ASC 606. The reconciliation to the most directly comparable GAAP financial measure can be found in a table at the end of this presentation Cambrex Corporation. All rights reserved. 2

3 Investor Highlights Extensive API portfolio of products in 3 categories Innovator, Generic APIs, Controlled Substances Over ~120 APIs and intermediates sold annually to leading pharmaceutical companies 5 Year revenue CAGR of 14% 2017 Net revenue grew 9% to $534.5 million and Adjusted EBITDA 1 grew 13% to $174.6 million 6 operating sites within US and EU Flexible, large-scale manufacturing capacity, with world-class quality systems and excellent regulatory record (FDA, EMA, DEA) Wide range of capabilities Entering Finished dosage segment of CDMO market with Halo acquisition Leading dosage form custom development and manufacturing organization Focused on the development and manufacture of small molecule active pharmaceutical ingredients (API) for the innovator and generic pharmaceutical markets Charles City, Iowa High Point, North Carolina Karlskoga, Sweden Paullo, Italy Tallinn, Estonia Wiesbaden, Germany 1. See Appendix 2018 Cambrex Corporation. All rights reserved. 3

4 Favorable Market Dynamics Drive Cambrex Growth Robust funding environment fueling preclinical pipeline Annual VC Investment / $Bn Growing number of small molecules in clinical phases Increasing outsourcing Small Molecule Outsourcing Large, fragmented, growing, outsourcing market API / F&F Market Small Molecule API and Fill/Finish $ B Strong approval rates of small molecules 34 approved in 2017 Small Molecule Pipeline (Phase I, II, III) 2,413 2,004 1,626 1,599 1,659 1, Increased global use of generics pushing up API demand Big Pharma plant closures Move from fixed to variablized costs Access to CMO technologies Limited CMOs with capabilities, capacity and scale Preference for high quality Westernbased assets API CMO 50-60% Outsourced 5-8% Growth Small Molecule API Market $50-60B (captive and merchant) Small Molecule API CMO $25-35B 2018 Cambrex Corporation. All rights reserved. 4

5 Big Growth in the Small Molecule Pipeline Small molecules are big again Constitute approximately 2/3 of all drugs under development in pharmaceutical pipelines Increasing number of small molecules in development: ~5,600 at the end of 2017 (up 7.7% from 2016) ~2,100 in Phase I-III clinical development (up 6.9% from 2016) Cambrex focuses on late-stage molecules of which there are ~380 (up 10.7% from 2016) Small molecules rapidly advancing into later stages of development: 462 drugs moved from one stage to the next in 2017 (up 10.5% from 2016) NCE Small Molecules Under Development ( ) Phase Yr CAGR 2 Yr CAGR Preclinical 2,462 2,473 2,351 2,786 3,175 3, % 10.9% Phase I % 11.7% Phase II % 4.4% Phase III % 16.5% Pre-Reg % 14.0% Registration % 18.3% Pipeline Total 4,127 4,125 4,070 4,643 5,241 5, % 10.2% NCE Small Molecules Moving Phase Per Year ( ) 2018 Cambrex Corporation. All rights reserved. 5

6 Strong Revenue and Profit Growth Revenue grew at 14% CAGR and Adjusted EBITDA 1 grew at 25% CAGR between 2012 and Guidance for currency adjusted sales growth of +2 to -2% and EBITDA of $150-$160 million reflected at mid-point in chart below Generics 20% of 2017 Revenue Serving ~$9-13B market 2018 Guidance*: Flat 1 Cambrex Product Mix Snapshot * Compared to 2017, excluding the impact of foreign currency and the impact of adopting the new revenue standards 1. See Appendix Innovator 66% of 2017 Revenue Serving ~$16-22B market 2018 Guidance*: Up low single digits to down low single digits % growth Excluding largest product, revenue will be up mid to high teens % growth Controlled Substances 14% of 2017 Revenue Serving ~$ M market 2018 Guidance*: Up mid single digit % growth 2018 Cambrex Corporation. All rights reserved. 6

