Contract
Exhibit (c)(2)(ii)
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Table of Contents
I. Income Statement Discussion
II. Discounted Cash Flow Analyses
III. Premiums Analysis
IV. Talking Points for Sun Negotiations
Appendix
Table of Contents
DRAFT
For discussion purposes only
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Income Statement Discussion
DRAFT
For discussion purposes only
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
I/S - Dec. 22, 2010 Model
Income Statement Discussion
§ Shown is the Income Statement from Dec. 22, 2010, prior to the adjustments due to the Consulting audit
that demonstrated problems with manufacturing operations
that demonstrated problems with manufacturing operations
§ Revenues, expenses and EBIT are shown by operating unit: Distribution, Contract Manufacturing and
XXXXXX Manufacturing
XXXXXX Manufacturing
§ Assumptions:
– Distribution agreement will terminate at fiscal year end 2012
– Revenue from XXXXXX manufacturing will recommence 2012
§ Based on Management’s projections
DRAFT
For discussion purposes only
1
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
I/S - Jan. 5, 2011 Model
§ Shown is the Income Statement from January 5, 2011
§ Assumptions:
– Distribution agreement will terminate at fiscal year end 2012
– Revenue from XXXXXX manufacturing will recommence two months later than December 22,
2010 model
2010 model
– Includes additional changes by management to reflect new assumptions regarding contract
manufacturing and other items
manufacturing and other items
§ Based on Management’s projections
DRAFT
For discussion purposes only
Income Statement Discussion
2
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
§ Shown is a comparison of the December 22, 2010 model and the January 5, 2011 model
§ Based on Management’s projections
I/S Comparison - Dec. 22, 2010 vs. Jan. 5, 2011
Comparison = Jan 5. 2011 Model - Dec. 22, 2010 Model.
DRAFT
For discussion purposes only
Income Statement Discussion
3
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
I/S - Jan. 10, 2011 Model
§ Shown is the Income Statement from January 10, 2011
§ Assumptions:
– Distribution agreement will terminate at fiscal year end 2012
– Revenue from XXXXXX manufacturing will recommence two quarters later than original plan
(December 22, 2010)
(December 22, 2010)
– Includes additional changes by management to reflect new assumptions regarding contract
manufacturing and other items
manufacturing and other items
§ Based on Management’s projections
DRAFT
For discussion purposes only
Income Statement Discussion
4
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
§ Shown is a comparison of the January 5, 2011 and the January 10, 2011 model
§ Based on Management’s projections
I/S Comparison - Jan. 5, 2011 vs. Jan. 10, 2011
DRAFT
For discussion purposes only
Income Statement Discussion
Comparison = Jan 10. 2011 Model - Jan. 5, 2011 Model.
5
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
I/S - Repaglinide
DRAFT
For discussion purposes only
Income Statement Discussion
§ Shown is the Income Statement impact of Repaglinide on the January 10, 2011 model
§ Based on Management’s projections
6
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Manufacturing Shut Down Analysis
§ Assumed that XXXXXX’x manufacturing operations are discontinued
§ XXXXXX manufacturing expense assumptions:
DRAFT
For discussion purposes only
Income Statement Discussion
Expense
|
2012P (‘000s)
|
Expense % Remaining
|
Salaries and Wages Detail
|
|
|
Manufacturing
|
$3,281
|
0%
|
Packaging
|
559
|
25%
|
Facilities
|
682
|
75%
|
QC & QA
|
3,778
|
50%
|
Regulatory affairs
|
511
|
100%
|
R&D Analytical Dev
|
581
|
100%
|
R&D Form. Dev
|
510
|
100%
|
Commercial
|
503
|
25%
|
Sales & Marketing
|
2,404
|
75%
|
Wixom Shipping
|
713
|
25%
|
M.I.S.
|
386
|
75%
|
General Admin. & Finance
|
1,290
|
75%
|
Human Resources
|
541
|
75%
|
Salary adjustments
|
941
|
25%
|
Bonus payments
|
353
|
25%
|
Total
|
17,035
|
|
Note: The above percentages apply to both the Shut Down March 31, 2011 Scenario and the Shut Down March 31, 2012 Scenario.
7
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Manufacturing Shut Down Analysis (ctd.)
