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Jefferies Healthcare Conference Presentation 13 th November 2012

Jefferies Healthcare Conference Presentation 13 th November 2012. Today’s presenters. Chief Executive Officer. John Beighton joined Mercury Pharma in May 2010 John has over 29 years of pharmaceutical industry experience

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Jefferies Healthcare Conference Presentation 13 th November 2012

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  1. Jefferies Healthcare Conference Presentation13th November 2012

  2. Today’s presenters Chief Executive Officer • John Beighton joined Mercury Pharma in May 2010 • John has over 29 years of pharmaceutical industry experience • Prior to joining Mercury, John spent 14 years at Teva Pharmaceuticals at various positions including as the Head of Teva UK and Vice President of Global Business Optimisation. • Prior to joining Teva, John spent 14 years with the pharmaceutical sales and marketing department at SmithKline Beecham John Beighton Guy Clark Director, Strategic Business Development • Guy Clark joined Mercury Pharma in August 2010 • Guy has over 20 years of experience in the pharmaceutical industry • Prior to joining Mercury Pharma, Guy had been President of Glenmark Europe for 3 years, and Director of Business Development for IVAX Europe for 5 years • Guy also has a background in large pharma in sales, marketing and BD roles, having spent 9 years with GD Searle and Pharmacia Today’s Presenters

  3. Merger Plan

  4. Merger Background • Cinven acquired Mercury Pharma in August of 2012 with the ambition of creating a significant pan-European specialty pharmaceutical company focused on niche products, with an asset-light business model • Cinven later announced the acquisition of Amdipharm, which specialises in marketing branded off-patent pharmaceutical products internationally. The transaction closed on October 31, 2012 • Mercury now plans to merge with Amdipharm in a combined operation, run by group CEO John Beighton. • The transaction creates an exciting enhanced business that: • Doubles the scale of the business with revenues of over £200m across 200+ molecules • Significantly expands the geographic foot print of the business in over 100 markets • Enhances a diversified business by decreasing reliance on any single product or manufacturer • Provides growth drivers through exploiting new opportunities across both business models • Creates cost synergies by combining infrastructure and leveraging Mercury’s bi-national cost structure 4

  5. Mercury Pharma snapshot • Company Overview • Mercury Pharmais a specialty pharmaceutical company focused on sale of niche prescription off-patent products with limited competition from originators or generics manufacturers or license holders • Operates in the retail and hospital segments with a direct sales presence in the UK, Ireland and the Netherlands with sales and marketing partnerships across 25 countries and distribution partners in 10 countries • Flexible, asset-light business model focused on the sale of niche products with manufacturing outsourced to over 35 partners • Core Processes centre of excellence in Mumbai, employs 2/3rd of the company staff • Mercury Pharma Growth Strategy • Driving volume growth of existing portfolio • Sustainable price increases in existing portfolio • Investment in product development to drive future new product launches • Profitable international expansion through insourcing sales and marketing in select territories (e.g. Netherlands) Standalone Pharmaceutical Trading Performance (£m) FYE - 31 December (1) (1) (1) • Historical numbers based on FYE - March 31 5

  6. Amdipharm snapshot • Company Overview • Headquartered in Basildon (UK), Amdipharm is a specialty pharmaceutical company that acquires, markets and sells off-patent specialist pharmaceuticals • Through eighteen significant acquisitions, Amdipharm offers more than 50 molecules which sell in over 80 countries and generated revenue of £107m (2012PF) • Operates a highly flexible, asset-light business model with 26 third party manufacturers and 62 API suppliers to produce its portfolio of 632 finished SKUs • Amdipharm is expected to show a decline in mature products, which is compensated with growth from drugs like Valoid ampules, soluble Prednisolone and Neomercazole, where the company has exclusive / semi-exclusive positions • Founded in 2002 and acquired by Cinven in October 2012 Standalone Amdipharm Trading Performance (£m) FYE - 31 December 6

