Charles River Laboratories International, Inc. · NYSE:CRL
Charles River Laboratories International — Merger or Acquisition (April 2010)
46 slides from Charles River Laboratories International's merger presentation, Apr 26, 2010
Slide 1: Charles River and WuXi PharmaTech To Combine
[GRAPHIC] Charles River and WuXi PharmaTech To Combine Creating the First Fully Integrated, Global Early-Stage CRO April 26, 2010 (Copyright) 2010 Charles River Laboratories International, Inc.
Slide 2: Speakers
Speakers James C. Foster Dr. Ge Li Chairman, President and CEO Chairman and CEO Charles River Laboratories WuXi PharmaTech Thomas F. Ackerman Edward Hu Executive Vice President and CFO COO and Acting CFO Charles River Laboratories WuXi PharmaTech 2
Slide 3: 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 "projec
Slide 4: Regulation G
Regulation G 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, without the effe
Slide 5: Charles River to Acquire WuXi
Charles River to Acquire WuXi o Charles River signed a definitive agreement to acquire WuXi for ~$1.6B in cash and stock o Combination will create the first and premier early-stage contract research organization (CRO) o Offering a full range of products and services from molecule creation to first-i
Slide 6: Company profiles: Charles River and WuXi
Founded 1947 2000 NYSE Ticker CRL WX 2009 Sales (1) $1.2B $270M Employees (Dec. 909) ~8,000 ~4,200 CEO James C. Foster Dr. Ge Li Chairman, President and CEO Founder, Chairman and CEO Core Capabilities Geographic Reach 6 1)Based on FY 2009 revenues. 2)Virtually all WuXi revenues are from clients outs
Slide 7: The New Corporate Profile
The New Corporate Profile Company Name and HQ Charles River Laboratories Wilmington, MA Board Composition 10 Charles River / 3 WuXi |X| Dr. Li joins Board Pro forma Ownership Charles River holders will own ~78% of the combined company Chairman, President and CEO James C. Foster Corporate EVP and Pre
Slide 8: Strategic Rationale
Strategic Rationale Creates a fully integrated global early-stage CRO Drives profitable revenue growth Compelling value proposition for clients Leverages increasing strategic importance of China 8
Slide 9: Creates a fully integrated global early-stage CRO
Creates a fully integrated global early-stage CRO o Combines leaders in in vivo biology and chemistry o Highly complementary portfolios with limited overlap o Creates fully integrated drug development portfolio from molecule creation to first-in-human testing o With large footprint in critical Weste
Slide 10: WuXi's Discovery-Focused Services
WuXi's Discovery-Focused Services [graphic] 10
Slide 11: CRL's Preclinical-Focused Services
CRL's Preclinical-Focused Services [graphic] 11
Slide 12: The New Charles River: Integrated Services
The New Charles River: Integrated Services [graphic] 12
Slide 13: Diversified Portfolio
Diversified Portfolio 2009 Combined Sales*: $1.5B 13
Slide 14: Diversified Portfolio
Diversified Portfolio Discovery Services Research Models and Services Preclinical Services o A leader in discovery chemistry services o A leading position in non-GLP efficacy testing o DIS o Developing position in chemistry-based manufacturing o Research and commercial scale o The market leader in r
Slide 15: Drives profitable revenue growth
Drives profitable revenue growth o WuXi provides opportunity to enhance revenue growth while expanding Charles River's margins o Discovery and Chemistry services o Fastest-growing business segment as pharmas increasingly choose to outsource o Significant growth opportunity for WuXi's new, downstream
Slide 16: WuXi's Revenue Growth
WuXi's Revenue Growth [graphic] 16
Slide 17: WuXi's China Facilities
WuxXi’s China Facilities Shanghai: 1M ft? R&D discovery facilities Jinshan: 300K ft? cGMP manufacturing facility Suzhou: 314k ft? GLP preclinical toxicology facility a 17 charles river
Slide 18: WuXi's U.S. Facilities
WuXi's U.S. Facilities Combined with Charles River's biopharmaceutical testing facilities in the U.S. and Germany, believe we will be the leading global provider of manufacturing support for biologics 18
