Jefferies Healthcare Conference Presentation 13 th November 2012

Jefferies Healthcare Conference Presentation

13th November 2012

Today’s Presenters

Today’s presenters

John Beighton

John Beighton joined Mercury Pharma in May 2010 John has over 29 years of pharmaceutical industry experience Prior to joining Mercury, John spent 14 years at Teva Pharmaceuticals at various

positions including as the Head of Teva UK and Vice President of Global Business Optimisation.

Prior to joining Teva, John spent 14 years with the pharmaceutical sales and marketing department at SmithKline Beecham

Chief Executive

Officer

Guy Clark Guy Clark joined Mercury Pharma in August 2010 Guy has over 20 years of experience in the pharmaceutical industry Prior to joining Mercury Pharma, Guy had been President of Glenmark Europe for

3 years, and Director of Business Development for IVAX Europe for 5 years Guy also has a background in large pharma in sales, marketing and BD roles,

having spent 9 years with GD Searle and Pharmacia

Director, Strategic Business

Development

Merger Plan

Merger Background

Cinven acquired Mercury Pharma in August of 2012 with the ambition of creating a significant pan-European specialty pharmaceutical company focused on niche products, with an asset-light business model

Cinven later announced the acquisition of Amdipharm, which specialises in marketing branded off-patent pharmaceutical products internationally. The transaction closed on October 31, 2012

Mercury now plans to merge with Amdipharm in a combined operation, run by group CEO John Beighton.

The transaction creates an exciting enhanced business that:

- Doubles the scale of the business with revenues of over £200m across 200+ molecules

- Significantly expands the geographic foot print of the business in over 100 markets

- Enhances a diversified business by decreasing reliance on any single product or manufacturer

- Provides growth drivers through exploiting new opportunities across both business models

- Creates cost synergies by combining infrastructure and leveraging Mercury’s bi-national cost structure 4

Mercury Pharma snapshot

Company Overview Mercury Pharma is a specialty pharmaceutical company focused on sale of niche prescription off-patent products

with limited competition from originators or generics manufacturers or license holders Operates in the retail and hospital segments with a direct sales presence in the UK, Ireland and the Netherlands with

sales and marketing partnerships across 25 countries and distribution partners in 10 countries Flexible, asset-light business model focused on the sale of niche products with manufacturing outsourced to over 35

partners Core Processes centre of excellence in Mumbai, employs 2/3rd of the company staffMercury Pharma Growth Strategy1. Driving volume growth of existing portfolio2. Sustainable price increases in existing portfolio3. Investment in product development to drive future new product launches4. Profitable international expansion through insourcing sales and marketing in select territories (e.g. Netherlands)

(1) Historical numbers based on FYE - March 31

Standalone Pharmaceutical Trading Performance (£m)

2007A 2008A 2009A 2010PF 2011PF LTM Sep-12 2012PF0

20406080

100120

50.1 58.567.8

80.9 88.798.9 104.4

18.3 17.4 25.1 36.2 39.9 48.1 49.8

36.6% 29.8%37.0% 44.7% 44.9% 48.6% 47.7%

Revenue EBITDA EBITDA Margin

FYE - 31 December

(1) (1) (1)

5

Amdipharm snapshot

Company Overview Headquartered in Basildon (UK), Amdipharm is a specialty pharmaceutical company that acquires,

markets and sells off-patent specialist pharmaceuticals Through eighteen significant acquisitions, Amdipharm offers more than 50 molecules which sell in over 80

countries and generated revenue of £107m (2012PF) Operates a highly flexible, asset-light business model with 26 third party manufacturers and 62 API

suppliers to produce its portfolio of 632 finished SKUs Amdipharm is expected to show a decline in mature products, which is compensated with growth from

drugs like Valoid ampules, soluble Prednisolone and Neomercazole, where the company has exclusive / semi-exclusive positions

Founded in 2002 and acquired by Cinven in October 2012

Standalone Amdipharm Trading Performance (£m)