  7. Enhanced diversification Mercury & Amdipharm combined Mercury Mercury & Amdipharm by product by country UK

  8. Rationale for combining Mercury Pharma and Amdipharm Enhanced position as a leading niche global pharmaceutical company • Doubling scale – 2012PF revenue increased from £104m to £212m (104% increase), 2012PF EBITDA increased from £50m to £94m (88% increase) • 202 molecules (92% increase) split between 1,383 SKUs (259% increase) • Non-UK sales increased from 24% to 44% Highly complementary businesses enhancing diversification • No meaningful overlap in existing molecule or SKU portfolio • UK reduced from 76% to 56% of total group revenue • No individual molecule represents >11% of combined revenue; • No individual CMO represents >10% of combined spend • Both companies operate an asset-light business model Significant achievable cost synergies • Clearly identified cost synergies from eliminating overlapping headcount and infrastructure and consolidation of distribution and manufacturing and leveraging Indian operations • Further synergies from reduced wholesaler rebates given increased scale and breadth of product offering • Potential benefit could be £10-12m per annum Provides platform for immediate further growth • Combined management team and infrastructure brings together Mercury Pharma’s UK and Amdipharm’s international expertise to create a best in class operations • Identified and easily achievable value optimisation opportunities to be delivered through a combined business strategy; Amdipharmis an under exploited portfolio but is beginning to apply Mercury Pharma’s proven approach to drive growth 8

  9. Strategy for combined business Robust strategy built upon key strengths and principles of both companies Apply best practices across both companies to drive value and growth • Not an operationally transformational acquisition, given asset light model – but easy wins given a similar focus on off-patent niche products: • Apply Mercury Pharma’s portfolio value optimisation skills to the Amdipharm UK portfolio • Utilise Mercury Pharma’s scalable, bi-national infrastructure for best-in-class skills at relatively low cost • Employ Mercury Pharma’s significant business development team to extend pipeline development across the group’s full range of products and markets • Leverage Amdipharm's strong international experience and network of partners to maximize potential of group portfolio - 14 countries have sales greater than £2m Multiple levers to achieve growth • Significant volume / price optimization opportunities - Mercury Pharma management successfully applied this strategy to the Mercury portfolio over the last two years; Amdipharm started to apply this strategy but portfolio remains underexploited; opportunity to accelerate because Mercury management has a proven track record in executing • Leveraging Mercury Pharma’s development team to develop pipeline across the Group • Enhance opportunities to consolidate international operations into directly managed subsidiaries to drive further growth and enhance profitability (as done in Netherlands) Realise synergies to optimise combined organisation • Identified and verified immediate cost savings of at least £6m per annum • Consolidation of overlapping headcount and infrastructure (leveraging existing Indian operations) and enhancing sales terms with wholesalers and distributors • Further operational enhancements from optimising third-party manufacturing base • Cautious and prudent approach will be adopted – Management team have significant experience of amalgamating acquisitions and successfully delivering synergies 9

  10. Key Strategic Elements

  11. Key Strategic Elements Enhanced by merger 1 Highly diversified portfolio • The combined business has 202 molecules split between 1,383 SKUs • Largest drug contributes no more than c.10% to group sales • Sales presence in 125 countries, 3 direct and rest through distributors 2 Limited and stable competitive dynamics around key products • Strong barriers to entry due to relatively small size of individual product markets by country, combined with geographic and SKU diversity and requirement for separate marketing authorisations by country • Provides recurring revenues 3 Favourable position in UK regulatory framework • Portfolio comprises low-cost, off-patent products which are not the main focus of healthcare cost reduction initiatives • UK is an attractive market owing to unrestricted pricing on unbranded products 4 Bi-national, outsourced business model supporting strong, sustainable margins and cash generation • Current Mercury Pharma infrastructure in India can be leveraged for operations reducing headcount and generating synergies • Largest CMO supplier is just c.10% of revenue for combined company, down from 21% for Mercury Pharma standalone 5 Multiple organic growth opportunities • Proven track record at executing multiple volume and price initiatives, tailored for each SKU • Low-risk, low-cost pipeline already well progressed • Synergies

  12. Highly diversified portfolio 1

  13. - rantoin £ Limited and stable competitive dynamics around key products 2 Sales (£m) • Complex manufacturing processes • Many of these products are old, with out-dated manufacturing processes, and were generally divested because they were difficult to make • Regulatory approvals • Many of the products will have been on the market for many years and hence will have been approved under “easier” regulatory regimes • Obtaining a new approval will often require qualifying under newer, tougher approval regimes • Relatively limited sales potential • Many of these niche products have total sales by presentation in any given country of less than £2m • Nearly all of these niche products have total global sales of less than £10m • This makes it harder for other suppliers to find it economically viable to enter the market 0% South Africa Other Markets United Kingdom France Italy Ireland Spain Australia Belgium Portugal Netherlands Difficult to manufacture / API sourcing Financial unattractiveness (sales <£2m) Existing competition

