1
Filed by Warner Chilcott PLC
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Company: Warner Chilcott plc
Commission File No.: 005-52501
2
The following documents are written communications first used as of May 4,
2000:
1. Press release (1);
2. Press release (2); and
3. Investor presentation (slide show).
3
[WARNER CHILCOTT LETTERHEAD]
NEWS RELEASE
Dublin, Ireland May 4, 2000
Rockaway, NJ
GALEN HOLDINGS PLC TO ACQUIRE WARNER CHILCOTT PLC
NASDAQ LISTING OF GALEN
BUILDING AN INTERNATIONAL SPECIALTY PHARMACEUTICAL PRODUCTS AND SERVICES
BUSINESS
May 4, 2000...The Boards of Warner Chilcott (Nasdaq:WCRX) and Galen (LSE:GAL)
announce today that they have entered into an agreement (the "Transaction
Agreement") under which Warner Chilcott will become a wholly owned subsidiary of
Galen. The acquisition is to be effected by way of a scheme of arrangement to be
proposed to Warner Chilcott shareholders (the "Scheme"). The Scheme is subject
to sanction by the High Court of Ireland.
Under the Transaction Agreement, Galen proposes to issue 2.5 new Galen shares
for each Warner Chilcott share (equivalent to 2.5 Galen shares for each Warner
Chilcott ADS) pursuant to the terms of the Scheme. The proposed acquisition of
Warner Chilcott in consideration for new Galen shares (the "Transaction") is
expected to be tax free to Warner Chilcott's US, UK and Republic of Ireland
shareholders and ADS holders.
Galen will seek the listing of the new Galen shares on Nasdaq in American
Depositary Share ("ADS") form.
Based on the closing mid-market price per Galen share of 612.5p ($9.58) on May
3, 2000, the terms of the Transaction value each Warner Chilcott share at $23.94
(1,531.3p) and the total current issued share capital of Warner Chilcott at
approximately $296.5 million ((pound sterling) 189.6 million) (or $406.3 million
((pound sterling) 259.9 million) on a fully diluted basis). The terms of the
Transaction represent a premium of 33.0 % over the closing price of $18.00 per
Warner Chilcott ADS on Nasdaq on May 3, 2000 and a premium of 57.0 % over the
average closing price of a Warner Chilcott ADS for the last 30 business days
ended 3rd May, 2000.
The scheme will require the approval of Warner Chilcott shareholders. Due to the
size of the Transaction, Galen will seek the approval of its shareholders at an
EGM. Subject to appropriate regulatory clearances in the US, Republic of Ireland
and UK, it is currently the intention of Warner Chilcott and Galen to send the
relevant documentation to their respective shareholders in July 2000. The Scheme
is currently expected to become effective and the Transaction to complete by the
end of August 2000.
Credit Suisse First Boston served as financial adviser to Warner Chilcott in
this transaction and Merrill Lynch served as financial adviser to Galen. Hoare
Govett Limited are sole UK and European broker to Galen, Goodbody Stockbrokers
are broker to Galen in Ireland and Merrill Lynch are broker to Galen in the US.
4
Merger Will Create a Fully Integrated, International Pharmaceutical Company
The Transaction will create a significant international specialty pharmaceutical
products and services group with combined pro forma revenues of $233.2 million
((pound sterling) 143.1 million), with a sales force of approximately 260
servicing the US and approximately 65 servicing the UK and Ireland. Based on the
closing mid-market price per Galen share of (pound sterling) 612.5p ($9.58) on
May 3, 2000, the pro forma combined market capitalization of the combined group
would be approximately $1.5 billion ((pound sterling) 969.1 million).
Major benefits of the combination include:
- Strengthened women's healthcare portfolio. The combined entity will
benefit from the combination of Galen's pipeline of proprietary
women's healthcare products and Warner Chilcott's women's healthcare
focused sales and marketing organization in the US. In particular, the
transaction will enable Galen both to commercialize its intravaginal
ring drug delivery system ("IVR"), and, by retaining the distribution
margin, to achieve a greater economic stake in any future success of
products using the IVR platform technology. The strength of Warner
Chilcott's US sales and marketing organization will be improved by
Galen's pipeline of proprietary products, enhanced product development
capability and current GMP (good manufacturing practice) manufacturing
capacity.
- Greater opportunities for growth and acquisitions. With its greater
scale and profitability, the combined entity expects to pursue
acquisitions both in the UK and the US as well as to seek selective
in-licensing opportunities from the pharmaceutical industry.
- An international management team with extensive pharmaceutical
expertise. The executive management of the combined entity, which will
be continue to be called Galen Holdings PLC, will consist of two
members each from Galen and Warner Chilcott. Dr. John King will be
Chairman of the Board, Roger Boissonneault will be Chief Executive
Officer, Geoffrey Elliott will be Chief Financial Officer and Paul
Herendeen will be Executive Vice President and Director of Business
Development. All four executives will serve on the Board of Directors.
- Increased investor profile and enhanced liquidity. The combined entity
will have listings in London, Dublin and Nasdaq and will offer
investors an opportunity to invest in a larger company with a growing
international presence and geographical reach.
Commenting, Roger Boissonneault, President and Chief Operating Officer of Warner
Chilcott, said:
"The most exciting element of this transaction is the opportunity to combine the
complementary strengths of our management teams. With the scale to be
competitive in segments of both the UK and the US markets we will have access to
a broad range of initiatives and the strength to capitalize on those we choose
to pursue. Warner Chilcott's Board of Directors is unanimous in its support for
the Offer and believes that it is in the best interests of Warner Chilcott
shareholders, customers and employees. Our entire senior management team is
looking forward to developing the business as a combined entity."
Commenting on the Offer, Dr. John King, Chief Executive Officer of Galen, said:
"This transaction is a major step in internationalizing the Galen business and
provides Galen with immediate product marketing and distribution strength in the
US, the world's largest pharmaceutical market. The combination will allow us to
geographically expand the distribution of our women's healthcare portfolio,
including our IVR product, within Galen without having to give away value from
out-licensing deals. The enlarged group will have a larger therapeutic and
geographic base with significant combined sales forces in the US, UK and Ireland
providing a strong platform to take the enlarged business forward."
5
Galen Holdings, PLC
Galen is an integrated pharmaceutical company, based in Northern Ireland. The
company was founded in 1968 and was listed on the London Stock Exchange in 1997.
Galen develops and manufactures branded prescription pharmaceutical products,
which are promoted by its 65 person sales and marketing organisation in the
United Kingdom and Ireland. Galen's Ethical Pharmaceutical Services division
supplies and distributes clinical trial materials internationally, operates a
drug reconciliation business and uses computer-based interactive voice response
systems to permit the more efficient management of the clinical trial process.
The Services division also provides a 'bench-to-pilot-scale' specialist chemical
synthesis service for the research-based pharmaceutical industry through its
SynGal and QuChem units. In 1997, Galen opened its first pharmaceutical services
facility in the United States to meet the needs of a global marketplace.
Galen's research and development activity focuses on the development of
proprietary drug delivery applications and technologies. Galen has a solid
pipeline of proprietary products in development for the women's healthcare
market including an intravaginal ring drug delivery system (IVR) that is
designed to deliver a consistent dose of a wide range of medicines over extended
periods of time.
The company has lodged its first marketing authorization application in the UK,
for the estradiol-based IVR for hormone replacement therapy (HRT), and
anticipates the UK launch of the product during the second half of 2000, with
the European launch expected to follow in late 2001. Galen is also targeting a
US NDA application for late 2000. A phase III trial for the estradiol/progestin
IVR for continuous combined HRT is planned for the current financial year, with
anticipated marketing authorization applications in the US and UK during 2002,
with Europe one year later. Galen has also developed proprietary topical drug
delivery technology based on the improved skin penetrating properties of
eutectic mixtures of pharmacologically active agents.
