Charles River Laboratories International, Inc. · NYSE:CRL
Charles River Laboratories International — Merger or Acquisition (July 2010)
37 slides from Charles River Laboratories International's merger presentation, Jul 13, 2010
Slide 1: Charles River and WuXi PharmaTech: The First Global Early-Stage CRO
[GRAPHIC OMITTED] [GRAPHIC OMITTED] Charles River and WuXi PharmaTech: The First Global Early-Stage CRO [C] 2010 Charles River Laboratories International, Inc.
Slide 2: Safe Harbor Statement
Safe Harbor Statement This document includes "forward -looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward -looking statements may be identified by the use of words such as "anticipate," "believe," "expect," "estimate," "plan," "outlook," and "proj
Slide 3: Non-GAAP Financial Measures and Additional Information
Non -GAAP Financial Measures This presentation includes discussion of non-GAAP financial measures. We believe that the inclusion of these non-GAAP financial measures provides useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects,
Slide 4: Charles River and WuXi: The Future of Early-Stage Contract Research
Charles River and WuXi: The Future of Early -Stage Contract Research [] The combination creates the first fully integrated global early-stage contract research organization (CRO) * Offers a full range of products and services from molecule creation to first-in-human testing * Leverages increasing st
Slide 5: Table of Contents
Table of Contents 1. Transaction Timing Update 2. Charles River Overview 3. WuXi Overview 4. Strategic Rationale for Transaction 5. Financial Rationale for Investors 5
Slide 6: Transaction Timeline
Transaction Timeline [] Definitive proxy statement filed/mailed July 1, 2010 [] On July 12, received "Second Request" from FTC requesting additional information relating to viral clearance, cell line characterization and lot release testing services [] Grand Court of the Cayman Islands approved the
Slide 7: Table of Contents
Table of Contents 1. Transaction Timing Update 2. Charles River/WuXi Overview 3. Strategic Rationale for Transaction 4. Financial Rationale for Investors 7
Slide 8: Charles River Today
Charles River Today [] A leading in vivo biology company* $1.20B in net sales (FY '09) [] Unique portfolio of products and services focused on the research and development continuum for new drugs [] A multinational company with ~8,000 employees worldwide * ~70 facilities in 16 countries [] Continuou
Slide 9: WuXi Today
WuXi Today [] A leading chemistry company * $270M in net sales (FY '09) [] Service portfolio supports clients early with molecule creation, extending downstream through laboratory and manufacturing services [] Largest China-based CRO with ~4,300 employees worldwide including ~3,500 scientists * One
Slide 10: WuXi Overview
WuXi Overview Headquarters [] Shanghai, China [] Laboratory services, consisting of synthetic and medicinal chemistry, DMPK/ADME, biology, microbiology, in vivo pharmacology, toxicology, pharmaceutical development, analytical Service Offerings services, biopharmaceutical, in vitro and in vivo biocom
Slide 11: WuXi History of Growth
WuXi History of Growth [GRAPHIC OMITTED]
Slide 12: WuXi is the Leading CRO in China
WuXi is the Leading CRO in China Employees / Facilities [] ~4,300 [] ~2M ft(2) in both China and the US WuXi [] ~1,500 [] ~600K ft(2), mainly in Shanghai ShangPharma [] >650 [] ~110K ft(2) Beijing laboratory BioDuro [] >400 [] ~218K ft(2) Medicilon 12 Source: Based on WuXi's information as disclosed
Slide 13: WuXi's Unique Competitive Strengths
WuXi's Unique Competitive Strengths [] Unmatched scale of World-Class [] State of the art research Integrated RandD China-based service Facilities in China and manufacturing facilities offering in China and US Service Platform and the United [] Seamless delivery of States complex integrated services
Slide 14: WuXi's 2008-2012 Margin Performance
WuXi's 2008-2012 Margin Performance [GRAPHIC OMITTED] 2010 margin trends 2011 and 2012 margin trends Margin pressure in 2010 driven by: Margin turnaround in 2011-2012 driven by: China Lab [] Investments in toxicology and biology businesses [] Contribution from biology and toxicology Services [] Mode
Slide 15: Table of Contents
Table of Contents 1. Transaction Timing Update 2. Charles River/WuXi Overview 3. Strategic Rationale for Transaction 4. Financial Rationale for Investors
Slide 16: The New CRL: Global Integrated Services
The New CRL: Global Integrated Services [GRAPHIC OMITTED]
Slide 17: Unmatched Portfolio of Services
With this Transaction CRL will Offer Unmatched Portfolio of Services Discovery Services Research Models and Services Preclinical Services []A leader in discovery []The market leader in [] A leader in GLP safety chemistry services research model production assessment []A leading position in []Largest
Slide 18: Leverages Increasing Strategic Importance of China
Leverages Increasing Strategic Importance of China [] Supportive of global pharmas who view China as the new frontier for drug development [] Pharmas are taking advantage of cost leverage by placing chemistry in China* Lower cost, highly skilled scientists with advanced degrees [] Emerging opportuni
Slide 19: Declining Pharma R&D Productivity Drives Need for Outsourcing
Declining Pharma RandD Productivity Drives Need for Outsourcing [GRAPHIC OMITTED] [] Drug companies are producing half as many new drugs at twice the cost as a decade ago [] These companies are forced to reinvent themselves, concentrating on their core strengths and outsourcing functions like RandD
Slide 20: Growing Interest in Outsourcing Upstream Discovery Activities
There is Growing Interest in Outsourcing Upstream Discovery Activities [] All stages of pharmaceutical RandD are now outsourced [] Drug discovery, a significant area of expenditure and WuXi's strength, is still at an early stage of outsourcing [GRAPHIC OMITTED] Source: Barclays Capital. 20
Slide 21: Timing of the Acquisition is Key
Timing of the Acquisition is Key [] CRL will improve its competitive position by increasing global presence and providing integrated services clients demand * Significant first-mover advantage in providing an integrated portfolio of services [] The combined company will have the broadest early-stage
Slide 22: Enthusiastic Client Response
Enthusiastic Client Response [] Senior management of CRL and WuXi have each reviewed the transaction with their respective top 20 pharmaceutical and biotechnology clients * Response has been overwhelmingly positive * Follow-up meetings have been scheduled/initiated [] Clients are viewing this transf
Slide 23: Enthusiastic Client Response (cont'd.)
