Sector Report. Specialty Pharmaceuticals Industry. April 2014

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1 Sector Report Specialty Pharmaceuticals Industry April 2014

2 Report Contents Industry Overview & Highlights 5 Market Trends 8 Industry Trading Comparables 16 Industry Transaction Comparables 34 Branded Spec Pharma Transaction Comparables Generic Spec Pharma Transaction Comparables Transaction Profiles Industry Outlook 60 Firm Overview 62 2

3 Total Deal Volume Tearsheet M&A Activity Specialty Pharmaceutical M&A Volume and Aggregate Announced Deal Values (1) Recent trends show both Big Pharma and other specialty pharmaceutical companies are acquiring specialty pharmaceutical companies to increase profit margins, diversify therapeutic category coverage, expand internationally, and build out anemic development pipelines % 72% 71% 66% 74% $60 bn $50 bn $40 bn $30 bn $20 bn Median deal size continues to increase as do LTM EBITDA and revenue multiples, which suggests that now is an attractive time to sell both branded and generic specialty pharmaceutical assets and companies Generic Branded Total Value $27.0 bn $33.2 bn $38.9 bn $28.1 bn $55.2 bn $10 bn $0 bn Industry Highlights By 2018, specialty pharmaceuticals will account for nearly half of the 100 top-selling drugs in the market (2) Specialty pharmaceutical sales are expected to reach $160 billion for 2013, which accounts for 18% of the global pharmaceutical market (3) Specialty pharmaceuticals offer a robust pipeline; Over 1,300 new specialty drugs in the pipeline Over 600 in global late-stage development (3) Specialty pharmaceutical spending grew by 8.7% in 2012, while non-specialty spending fell by 4.2% (3) 3 Source: 1) Bourne Partners Internal Research; CapitalIQ January 2014; Irving Levin (2)BIOtech Now (3) IMS Health

4 Industry Overview Branded Spec Pharma Overview Branded specialty pharmaceutical ( Branded Spec Pharma ) companies offer products across all therapeutic categories. Likewise, corporate size varies dramatically, from small regional companies to very large multinationals (some even rivaling Big Pharma in size and global presence). Regardless of size, Branded Spec Pharma companies generally focus on one to three main therapeutic categories, which offer synergies for their development efforts and sales forces. However, there is no single Branded Spec Pharma business model, and many companies do not have significant product development or R&D operations; preferring instead to focus on life-cycle management strategies. There is sometimes overlap between branded and generic specialty pharmaceutical product offerings from individual companies ( Blended Spec Pharma ); however, for purposes of this report, we have done our best to categorize companies and deals by their strategic focus and majority revenue generation Generic Spec Pharma Overview Generic specialty pharmaceutical ( Generic Spec Pharma ) companies focus on offering bioequivalent products to their branded counterparts that have lost patent protection either in the US or abroad. The typical Generic Spec Pharma business model relies on taking significant market share by offering bioequivalent drugs at steeply reduced price points (often 70%-80% below the branded drug during its patent exclusivity). (1) Not wholly disimilar to Branded Spec Pharma, Generic Spec Pharma companies often offer branded generics as well, which are bioequivalent drugs that are marketed under a different brand name from the original patent holder. There are various means by which a company may receive FDA approval to market a generic version of a branded drug, but the most common path is via an Abbreviated New Drug Application ( ANDA ). The timing and process for bringing generics to market is highly nuanced and can include Paragraph IV challenges, authorized generics, and even pay for delay tactics by the branded manufacturers. However, contemplation of these specific pathways and strategies are beyond the scope of this report 4 Source: (1) FDA

5 Bourne Partners Information Life Sciences Merchant Bank Geographic Coverage Investment banking advisory Direct investing Operational and management consulting Segmentation Healthcare services Specialty pharmaceuticals Consumer Heath Medical technology (devices) Distribution Advisory Services Dots represent the countries where the Bourne Partners team has transaction experience Mergers & Acquisitions Company and product focus Primarily sell side with select buy side assignments $ million transaction focus Business Development Support Services In/out-licensing of late stage and approved products United States, European and Asian companies focused on partnering locally or in international markets Capital Raising Mature spaces of healthcare (OTC, Specialty Pharmaceuticals, Generics, Medical Devices, Services) $ million raises Debt and equity Active calling effort on 75+ healthcare focused private equity and venture capital groups 5