Specialty pharma meets M&A competence

INVESTOR RELATIONS

Investor Presentation per November 2019

AT A GLANCE

Company Snapshot Profitable Growth

Recently Closed Acquisitions Brand diversification by area

Family-owned company with > 25 years of pharma sector expertise

Buy and Build strategy

M&A know-how and track record with > 90 products acquired

Branded specialty pharma / niche products in over 120 countries

Value creation via scalable platform and Life-Cycle-Management

Asset light business model with strong scientific backbone

Revenue growth < € 1m in 1998 to c. € 292m in 2018

80122

228

292

3868

134167

2015A 2016A 2017A 2018A

mEUR Sales* EBITDA

56% 59%47%

Gastroenterology

Adiposity

Cardiology

Infection Medicine

Haematooncology

Other Therapeutic Areas

Ophthalmology

Haematology

Oncology

Addiction Medicine

57%

09/201809/2018 09/2018

Average age: c. 25 years

01/2019

09/2018

09/2019 01/201910/2019

% EBITDA margin

2

Sleeping Disorder

Emergency Medicine

1) Pro Forma

*Mix of Net sales and sales/profit generated during the transitional phase of acquired products

29%

15%

13%

8%

7%

7%

7%

5%

2%2% 2% 3%

2018

PF¹

15%

9%

7%

5%

2%2%14%

7%3%

3%2%1%

9%

6%

6%

5%4%

15%

15%

12%

8%7%

6%

5%

5%

4%

1%11%

Atacand/Plus Xenical

Dilatrend Cymevene

Visudyne Deursil/Ursolvan

Fungizone Konakion

Vesanoid/Tretinoin Questran

Distraneurin Anexate

VePesid Rohypnol

Sotalex Etopophos

Lexotan Dormicum

All other

ea. 2%

3

PORTFOLIO OVERVIEW

TOP 3 = 42%Legacy

Niche

Europe

Japan

Korea

China

Taiwan

Hong Kong

Rest of Asia

Asia & Oceania (30%)

Other Regions (16%)

Italy

France

Germany

Spain

Switzerland

UK

Europe (54%)

Rest of Europe Oceania

Latin America and Caribbean

North America

AfricaAsia &

Oceania

Other Regions

Sales by Products

Sales by Geography

CHEPLAPHARM is well diversified across products and geographies,

providing global reach to Big Pharma

47%

31%

22%

Niche vs. Legacy

Business Footprint

• Business in more

than 120 countries

• Vast network of

distribution

partners globally

• Secured supply

and production

network

1) Pro Forma

2018

PF¹

2018

PF¹

2018

PF¹

4

FIGURES AS PER 12/2018

> 90Products

> 10Therapeutic

Areas

> 900Acquired

Marketing

Authorisations

> 24mPacks of

pharmaceutical

products p.a.

> 250Employees from

15 Nationalities

> 130Distribution

partners globally

167m€EBITDA*

*Exceptional items not

considered

30Yrs of experience

within the

management

292m€Sales*

*Mix of Net sales and TSA

related sales

Deal Sourcing &

Due Diligence

Life-Cycle Management

Key value levers: (i) overhead cost and complexity reduction, (ii) optimization of production costs, (iii) active pricing strategy and (iv)

well-established partners for production / D&M

ProductionResearch &

Development

5

Distribution

& Marketing

BUY – INTEGRATE – BUILD / OPTIMIZE

Disciplined identification of right acquisition targets, integration into outsourced supply chain and optimization via professional Life-Cycle Management

No R&D activities & associated risks

Focus on inorganic growth acquiring branded original off-patented niche or legacy products from Big Pharma

CHEPLAPHARM is principally shifting distribution & marketing to its own external exclusive distribution network or taking over agreements by assignment

CHEPLAPHARM’s clear focus and key competence is Life-Cycle Management creating added value vs Big Pharma

Lean set-up given outsourced manufacturing and distribution activities to trusted, qualified and long-standing 3rd parties