Enthusiastic Client Response (cont'd. ) What our clients have said "We have great respect for and work with both organizations. When combined with WuXi, Charles River will be able to provide a unique set of end-to-end services which we believe will help accelerate our drug development process. We lo
Slide 24: Cultural Fit
Cultural Fit [] WuXi is a client-focused service organization * Excellent client retention [] 100% retention of top 10 clients ('07-'09) * ~90% of WuXi's sales generated from US and European clients [] WuXi shares CRL's employee -centric culture [] Scientific depth and expertise differentiates CRL a
Slide 25: High Degree of Management Continuity
High Degree of Management Continuity [] Top WuXi executives to join CRL management team (3-year employment agreements) * Ge Li, PhD: Corporate EVP and President, Global Discovery and China Services [] Joins CRL Board, along with two additional directors chosen by WuXi [] Founded WuXi in 2000; previo
Slide 26: Integration Planning Well Underway
Integration Planning Well Underway [] Minimal business overlap simplifies integration process [] Corporate integration team jointly headed by: * CRL: David P. Johst, EVP, Human Resources, General Counsel and CAO * WX: Edward Hu, COO [] Nine operational sub-teams already established and meeting to de
Slide 27: Table of Contents
Table of Contents 1. Transaction Timing Update 2. Charles River/WuXi Overview 3. Strategic Rationale for Transaction 4. Financial Rationale for Investors 27
Slide 28: Impressive Record of Revenue Growth
Impressive Record of Revenue Growth [GRAPHIC OMITTED] [] 2007-2010E global discovery/chemistry industry CAGR of ~7%(2) [] 2010-2015E global discovery/chemistry/preclinical industry CAGR of ~10%(2) [] WuXi expected to continue to outpace global industry due to: * China outsourcing expected to outpace
Slide 29: Drives Accelerated Revenue Growth
Drives Accelerated Revenue Growth [] Global outsourced discovery chemistry segment is estimated to be at least $2B in 2010, with a mid-teens CAGR over the next 3-5 years* * Currently ~20-30% outsourced [] Growth in Discovery Chemistry and other downstream services accelerated by pharma outsourcing*
Slide 30: Enhances Top-Line Growth Potential
Enhances Top-Line Growth Potential by 200 BPS '11-'13E Growth Potential Research Models and Services Mid-single-digit revenue CAGR Preclinical Services Up to 10% revenue CAGR WuXi's Discovery Services Segment* Mid-teens revenue CAGR 0% +10% +20% Growth Drivers [] Improved demand for models used in t
Slide 31: Revenue Synergy Opportunities
Revenue Synergy Opportunities [] Cross-selling and combined sales force create incremental opportunity to drive more business upstream and downstream with existing and prospective clients based on unprecedented scope of early-stage portfolio [] Increased presence and scale in the emerging China mark
Slide 32: Significant Cross-Selling Opportunities
Significant Cross-Selling Opportunities CRL WX Combined Top 20 Clients ('09) Rank Rank 1 Large Pharma Top 10 Top 5 2 Large Pharma Top 5 Top 10 3 Large Pharma Top 5 Top 5 4 Large Pharma Top 5 Top 5 5 Large Biotech Top 5 Top 10 6 Academic/Government Top 5 ** 7 Large Pharma Top 10 Top 5 8 Large Pharma
Slide 33: Estimated Revenue Synergies
Estimated Revenue Synergies [] Expect annual revenue synergies of at least $75-$100M by 2013* Ramp up starting in 2011 [] Leveraging services areas including:* Chemistry* Discovery* Toxicology (GLP and non-GLP) and Phase I * Manufacturing* Other [] Developed by CRL-WX Global Sales and Marketing inte
Slide 34: Estimated Cost Synergies
Estimated Cost Synergies Public Company [] Reduction of Board, SOX, audit, legal, stock exchange, insurance and related expenses ~ [] of cost and Corporate [] Elimination of duplicative corporate overhead and synergies Expenses support functions [] Leverage greater purchasing power in vendor Other p
Slide 35: Charles River's Relative Share Price Performance
Charles River's Relative Share Price Performance April 23-- April 23-- Share price performance June 4 June 30 ========================= ========== ========== Charles River (17.1%) (14.0%) Covance (16.4%) (17.6%) SandP 500 (12.5%) (15.3%) ========================= ========== ========== Charles River
Slide 36: Charles River and WuXi: The Future of Early-Stage Contract Research
Charles River and WuXi: The Future of Early -Stage Contract Research [] The combination creates the first fully integrated global early-stage CRO * Offers a full range of products and services from molecule creation to first-in-human testing * Leverages increasing strategic importance of China [] Dr
Slide 37: Accelerating Drug Development. Exactly.
[GRAPHIC OMITTED] Accelerating Drug Development. Exactly. [C] 2010 Charles River Laboratories International, Inc.
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