Galen has an impressive track record of profitable growth generated both
organically and through acquisition. Since 1995 revenues have nearly tripled
from (pound sterling) 23.3 million to (pound sterling) 67.0 million ($36.9
million to $109.2 million) while profit before taxation and exceptional items
increased five-fold from (pound sterling) 3.6 million to (pound sterling) 18.4
million ($5.7 million to $30.0 million).
Warner Chilcott, PLC
Warner Chilcott develops and markets branded prescription pharmaceutical
products in the United States, primarily focused on the women's health
therapeutic category. The company was formed in 1992 and its shares became
publicly traded in ADS form on Nasdaq in 1997. Through its national US sales
force of approximately 260 representatives, Warner Chilcott markets branded
pharmaceutical products directly to physician specialists across the US,
particularly obstetrician/gynecologists and urologists. The Company's principal
offices are in Dublin, Ireland and Rockaway, New Jersey. On February 15, 2000,
Warner Chilcott acquired three women's healthcare products from Bristol-Myers
Squibb for a total consideration of $175.1 million. The acquired brands, which
generated nearly $50 million in revenues during 1999, are Estrace(R) vaginal
cream, an estrogen replacement therapy product, and two oral contraceptives,
Ovcon(R) 35 and Ovcon(R) 50.
On a pro forma basis after giving effect to the recent acquisition of the three
branded pharmaceutical products from Bristol-Myers Squibb and the financing
thereof, Warner Chilcott would have had, on a US GAAP basis, total revenues and
income before taxes for the twelve months ended December 31, 1999 of $124.0
million ((pound sterling) 76.1 million) and $4.8 million ((pound sterling) 3.0
million), respectively and would have had net assets as at December 31, 1999 of
$98.3 million ((pound sterling) 60.3 million).
6
Recommendations
The Directors of Warner Chilcott, who have been so advised by CSFB, consider the
Transaction to be fair to Warner Chilcott shareholders from a financial point of
view. In providing advice to the Directors, CSFB has taken into account the
commercial assessments of the Directors. The Directors of Warner Chilcott intend
unanimously to recommend Warner Chilcott shareholders to vote in favor of the
resolutions necessary to implement the Scheme and related transactions.
The Directors of Galen, who have been advised by Merrill Lynch, Galen's
financial adviser, consider the terms of the Transaction to be fair and
reasonable. In providing its advice, Merrill Lynch has relied on the Directors'
commercial assessments. Additionally, the Directors believe the transaction to
be in the best interests of the Shareholders as a whole and, accordingly,
unanimously recommend Shareholders to vote in favour of the resolution(s) to be
proposed at the extraordinary general meeting of Galen, as they intend to do in
respect of their own beneficial holdings of, in aggregate, 68.0 million Galen
Shares, representing approximately 53.4 per cent of Galen's existing issued
share capital. Dr. Allen McClay, Dr. John King and Geoffrey Elliott, whose
aggregate interests represent 53.1 per cent of the Galen shares in issue, have
given indicative undertakings to Warner Chilcott that they will vote in favour
of the resolution to be proposed to approve the Transaction.
Investors and security holders are advised to read the proxy statement and such
other documents that may be distributed by Galen and Warner Chilcott
("Shareholder Documentation") regarding the business combination transaction
referenced in the foregoing information, when it becomes available, because it
will contain important information. The Shareholder Documentation will be filed
with the Securities and Exchange Commission by Galen and Warner Chilcott.
Investors and security holders may obtain free copies of the Shareholder
Documentation (when available) and other documents filed by Galen and Warner
Chilcott with the Commission at the Commission's web site at www.sec.gov. The
Shareholder Documentation and such other documents may also be obtained for free
from Warner Chilcott by directing such requests to: Warner Chilcott PLC, 100
Enterprise Drive, Suite 280, Rockaway, New Jersey 07866, USA, Attention:
Investor Relations, telephone: +1 973 442 3200, e-mail: cst@wclabs.com or from
Galen by directing such requests to: Galen Holdings PLC, Seagoe Industrial
Estate, Craigavon, Northern Ireland, BT63 5UA, Attention: Investor Relations,
telephone: +44 28 3833 4974, e-mail: info@galenplc.co.uk.
Warner Chilcott and its officers and directors may be deemed to be participants
in the solicitation of proxies from shareholders of Warner Chilcott with respect
to the transactions contemplated by the Transaction Agreement. Information
regarding such officers and directors is included in Warner Chilcott's proxy
Statement for its 2000 Annual Meeting of Shareholders filed with the Commission
on April 13, 2000 and its Annual Report on Form 10-K for the year ended December
31, 1999 filed with the commission on March 16, 2000. These documents are
available free of charge at the Commission's web site at http://www.sec.gov and
from Warner Chilcott at the address set forth above.
The securities offered will not be or have not been registered under the US
Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exception from registration requirements.
This press release contains forward-looking statements which are based on
assumptions and external factors, including assumptions relating to, but not
limited to, the compatibility of the combined businesses, regulatory action,
product pricing, competitive market conditions, unaudited financial data, new
product development and other risks or uncertainties detailed from time to time
in filings with the Securities and Exchange Commission. These forward-looking
statements represent the companies' judgment as of the date of this release and
any changes in the assumptions or external factors could produce significantly
different results.
7
Contacts:
WARNER CHILCOTT GALEN
Diane M. Cady John King
Sr. Vice President, Investor Relations Geoffrey Elliott
Telephone: (973) 442-3327 or (800) 521-8813 Telephone: +44 207 628 1000 (today
only)
Telephone: +44 28 33 4974
(thereafter)
CSFB MERRILL LYNCH
Financial adviser Financial adviser and sponsor
Stephanie Leouzon/Magnus Scaddan Mark Preston/Michael Frost/Martin
Telephone: +44 207 888 8888 Brass
Telephone: +44 207 628 1000
MERRILL LYNCH
Sole US Broker
Peter Moorhouse/Wayland Austin
Telephone: +44 207 772-1000
HOARE GOVETT LIMITED
Sole UK and European broker
Andrew Chapman/Jim Wight
Telephone: +44 207 678 8000
GALEN FINANCIAL DYNAMICS
Andrew Dowler/Sophie Pender-Cudlip
Telephone: +44 207 831 3113
8
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN
OR INTO AUSTRALIA, CANADA OR JAPAN
FOR IMMEDIATE RELEASE
4th May, 2000
GALEN HOLDINGS PLC
("GALEN")
ACQUISITION OF WARNER CHILCOTT PLC
("WARNER CHILCOTT")
NASDAQ LISTING OF GALEN
BUILDING AN INTERNATIONAL SPECIALTY PHARMACEUTICAL PRODUCTS AND SERVICES
BUSINESS
- - The Boards of Galen and Warner Chilcott announce today that they have
entered into an agreement (the "Transaction Agreement") under which Warner
Chilcott will become a wholly owned subsidiary of Galen. The acquisition is
to be effected by way of a scheme of arrangement to be proposed to Warner
Chilcott shareholders (the "Scheme"). The Scheme is subject to sanction by
the High Court of Ireland.
- - Under the Transaction Agreement, Galen proposes to issue 2.5 new Galen
shares for each Warner Chilcott share (equivalent to 2.5 Galen shares for
each Warner Chilcott ADS) pursuant to the terms of the Scheme. The proposed
acquisition of Warner Chilcott in consideration for new Galen shares (the
"Transaction") is expected to be tax free to Warner Chilcott's US, UK and
Republic of Ireland shareholders and ADS holders.