BUSINESS MODEL

UNIQUE, LOW RISK BUSINESS MODEL

6

Acquisition of “tried and tested” pharmaceuticals with sticky customer base, long-phase out

periods and high brand awareness requiring no / less marketing

Post-Patent Phase Management of

product Life-Cycle

Optimization of

cost structure

• Limited competition,

no relevant generics

• Unlikely to be replaced

by new treatment guidelines

• Stable to little growing sales

and cash flows

TimeCash

Development Phase Patent Phase

CHEPLAPHARM’s

Business Model

Niche product - Lower volume – typically no or limited competition (solid and stable sales)

Legacy product - Higher volume – generic competition (price competitive)

CHEPLAPHARM

advantages:

• Limited or no competition

• 10+ years out of patent

• Stable sales

• Low risk due to “tried &

tested” pharmaceuticals

• Stable market share

following generics competition

• High brand loyalty being

able to retain customers

• Stable to slightly declining

sales and cash flows

1

2

Key characteristics

Niche

products

Legacy

products

2

1

LIMITED COMPETITION MARKET SEGMENT / BARRIERS TO ENTRY

7

Strong relationships to big pharmas and reliability being key for any upcoming transaction

representing a significant barrier to entry for potential new market players

M&A

track record

and

regulatory

competence

Fast - Flexible -

Reliable

Package

Deals

Global

distribution

And many more…!

FROM SIGNING TO TRANSITION

✓ Signing of the Asset Purchase Agreement (APA) and ancillary contracts like TSA, PVA and MSQA/ TMA

8

✓ Payment of the purchase price when APA becomes effective

✓ Immediate start of integration process

✓ Start of preparing Business Transfer Plan

✓ Transfer of all IP and know-how

✓ Transition to exclusive CP cooperation partner network (in terms of distribution and CMO)

✓ Transition period lasts according to agreement with seller

Signing Closing Transition

0

200

400

600

800

1000

1200

1 2 3 4 5 6 7

CREATING VALUE FROM

LIFE-CYCLE MANAGEMENT

Life-Cycle

Value of

Big Pharma

Life-Cycle Value

of

CHEPLAPHARM

Overhead

Reduction

Reduction of

Production Costs

Active Price

Strategy

Reduction of

complexity

Others

Schematic presentation for illustration purposes only

9

Life-Cycle Management comprises several measures with regular optimization of

production costs being the most important value lever

Life-Cycle Management provides additional upside,

i.e. neither included in investment decision nor in

CHEPLAPHARM’s business plan

Basis for investment decision

(ROI calculation)

SUMMARY - KEY CREDIT HIGHLIGHTS

10

Unique, low risk business model with easy scalability

Strong acquisition track record and global distribution

Limited competition market segment

Diversified sales base and high revenue visibility

Limited capex requirements resulting in significant cash generation

Highly qualified management with proven operational and M&A track record

1

2

3

4

5

6

Specialty pharma meets M&A competence

APPENDIX

ORGANISATIONAL STRUCTURE

12

COMMENTS FROM THE RATING AGENCIES

13

“ CHEPLAPHARM runs a profitable and cash flow generative business model

…. good therapeutic and geographic diversity

…. successful track record and established relationships with leading global pharma

companies ”

“ CHEPLAPHARM will be able maintain its profitability metrics, supported by

management's focus on lifecycle management activities

The main strengths of the company is its established track record of careful product

selection ….

…. the company has been able to generate average EBITDA margins of about 55% ”

“With EBITDA margins projected at around 50% over the rating horizon, the

company ranks among the most profitable in Fitch’s low non-investment grade

portfolio….

We project free cash flows (FCF) at or above EUR 100 million

a year….”

CONTACT

14

Request further information

HEADQUARTER

CHEPLAPHARM Arzneimittel GmbH

Ziegelhof 24

17489 Greifswald

Internet: www.cheplapharm.com

Jens Remmers

Head of Investor Relations

Tel.: +49 (0) 3834 8539-145

Email: investor-relations@cheplapharm.com

Jens Rothstein

Chief Financial Officer

Tel.: +49 (0) 3834 8539-122

DISCLAIMER

15

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