Fairness opinions › Pharmaceutical Services › 2018

Juniper Pharmaceuticals acquired by Catalent: fairness opinion by Rothschild & Co

Announced July 3, 2018 · Tender offer · All cash · SC 14D9 filed July 17, 2018

Pharmaceutical Services CDMO

Enterprise value

$128M

EV / LTM EBITDA

9.9x

EBITDA $12.9M · 20% margin

EV / LTM revenue

1.97x

revenue $64.7M

DCF discount rate

14.0%–16.0%

Perpetuity growth

Deal terms

ConsiderationAll cash

Price per share$11.50

Premium—

Premium basis—

StructureTender offer

Termination fee$5.6M

Reverse termination fee—

Go-shopNone

Outside date—

FilingSC 14D9 · EDGAR index

Implied value per share by method vs. $11.50 offer

Selected companies — EV / 2018E EBITDA $11.05 – $13.05

Selected companies — EV / 2019E EBITDA $9.85 – $11.65

Precedent transactions — EV / LTM EBITDA $8.90 – $10.35

Discounted cash flow $10.10 – $12.00

Historic closing prices (52-week range) $3.85 – $7.20

Premia paid analysis $8.30 – $11.05

Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.

Opinion of Rothschild & Co to the target board

Delivered July 2, 2018 · Fee $4.9M ($3.9M contingent on closing), $0.5M on delivery of the opinion

Discounted cash flow assumptions

Discount rate14.0%–16.0%

BasisEstimated WACC calculated using the traditional capital asset pricing model; NOL tax credit cash flows discounted at the Company's cost of equity of 15.5%-16.1%

Terminal valuePerpetuity growth

Perpetuity growth2.0%–3.0%

Exit multiple—

Projection periodFY2018-FY2023 (core business); IVR payments through FY2037

Projections usedCompany management Forecasts

Implied value per share$10.10–$12.00

Separate DCFs for (i) the business excluding IVR-related milestones/royalties (mid-FY2018 through FY2023, mid-year convention), (ii) risk-adjusted IVR milestone and royalty payments through FY2037, and (iii) tax credits from NOL utilization; net debt of $(17.8) million as of June 30, 2018 subtracted.

Selected public companies (5)

Lonza Group AG · Catalent, Inc. · Siegfried Holding AG · Cambrex Corporation · Recipharm AB

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / 2018E EBITDA	10.2x	14.6x	14.7x	9.0x–11.0x	$11.05–$13.05
EV / 2019E EBITDA	9.6x	12.7x	13.5x	8.5x–10.5x	$9.85–$11.65

Selected precedent transactions (19)

Date	Target	Acquirer	Multiple
2017-06-06	Albany Molecular Research, Inc.	The Carlyle Group & GTCR LLC	13.3x EV/LTM EBITDA
2017-05-15	Patheon N.V.	Thermo Fisher Scientific, Inc.	17.3x EV/LTM EBITDA
2016-12-15	Capsugel S.A.	Lonza Group AG	15.1x EV/LTM EBITDA
2016-11-28	Accucaps Industries Limited	Catalent, Inc.	10.1x EV/LTM EBITDA
2016-09-13	Pharmatek Laboratories, Inc.	Catalent, Inc.	14.5x EV/LTM EBITDA
2016-05-05	Prime European Therapeuticals S.p.A. (Euticals)	Albany Molecular Research, Inc.	13.3x EV/LTM EBITDA
2016-04-18	Kemwell AB	Recipharm AB	15.5x EV/LTM EBITDA
2016-04-11	Novacap Group	Eurazeo SA	7.1x EV/LTM EBITDA
2016-02-23	Mitim Srl	Recipharm AB	8.0x EV/LTM EBITDA
2015-10-20	Nitin Lifesciences Limited	Recipharm AB	12.4x EV/LTM EBITDA
2015-07-16	Gadea Grupo Farmacéutico	Albany Molecular Research, Inc.	10.2x EV/LTM EBITDA
2014-11-13	Lusomedicameta Sociedade Técnica Farmacêutica S.A.	Recipharm AB	8.8x EV/LTM EBITDA
2014-09-30	Aesica Holdco Limited	Consort Medical plc	11.5x EV/LTM EBITDA
2014-08-19	Corvette Pharmaceutical Services Group	Recipharm AB	8.0x EV/LTM EBITDA
2014-06-02	Oso Biopharmaceuticals Manufacturing, LLC	Albany Molecular Research, Inc.	12.9x EV/LTM EBITDA
2014-03-24	Cedarburg Pharmaceuticals, Inc.	Albany Molecular Research, Inc.	7.4x EV/LTM EBITDA
2013-11-19	Patheon Inc.	JLL Partners, Inc. / Koninklijke DSM N.V.	13.3x EV/LTM EBITDA
2012-10-29	Banner Pharmacaps Inc.	Patheon Inc.	10.2x EV/LTM EBITDA
2011-08-22	Aptuit LLC (Clinical Trial Supplies business)	Catalent, Inc.	10.2x EV/LTM EBITDA

