Fairness opinions › Pharmaceutical Services › 2024

Societal CDMO acquired by CoreRx: fairness opinion by Raymond James

Announced February 28, 2024 · Tender offer · All cash · SC 14D9 filed March 11, 2024

Pharmaceutical Services CDMO Sponsor: QHP Capital, L.P.

Enterprise value

$144M

EV / LTM EBITDA

11.4x

EBITDA $12.7M · 15% margin

EV / LTM revenue

1.71x

revenue $84.2M

DCF discount rate

14.5%–16.5%

Perpetuity growth

Deal terms

ConsiderationAll cash

Price per share$1.10

Premium120.0%

Premium basisone day prior closing price of $0.50 as of February 22, 2024

StructureTender offer

Termination fee$5.0M (3.8% of equity)

Reverse termination fee—

Go-shopNone

Outside date—

FilingSC 14D9 · EDGAR index

Implied value per share by method vs. $1.10 offer

Selected companies — EV / CY2023 Adj. EBITDA $0.44 – $1.50

Selected companies — EV / CY2024E Adj. EBITDA $0.65 – $0.98

Precedent transactions — EV / LTM Adj. EBITDA $0.30 – $0.55

Discounted cash flow $0.44 – $0.78

Illustrative Trading Analysis $0.40 – $1.47

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

Opinion of Raymond James to the target board

Delivered February 25, 2024

Discounted cash flow assumptions

Discount rate14.5%–16.5%

Basisweighted average after-tax cost of debt and equity capital associated with executing SCTL's business plan

Terminal valuePerpetuity growth

Perpetuity growth2.0%–4.0%

Exit multiple—

Projection period2024E-2027E

Projections usedSCTL Management Projections (standalone, probability-weighted)

Implied value per share$0.44–$0.78

Unlevered free cash flows of $12.7M (2024), $12.5M (2025), $16.9M (2026), $18.3M (2027); included tax savings from NOLs in enterprise value; fully diluted shares of 116.6-116.9 million

Selected public companies (3)

Lonza Inc. · Catalent, Inc. · Siegfried AG

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / CY2023 Adj. EBITDA	16.7x	—	33.7x	16.7x–33.7x	$0.44–$1.50
EV / CY2024E Adj. EBITDA	15.6x	—	19.8x	15.6x–19.8x	$0.65–$0.98

Selected precedent transactions (10)

Date	Target	Acquirer	Multiple
2024-02	Catalent, Inc.	Novo Holdings	—
2023-05	BioPharma Solutions business of Baxter International Inc.	Advent International & Warburg Pincus	—
2022-08	Metrics Contract Services division of Mayne Pharma Group Limited	Catalent, Inc.	—
2020-12	Recipharm AB	EQT AB	—
2019-11	Consort Medical plc	Recipharm AB	—
2019-08	Cambrex Corporation	Permira	—
2017-06	Albany Molecular Research, Inc.	The Carlyle Group & GTCR LLC	—
2017-05	Patheon N.V.	Thermo Fisher Scientific Inc.	—
2016-05	Prime European Therapeuticals	Albany Molecular Research, Inc.	—
2016-04	Kemwell	Recipharm AB	—

Multiple	Low	Median	High	Range applied	Implied per share
EV / LTM Adj. EBITDA	14.3x	—	18.4x	14.3x–18.4x	$0.30–$0.55

Other analyses

Analysis	Summary	Implied per share
Illustrative Trading Analysis	Solely for informational purposes, compared historical closing/VWAP prices to the $1.10 Offer Price: closing price 2/23/24 $0.51 (117% premium), one day prior 2/22/24 $0.50 (120%), one week prior VWAP $0.50 (118%), one month prior VWAP $0.42 (160%), 6-month VWAP $0.40 (174%), 52-week VWAP $0.60 (85%), 52-week high $1.47 ((25)%).	$0.40–$1.47

Filing sections provided do not state the Raymond James fee amounts. Raymond James had not provided investment banking, financial advisory or financing services to SCTL or Parent for fees in the prior two years other than this engagement.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	CAGR
Revenue	$84.2M	$96.3M	$105M	$112M	10.1%
Revenue growth	0.0%	14.4%	9.1%	6.9%
EBITDA	$14.0M	$26.6M	$30.6M	$33.2M	33.4%
EBITDA growth	10.2%	90.0%	15.0%	8.5%
EBITDA margin	17%	28%	29%	30%
Implied EV / EBITDA	10.3x	5.4x	4.7x	4.3x

Year-1 growth is against LTM at announcement ($84.2M revenue, $12.7M EBITDA); later years are year over year.

Two sets of management projections covering FY2024-FY2027. The SCTL Management Projections (standalone, probability-weighted) show revenue of $84.2M in 2024 rising to $112.3M in 2027, Adjusted EBITDA of $14.0M in 2024 rising to $33.2M in 2027, and unlevered free cash flow of $12.7M (2024) to $18.3M (2027); these were relied upon by Raymond James for its DCF. The SCTL Management Pro Forma Projections (non-public-company view excluding San Diego facility and certain public-company/management costs, with improved Verapamil profit-sharing from 2024) show revenue of $93.7M in 2024 to $112.3M in 2027 and Adjusted EBITDA of $34.6M in 2024 to $40.3M in 2027; they were provided to the SCTL Board and Parent.

Process notes

Single financial advisor (Raymond James) to the SCTL Board; no special committee. Offer price of $1.10 exceeded every analysis range: DCF ($0.44-$0.78), selected transactions ($0.30-$0.55) and selected companies ($0.44-$1.50 on 2023; $0.65-$0.98 on 2024E). Supporting shareholders holding ~25.5% of outstanding shares (including First Light Asset Management) signed tender and support agreements. Termination fee negotiated from an initial 2.0% proposal up to $5.0 million (~3.8% of transaction equity value); no go-shop. Confidentiality agreement with QHP Capital dated 10/27/2023, amended 2/28/2024 to waive standstill. Catalent data in the selected companies analysis used market data as of 2/2/2024, one day prior to the Novo Holdings announcement; Lifecore Biomedical and Thermo Fisher were considered but excluded.

Other Pharmaceutical Services fairness opinions

Avid Bioservices / GHO Capital Partners / Ampersand Capital Partners 2024
Catalent / Novo Holdings / Novo Nordisk 2024 · 22.9x EV/EBITDA
Syneos Health / Elliott Investment Management / Patient Square Capital / Veritas Capital 2023 · 9.7x EV/EBITDA
PPD / Thermo Fisher Scientific 2021 · 20.3x EV/EBITDA
PRA Health Sciences / ICON 2021 · 19.2x EV/EBITDA
Cambrex / Permira Funds 2019 · 14.5x EV/EBITDA

All Pharmaceutical Services opinions → · Raymond James opinions