7 Research facilities Cambrex Provides Full Service Offerings at Each Stage of Drug Development File IND Drug Development File NDA Commercialization Preclinical Development Clinical Phase I Clinical Phase II Clinical Phase III Launch Phase IV Maturity / Generics High Point (US) APIs and intermediates for early clinical phase Controlled substance manufacturing (DEA Schedule II-V) Continuous flow process development Charles City (US) Custom development and cgmp manufacturing High potency (HPAPI) capability down to OEL of <0.1 μg/m³ Controlled substance manufacturing (DEA Schedule II-V) Nicotine replacement products Tallinn (Estonia) Spin-off of the Tallinn University of Technology, specialists in synthetic organic chemistry, contract research, process development, non-cgmp kilo lab Wiesbaden (Germany) Biocatalytic enzymes and related process development, route scouting, analytical development and synthesis of intermediates and APIs Karlskoga (Sweden) Custom development and cgmp manufacturing High energy and hazardous chemistry Large-scale continuous flow chemistry Paullo, Milan (Italy) Commercial production of generic APIs Custom development and cgmp manufacturing ~70 generic APIs and ~70 DMF filings 2018 Cambrex Corporation. All rights reserved. 7

8 Innovator Market: Custom Development and Manufacturing 2018 Cambrex Corporation. All rights reserved. 8

9 Innovator Market Overview and Key Trends Large, fragmented, growing, outsourcing market Clinical Phase (Custom Development) Most new innovator drugs originate in US and Europe Venture capital funding for emerging pharmaceutical companies has driven growth in clinical phase pipeline Phase I, II and III projects require cgmp facilities Commercial Products (Custom Manufacturing) Ongoing rationalization of big pharma manufacturing Increasing outsourcing of intermediates and APIs to reliable, western-based CMOs Periodic shortages of US CMO capacity, recent investments by Cambrex to meet rising demand Small number of global players with world-class quality systems and ability to scale through commercial quantities $25-35B Total CMO API Market API CMO Innovator (Patent-protected) Market $16-22B 2018 Cambrex Corporation. All rights reserved. 9

10 Custom Development for Clinical Phase Projects Goal is to generate a broad pipeline of commercial products for custom manufacturing Leader in providing range of services for clinical phase projects Process and analytical chemistry, development and scale-up of manufacturing processes, supply of cgmp materials for clinical trials, process validations and CMC support for NDA approvals Target late-stage clinical projects that match our assets and capabilities Provides pipeline for custom manufacturing 17 active late-stage projects with focus on larger clinical projects Early-stage opportunities to broaden the funnel Involved with development projects per year ranging from investigational new drug (IND) support, pre-clinical and clinical Phase I and II Serves as feeder for late-stage clinical projects and seamless transfer to our large scale facilities 2018 Cambrex Corporation. All rights reserved. 10

11 Custom Manufacturing Growth Initiatives Currently produce products annually under medium-to-long-term supply contracts (typically three to five years) Custom manufacturing growth initiatives Currently produce 17 late-stage products; plan to increase number of projects to 25 Focus on larger volume late-stage clinical projects better suited to our assets 2018 Cambrex Corporation. All rights reserved. 11

12 Generics Market 2018 Cambrex Corporation. All rights reserved. 12

13 Generic APIs Overview and Key Trends Large, fragmented, growing, outsourcing market Worldwide trend of increasing generic penetration rates generic usage still relatively low in many sizable markets Generic drug marketers outsource most of their API volume API volumes will continue to increase with net global growth projected at mid-single digits $25-35B Total CMO API Market API CMO Generic (Patent-expired) Market $9-13Bn High level of FDA violations related to quality or regulatory issues with plants in low cost locations. Recent GDUFA legislation will augment funding to increase FDA inspections FDA initiatives continue to shorten review time and accelerate approval of ANDAs 2018 Cambrex Corporation. All rights reserved. 13

14 Generics continue to grow in developed markets Generics in the US account for 90% of prescriptions Generic adoption rates are increasing across developed markets Generic Penetration / Volume (TRx) US is the largest generic market growing 8.8% CAGR and now account for nearly 90% of prescriptions and is projected to rise to 92% by 2021 as more medicines lose patent protection Generics will account for 31% of total revenues in developed markets by 2021 up from 28.8% in 2016 and 27.8% in Cambrex Corporation. All rights reserved. 14