- - Galen will seek the listing of the new Galen shares on NASDAQ (in American
Depositary Share ("ADS") form).
- - Based on the closing mid-market price per Galen share of 612.5p ($9.58) on
3rd May, 2000, the terms of the Transaction value each Warner Chilcott
share at $23.94 (1,531.3p) and the total current issued share capital of
Warner Chilcott at approximately $296.5 million ((pound sterling) 189.6
million) (or $406.3 million ((pound sterling) 259.9 million) on a fully
diluted basis). The terms of the Transaction represent a premium of 33.0
per cent. over the closing price of $18.00 per Warner Chilcott ADS on
NASDAQ on 3rd May, 2000 and a premium of 57.0 per cent. over the average
closing price of a Warner Chilcott ADS for the last 30 business days ended
3rd May, 2000.
9
- - The Transaction will create a significant international specialty
pharmaceutical products and services group with combined UK/Irish GAAP
proforma revenues of (pound sterling) 143.1 million ($233.2 million).
Additional UK/Irish GAAP proforma financial information is included in
Appendix I. Based on the closing mid-market price per Galen share of 612.5p
($9.58) on 3rd May, 2000, the pro forma combined market capitalisation of
the enlarged group would be approximately (pound sterling) 969.1 million
($1.5 billion).
- - The enlarged group will benefit from the combination of Galen's pipeline of
proprietary women's healthcare products and Warner Chilcott's women's
healthcare focused sales and marketing organisation in the US. In
particular, the Transaction will enable Galen both to commercialise its
intravaginal ring drug delivery system ("IVR"), and, by retaining the
distribution margin, to achieve a greater economic stake in any future
success of products using the IVR platform technology. The strength of
Warner Chilcott's US sales and marketing organisation will be improved by
Galen's pipeline of proprietary products, enhanced product development
capability and current GMP (good manufacturing practice) manufacturing
capacity.
- - The enlarged group will also focus on developing its women's healthcare
franchise by growing sales of the three branded pharmaceutical products,
Estrace(R) cream, Ovcon 35(R) and Ovcon 50(R), that Warner Chilcott
recently acquired from Bristol-Myers Squibb.
- - The enlarged group has a sales force of approximately 260 servicing the US
and approximately 65 servicing the UK and Ireland. Furthermore, given this
greater scale and expanded marketing capacity, it is expected that the
enlarged group will represent an attractive partner for the in-licensing or
acquisition of products from the biotechnology and pharmaceutical
industries, providing further opportunities for growth.
- - On the Scheme becoming effective, a number of changes will be made to the
Galen Board. Dr. Allen McClay will relinquish his executive
responsibilities and will become Non-executive President. Dr. John King
will become Executive Chairman and Dr. Harold Ennis will be appointed
Non-executive Vice-Chairman. Geoffrey Elliott will continue as Finance
Director, and Alan Armstrong will become Executive Director and Chief
Executive, Ethical Pharmaceutical Services. Warner Chilcott has an
experienced management team and the Board of Galen is delighted that Roger
Boissonneault and Paul Herendeen have agreed to join the Galen Board as
Chief Executive Officer and Executive Vice President and Director of
Business Development, respectively.
- - In the year ended 30th September, 1999, Galen had, on a UK GAAP basis,
sales and EBITDA of (pound sterling) 67.0 million ($109.2 million) and
(pound sterling) 22.4 million ($36.5 million) respectively. Warner
Chilcott, on a pro forma basis after giving effect to the recent
acquisition of three branded pharmaceutical products from Bristol-Myers
Squibb, would have had, on a US GAAP basis, sales and EBITDA for the twelve
months ended 31st December, 1999 of $124.0 million ((pound sterling) 76.1
million) and $41.1 million ((pound sterling) 25.2 million) respectively.
The Board of Galen expects the acquisition of Warner Chilcott by Galen to
be earnings accretive on a pre-exceptional and pre-amortisation of goodwill
and intangible assets basis in the first full year post acquisition.
- - Based on the current issued share capital of Warner Chilcott, Galen
shareholders are expected to hold approximately 80 per cent. and Warner
Chilcott shareholders approximately 20 per cent. of the enlarged issued
share capital of Galen. On a fully diluted basis, Galen shareholders are
expected to hold approximately 75 per cent. and Warner Chilcott
shareholders approximately 25 per cent. of the enlarged share capital of
Galen.
- - Warner Chilcott is listed on NASDAQ (ticker: WCRX). Warner Chilcott markets
branded pharmaceutical products in the US, primarily in the large and
growing women's health
10
therapeutic category, through approximately 260 representatives, one of the
larger salesforces found in women's healthcare products in the US.
- - Galen is listed on the London Stock Exchange (ticker: GAL). Galen's Ethical
Pharmaceutical Products business develops and manufactures branded
prescription pharmaceutical products. The Ethical Pharmaceutical Services
division supplies and distributes clinical trial materials internationally,
operates a drug reconciliation business and uses computer-based interactive
voice response systems to permit the more efficient management of the
clinical trial process. The division also provides a 'bench-to-pilot-scale'
specialist chemical synthesis service for the research-based pharmaceutical
industry through its SynGal and QuChem units.
- - Due to the size of the Transaction, Galen will seek the approval of its
shareholders at an EGM. Meetings will also be held for Warner Chilcott
shareholders. Subject to appropriate regulatory clearances in the US,
Republic of Ireland and UK, it is currently the intention of Galen and
Warner Chilcott to send the relevant documentation to their respective
shareholders in July 2000. The Scheme is currently expected to become
effective and the Transaction to complete by the end of August 2000.
Commenting on the Transaction, Dr. John King, Chief Executive Officer of Galen,
said:
"This transaction is a major step in internationalising the Galen business and
provides Galen with immediate product marketing and distribution strength in the
US, the world's largest pharmaceutical market. The combination will allow us to
geographically expand the distribution of our women's healthcare portfolio,
including our IVR product, within Galen without having to give away value from
out-licensing deals. The enlarged group will have a larger therapeutic and
geographic base with significant combined sales forces in the US, UK and Ireland
providing a strong platform to take the enlarged business forward."
Roger Boissonneault, President and Chief Operating Officer of Warner Chilcott,
who will be joining the Galen Board, added:
"The most exciting element of this transaction is the opportunity to combine the
complementary strengths of our management teams. With the scale to be
competitive in segments of both the UK and the US markets we will have access to
a broad range of initiatives and the strength to capitalize on those we choose
to pursue. Warner Chilcott's Board of Directors is unanimous in its support for
the Transaction and believes that it is in the best interests of Warner Chilcott
shareholders, customers and employees. Our entire senior management team is
looking forward to developing the business as a combined entity."
A presentation to analysts will be held at 10.00 a.m. today at the Merrill Lynch
Client Centre, 7th Floor, 25 Ropemaker Street, London EC2Y 9LY. Shareholders are
also welcome to attend the analysts presentation.