Expense
|
2012P
(‘000s) |
Expense %
Remaining |
Education and Training
|
26
|
50%
|
Dues and Subscriptions
|
312
|
50%
|
Freight
|
71
|
0%
|
Legal and Professional (2)
|
5,199
|
NA (2)
|
Travel Related
|
116
|
75%
|
R/E Taxes
|
604
|
100%
|
Rent
|
66
|
100%
|
Director Fees
|
100
|
50%
|
Facility Maintenance and
Security |
566
|
50%
|
Service Agreement
|
725
|
50%
|
Advertising
|
0.0
|
50%
|
Miscellaneous
|
431
|
50%
|
Depreciation and
Amortization |
4,767
|
100%
|
Total Operating Expense
|
34,911
|
|
Note: The above percentages apply to both the Shut Down March 31, 2011 Scenario and the Shut Down March 31, 2012 Scenario.
Note: Operating expenses do not contain “Tax Expense - State & Local “and “Technology Transfer” expense.
!1) See discussion of salary and wages on prior page.
(2) Assumes legal and professional expenses remain; however Xxxxxxx expenses are removed - Xxxxxxx expenses were projected to be $3.75 million in 2012 and $3.0 million in 2013.
DRAFT
For discussion purposes only
Income Statement Discussion
Expense
|
2012P
(‘000s) |
Expense %
Remaining |
Material Charges
|
$4
|
0%
|
Salaries & Wages (1)
|
17,035
|
NA (1)
|
Contract Labor
|
98
|
50%
|
Insurance Costs
|
322
|
50%
|
Operational Supplies
|
531
|
50%
|
Chemicals and Solvents
|
246
|
0%
|
Tooling-Stores and Spares
|
50
|
50%
|
R&D Materials
|
189
|
100%
|
Repairs and Maintenance
|
608
|
50%
|
Utilities
|
1,145
|
50%
|
Outside Testing and
Analytics |
332
|
75%
|
Biostudies
|
1,250
|
100%
|
Office Supplies
|
118
|
50%
|
§ Assumed that XXXXXX’x manufacturing operations are discontinued
§ XXXXXX manufacturing expense assumptions:
8
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
I/S - Shut Down Mar. 31, 2011
DRAFT
For discussion purposes only
Income Statement Discussion
§ Shown is the Income Statement from January 10, 2011 with the assumption that XXXXXX’x
manufacturing operation are discontinued March 31, 2011
manufacturing operation are discontinued March 31, 2011
§ Contract Manufacturing Assumptions:
– Existing products continue as well as products to be “relaunched”
– Expenses after 2012 are kept constant except for incremental material costs from “relaunched” products
§ XXXXXX Manufactured Products Assumptions:
– Future revenue from manufactured products is zero
– Adjusted expenses are kept constant at 2012 levels
9
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
I/S - Shut Down Mar. 31, 2012
DRAFT
For discussion purposes only
Income Statement Discussion
(1)
(1)
§ Shown is the Income Statement from January 10, 2011 with the assumption that XXXXXX’x manufacturing
operation are discontinued March 31, 2012
operation are discontinued March 31, 2012
§ Contract Manufacturing Assumption:
– Revenue and expenses as projected by management
§ XXXXXX Manufactured Products Assumptions:
– Revenue and material costs delayed two years due to site transfer from XXXXXX to a contract manufacturer
– Adjusted expenses are kept constant at 2013 levels with the exception of material costs mentioned above
(1) Represents product revenue and cost associated with products to be site transferred from XXXXXX to a contract manufacturer.
10
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Discounted Cash Flow Analyses
DRAFT
For discussion purposes only
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Key Assumptions Underlying DCF Analysis
Discounted Cash Flow Analyses
§ At the instruction of the Independent Committee (the “Committee”), we have performed
discounted cash flow analyses on different potential operating scenarios:
discounted cash flow analyses on different potential operating scenarios:
– Scenario 1: Management’s current forecast from January 10, 2011, which reflects the resumption of
XXXXXX’x manufacturing activities in fiscal year 2012 in addition to ongoing contract manufactured
business
XXXXXX’x manufacturing activities in fiscal year 2012 in addition to ongoing contract manufactured
business
– Scenario 2: Repaglinide’s stand-alone valuation given Management’s current forecast from January
10, 2011
10, 2011
– Scenario 3: Management’s current forecast above (Scenario 1); however, adjusted assuming
manufacturing operations are discontinued as of March 31, 2011
manufacturing operations are discontinued as of March 31, 2011
– Scenario 4: Management’s current forecast above (Scenario 1); however, adjusted assuming
manufacturing operations are discontinued as of March 31, 2012
manufacturing operations are discontinued as of March 31, 2012
§ For scenarios involving the termination of manufacturing activities, we have relied on the advice
of the Committee regarding certain assumptions (e.g., shutdown costs, liquidation proceeds,
etc.) to enable this analysis and express no opinion with respect to the estimates and judgments
on which those assumptions are based
of the Committee regarding certain assumptions (e.g., shutdown costs, liquidation proceeds,
