RxElite Investor Presentation August2007...
Transcript of RxElite Investor Presentation August2007...
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Corporate IntroductionAugust 2007
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Safe Harbor Statement
Statements contained in this presentation may be forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995 involving known andunknown risks, delays, and uncertainties that may cause the our actual results orperformance to differ materially from those expressed or implied by these forward-lookingstatements. These risks, delays, and uncertainties include, but are not limited to: risksassociated with the uncertainty of future financial results, our reliance on our sole supplier,the limited diversification of our product offerings, additional financing requirements,development of new products, government approval processes, the impact of competitiveproducts or pricing, technological changes, the effect of economic conditions and otheruncertainties detailed in the Company's filings with the Securities and ExchangeCommission. The Company undertakes no obligation to update any forward-lookingstatements.
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About RxElite
RxElite (OTCBB: SOUT) Total Shares Outstanding: 83.7 Million / Float: 16.5 Million Market Capitalization: $121.4 Million1
Insider Ownership: 25.8%
RxElite Holdings, Inc., founded in 2000, develops, manufactures, and markets genericprescription drug products in specialty generic markets. These markets include products inthe areas of anesthesia, sterile liquid dose drugs (including respiratory inhalation drugs,ophthalmics, and injectable drugs), and transdermal patch products.
Recently Closed a $19.6M Financing
1. As of August 14, 2007
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Business Strategy / Model
Specialty Focus –Expertise and investments in specialty products, characterized by» High barriers to entry,» Limited competition,
» Good margin opportunities;
Low Cost Excellence» Be low cost producer
» Maintain low cost operations with scalable infrastructure;
Leverage Distribution Strength» Vendor to 46 of top 50 US generic buyers
» Approved vendor contracts with all 8 hospital GPOs
Unparallel Service - 100% deliverability» 74 months of uninterrupted supply –100% fulfillment
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Specialty Generic Contains Attractive Segments
IR Oral SolidsCreams/OintmentsCR Oral SolidsOral Suspensions
AerosolsCytotoxicsOphthalmicsInjectables (in glass)
Injectables (inplastic)Transdermals
Schedule II ProductsBiogenericsAnesthetic GasesIntranasalsHormonals
Low HighMedium
Number of Competitors
Hig
hLo
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Bar
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(1) Injectables in plastic
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Leading HomecareCompanies
•Lincare•Apria•ChemRx
Major DirectStocking Chains
•Wal-Mart•Walgreens•Hannaford Bros.
All RegionalWholesalers
•ANDA•Harvard Drugs•Kinray
All 3 NationalWholesalers
•McKesson•Cardinal•AmerisourceBergen
Product Distribution: 46 of the top 50 US Generic Buyers
Market Credibility = National Distribution Strength
It takes longer to establish market credibilitythan to attain an ANDA
Distribution Strength
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Superior Execution
RxElite's goal: To be the generic buyer's "vendor of choice" for each of their products byproviding the highest quality products at the best prices, with 100% deliverability;
Quality –All RxElite’s products meet current FDA standards;
Price –Delivering the best value to customers by combining select manufacturingtechnologies and proprietary processes, with low cost distribution methods;
Deliverability –RxElite has maintained a track record of 100% order fulfillment rate forover 74 months of uninterrupted supply;
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Business Opportunity
Market Size: Total addressable market from pipeline products exceed $2 Billion» Sevoflurane is a $400 Million market in the US, with limited competitors;
Market Growth: US Sevoflurane market growth is forecasted to be 11%-15% year overyear (in volume);
Growth Strategy: Organic growth through» A pipeline of more than ten specialty generic drugs with high barriers to entry;» Partnering agreements with low cost generic drug producers
− Further leverage RxElite’s existing distribution network,− Combine to launch new products beginning in 2008
Scalability & Margins» Scalable to increase business several times its current size without much increase
in fixed costs,» Potential for exponential increase in profitability as new products launch;
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Competitive Advantage
Specialty product expertise» RxElite has a strong base in Blow Fill Seal (“BFS”) sterile liquid dose products,
» Expertise in other specialty areas through partnerships with leading companies in thedevelopment and manufacturing of anesthetic gases and transdermal patch products;
Uniquely positioned» Specialty products pipeline and partnership agreements with industry leaders;
» RxElite has robust marketing channels
» Well-developed sales and supplier relationships,
Strong product pipeline» Three Abbreviated New Drug Applications (ANDA) approved,» Over 10 ANDAs in various stages of development,
» Blockbuster generics through partnerships with low cost industry players;
Senior management» Experienced and understands the market,
» Great credibility with the market and its commercial partners;
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Competitors
Competitors:
» Successfully competed with large industry players such as Dey Labs, IVAX (now part of Teva),Alpharma (now part of Actavis), and Warrick (generic subsidiary of Schering-Plough),
» Current competitors include Abbott and Baxter for RxElite’s recently launched Sevoflurane,
» Baxter and Hospira for other anesthetic gases;
Barriers to Additional Competition:
» Manufacturing process patents,
» Limited manufacturing capacity,
» Long lead times for new industry capacity to come online,
» Products that require unique expertise &/or lengthy approval times;
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Risk
Limited product portfolio,