Enquiries:
GALEN WARNER CHILCOTT
Dr. John King Roger Boissonneault
Geoffrey Elliott Telephone (today): +44 207 628 1000
Telephone (today): +44 207 628 1000 Diane Cady
Telephone (thereafter): +44 28 38 33 4974 Telephone: +1 973 442 3200
11
MERRILL LYNCH CSFB
Financial Advisor & Sponsor Financial Advisor
Mark Preston Stephanie Leouzon
Michael Frost Magnus Scaddan
Martin Brass Telephone: +44 207 888 8888
Telephone: +44 207 628 1000
MERRILL LYNCH
Sole US broker
Peter Moorhouse
Wayland Austin
Telephone: +44 207 772 1000
HOARE GOVETT LIMITED
Sole UK and European broker
Andrew Chapman
Jim Wight
Telephone: +44 207 678 8000
GOODBODY STOCKBROKERS
Sole Irish broker
Joan Garahy
Telephone: +353 1 667 0400
FINANCIAL DYNAMICS
Andrew Dowler
Sophie Pender-Cudlip
Telephone: +44 207 831 3113
This summary should be read in conjunction with the accompanying full text
announcement.
Merrill Lynch International ("Merrill Lynch"), which is regulated in the UK by
The Securities and Futures Authority Limited, is acting for Galen and no one
else in connection with the Transaction and will not be responsible to anyone
other than Galen for providing the protections afforded to customers of Merrill
Lynch, nor for providing advice in relation to the Transaction.
Credit Suisse First Boston (Europe) Limited ("CSFB"), which is regulated in the
UK by The Securities and Futures Authority Limited, is acting for Warner
Chilcott and no one else in connection with the Transaction and will not be
responsible to anyone other than Warner Chilcott for providing the protections
afforded to customers of CSFB, nor for providing advice in relation to the
Transaction.
This press release has been issued by Galen and Warner Chilcott. It has been
approved by Merrill Lynch and CSFB solely for the purposes of Section 57 of the
UK Financial Services Act 1986. For the purposes of the Investment
Intermediaries Act 1995 for Ireland, Merrill Lynch and CSFB are authorised to
conduct investment business in the UK by The Securities and Futures Authority
Limited. The address of Merrill Lynch is 25 Ropemaker Street, London EC2Y 9LY
and the address of CSFB is 1 Cabot Square, London E14 1QJ.
This press release contains forward-looking statements which are based on
assumptions and external factors, including assumptions relating to, but not
limited to, the compatibility of the combined businesses, regulatory action,
product pricing, competitive market conditions, unaudited financial data, new
product development and other risks or uncertainties. These forward-looking
statements represent the companies' judgement as of the date of this release and
any changes in the assumptions or external factors could produce significantly
different results.
Nothing in this announcement should be construed as a profit forecast or be
interpreted to mean that the earnings per share of Galen as enlarged by the
Transaction for the current year or future years will necessarily match or
exceed the historical published earnings per share of Galen and Warner Chilcott.
This announcement does not constitute an offer to sell or issue, or a
solicitation of any offer to purchase or
12
subscribe for any shares in Galen nor shall it form the basis of, or be relied
upon in connection with, any contract for such purchase or subscription. No
representation or warranty, express or implied, is made or given by Galen as to
the accuracy or completeness of the information or the opinions contained in
this announcement and no liability is accepted for any such information or
opinions.
Copies of this announcement are not being, and must not be, mailed, or otherwise
forwarded, distributed or sent in, into or from Australia, Canada or Japan and
persons receiving this announcement (including custodians, nominees and
trustees) must not distribute or send it in, into or from Australia, Canada or
Japan.
Investors and security holders are advised to read the proxy statement and such
other documents that may be distributed by Galen and Warner Chilcott
("Shareholder Documentation") regarding the business combination transaction
referenced in the foregoing information, when it becomes available, because it
will contain important information. The Shareholder Documentation will be filed
with the Securities and Exchange Commission by Galen and Warner Chilcott.
Investors and security holders may obtain free copies of the Shareholder
Documentation (when available) and other documents filed by Galen and Warner
Chilcott with the Commission at the Commission's web site at www.sec.gov. The
Shareholder Documentation and such other documents may also be obtained for free
from Warner Chilcott by directing such requests to: Warner Chilcott PLC, 80
Corporate Centre, 100 Enterprise Drive, Suite 280, Rockaway, New Jersey 07866,
USA, Attention: Investor Relations, telephone: +1 973 442 3200, e-mail:
cst@wclabs.com or from Galen by directing such requests to: Galen Holdings PLC,
Seagoe Industrial Estate, Craigavon, Northern Ireland, BT63 5UA, Attention:
Investor Relations, telephone: +44 28 3833 4974, e-mail:
info@galenplc.co.uk.
Warner Chilcott and its officers and directors may be deemed to be participants
in the solicitation of proxies from shareholders of Warner Chilcott with respect
to the transactions contemplated by the Transaction Agreement. Information
regarding such officers and directors is included in Warner Chilcott's Proxy
Statement for its 2000 Annual Meeting of Shareholders filed with the Commission
on 13th April, 2000 and its Annual Report on Form 10-K for the year ended 31st
December, 1999 filed with the Commission on 16th March, 2000. These documents
are available free of charge at the Commission's web site at and from Warner
Chilcott at the address set forth above.
Certain financial data (including the pro forma information) contained in this
document is calculated on or derived from data which is based on UK or US
generally accepted accounting principles. Investors and security holders should
be aware that this financial data may be reconciled to US or UK generally
accepted accounting principles in the Shareholder Documentation and accordingly
such financial data may be different in such Shareholder Documentation.
13
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN
OR INTO AUSTRALIA, CANADA OR JAPAN
4th May, 2000
GALEN HOLDINGS PLC
("GALEN")
ACQUISITION OF WARNER CHILCOTT PLC
("WARNER CHILCOTT")
BUILDING AN INTERNATIONAL SPECIALTY PHARMACEUTICAL PRODUCTS AND SERVICES
BUSINESS
1. Introduction
The Boards of Galen and Warner Chilcott announce today that they have entered
into an agreement under which Warner Chilcott will become a wholly owned
subsidiary of Galen. The acquisition is to be effected by way of a scheme of
arrangement to be proposed to Warner Chilcott shareholders.
The agreement sets out certain conditions to the implementation of the Scheme,
including: the approval of Warner Chilcott shareholders and Galen shareholders,
the sanctioning of the Scheme by the High Court of Ireland, and Galen shares
being admitted to listing in American Depository Share form on NASDAQ. A summary
of the terms and conditions of the Transaction is set out in Appendix II to this
document.
The Transaction is expected to be tax free to Warner Chilcott's US, UK and
Republic of Ireland shareholders and ADS holders.
2. The Transaction
Under the agreement, Galen shareholders will retain their shares in Galen and
Warner Chilcott shareholders will be entitled to receive:
For every Warner Chilcott share 2.5 new Galen shares
and so in proportion for any other number of Warner Chilcott shares held.
Holders of Warner Chilcott ADSs (each representing one Warner Chilcott share)
will receive Galen ADSs.
Based on the closing mid-market price per Galen share of 612.5p ($9.58) on 3rd
May, 2000, the Transaction values each Warner Chilcott share and ADS at $23.94
(1,531.3p) and the total current issued share capital of Warner Chilcott at
$296.5 million ((pound sterling) 189.6 million) (or $406.3 million ((pound
sterling) 259.9 million) on a fully diluted basis).
The Transaction represents a premium of 33.0 per cent. over the closing price of
$18.00 per Warner Chilcott ADS on 3rd May, 2000 and a premium of 57.0 per cent.
over the average closing price per Warner Chilcott ADS for the 30 business days
ending 3rd May, 2000.
Based on the current issued share capital of Warner Chilcott, Galen shareholders
will hold approximately 80 per cent. and Warner Chilcott shareholders
approximately 20 per cent. of
14
the enlarged issued share capital of Galen. On a fully diluted basis, Galen
shareholders will hold approximately 75 per cent. and Warner Chilcott
shareholders approximately 25 per cent. of the enlarged issued share capital of
Galen.