Slide 19: Compelling value proposition for clients
o Larger footprint with more capabilities enables clients to partner with one company from chemistry to man o More attractive partner for biopharmaceutical companies looking to gain more value from fewer service providers o Allows clients to utilize services in North America, Europe or China o Seaml
Slide 20: Enhancing Client Relationships
Enhancing Client Relationships o Focus on expanding existing client partnerships o Enhances solid, high-level relationships in the same companies o Strengthens relationships with those clients where one company is pre-eminent o Creates new opportunities with clients where both entities currently hav
Slide 21: Diverse Client Base
Diverse Client Base o Client base composed of big pharma and biotech, small and mid-tier pharma and biotech, academic and government clients, CROs and agricultural and chemical manufacturers o Top 10 clients represent ~35% of combined sales o 3 clients above 5% of sales o Largest client represents ~
Slide 22: Leverages increasing strategic importance of China
Leverages increasing strategic importance of China o Supportive of global pharmas who view China as the new frontier for drug development o Pharmas are taking advantage of cost leverage by placing chemistry in China o Lower cost, highly skilled scientists with advanced degrees o Emerging opportuniti
Slide 23: Diversified Revenue Base
Diversified Revenue Base North America 58% Europe 22% China 15% Asia (ex. China) 5% 23
Slide 24: Expands CRL Scientific Leadership
Expands CRL Scientific Leadership o Enhanced management team including: o Ge Li, PhD: Director, Corporate EVP and President, Global Discovery and China Services o Edward Hu: Corporate SVP and General Manager, Global Discovery and China Services o Shuhui Chen, PhD: Corporate SVP and General Manager,
Slide 25: Shared Corporate Culture
Shared Corporate Culture o Dedication to exceeding customer expectations o Shared mission to accelerate our clients' drug development efforts o Scientific expertise o Employee-centric o Focus on market leadership o Commitment to building shareholder value 25
Slide 26: Comments from Dr. Li
Comments from Dr. Li o Transformational transaction which creates the leading early-stage CRO o Combination of chemistry and in vivo biology o Provides a larger services platform to support our clients' research and development efforts ? Enables pull-through for both companies, upstream and downstre
Slide 27: Unique Opportunity
Unique Opportunity o Combines leaders in in vivo biology and chemistry o Larger footprint with more capabilities enables clients to partner with one company from chemistry to man o Supportive of global pharmas who view China as the new frontier for drug development o Dramatically improves both compa
Slide 28: Transaction Summary
28 TRANSACTION SUMMARY Co charles river
Slide 29: Transaction Summary
Transaction Summary Purchase price >> $1.6B, including the assumption of WuXi's debt and cash Consideration >> $21.25 total per ADS subject to collar (below) per share o $11.25 in cash (~53%) plus o $10.00 of CRL common stock (~47%) determined by exchange ratio Exchange Ratio >> $10.00 divided by 20
Slide 30: Financial Benefits
Financial Benefits EPS Impact* Annual Synergies Free Cash Flow o Expected to be neutral to slightly accretive to non-GAAP EPS in 2011 and increasingly accretive thereafter o Expect to generate $20M in annualized synergies beginning in 2011 o Public company costs o Corporate G and A o Refinement of c
Slide 31: Strong Combined Financial Profile FY December 2009
Strong Combined(1) Financial Profile FY DECEMBER 2009 ----------------------------------------------------------------------- CRL WUXI(2) COMBINED(3) ----------------------------------------------------------------------- Sales $1,203 $270 $1,473 Non-GAAP OI(4) $225 $55 $280 Margin 19% 20% 19% 1) "C
Slide 32: Strong Combined Financial Profile FY December 2010