2010PF 2011PF 2012PF0

20

40

60

80

100

120

140

106.2 102.6 107.4

42.0 41.2 43.8 39.5% 40.2% 40.8%

Revenue Normalised EBITDA Normalised EBITDA marginFYE - 31 December

6

Enhanced diversification

MercuryMercury & Amdipharm

by country

UK

by product

Mercury & Amdipharm combined

Rationale for combining Mercury Pharma and Amdipharm

Doubling scale – 2012PF revenue increased from £104m to £212m (104% increase), 2012PF EBITDA increased from £50m to £94m (88% increase)

202 molecules (92% increase) split between 1,383 SKUs (259% increase) Non-UK sales increased from 24% to 44%

No meaningful overlap in existing molecule or SKU portfolio UK reduced from 76% to 56% of total group revenue No individual molecule represents >11% of combined revenue; No individual CMO represents >10% of combined spend Both companies operate an asset-light business model

Enhanced position as a leading niche

global pharmaceutica

l company

Clearly identified cost synergies from eliminating overlapping headcount and infrastructure and consolidation of distribution and manufacturing and leveraging Indian operations

Further synergies from reduced wholesaler rebates given increased scale and breadth of product offering

Potential benefit could be £10-12m per annum

Highly complementary businesses

enhancing diversification

Combined management team and infrastructure brings together Mercury Pharma’s UK and Amdipharm’s international expertise to create a best in class operations

Identified and easily achievable value optimisation opportunities to be delivered through a combined business strategy; Amdipharm is an under exploited portfolio but is beginning to apply Mercury Pharma’s proven approach to drive growth

Significant achievable

cost synergies

Provides platform for immediate

further growth

8

Strategy for combined business

Not an operationally transformational acquisition, given asset light model – but easy wins given a similar focus on off-patent niche products:- Apply Mercury Pharma’s portfolio value optimisation skills to the Amdipharm UK portfolio- Utilise Mercury Pharma’s scalable, bi-national infrastructure for best-in-class skills at relatively low cost

- Employ Mercury Pharma’s significant business development team to extend pipeline development across the group’s full range of products and markets

- Leverage Amdipharm's strong international experience and network of partners to maximize potential of group portfolio - 14 countries have sales greater than £2m

Apply best practices

across both companies to

drive value and growth

Identified and verified immediate cost savings of at least £6m per annum Consolidation of overlapping headcount and infrastructure (leveraging existing Indian operations) and

enhancing sales terms with wholesalers and distributors Further operational enhancements from optimising third-party manufacturing base Cautious and prudent approach will be adopted – Management team have significant experience of

amalgamating acquisitions and successfully delivering synergies

Realise synergies to

optimise combined

organisation

Multiple levers to achieve

growth

Significant volume / price optimization opportunities - Mercury Pharma management successfully applied this strategy to the Mercury portfolio over the last two years; Amdipharm started to apply this strategy but portfolio remains underexploited; opportunity to accelerate because Mercury management has a proven track record in executing

Leveraging Mercury Pharma’s development team to develop pipeline across the Group Enhance opportunities to consolidate international operations into directly managed subsidiaries to

drive further growth and enhance profitability (as done in Netherlands)

Robust strategy built upon key strengths and principles of both companies

9

Key Strategic Elements

Highly diversified portfolio

Key Strategic Elements

The combined business has 202 molecules split between 1,383 SKUs Largest drug contributes no more than c.10% to group sales Sales presence in 125 countries, 3 direct and rest through distributors

1

Limited and stable competitive dynamics around key products

Strong barriers to entry due to relatively small size of individual product markets by country, combined with geographic and SKU diversity and requirement for separate marketing authorisations by country

Provides recurring revenues

2

Favourable position in UK regulatory framework

Portfolio comprises low-cost, off-patent products which are not the main focus of healthcare cost reduction initiatives

UK is an attractive market owing to unrestricted pricing on unbranded products

3

Bi-national, outsourced business model supporting strong, sustainable margins and cash generation

Current Mercury Pharma infrastructure in India can be leveraged for operations reducing headcount and generating synergies