No fractions of new Galen shares will be issued to Warner Chilcott shareholders.
Any fractional entitlements shall be rounded down to the nearest whole number of
new Galen shares.
The new Galen shares to be issued under the Scheme will rank pari passu in all
respects with Galen shares in issue at the Effective Time.
3. Background to and Reasons for the Transaction
The Transaction is expected to create an integrated international pharmaceutical
company with a variety of revenue platforms in attractive high growth sectors.
In particular, the Transaction represents the opportunity to create a new force
in the women's healthcare market with both Galen and Warner Chilcott
contributing product portfolios which have significant potential in this
marketplace and with sales and marketing organisations which are geographically
complementary.
The change in scale resulting from the Transaction is expected to provide the
enlarged entity with, inter alia, the following benefits which, together, would
establish a platform for future growth:
- - Complementary business strengths;
- - Greater geographic breadth;
- - Enhanced opportunities for growth and retention of earnings;
- - International management team with extensive sectoral expertise; and
- - Increased investor profile and enhanced liquidity.
Complementary business strengths
The marketing of products using Galen's intravaginal ring drug delivery system
(IVR) will be able to benefit from Warner Chilcott's women's healthcare focused
sales and marketing organisation in the US.
The enlarged group will also focus on developing its women's healthcare
franchise by growing sales of Estrace(R) cream, Ovcon 35(R) and Ovcon 50(R), the
three branded pharmaceutical products that Warner Chilcott recently acquired
from Bristol-Myers Squibb.
The enlarged group's enhanced marketing strength in the women's healthcare
segment will also be complemented by a presence in the therapeutic areas of
analgesia, gastro-intestinal, infection control, urology and cardiology.
15
Greater geographic breadth
The improved geographic breadth of the enlarged group resulting from Galen's
established presence in the UK and Ireland and Warner Chilcott's strength in the
US are expected to increase the commercial opportunities open to the enlarged
group both from its existing product portfolio and from acquisition and
in-licensing opportunities.
Enhanced opportunities for growth and retention of earnings
The complementary business strengths of Galen and Warner Chilcott and the
greater geographic breadth of the enlarged group will not only provide future
growth potential but also represent an opportunity to retain a greater economic
stake in the success of Galen's IVR products by capturing the US distribution
margin.
International management team with extensive sectoral experience
The enlarged group will have a high calibre and experienced management team. The
executive directors of the enlarged group have more than 75 years of experience
in the pharmaceutical industry.
Increased investor profile and enhanced liquidity
Galen has listings in London and Dublin and will seek a listing on NASDAQ which
will offer investors an opportunity to invest in a larger company with a growing
international presence and geographical reach.
4. Management
On the Scheme becoming effective, a number of changes will be made to the Galen
Board. Dr. Allen McClay will relinquish his executive responsibilities and will
become Non-executive President. Dr. John King will become Executive Chairman and
Dr. Harold Ennis will be appointed Non-executive Vice-Chairman. Geoffrey Elliott
will continue as Finance Director and Alan Armstrong will become Executive
Director and Chief Executive, Ethical Pharmaceutical Services.
Warner Chilcott has an experienced management team and the board of Galen is
delighted that Roger Boissonneault and Paul Herendeen have agreed to join the
Galen Board as Chief Executive Officer and Executive Vice President and Director
of Business Development, respectively. Following completion of the Transaction,
the board of the enlarged group will therefore comprise:
Name Position in enlarged group
Dr. John King Executive Chairman
Roger Boissonneault Chief Executive Officer
Geoffrey Elliott Chief Financial Officer
Alan Armstrong Executive Director and Chief Executive, Ethical
Pharmaceutical Services
Paul Herendeen Executive Vice President and Director of Business
Development
Dr. Allen McClay OBE Non-Executive President
16
Dr. Harold Ennis OBE Non-Executive Vice-Chairman
David Gibbons MBE Non-Executive Director
Dr. Michael Carter Non-Executive Director
Both Roger Boissonneault and Paul Herendeen have agreed, conditional upon the
Scheme becoming effective, new employment agreements with the enlarged group.
Each new director will be entitled to a severance payment equivalent to 12
months' salary in the event of a termination without cause. However, in the
event of a change of control of Galen, such payment shall be an amount equal to
18 months' salary. Both new directors are required to give 12 months' notice in
order to terminate their agreements. The directors are also entitled to a bonus
payable by Warner Chilcott on the consummation of the Acquisition and, in
certain specified circumstances, a retention bonus on the first anniversary of
the effective date.
5. Information on Galen
Galen is an integrated pharmaceutical company, based in Northern Ireland. The
company was founded in 1968 and was listed on the London Stock Exchange in 1997.
Galen develops and manufactures branded prescription pharmaceutical products,
which are promoted by its 65 person sales and marketing organisation in the
United Kingdom and Ireland. Galen's Ethical Pharmaceutical Services division
supplies and distributes clinical trial materials internationally, operates a
drug reconciliation business and uses computer-based interactive voice response
systems to permit the more efficient management of the clinical trial process.
The division also provides a 'bench-to-pilot-scale' specialist chemical
synthesis service for the research-based pharmaceutical industry through its
SynGal and QuChem units. In 1997, Galen opened its first pharmaceutical services
facility in the United States to meet the needs of a global marketplace.
Galen's research and development activity focuses on the development of
proprietary drug delivery applications and technologies. Galen has a solid
pipeline of proprietary products in development for the women's healthcare
market including an intravaginal ring drug delivery system (IVR) that is
designed to deliver a consistent dose of a wide range of medicines over extended
periods of time.
The company has lodged its first marketing authorisation application in the UK,
for the estradiol-based IVR for HRT, and anticipates the UK launch of the
product during the second half of 2000, with the European launch expected to
follow in late 2001. Galen is also targeting a US NDA application for late 2000.
A phase III trial for the estradiol/progestogen IVR for continuous combined HRT
is planned for the current financial year, with anticipated marketing
authorisation applications in the US and UK during 2002, with Europe one year
later. Galen has also developed proprietary topical drug delivery technology
based on the improved skin penetrating properties of eutectic mixtures of
pharmacologically active agents.
Galen has an impressive track record of profitable growth generated both
organically and through acquisition. Since 1995, revenues have nearly tripled
from (pound sterling) 23.3 million to (pound sterling) 67.0 million ($36.9
million to $109.2 million) while profit before taxation and exceptional items
increased five-fold from (pound sterling) 3.6 million to (pound sterling) 18.4
million ($5.7 million to $30.0 million).
6. Information on Warner Chilcott
17
Warner Chilcott develops and markets branded prescription pharmaceutical
products in the United States, primarily focused on the women's health
therapeutic category. The company was formed in 1992 and its shares became
publicly traded in ADS form on NASDAQ in 1997. Through its national US sales
force of approximately 260 representatives, Warner Chilcott markets branded
pharmaceutical products directly to physician specialists across the US,
particularly obstetrician/gynaecologists and urologists. The company's principal
offices are in Dublin, Ireland and Rockaway, New Jersey. For the year ended 31st
December, 1999, Warner Chilcott had, on a US GAAP basis, total revenues and loss
before taxes of $74.0 million ((pound sterling) 45.4 million) and $6.7 million
((pound sterling) 4.1 million) respectively. As at 31st December, 1999, Warner
Chilcott had net assets of $99.0 million ((pound sterling) 60.1 million).
On 15th February, 2000, Warner Chilcott acquired three women's healthcare
products from Bristol-Myers Squibb for a total consideration of $175.1 million.