Strong Combined(1) Financial Profile FY DECEMBER 2010 ------------------------------------------------------------------- CRL WUXI(2) COMBINED(3) ------------------------------------------------------------------- Sales $1,200-$1,240 $310-$320 $1,510-$1,560 Non-GAAP OI(4) $210-$225 $53-$60 $263-$285
Slide 33: Transaction Financing
Transaction Financing Sources ($mm) New equity $755 Balance sheet cash and new debt 1,137 Total sources $1,892 - --------------------------------------------------------- Uses ($mm) - --------------------------------------------------------- Equity purchase price $1,604 Debt refinancing(1) 221 Fees
Slide 34: CRL 1Q10 Results
CRL 1Q10 RESULTS 34
Slide 35: CRL 1Q10 Net Sales
CRL 1Q10 Net Sales ($ in millions) 1Q10 1Q09 % change FX % change ---------------- RMS $172.2 $161.5 6.6% 2.9% 3.7% PCS $125.1 $140.0 (10.6)% 3.9% (14.5)% -------------------------------- Net sales $297.3 $301.5 (1.4)% 3.4% (4.8)% >> Sales up slightly from 4Q09 35
Slide 36: CRL 1Q10 Operating Margin/EPS
CRL 1Q10 Operating Margin/EPS ($ in millions) 1Q10 1Q09 % change Operating margin 9.9% 13.2% (330)bps Non-GAAP OM% 14.8% 18.8% (400)bps EPS $0.26 $0.38 (31.6)% Non-GAAP EPS $0.45 $0.58 (22.4)% o Operating margin and EPS decline driven by lower sales volume, resumption of incentive compensation progr
Slide 37: RMS: 1Q10 Results
RMS: 1Q10 Results ($ in millions) 1Q10 1Q09 change 4Q09 change Net sales $172.2 $161.5 6.6% $169.4 1.6% Operating margin 29.0% 29.4% (30)bps 28.8% 30bps Non-GAAP OM 30.4% 31.6% (110)bps 30.1% 40bps o RMS sales growth driven by acquisitions of Piedmont and Cerebricon and foreign exchange benefit o Op
Slide 38: PCS: 1Q10 Results
PCS: 1Q10 Results ($ in millions) 1Q10 1Q09 change 4Q09 change Net sales $125.1 $140.0 (10.6)% $125.9 (0.6)% Operating margin (0.2)% 7.5% (770)bps 0.2% (40)bps Non-GAAP OM 9.3% 15.5% (620)bps 10.5% (120)bps o Flat sequential sales indicate plateauing of preclinical demand and impact of stable but lo
Slide 39: CRL Q2 Commentary
CRL Q2 Commentary o Continue to view 2Q10 as the beginning of improved demand for preclinical services o More robust inquiry levels, though not yet translated to sustained bookings and backlog due to normal lag in the selling cycle o Significant percentage of revenue booked for 2Q o Demonstrates tha
Slide 40: Appendix
APPENDIX 40
Slide 41: Glossary of Terms
Glossary of Terms o Advanced intermediate: An ingredient of a pharmaceutical created at an advanced stage of manufacturing but prior to API. o Analytical development: Development and validation of methods of analyzing APIs and formulated products for properties such as potency, purity, solubility, a
Slide 42: Glossary of Terms
Glossary of Terms o Full time equivalent: A type of contract where services are billed according to an employee�s time and effort rather than for shipment of a specific deliverable. o GLP (good laboratory practice): A standard of laboratory practice characterized by a high quality of equipment, trai
Slide 43: Glossary of Terms
Glossary of Terms o Phase 1 clinical trial: The stage of clinical testing where compounds are tested primarily for safety in small numbers of healthy patients. o Phase 2 clinical trial: The stage of clinical testing where compounds are tested, often in a range of doses, for efficacy and safety in sm
Slide 44: Reconciliation of GAAP to Non-GAAP Selected Business Segment Information
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (dollars in thousands) Three Months Ended March 27, March 28, December 26, Research Models and Services 2010 2009 2009 Net sales $ 172,205 $ 161,490 $ 169,444 Opera
Slide 45: Reconciliation of GAAP Earnings to Non-GAAP Earnings
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (1) (dollars in thousands, except for per share data) Three Months Ended March 27, March 28, 2010 2009 Net income attributable to common shareholders $ 17,382 $ 25,405 Add back: Amortization related t
Slide 46: Accelerating Drug Development. Exactly.
Accelerating Drug Development. Exactly. CRL LISTED NYSE (Copyright) 2010 Charles River Laboratories International, Inc.
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