Largest CMO supplier is just c.10% of revenue for combined company, down from 21% for Mercury Pharma standalone

4

Multiple organic growth opportunities

Proven track record at executing multiple volume and price initiatives, tailored for each SKU

Low-risk, low-cost pipeline already well progressed Synergies

5

11

Enhanced by merger

12

Highly diversified portfolio1

13

0 7 7 28 28 37 37 57 57 80 80 90 90 95 95 100 1000%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Limited and stable competitive dynamics around key products2

Difficult to manufacture / API sourcingFinancial unattractiveness (sales <£2m)Existing competition

Complex manufacturing processes– Many of these products are

old, with out-dated manufacturing processes, and were generally divested because they were difficult to make

Regulatory approvals– Many of the products will

have been on the market for many years and hence will have been approved under “easier” regulatory regimes

– Obtaining a new approval will often require qualifying under newer, tougher approval regimes

Relatively limited sales potential– Many of these niche

products have total sales by presentation in any given country of less than £2m

– Nearly all of these niche products have total global sales of less than £10m

– This makes it harder for other suppliers to find it economically viable to enter the market

United Kingdom

Fran

ce

Italy

Irela

nd

Sout

h Af

rica

Spai

nAu

stra

lia

Portu

gal

Belg

ium

Neth

erla

n ds

0%

Sales (£m)

-rantoin

£

Othe

r M

arke

ts

14

Favourable position in UK regulatory framework3

Source: IMS, EGA and Mercury Pharma management

UK pharmaceutical reimbursement less at risk from austerity policies

The UK has one of the lowest per capita pharmaceutical spends in Europe…

…and the lowest average cost per prescription…

Unlike many other areas of government expenditure, the DoH currently forecasts the NHS budget (£108.8bn) to continue to rise, at 2.5% CAGR through the year 2014-15

Pharmaceutical reimbursement contributed c.10% to the total NHS budget in 2012, so is not as material to overall healthcare spending as actual service provision, which is the primary focus of healthcare reform

CH FR BE DE SE ES IT GR NO UK€0

€100€200€300€400€500€600

539 465 412 373 358 345 338 315 289 249

IT FR ES DE ROW UK€0.0€0.1€0.2€0.3€0.4€0.5

€0.4 €0.3 €0.3 €0.3 €0.3 €0.2

UK is an attractive market for Mercury/Amdipharm

…driven by an effective regulatory policy encouraging the use of off-patent products

UK

France

Germany

Japan

USA

0% 25% 50% 75% 100%

18%

59%

51%

68%

14%

71%

28%

40%

7%

51%

11%

13%

9%

25%

35%

Off-Patent Branded Off-Patent Un-Branded

Penetration of off-patent drugs in % (by volume)

15

4

Efficient structure combining UK headquarters with Indian centre of excellence

Note: Global Operations includes Quality, Supply Chain Management, Procurement and Project Management

India

India

High-quality employee base in India A balanced mix of qualified employees with varied academic backgrounds

and strong understanding of regulatory, pricing and competitive aspects of the European pharmaceuticals industry

India-based employees account for 65% of headcount but only 22% of employee costNumber of employees Employee costs

Commercial

2011PF Revenue (£m)

Business Devt

Finance

Legal

Supply Chain

Med, Reg & Quality

40

7

23

2

19

53

16

2

13

0

24

43

HR / IT 29 7

89 103

Significant overlap providing substantial scope for synergies

FTEs

Mercury Pharma’s scalable operating structure Head-to-head comparison

Total FTEs 194 114

0

10

20

30

40

189 12 12

74

19 18

33 3126

4 1

Num

ber

of

empl

oyee

s

41 303846309

Total employeesOthers

Mercury Pharma infrastructure is designed to be scalable and is built for growth

Admin 14 4

Total FTEs 187 109

Senior Management 7 5

Bi-national, outsourced business model supporting strong, sustainable margins and cash generation

16

Top 10 CMOs by net spend (1)

CMORank

Mercury

Mercury Pharma

Standalone% of spend

Rank Amdipharm

AmdipharmStandalone% of spend

Spend (£m) (1)