The acquired brands, which generated nearly $50 million in revenues during 1999,
are Estrace(R) vaginal cream, an estrogen replacement therapy product, and two
oral contraceptives, Ovcon(R) 35 and Ovcon(R) 50.
On a pro forma basis after giving effect to the recent acquisition of the three
branded pharmaceutical products from Bristol-Myers Squibb and the financing
thereof, Warner Chilcott would have had, on a US GAAP basis, total revenues and
income before taxes for the twelve months ended 31st December, 1999 of $124.0
million ((pound sterling) 76.1 million) and $4.8 million ((pound sterling) 3.0
million), respectively and would have had net assets as at 31st December, 1999
of $98.3 million ((pound sterling) 59.7 million).
Warner Chilcott released its results for the quarter ended 31st March, 2000 on
3rd May, 2000.
7. Further details of the Scheme
The acquisition is to be effected by way of a scheme of arrangement of Warner
Chilcott under Section 201 of the Irish Companies Act, 1963, in accordance with
the terms and conditions of the Transaction Agreement dated 4th May, 2000. The
Scheme will provide for the cancellation of all Warner Chilcott shares in issue
at the record date for the Scheme, in consideration for the issue of new Galen
shares to Warner Chilcott shareholders. Warner Chilcott will become a
wholly-owned subsidiary of Galen. Implementation of the Scheme is subject to the
conditions set out in the Transaction Agreement and to the rights of Warner
Chilcott or Galen to terminate the Transaction Agreement in certain
circumstances. A summary of the terms and conditions is set out in Appendix II
to this document.
Meetings of Warner Chilcott shareholders to consider and vote on resolutions to
approve the Scheme and certain related matters necessary to implement the Scheme
will be convened. A proxy statement for the meetings is currently expected to be
posted to Warner Chilcott shareholders in July 2000.
The Scheme will also require the sanction of the High Court of the Republic of
Ireland.
Due to its size, the Transaction is subject to the approval of Galen
shareholders at an EGM. It is expected that the appropriate documentation will
be dispatched to Galen shareholders in July 2000.
The Scheme is currently expected to become effective and the Transaction to
complete by the end of August 2000.
18
Application will be made to the UK Listing Authority and the Dublin Stock
Exchange for the new Galen shares to be admitted to their respective Official
Lists and to trading on the London Stock Exchange. In addition, application will
be made to NASDAQ for the admission to trading of the new Galen ADSs.
8. Warner Chilcott Options and Warrants
It is expected that all outstanding options and warrants over Warner Chilcott
shares will become vested upon the Scheme becoming effective.
It is proposed that outstanding options over Warner Chilcott shares will be
adjusted upon the Scheme becoming effective so that they become options over
Galen shares on the same basis as under the Scheme. Roger Boissonneault and Paul
Herendeen have specifically agreed to roll-over their options over Warner
Chilcott shares for options over Galen shares and not to exercise any of these
options for a period expiring, at the latest, on the date of publication of the
interim financial results of Galen for the six month period ending 31st March,
2001.
In addition, amendments will be proposed to Warner Chilcott's Articles of
Association so that any Warner Chilcott shares issued after the Effective Time
will automatically be transferred to Galen in exchange for new Galen shares on
the same basis as under the Scheme.
Up to 11.5 million Galen shares may be required to be issued pursuant to the
exercise of Warner Chilcott options and warrants.
9. Recommendations and undertakings
The Directors of Galen, who have been advised by Merrill Lynch, Galen's
financial adviser, consider the terms of the Transaction to be fair and
reasonable. In providing its advice, Merrill Lynch has relied on the Directors'
commercial assessments. Additionally, the Directors believe the transaction to
be in the best interests of the Shareholders as a whole and, accordingly,
unanimously recommend Shareholders to vote in favour of the resolution(s) to be
proposed at the extraordinary general meeting of Galen, as they intend to do in
respect of their own beneficial holdings of, in aggregate, 68.0 million Galen
Shares, representing approximately 53.4 per cent. of Galen's existing issued
share capital.
The Directors of Warner Chilcott, who have been so advised by CSFB, consider the
Transaction to be fair to Warner Chilcott shareholders from a financial point of
view. In providing advice to the Directors, CSFB has taken into account the
commercial assessments of the Directors. The Directors of Warner Chilcott intend
unanimously to recommend Warner Chilcott shareholders to vote in favour of the
resolutions necessary to implement the Scheme and related transactions.
Appendix III contains definitions of certain terms used in this announcement.
19
APPENDIX I
PROFORMA FINANCIAL INFORMATION
The unaudited proforma financial information in respect of the enlarged group
set out below is prepared for illustrative purposes only and because of its
nature may not give a true picture of the results or financial position of the
enlarged group. The proforma financial information is based on the audited
consolidated financial statements of Galen for the year ended 30th September,
1999 adjusted to reflect the proposed acquisition of Warner Chilcott. The
purpose of the proforma financial information is to illustrate the effect of the
proposed acquisition on the results of the Galen Group as if the acquisition had
taken place on 1st October, 1998 and on the net assets as if it had happened on
30th September, 1999. The proforma financial information has been prepared on
the basis of the notes set out below.
UNAUDITED UK/IRISH GAAP PROFORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
ADJUSTMENTS
------------------------------------------------------------
GALEN WARNER
RESULTS CHILCOTT
FOR THE RESULTS FOR
YEAR ENDED THE YEAR WARNER
30 ENDED 31 WARNER CHILCOTT
SEPTEMBER DECEMBER CHILCOTT PURCHASE GALEN
1999 1999 TRANSACTIONS ADJUSTMENTS PLACING PRO FORMA
NOTE 1 NOTE 2 NOTE 3 NOTE 4 NOTE 5 RESULTS
(POUND (POUND (POUND (POUND (POUND (POUND
STERLING) STERLING) STERLING) STERLING) STERLING) STERLING)
000 000 000 000 000 000
Turnover 67,010 45,434 30,683 -- -- 143,127
Cost of sales (32,558) (17,001) (1,166) -- -- (50,725)
-------- -------- -------- -------- -------- --------
Gross profit 34,452 28,433 29,517 -- -- 92,402
Net operating expenses (15,762) (32,759) (7,696) (8,794) -- (65,011)
-------- -------- -------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA and non operating
exceptional items 22,423 (1,897) 27,193 -- -- 47,719
Depreciation
- tangible fixed assets (3,026) (158) -- -- -- (3,184)
-intangible fixed assets (36) (2,271) (5,155) -- -- (7,462)
Amortisation of goodwill (671) -- (217) (8,794) -- (9,682)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) 18,690 (4,326) 21,821 (8,794) -- 27,391
Gain/(loss) on fixed asset
disposals -- 1,684 -- -- -- 1,684
Investment income 925 1,389 (282) (620) 1,701 3,113
Interest payable (1,210) (1,848) (14,458) -- 419 (17,097)
-------- -------- -------- -------- -------- --------
Profit/(loss) before tax 18,405 (3,101) 7,081 (9,414) 2,120 15,091
Tax (4,396) -- -- -- (647) (5,043)
-------- -------- -------- -------- -------- --------
Profit/(loss) after tax 14,009 (3,101) 7,081 (9,414) 1,473 10,048
Minority interests (19) -- -- -- -- (19)
-------- -------- -------- -------- -------- --------
Profit/(loss) for the
financial year 13,990 (3,101) 7,081 (9,414) 1,473 10,029
======== ======== ======== ======== ======== ========
NOTES:
20
1 The results of Galen have been extracted from the audited consolidated
financial statements and annual reports of Galen for the year ended
30th September, 1999.