Depending on a single, large market product, for the next 12 months;
Risk Mitigation
» Sevoflurane has few competitors, and a $400 M market that is growing between 11 to 15% peryear,
» Successfully competing by
− Combining a highly competitive value, with flexibility, response, and service
» Strategic partners and ongoing corporate development efforts will continually diversify portfolio;
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RxElite’s Future
Key Revenue Drivers
» 2007-2008: Anesthetic Gases
» 2009-2010: Partnerships Products
» 2010 and Beyond: Sterile Liquid Products
Anticipated Product Filings» 2007 –2008: 3 to 5 ANDA filings
Capabilities Expansion» Specialty Product Development and Sterile Manufacturing
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Strategic Partners
Minrad International - exclusive manufacturing partner for anesthetic gas products
» Isoflurane
» Enflurane
» Sevoflurane
» Desflurane –Expected 2008/2009
Alkem Laboratories and Stason Pharmaceuticals exclusive manufacturing partner fororal solid products;
Core Tech Solutions is our exclusive manufacturing partner for a portfolio oftransdermal patch products;
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8 Major GPO’s Control >90% of Hospital Purchasing
Novation; 24%
Premier; 20%
MedAssets/HSCA; 18%
Amerinet; 10%
Broadlane; 12%
HPG/Consorta; 12%
Cardinal; 3%
PACT; 1%
RxElite has approved vendor contracts with all 8 GPO’s RxEliteis the Sole Source Vendor to HPG/Consorta for Isoflurane and Enflurane
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Sevoflurane –2007 Opportunity
FDA-Approved in May 2007
US Market: $400M» Market growing 11% - 15% per year (in units),
» Attractive competitive landscape with only 2 competitors (Abbott/Baxter);
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Market Strategies
Focus where Abbott and Baxter are not
» Ambulatory/Outpatient surgery centers
− Highly defensible market share
− Vaporizer ownership
− Attractive pricing
» IDNs and Tier 2 GPOs
» Primary GPOs
» Experienced sales force:
− Value-added selling with focus on service
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Desflurane –2008 / 2009 Opportunity
FDA-Approval expected in 2008 / 2009
US Market: $200M+» Attractive competitive landscape with 1 competitor until 2011 due to patent
conditions» Continues to be branded with growing market» Barriers to entry and profitable niche
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$0
$5 000 000
$10 000 000
$15 000 000
$20 000 000
$25 000 000
$30 000 000
2001
2002
2003
2005
2006
RxElite Sales Performance (in US Dollars)
100% service deliverability withno backorders for over
6 years
Decrease of sales from 2005 to 2006reflects the divestiture of two productlines, Albuterol 0.083% and Ipratropium0.02%
Expect forecast sales to EXCEEDhistoric high following generic approvaland launch of Sevoflurane
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Staged Growth and Cash Flows
Partnering Opportunities andPlatform Leverage
Vertical Integration andNew Products
• Minrad / Desflurane
• Sterile liquidsproducts
• Other specialtygenerics
2007 - 2008 2009 - 2011
• Minrad /Sevoflurane
• Stason• Alkem Labs
Market Credibility andDistribution leverage
• Albuterol Sulfate
• Ipratropium Bromide• Isoflurane• Enflurane
2001 - 2006
Stage I Stage II Stage III
OperatingMargins 5 - 10% 10 - 30%< 5%
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Product Launches and Addressable Markets
Addressable Market
2007 2008 2009 2010 2011
$411 M$591 M
$1,836 M
$400M
$180M
$1,245M
$11M
$2,153 M
$317M
$2,494 M$341M
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Specialty focus andpartnership growth oriented
Sterile liquids franchise
Recently completed FDA –approved sterile liquidsfacility
$622.5$635.0-$12.4/$-16.4
$52.4Akorn(AKRX)
Anesthetic gas partner
Rx Elite representssignificant portion offorecasted revenues
Near term prospects andUS economics similar
Producing Sevoflurane
$228.2$232.6-$9.32 / -$9.4
$18.4Minrad (BUF)
CommentsEnterprise
Value(M)
MarketCap(M)
EBITDA/Net
Income(M)
Sales(M)
Company
Public Comparables
1. Market Cap Values as of 8/15/2007
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Key Management
Daniel Chen, Chairman & CEO - 2003Cendian Pharmaceuticals, Lifespan Biosciences, Astrazeneca, GSK, ALARIS Medical Systems, A.T.
Kearney & Merrill Lynch
Jonathan Houssian, President, Secretary, and Director - founderSISBRO LLC, Americare / Ashley Manor Care, TechHealth, and Everfill LLC, and D.A. Davidson
Earl Sullivan, EVP Operations - 2002Express-Med, Inc., Green Mountain Energy, and Metropane, Inc.
Patrick Poisson, VP Sterile Operations - 2007Cardinal Health, Genentech
Ric Tener, VP Administration - 2001BioBoost, Inc, C.F. Childs & Co., Eden Housing & Eden Social Services Inc., New York Health and
Hospital Corporation, and Blue Cross of Northern California
Key Sales Team MembersASC/Hospital - Steve Anderson (Guilford)
»Chad May (Abbott, Endo) , Kevin Dycus (Baxter), Andrew Horrocks (J&J), Tom Lennox (Endo)Wholesaler/Distributor/Retail Chains
»T Slaven (2001), Brad McElliott (2002)
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RxElite Board Members
Mark Auerbach –Director»He was a director at Par pharmaceuticals (NYSE:PRX) from 1990 to 2006 with his last position as
its executive chairman of the board. During this period Par grew from a young generic drugscompany to over $500M in sales
Peter Williams –Director»He served on the board at Par Pharmaceuticals beginning in 2003. Mr. Williams served on the
board of the New York based Special Situations Fund, where he is Chairman of the IndependentGeneral Partners; and on the International Advisory Committee of RWE/Thames Water.
Daniel Chen –Chairman & CEO»RxElite Management Director
Jonathan Houssian –President»RxElite Management Director
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Reasons to Invest
Specialty expertise in attractive markets» Sevoflurane has a generic market of $400M
Strong pipeline and solid distribution platform with track record of superior execution
Key partnerships in place, with new products launching in 2008
Investment in high value, sterile manufacturing capacity
Experienced management team focused on growth, quality, and cost
Attractive valuation relative to public comps
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Questions