etc.) to enable this analysis and express no opinion with respect to the estimates and judgments
on which those assumptions are based
§ Further, we acknowledge to the Committee that adjustments to these assumptions may have a
material effect on the outcome of the discounted cash flow analysis
material effect on the outcome of the discounted cash flow analysis
§ Finally, we are not expressing any opinion as to the relative merits of any alternative operating
scenario that might exist for XXXXXX or the effect of any other transaction in which XXXXXX
might engage
scenario that might exist for XXXXXX or the effect of any other transaction in which XXXXXX
might engage
DRAFT
For discussion purposes only
11
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 1 - January 10, 2011 Model
Parameters
XXXXXX Stand-Alone (Price Per Share)
EBITDA Exit Multiple Range
Discounted Cash Flow Analyses
Discount
Rate
Rate
DRAFT
For discussion purposes only
§ Based on XXXXXX’x balance sheet and cash
flow projections for 2011-2016 from the
Company’s January 10, 2011 model
flow projections for 2011-2016 from the
Company’s January 10, 2011 model
§ EBITDA exit multiples ranging from 8.0x to
10.0x
10.0x
§ Discount rates ranging from 11.0% to 15.0%
§ Assumes tax rate of 40%
§ Present value as of January 31, 2011
§ Net working capital per Management balance
sheet projections
sheet projections
§ Reflects XXXXXX’x common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
12
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 2 - Repaglinide Stand-Alone
Parameters
Repaglinide Stand-Alone (Price Per Share)
Discounted Cash Flow Analyses
§ EBITDA exit multiples ranging from 8.0x to
10.0x
10.0x
§ Discount rates ranging from 11.0% to 15.0%
§ Assumes tax rate of 40%
§ Present value as of January 31, 2011
§ Reflects XXXXXX’x common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
§ Assumes zero capital expenditures and zero
change in net working capital
change in net working capital
EBITDA Exit Multiple Range
Discount
Rate
Rate
DRAFT
For discussion purposes only
13
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 3 - Cease Manufacturing March 31, 2011
Parameters
XXXXXX Stand-Alone (Price Per Share)
Discounted Cash Flow Analyses
Revenue Exit Multiple Range
Discount
Rate
Rate
DRAFT
For discussion purposes only
§ Based on XXXXXX’x balance sheet and cash
flow projections for 2011-2016 from the
Company’s January 10, 2011 model
flow projections for 2011-2016 from the
Company’s January 10, 2011 model
§ Given negative EBITDA in the exit year,
revenue exit multiples ranging from 1.00x to
2.00x
revenue exit multiples ranging from 1.00x to
2.00x
§ Discount rates ranging from 11.0% to 15.0%
§ Assumes tax rate of 40%
§ Present value as of January 31, 2011
§ Net working capital per Management balance
sheet projections
sheet projections
§ Reflects XXXXXX’x common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
14
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 4 - Cease Manufacturing March 31, 2012
Parameters
XXXXXX Stand-Alone (Price Per Share)
Discounted Cash Flow Analyses
EBITDA Exit Multiple Range
Discount
Rate
Rate
DRAFT
For discussion purposes only
§ Based on XXXXXX’x balance sheet and cash
flow projections for 2011-2016 from the
Company’s January 10, 2011 model
flow projections for 2011-2016 from the
Company’s January 10, 2011 model
§ EBITDA exit multiples ranging from 8.0x to
10.0x
10.0x
§ Discount rates ranging from 11.0% to 15.0%
§ Assumes tax rate of 40%
§ Present value as of January 31, 2011
§ Net working capital per Management balance
sheet projections
sheet projections
§ Reflects XXXXXX’x common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1
15
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Discount Cash Flow Analyses Summary
|
Scenario 1
Final Model
(Jan. 10, 2011) |
Scenario 2
Repaglinide
Stand-Alone
|
Scenario 3
Cease
Manufacturing March 31, 2011 |
Scenario 4
Cease
Manufacturing March 31, 2012 |
|
||||
Low
|
$4.33
|
[ * ]
|
$2.05
|
$4.22
|
Midpoint
|
$4.91
|
[ * ]
|
$2.28
|
$4.71
|
High
|
$5.59
|
[ * ]
|
$2.55
|
$5.28
|
|
|
|
|
|
|
||||
Low
|
$173.9
|
[ * ]
|
$82.2
|
$169.6
|
Midpoint
|
$197.3
|
[ * ]
|
$91.5
|
$189.3
|
High
|
$224.4
|
[ * ]
|
$102.4
|
$212.2
|
Discounted Cash Flow Analyses
Implied Aggregate Equity Value
DRAFT
For discussion purposes only
($ in millions, except per
share amounts)
Implied Per Share Equity Value
16
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Premiums Analysis
DRAFT
For discussion purposes only
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Premiums in Public Acquisitions
§ Xxxxxxx Xxxxx analyzed 27 domestic public transactions announced since January 1, 2000 with
transaction values greater than $10 million in which 15% to 35% of the target’s equity was acquired
with the acquiror owning between 65% to 85% of the target prior to the transaction.(1) Upon
completion of the transaction the acquiror owned 100% of the target.