2 The results of Warner Chilcott have been extracted from the audited
financial statements and annual report of Warner Chilcott and its
subsidiaries for the year ended 31st December, 1999, prepared in
accordance with Irish GAAP, translated at $1.6295=(pound sterling) 1,
the average exchange rate ruling during the year ended 30th September,
1999. Irish GAAP are substantially the same as UK GAAP.
3 These adjustments, referred to as the 'Warner Chilcott transactions',
relate to the acquisition in February 2000 by Warner Chilcott of three
branded pharmaceutical products from Bristol-Myers Squibb for $175.1
million, the issue contemporaneously of $200.0 million of 12 5/8%
senior notes due 2008, the repayment of amounts outstanding under the
company's prior working capital facility, the redemption of remaining
senior subordinated discount notes due 2001 and the closure of a new
senior credit facility.
- Net sales and product contribution of the three products
acquired for the year ended 31st December, 1999 were extracted
from the audited statements of net sales and product
contribution included in Form 8-K/A dated 21st April, 2000
which amends the report on Form 8-K of Warner Chilcott
previously filed with the Securities and Exchange Commission
on 28th February, 2000. All transactions were translated at
$1.6295=(pound sterling) 1, the average exchange rate ruling
for the year ended 30th September, 1999.
- The turnover adjustment reflects the net sales of the three
products acquired.
- The cost of sales adjustment reflects the cost of sales of the
three acquired products less an adjustment to reflect the
amount that Warner Chilcott would have paid for product
purchases under a 10 year supply agreement with Bristol-Myers
Squibb.
- The net operating expenses adjustment includes the selling,
general and administration costs of the three acquired
products plus the amortisation of the intangible assets
associated with the product acquisitions.
- The investment income adjustment is attributable to the
reduction in the amount of cash available for investment of
$9.8 million at an assumed investment rate of 4.7%.
- The interest expense adjustment reflects additional interest
payable resulting from the issuance of the notes at 12 5/8%,
the expected availability fee of 0.375% on the new senior
secured credit facility and the repayment of all other
indebtedness.
4 Represents the amortisation of goodwill arising on the Transaction over
20 years and the reduction in investment income arising from the costs
of the Transaction.
5 This adjustment relates to the placing on 25th November, 1999 of
6,000,000 new Galen shares at (pound sterling) 6.15 per share. Total
proceeds, net of costs, amounted to (pound sterling) 36.4 million. The
adjustment to the consolidated proforma profit and loss account
represents the interest saving on borrowings eliminated by the proceeds
and interest income on additional cash held as if the proceeds had been
received on 1st October, 1998. Tax has been adjusted at the corporation
tax rate for the year ended 31st December, 1999 of 30.5%.
21
UNAUDITED UK/IRISH GAAP PROFORMA NET ASSET STATEMENT
ADJUSTMENTS
-----------------------------------------------------------------------
WARNER
GALEN AS CHILCOTT
AT 30 AS AT 31 WARNER
SEPTEMBER DECEMBER CHILCOTT GALEN MERGER PROFORMA
1999 1999 TRANSACTIONS PLACING ADJUSTMENT NET
NOTE 1 NOTE 2 NOTE 3 NOTE 4 NOTE 5 ASSETS
(POUND (POUND (POUND (POUND (POUND (POUND
STERLING) STERLING) STERLING) STERLING) STERLING) STERLING)
000 000 000 000 000 000
FIXED ASSETS
Intangible assets 35,337 24,273 106,293 -- 175,886 341,789
Tangible assets 65,173 715 -- -- -- 65,888
-------- -------- -------- -------- -------- --------
100,510 24,988 106,293 -- 175,886 407,677
-------- -------- -------- -------- -------- --------
CURRENT ASSETS
Stock 8,829 2,444 -- -- -- 11,273
Debtors 15,826 7,554 -- -- -- 23,380
Cash at bank and in
hand 6,351 30,939 (5,960) 30,000 (11,032) 50,298
-------- -------- -------- -------- -------- --------
31,006 40,937 (5,960) 30,000 (11,032) 84,951
CREDITORS: amounts
falling due within
one year (27,112) (6,621) -- 6,385 -- (27,348)
-------- -------- -------- -------- -------- --------
NET CURRENT ASSETS 3,894 34,316 (5,960) 36,385 (11,032) 57,603
-------- -------- -------- -------- -------- --------
TOTAL ASSETS LESS
CURRENT LIABILITIES 104,404 59,304 100,333 36,385 164,854 465,280
CREDITORS: amounts
falling due in more
than one year (29,981) (13,707) (100,777) -- -- (144,465)
Deferred income (6,270) -- -- -- -- (6,270)
-------- -------- -------- -------- -------- --------
NET ASSETS 68,153 45,597 (444) 36,385 164,854 314,545
======== ======== ======== ======== ======== ========
Notes:
1 The net assets of Galen have been extracted from the audited
consolidated financial statements of Galen for the year ended 30th
September, 1999.
2 The net assets of Warner Chilcott have been extracted from its audited
financial statements and annual report for the year ended 31st
December, 1999, prepared in accordance with Irish GAAP and translated
at $1.6469=(pound sterling) 1, being the exchange rate ruling at 30th
September, 1999. Irish GAAP are substantially the same as UK GAAP.
3 These adjustments, referred to as the 'Warner Chilcott transactions',
relate to the acquisition in February 2000 by Warner Chilcott of three
branded pharmaceutical products from Bristol-Myers Squibb for $175.1
million, the issue contemporaneously of $200.0 million of 12 5/8%
senior notes due 2008, the repayment of amounts outstanding under the
company's prior working capital facility, the repayment of remaining
senior subordinated discount notes due 2001 and the closure of a new
senior credit facility. Cash in excess of that raised was required to
finance the transaction of $9.8 million. All transactions were
translated at $1.6469=(pound sterling) 1, the exchange rate ruling at
30th September, 1999.
4 This adjustment relates to the placing on 25th November, 1999 of
6,000,000 new Galen shares at (pound sterling) 6.15 per share. Total
proceeds, net of costs, amounted to (pound sterling) 36.4 million.
5 Goodwill arising on the acquisition is calculated as follows:
22
(pound sterling) '000s
Consideration (see below) 217,039
Estimated expenses of the Acquisition 4,000
Less: Net tangible assets of Warner Chilcott
at 31st December, 1999 (45,153)
Goodwill on acquisition 175,886
In preparing the proforma statement of new assets, the consideration
has been calculated on the basis of 2.5 new Galen shares for each
Warner Chilcott share. Based on the closing mid-market price per Galen
share of 612.5p on 3rd May, 2000, the terms of the Transaction value
each Warner Chilcott share at 1,531.3p and the total issued share
capital of Warner Chilcott at approximately (pound sterling) 189.6
million. In addition consideration includes an amount of (pound
sterling) 25.4 million relating to the options and warrants which are
to be exchanged for Galen options. Consideration also takes into
account compensation amounts totalling (pound sterling) 2.0 million
triggered by the transaction. In accordance with the requirements of
Financial Reporting Standard No. 7 "Fair Values in Acquisition
Accounting" the fair value of the shares at the date of completion
(based on market value at that date) and the fair value of the tangible
net assets of Warner Chilcott at the same date is used for the
calculation of the goodwill for inclusion in Galen accounts.
(pound sterling) 11.0 million representing the total estimated
transaction costs are shown as a reduction in cash balances.
6 No account has been taken of any trading or other transactions of Galen
or Warner Chilcott since 30th September, 1999 and 31st December, 1999
respectively.