15 Generic APIs Focus on Niche Markets One of world s largest producers of generic APIs Flexible manufacturing facilities allow efficient production of ~70 different APIs annually Percentage of revenues from products with 2017 sales >$5MM 33% 4 products Niche markets are less competitive 67% Percentage of revenues from products with 2017 sales <$5MM 2018 Cambrex Corporation. All rights reserved products

16 Generic APIs Growth Initiatives In addition to increasing our share of business with our existing product portfolio, we Aggressively develop new products 12 APIs in development and several more under technical and economic evaluation Target products utilizing biocatalysis technology platform where we can create a cost advantage Apply differentiated technologies and capabilities, including DEA controlled substances and highly potent compounds Further penetrate generic market Qualify as an additional / secondary source supplier of API to potential customers Leverage API position to capture more of the value chain and expand into formulated generic drug product Expand geographically Grow sales in high-growth markets where we already have a presence (Brazil, Japan, Eastern Europe, etc.) Continue to develop partners in other new markets (Russia, Mexico, Asia) 2018 Cambrex Corporation. All rights reserved. 16

17 Controlled Substances 2018 Cambrex Corporation. All rights reserved. 17

18 Controlled Substances Limited Competition, Strong Growth Heavily regulated market with restricted competition Market entry controlled by DEA through licenses $ M US DEA Schedule II API Market FDA and DEA oversight, including quota system Schedule I & II APIs require US manufacture no low-cost competition Business Overview Cambrex currently participates primarily in large and growing non-opiate pain and ADHD markets Significant revenue growth in recent years driven by increasing market share with existing customers, new customers and new products One new Schedule II controlled substance in development Opioids API Market $ M Growth -2.6% CAGR Non-Opioids API Market $ M Growth +8.0% CAGR Cambrex Corporation. All rights reserved. 18

19 Acquisition of Halo Pharma 2018 Cambrex Corporation. All rights reserved. 19

20 Halo Pharma Overview Leading dosage form custom development and manufacturing organization (CDMO) providing Product Development (PD) and Commercial Manufacturing services to the innovator and generic pharmaceutical markets Broad dosage form manufacturing capabilities Oral solids, liquids and sterile ointments and gels Specialty offerings include modified release, pediatric dosage forms and oral dissolving tablets, among others Key Stats 400+ approved SKUs Focus on complex dosage forms Differentiated drug delivery, controlled substance and complex formulation competencies Integrated product development and manufacturing Product development business feeds clinical and long-cycle commercial manufacturing Diversified customer base with sticky products Includes large, specialty and generic pharma customers Sole source supplier for > 80% of commercial customers Efficient, 2 facility North American manufacturing network Whippany, NJ (167,000ft 2 ) and Mirabel, Québec (234,000ft 2 ) Strong regulatory history and capacity to fuel expansion 100+ active PD projects 70+ active customers 2 state of the art facilities ~450 employees 2018 Cambrex Corporation. All rights reserved. 20

21 Efficient Finished Dose Manufacturing Network Whippany, New Jersey, USA 167,000 ft 2 (21 Acres) Controlled substance manufacturing (DEA Schedule I-V) Large vault capacity for additional narcotics storage Capabilities include analytical method development, formulation, transfers, release, microbiologic testing, manufacturing and packaging Mirabel, Canada 234,000 ft 2 (23 Acres) Controlled substance manufacturing (DEA Schedule I-V) Capabilities include analytical method development, formulation, transfers, release, microbiologic testing, manufacturing and packaging Production Capacities: o Solid Dose: 3 Billion Units o Liquid: 500,000 Liters o Suppository: 5 Million Units o Sterile Ointments: 200,000 KG o Bulk Powder: 1,500 KG Production Capacities: o Solid Dose: 2 Billion Units o Liquid: 12 Million Liters o Suppository: 100 Million Units o Semi Solids: 325,000 KG Capacity for growth and room for long term expansions 2018 Cambrex Corporation. All rights reserved. 21