Multiple	Low	Median	High	Range applied	Implied per share
EV / LTM EBITDA	7.1x	11.5x	17.3x	9.0x–11.0x	$8.90–$10.35

Other analyses

Analysis	Summary	Implied per share
Historic closing prices (52-week range)	Closing price of the Shares ranged from $3.85 to $7.20 in the 52-week period preceding January 31, 2018 (prior to public announcement of Rothschild's engagement).	$3.85–$7.20
Premia paid analysis	Premia paid in selected transactions announced June 2013 to June 2018 involving Nasdaq/NYSE-listed targets with implied equity values between $50 million and $300 million (excluding bankruptcy); 1st to 3rd quartile premia of 15% to 53% applied to the $7.20 unaffected closing price prior to January 31, 2018.	$8.30–$11.05

Aggregate fee of approximately $4.9 million; $500,000 paid for services performed through June 2018, $500,000 payable upon delivery of the opinion, and approximately $3.9 million contingent upon consummation of the Transactions.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	Year 5	CAGR
Revenue	$65.8M	$72.2M	$80.9M	$95.4M	$107M	12.8%
Revenue growth	1.7%	9.7%	12.0%	17.9%	11.7%
EBITDA	$11.8M	$14.4M	$17.6M	$23.7M	$28.1M	24.2%
EBITDA growth	-8.5%	22.0%	22.2%	34.7%	18.6%
EBITDA margin	18%	20%	22%	25%	26%
Implied EV / EBITDA	10.8x	8.9x	7.2x	5.4x	4.5x

Year-1 growth is against LTM at announcement ($64.7M revenue, $12.9M EBITDA); later years are year over year.

Rothschild used management-prepared Forecasts ("the Forecasts"), including net operating loss utilization forecasts. Core business unlevered after-tax free cash flows were projected from mid-fiscal 2018 through fiscal 2023, with risk-adjusted IVR milestone and royalty cash flows forecast through fiscal 2037 and separate forecasts of tax credits from NOL utilization. Estimated net debt was $(17.8) million as of June 30, 2018; specific revenue/EBITDA figures were not disclosed in the sliced sections.

Process notes

A Special Committee of the Board oversaw the sale process (advisors Rothschild, Chestnut and Goodwin participated), but the fairness opinion was delivered to the full Board. Filing references a competing bidder ("Party B") whose exclusivity period expired before Catalent's proposal was pursued. Rothschild performed three separate DCF streams (core business, risk-adjusted IVR milestone/royalty payments through FY2037, and NOL tax credits discounted at the 15.5%-16.1% cost of equity).

Other Pharmaceutical Services fairness opinions

Cambrex / Permira Funds 2019 · 14.5x EV/EBITDA
Albany Molecular Research / Carlyle Group / GTCR 2017 · 11.5x EV/EBITDA
Parexel International / Pamplona Capital Management 2017 · 13.9x EV/EBITDA
Patheon NV / Thermo Fisher Scientific 2017 · 16.4x EV/EBITDA
Quintiles / IMS Health 2016 · 10.8x EV/EBITDA
IMS Health / Quintiles 2016 · 13.5x EV/EBITDA

All Pharmaceutical Services opinions → · Rothschild & Co opinions