transaction values greater than $10 million in which 15% to 35% of the target’s equity was acquired
with the acquiror owning between 65% to 85% of the target prior to the transaction.(1) Upon
completion of the transaction the acquiror owned 100% of the target.
§ Xxxxxxx Xxxxx compared the price of each transaction to the closing price of the target stock one day,
one week, one month, 90 days, 180 days, and 360 days prior to the announcement of the
transaction
one week, one month, 90 days, 180 days, and 360 days prior to the announcement of the
transaction
Source: FactSet Research Systems. Data as of December 28, 2010.
(1) Includes the March 2009 Genentech / Roche transaction at the instruction of the Committee.
(2) As of December 3, 2010.
Premiums Analysis
DRAFT
For discussion purposes only
(2)
17
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Talking Points for Sun Negotiations
DRAFT
For discussion purposes only
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Preliminary Talking Points for Sun Negotiation
§ The announced premium on December 6, 2010 of 5% represents a below median premium for the
transaction. This is the case for both:
transaction. This is the case for both:
– Public company acquisitions generally
– Public company acquisitions where the buyer owned greater than 50.1%, but less than 99.9% prior to
acquiring the remaining shares
acquiring the remaining shares
– Public company acquisitions where the buyer owned greater than 65.0%, but less than 85% prior to
acquiring the remaining shares
acquiring the remaining shares
§ At a proposed offer price per share of $4.75, it is not clear that the value of the shares has been
maximized
maximized
– The Independent Committee may want to consider an alternative to the current business plan, whereby
all manufacturing activities at the plant cease as soon as possible
all manufacturing activities at the plant cease as soon as possible
– The Independent Committee may consider other possible alternatives including finding alternative
buyers for the minority shares
– The minority shareholders may not sell, leaving Xxx as owner of less than the 90% threshold to
complete a squeeze out merger
– Exploration of all of these alternatives take time and will delay a possible transaction with Sun
Talking Points for Sun Negotiations
In an attempt to maximize the potential value obtained in a possible transaction with Xxx, we believe
the following points represent some of the key themes that should be developed during future
negotiations:
the following points represent some of the key themes that should be developed during future
negotiations:
DRAFT
For discussion purposes only
18
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Preliminary Talking Points for Sun Negotiation (ctd.)
§ The announced share price has been deemed unsatisfactory by the market
– Immediately following the announcement, the stock price increased to a high of $5.29 on December 13th
due to the expectation that a higher price would be achieved
due to the expectation that a higher price would be achieved
– There have been numerous shareholder lawsuits filed against the Company on the basis that $4.75 per
share is inadequate
share is inadequate
– The Company has received correspondence from existing shareholders (including large institutional
investors) stating their opposition to the deal given the proposed price per share
investors) stating their opposition to the deal given the proposed price per share
§ To ensure an expeditious transaction is achieved, it is imperative that the Company achieve a
higher share price than $4.75 that will enable broad support from the minority shareholders. If not,
the deal will encounter several challenges:
higher share price than $4.75 that will enable broad support from the minority shareholders. If not,
the deal will encounter several challenges:
– Enhanced legal costs
– Delayed closing
– Deterioration of the value of the Company (i.e., lost employees, strained customer relationships,
distraction from consent decree remediation work, etc.)
distraction from consent decree remediation work, etc.)
DRAFT
For discussion purposes only
Talking Points for Sun Negotiations
19
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Appendix
DRAFT
For discussion purposes only
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 1 - January 10, 2011 Model Detail
Appendix
DRAFT
For discussion purposes only
20
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 2 - Repaglinide Stand-Alone Detail
DRAFT
For discussion purposes only
Appendix
21
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 3 - Cease Manufacturing March 31, 2011 Detail
DRAFT
For discussion purposes only
Appendix
22
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.
CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.
Scenario 4 - Cease Manufacturing March 31, 2012 Detail
DRAFT
For discussion purposes only
Appendix
23
[ * ] CONFIDENTIAL TREATMENT REQUESTED BY CARACO PHARMACEUTICAL LABORATORIES, LTD.