% of Total Spend (2)

- 1 18% 7.0 10.4%

1 21% 9 2% 6.7 9.9%

- 2 13% 5.3 7.9%

- 3 11% 4.3 6.4%

- 4 8% 3.3 4.9%

- 5 8% 3.0 4.5%

2 10% - 2.8 4.2%

3 9% - 2.7 3.9%

4 9% - 2.6 3.8%

5 9% - 2.4 3.6%Subtotal 52.6 59.3%Other 14.8 40.7%Total 67.4 100%

Bi-national, outsourced business model supporting strong, sustainable margins and cash generation

(1) Figures refer to 2011PF for Amdipharm and Mercury Pharma(2) Figures based on CY2011 for Amdipharm and FYE March 2012 for Mercury Pharma

4

Long and closely managed strategic relationships with well established blue-chip CMOs with some approaching 15 years

Combined company has decreased overall reliance on any single CMO

17

Multiple organic growth opportunities5

Volume

Price

Best practice synergies

Low risk, executable pipeline

International consolidation

Mercury/Amdipharm

Multiple levers to drive growth with different strategies for different products and geographies

18

Multiple organic growth opportunities: Low risk pipeline5

FY13 YTD Budget FY13 YTD Achieved

£0.0£0.5£1.0£1.5£2.0£2.5£3.0

£1.1

£2.2

Low risk executable initiatives

New strength version of existing molecules

Launch of existing molecules in new markets

New formulations of existing molecules

New molecules

Solid track record of delivering

PIPELINE SUCCESS CONTINUES:

– 8 product launches YTD – on track vs plan KEY NEW LAUNCHES:

– Eltroxin Oral Solution launched in May 2012 – on time– Alfacalcidol capsules launched in May 2012 – on time– Teromeg (Omega 3) capsules launched in October 2012 – on

time PRIOR YEAR GROWTH DRIVERS:

– Codipar capsules (new formulation of existing product) – Co-codamol Effervescent (new formulation of existing product)

FUTURE PIPELINE: – 9 new deals signed YTD, against YTD target of 7

New Company

C. 11% of 2015 revenue comes from low risk executable pipeline initiatives(1)

95% above YTD budget

Superior execution of Mercury Pharma management strategy

Revenue (£m)

(1) Figures based on CY2011 for Amdipharma and FYE March 2012 for Mercury Pharma(2) Figures are YTD Sep-12 (April to September)

FY13 full-year budget of £4.2m

(2)

19

Multiple organic growth opportunities: International consolidation5

There is significant potential upside from undertaking incremental investment in recruiting sales managers across selected international markets.

Potential front-end strategy in international markets A natural progression of the Company’s international business as it gains

scale is to establish a direct sales presence in selected markets A direct presence would allow the Company to:

– Capture a greater portion of the pharmaceutical value chain– Implement a ‘push’ strategy for its products to drive higher sales– Better identify opportunities for its products already being sold in the

UK– Identify local product / company acquisitions

In FY2012, Mercury Pharma management moved from a distributor model to a direct sales model in the Netherlands (see case study on right hand side)

Management believes there is significant upside potential in replicating the Dutch model across other ‘mature’ generics markets (with no / limited generics detailing) requiring only small sales offices to significantly drive sales

Potential markets for front-ending could include:

Case study – establishing direct sales in the Netherlands In FY2012, Mercury Pharma recruited a sales manager in the

Netherlands and subsequently revised its contract with its partner from a sales and marketing function to a distribution function

The table below shows management’s best estimate of the impact of the new business model in the Netherlands

YE 2011 YE 2013

Revenue (£m) 1.6 2.9

Gross margin 83.0% 79.6%

Cost of sales employees (£m) - 0.1

Illustrative operating profit (£m) 1.0 2.1

Operating margin 65.2% 70.5%

Sales (£m)

12.3 5.1 3.6

9.6 4.2 3.6

9.3 3.9 3.0

6.2 3.7 2.3

5.4 3.6 1.7