22 Strategic Rationale Creates leading small molecule CDMO with broad range of capabilities Expands addressable market and creates new avenue for growth within the large, fragmented and growing market for outsourced finished dosage form contract development and manufacturing Diversifies business, expands customer base and broadens molecule funnel Extends capabilities through addition of finished dose development and manufacturing and provides a platform for adding new dosage forms in the future Complements existing innovator, generic and controlled substance offerings Adds efficient North American network with existing capacity for mid-term growth and room for longer-term expansions Opportunity to expand generic drug product initiative Accretive transaction that accelerates growth 2018 Cambrex Corporation. All rights reserved. 22

23 Transaction Overview $425 million total cash consideration Consideration To be funded with balance sheet cash and borrowings on $500 million senior credit facility Halo had Revenue and Adjusted EBITDA of $105 million* and $27 million, respectively for the 12 months ended 06/30/18 Financial Impact Enhances top-line revenue growth Accretive to adjusted EPS in 2019 Anticipate pro forma total net leverage at closing of 1.2x Timing Expected to close in Q3 2018, subject to regulatory approvals and customary closing conditions Updated 2018 guidance to be provided post-closing in conjunction with Q earnings release in early November * Halo revenue is reported under ASC Cambrex Corporation. All rights reserved. 23

24 M&A Drive Growth M&A Strategy Evaluate all small molecule API acquisition opportunities Synergistic products, technologies or capabilities Ability to enhance late clinical phase or already-commercial project pipeline Increase access and grow customer base Development capabilities to support new product development initiatives Assess broader opportunities in outsourced market sectors High quality businesses in the US or western Europe with differentiating capabilities Opportunity to generate growth synergies new customers, expanded services to existing customers Small Molecule API Consolidation Finished Dosage Form Early Discovery & Development Services Biologics 2018 Cambrex Corporation. All rights reserved. 24

25 Market Trends and Growth Opportunities Market Trends Cambrex Advantage Strong growth in clinical pipeline End-to-end supplier from early to late clinical phase and commercial manufacturing Higher demand for outsourced development and manufacturing Flexible, large-scale manufacturing capacity in the US and Europe with substantial capex investment over last 5 years Worldwide generic prescription growth expected to continue as governments and payors reduce costs Preference for dependable US and European suppliers Strong growth rates for certain DEA Schedule II products DEA World-class quality and regulatory systems with excellent track record (FDA, EMA, DEA) Growing pipeline of new generic APIs. Increasing presence in key developing markets through local partners and direct customer relationships Established relationships and supply positions with key marketers of US controlled substances 2018 Cambrex Corporation. All rights reserved. 25

26 Cambrex Highlights Leading global Active Pharmaceutical Ingredient (API) manufacturer serving the innovator and generic pharmaceutical markets Extensive portfolio of products in 3 categories Over ~120 APIs and intermediates sold annually 5 Year Revenue CAGR of 14% 2017 Net revenue grew 9% to $534.5 million and Adjusted EBITDA 1 grew 13% to $174.6 million Currency-adjusted sales growth of +2 to -2% and Adjusted EBITDA of $150-$160 million expected for 2018 excluding the impact of adopting the new revenue standards Strategic initiatives and investment decisions match key positive market trends NCEs in late-stage clinical trials create over 2,000 API and advanced intermediate outsourcing opportunities Growing clinical pipeline with strong late stage growth Generic penetration continues to grow globally Strong balance sheet to allow financial capacity to execute acquisitions and invest internally Experienced management team with track record of success and creating shareholder value 1. See Appendix 2018 Cambrex Corporation. All rights reserved. 26

27 Appendix 2018 Cambrex Corporation. All rights reserved. 27

28 EBITDA and Adjusted EBITDA Reconciliation Reconciliation of GAAP to non-gaap Results ($M) Operating Profit $35.7 $49.6 $52.3 $91.0 $128.4 $142.7 Depreciation and Amortization EBITDA $57.5 $72.1 $76.1 $113.0 $153.0 $174.6 Loss on Voluntary Pension Settlement Gain on Sale of Asset - (4.7) (1.2) Restructuring Expenses Adjusted EBITDA $57.5 $67.4 $82.1 $128.6 $154.2 $ Cambrex Corporation. All rights reserved. 28

29 2018 Wells Fargo Healthcare Conference September 5, Cambrex Corporation. All rights reserved. 29