  14. Favourable position in UK regulatory framework 3 UK is an attractive market for Mercury/Amdipharm UK pharmaceutical reimbursement less at risk from austerity policies • Unlike many other areas of government expenditure, the DoH currently forecasts the NHS budget (£108.8bn) to continue to rise, at 2.5% CAGR through the year 2014-15 • Pharmaceutical reimbursement contributed c.10% to the total NHS budget in 2012, so is not as material to overall healthcare spending as actual service provision, which is the primary focus of healthcare reform The UK has one of the lowest per capita pharmaceutical spends in Europe… …driven by an effective regulatory policy encouraging the use of off-patent products Penetration of off-patent drugs in % (by volume) …and the lowest average cost per prescription… Source: IMS, EGA and Mercury Pharma management

  15. Bi-national, outsourced business model supporting strong, sustainable margins and cash generation 4 Mercury Pharma’s scalable operating structure Head-to-head comparison 2011PF Revenue (£m) 89 103 Efficient structure combining UK headquarters with Indian centre of excellence FTEs 41 30 46 38 30 Commercial 40 16 9 Business Devt 7 2 Number of employees Finance 23 13 Legal 2 0 Supply Chain 19 24 Total employees Others 43 Med, Reg & Quality 53 • High-quality employee base in India • A balanced mix of qualified employees with varied academic backgrounds and strong understanding of regulatory, pricing and competitive aspects of the European pharmaceuticals industry • India-based employees account for 65% of headcount but only 22% of employee cost 7 HR / IT 29 4 Admin 14 Number of employees Employee costs 109 Total FTEs 187 5 Senior Management 7 Total FTEs 194 114 Mercury Pharma infrastructure is designed to be scalable and is built for growth Significant overlap providing substantial scope for synergies Note: Global Operations includes Quality, Supply Chain Management, Procurement and Project Management

  16. Bi-national, outsourced business model supporting strong, sustainable margins and cash generation 4 Long and closely managed strategic relationships with well established blue-chip CMOs with some approaching 15 years Combined company has decreased overall reliance on any single CMO • Top 10 CMOs by net spend (1) • Figures refer to 2011PF for Amdipharm and Mercury Pharma • Figures based on CY2011 for Amdipharm and FYE March 2012 for Mercury Pharma

  17. Multiple organic growth opportunities 5 • Volume • Price Mercury/Amdipharm • Best practice synergies • Low risk, executable pipeline • International consolidation Multiple levers to drive growth with different strategies for different products and geographies

  18. Multiple organic growth opportunities: Low risk pipeline 5 Solid track record of delivering Low risk executable initiatives FY13 full-year budget of £4.2m New Company Revenue (£m) • 95% above YTD budget • Superior execution of Mercury Pharma management strategy Launch of existing molecules in new markets New strength version of existing molecules (2) • PIPELINE SUCCESS CONTINUES: • 8 product launches YTD – on track vs plan • KEY NEW LAUNCHES: • Eltroxin Oral Solution launched in May 2012 – on time • Alfacalcidolcapsules launched in May 2012 – on time • Teromeg(Omega 3) capsules launched in October 2012 – on time • PRIOR YEAR GROWTH DRIVERS: • Codipar capsules (new formulation of existing product) • Co-codamolEffervescent (new formulation of existing product) • FUTURE PIPELINE: • 9 new deals signed YTD, against YTD target of 7 New formulations of existing molecules New molecules C. 11% of 2015 revenue comes from low risk executable pipeline initiatives(1) • Figures based on CY2011 for Amdipharma and FYE March 2012 for Mercury Pharma • Figures are YTD Sep-12 (April to September)

  19. Multiple organic growth opportunities: International consolidation 5 • There is significant potential upside from undertaking incremental investment in recruiting sales managers across selected international markets. • Potential front-end strategy in international markets • A natural progression of the Company’s international business as it gains scale is to establish a direct sales presence in selected markets • A direct presence would allow the Company to: • Capture a greater portion of the pharmaceutical value chain • Implement a ‘push’ strategy for its products to drive higher sales • Better identify opportunities for its products already being sold in the UK • Identify local product / company acquisitions • In FY2012, Mercury Pharma management moved from a distributor model to a direct sales model in the Netherlands (see case study on right hand side) • Management believes there is significant upside potential in replicating the Dutch model across other ‘mature’ generics markets (with no / limited generics detailing) requiring only small sales offices to significantly drive sales • Potential markets for front-ending could include: • Case study – establishing direct sales in the Netherlands • In FY2012, Mercury Pharma recruited a sales manager in the Netherlands and subsequently revised its contract with its partner from a sales and marketing function to a distribution function • The table below shows management’s best estimate of the impact of the new business model in the Netherlands

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