Life Sciences Research
Raymond James
Investor Conference
March 2008
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This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements relating to LSR’s anticipated financial performance, business prospects, new
developments and similar matters, and/or statements preceded by, followed by or that include the words "believes," "could,"
"expects," "anticipates," "estimates," "intends," "plans," or similar expressions. These forward-looking statements are based on
management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in
circumstances that are difficult to predict and which may be beyond LSR’s control, as more fully described in the Company’s SEC
filings, including its Form 10K, as filed with the US Securities and Exchange Commission. Actual results may differ materially from
those suggested by the forward-looking statements due to a variety of factors, including changes in business, political, and
economic conditions, and actions and initiatives by current and potential competitors. Other unknown or unpredictable factors also
could have material adverse effects on LSR’s future results, performance or achievements. In light of these risks, uncertainties,
assumptions and factors, the forward-looking events discussed in this presentation may not occur. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date
of this presentation. LSR is not under any obligation and does not intend to make publicly available any update or other revisions
to any of the forward-looking statements contained in this presentation. to reflect circumstances existing after the date of this press
release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results
expressed or implied by those forward-looking statements will not be realized.
Attractive investment opportunity
Leading player in rapidly growing CRO market
High barriers to entry
Proven strategy for growth
Strong revenue visibility
Opportunity for margin and earnings expansion
Experienced management team
Attractively valued below peers
Contract research
We are in the business of helping our customers get
new medicines to market
As quickly, safely and efficiently as possible
To help patients with unmet medical need
Safety testing of novel medicines is mandated by
governments worldwide
Must be performed in animal models prior to testing in
humans
R&D outsourcing
Development
$83bn
Research
$37bn
Source: Goldman Sachs
Other
$23bn
Clinical
$44bn
Preclinical
$16bn
Outsourced
$3.5bn
…and some
suggest it could
double within 5
years
Drivers of outsourcing
Big pharma
Under pressure to increase outputs of innovation
whilst cutting costs per compound
Pharma don’t want to invest in expensive, fixed-
cost assets
Biotech
Little or no internal infrastructure
Need access to development expertise
Market dynamics
Non-clinical market of $3.5 billion
Estimated growing at 11-15% per annum
High barriers to entry
Heritage and staffing
Capacity constrained
Additions complex and expensive
Controlled introduction of new capacity
Competitive landscape
Three public, global, full service providers
Differentiated by size and focus on big pharma
Life Sciences Research, Inc.
A leading non-clinical CRO
More than 50% of sales from big pharma
Studies last up to 3 years, so we build
significant backlog
Around 75% of backlog will convert to
revenues in next 12 months
A global CRO
…with around 1,600 employees
…and ~$240 million revenue
Research locations
Princeton, US
300 staff
180,000 sq ft
Huntingdon, UK
900 staff
450,000 sq ft
Eye, UK
400 staff
200,000 sq ft
Business mix
Sales by division
Toxicology
68%
Chemistry
21%
Environmental
11%
Core strategy
Customer Service
Scientific Quality
Operational Excellence
Customer service
Everyone says it, but we’re the only company with a
dedicated Customer Service Director
…and training for every member of staff
Big enough…but not too big
Small enough so customers still feel they’re valued and
treated as individuals
Innovative and flexible partnerships
We built the first dedicated space deal
Recent feedback from top pharma tell us we think out of the
box more than other full service CROs to meet their needs
Scientific quality
Recruitment and training
Attract and retain scientific leaders
CPD for scientific staff
Structured training programs
Specialty tox
World leaders in inhalation
Recognised strength in reproductive toxicology and
infusion…with continued focus and investment
Biologics
Focused on, and hugely experienced in, safety assessment
for biologics
Adding expertise and facilities in key areas to become a
global leader
Operational excellence
Focus on delivery
On time…every time is our goal
Continually measure and improve
Drive efficiency
Process improvement teams focus across the company
Company-wide metrics on performance
Investment in IT infrastructure
Liberate – automated report production
Primavera – smart, flexible scheduling system
Extranet – customer access data in near real-time
Historic performance
Backlog growth
Revenue growth
7%
9%
10%
11%
16%
Note: % growth is at constant currency
Operating margin growth
9.4%
10.1%
11.6%
10.4%
11.5%
12.9%
14.1%
15.1%
Increasing capacity utilization…
…gives operating margin leverage
Excellent cash flow “boosters”
Low capital intensity
Cap ex/sales ~8-9%
$16M in 2007, $20-25M anticipated in 2008
Modest working capital demands
DSO of 13
Stable low tax rate
Benefit from long term UK R&D tax incentives
>$85M, primarily UK, should they ever be needed
Management
Combined 21% equity ownership in LSR
2007 Financial Results
2007 financial results ($ millions, except EPS)
Revenue $236.8 up 15.6%
Op Profit $ 31.9 up 59% excl 2006 one time charges
OM % 13.5% up 300 b.p. excl 2006 one time charges
Net Income $ (14.0 )
Adjustments:
NOL & Pension Tax Valuation Expense 37.4
non-cash fx (gain)/ loss (0.9)
Tax Benefit (4.2 )
Adj Net Income $ 18.3
Weighted shares outstanding (millions)
- basic 12.7
- fully diluted 15.0
Adj EPS
- basic $ 1.44
- fully diluted $ 1.22
2007 financial results ($ millions, except EPS)
Revenue $236.8 up 15.6%
Op Profit $ 31.9 up 59% excl 2006 one time charges
OM % 13.5% up 300 b.p. excl 2006 one time charges
Adj Net Income $ 18.3
Adj EPS (diluted) $ 1.22
Q1 ��Q2 Q3 Q4
Revenue $ 54.3 $ 58.2 $ 60.9 $ 63.4
OM% 11.5% 12.9% 14.1% 15.1%
Net Income 3.5 5.5 5.9 (28.8 )
Adjustments:
non-cash fx (gain)/loss (0.1) (1.3) (0.6 ) 1.1
Tax Valuation Expense 37.4
Tax (Benefit)/ charge (.8 ) .0 .2 (3.7 )
Adjusted Net Income $ 2.6 $ 4.5 $ 5.6 $ 6.0
Adjusted EPS $.17 $.29 $.36 $.39
2007 financials
Cash $36.2
Long Term Debt
Term Loan $59.2
Capitalized Lease $23.3
Free Cash Flow $22.3
(cash from operations less investing activities)
2007 Cap Ex$16
2008 estimated Cap Ex $20-25
DSO 13
August 2007: Company amended financing agreement
to lower rates and debt level by $10 million
~$10 million used to repurchase equity in H2 07
Summary
Leading player in rapidly growing CRO market
High barriers to entry
Proven strategy for growth
Strong revenue visibility
Opportunity for margin and earnings expansion
Experienced management team
Attractively valued below peers
Life Sciences Research
Raymond James
Investor Conference
March 2008