23
APPENDIX II
SUMMARY TERMS AND CONDITIONS
1. The obligations of the parties to effect the Scheme are subject to (i) the
satisfaction (or, to the extent permitted by the Transaction Agreement,
waiver) of each of the conditions set out below on or before 29th December,
2000.
(a) No Injunctions or Restraints. No judgement, order, decree,
statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other governmental
entity of competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") shall be in effect or pending
(i) imposing or seeking to impose material limitations on the ability
of Galen to acquire or hold or to exercise full rights of ownership of
any Warner Chilcott Shares; (ii) imposing or seeking to impose
material limitations on the ability of Galen and its affiliates to
combine, operate or control the business and assets of Warner
Chilcott; (iii) imposing or seeking to impose other material
sanctions, damages, or liabilities directly arising out of the
Transactions on Galen or Warner Chilcott; (iv) requiring or seeking to
require divestiture by Galen of all or any material portion of the
business, assets or property of Warner Chilcott; or (v) preventing the
consummation of the Transactions.
(b) Governmental Action. No action or proceeding shall be instituted,
proposed or threatened by any governmental entity seeking to prevent
consummation of the Transaction, asserting the illegality of the
Transaction or the Transaction Agreement or seeking material damages
directly arising out of the transactions contemplated thereby which
continues to be outstanding.
(c) Galen Shareholder Approval. The approval in general meeting of
Galen shareholders shall have been obtained.
(d) Antitrust Laws.
(i) The waiting period applicable to the consummation of the
Transactions under the Hart-Scott-Rodino Antitrust Improvements
Act 1976 (as amended) and any applicable foreign or supranational
antitrust laws shall have expired or been terminated; and
(ii) no action by the Department of Justice or Federal Trade
Commission or any foreign or supranational agency or entity
charged with enforcement of antitrust laws that are applicable to
the transactions contemplated hereby challenging or seeking to
enjoin the consummation of the Transaction shall have been
instituted and be pending; and
(iii) to the extent that the Irish Mergers, Takeovers and
Monopolies (Control) Act, 1978 as amended (the "Mergers Act") is
applicable, the Minister for Enterprise, Trade and Employment of
Ireland shall have stated in writing, pursuant to Section 7(a) of
the Mergers Act, that he/she does not intend to make an order
under Section 9 of the Act in relation to the Transaction or, in
the event of the said Minister making an order under Section 9
prohibiting the implementation of the Scheme except on conditions
specified in the said order, Galen in its absolute discretion
having decided to accept such
24
conditions or, in the event of no order under that section being
made and the said Minster not stating in writing that he/she does
not intend to make such an order, the relevant period within the
meaning of Section 6 of that Act having elapsed.
(e) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or prohibition
preventing or prohibiting the consummation of the
Transaction or materially limiting or restricting Galen's
conduct or operation of the business of Warner Chilcott
after the Effective Time shall have been issued and be in
effect, nor shall any proceeding brought by a domestic
administrative agency or commission or other domestic
governmental entity, seeking any of the foregoing be
pending; nor shall any action have been taken or any
statute, rule, regulation or order have been enacted,
entered or enforced or be deemed applicable to the
Transaction which makes the consummation of the Transaction
illegal or prevents or prohibits the Transaction.
(f) Warner Chilcott Shareholder and Court Approvals.
(i) Approval of the Scheme by a majority in number
representing three-fourths in value of the holders of
the relevant classes of Warner Chilcott shares present
and voting, either in person or by proxy, at the
relevant general meetings;
(ii) the special resolution to approve the reduction
and cancellation of the capital of Warner Chilcott and
the creation and issue of new Warner Chilcott shares to
Galen being duly passed as a special resolution at an
extraordinary general meeting of Warner Chilcott
shareholders;
(iii) the Scheme being sanctioned by the High Court of
Ireland (without modification save as agreed by Warner
Chilcott and Galen) and the reduction and cancellation
of the capital of Warner Chilcott being confirmed by
the Court; and
(iv) an official copy of the order of the High Court of
Ireland sanctioning the Scheme and the minute of the
relevant reduction of capital being duly delivered to
the Registrar of Companies in the Republic of Ireland
for registration and such Registrar issuing a
certificate of registration in relation to that capital
reduction.
(g) Effective Registration Statement. The registration
statement on Form 20-F shall have been declared effective by
the United States Securities and Exchange Commission ("SEC")
and no stop order suspending its effectiveness shall have
been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the knowledge of Galen or
Warner Chilcott, threatened by the SEC, and all necessary
approvals under blue sky laws relating to the issuance or
trading of the Galen shares and the Galen ADSs to be issued
to the Warner Chilcott shareholders in connection with the
Transaction shall have been received.
(h) NASDAQ Listing. The Galen ADSs shall be listed for
trading on NASDAQ.
(i) UK Admission. The United Kingdom Listing Authority shall
have agreed to
25
admit the new Galen shares to be issued pursuant to the
Scheme to the Official List of the United Kingdom Listing
Authority and the London Stock Exchange shall have agreed to
admit such shares to trading, such agreements shall not have
been revoked or withdrawn and no event shall have occurred
which will or may reasonably be expected to result in such
agreements being revoked or withdrawn.
2. In addition the obligations of Warner Chilcott to
implement the Scheme and of Galen otherwise to effect
the Transaction are subject to a number of further
conditions, including:
(a) each of the representations and warranties of
Galen and Warner Chilcott contained in the
Transaction Agreement shall remain true, complete
and correct in all material respects;
(b) each of Galen and Warner Chilcott shall have
performed or complied in all material respects
with all covenants required by the Transaction
Agreement to be performed or complied with by it
on or prior to the Effective Time; and
(c) there shall not have occurred any change,
condition, event or development that would result
in a material adverse effect on Galen or Warner
Chilcott.
The Transaction Agreement may be terminated by either
of Galen or Warner Chilcott in certain specified
circumstances, including in the event of a breach of
that agreement by the other party or in the event that
the relevant conditions are not satisfied. In certain
specified circumstances, termination of the Transaction
Agreement may result in the payment by one party to the
other of its costs and expenses and in some cases a
termination fee not exceeding in aggregate $4.25
million.
26
APPENDIX III
DEFINITIONS
"ADSs" American Depositary Shares
"Bristol-Myers Squibb" Bristol-Myers Squibb Company
"CSFB" Credit Suisse First Boston (Europe) Limited
"EBITDA" earnings before interest, tax,
depreciation, and amortisation of goodwill
and intangibles
"Effective Time" the time at which the Scheme becomes
effective
"EGM" Extraordinary General Meeting
"Galen" Galen Holdings PLC
"Galen Board" the Board of Directors of Galen
"Galen shareholders" holders of Galen Shares
"Galen shares" ordinary shares of 10p each in the capital
of Galen
"HRT" Hormone Replacement Therapy. Usually refers
to the treatment of post-menopausal women
with estrogen and/or progestogen in order
to restore the normal levels of these
hormones which are no longer produced
naturally by the body
"Ireland" unless preceded by "Northern", this refers
to the Republic of Ireland
"IVR" intravaginal ring, being a ring/ovoid
shaped delivery system designed for
insertion into the vagina to release
medicine from the core of the ring into the
surrounding tissues and bloodstream at a
constant rate
"London Stock Exchange" or "LSE" London Stock Exchange Limited
"Merrill Lynch" Merrill Lynch International
"NASDAQ" the Nasdaq National Market
"Official List" the Official List of the UK Listing
Authority or the Dublin Stock Exchange, as
appropriate
"Scheme" the scheme of arrangement to be put to
Warner Chilcott shareholders by which
Warner Chilcott will become a wholly owned
subsidiary of Galen
"Securities and Exchange the United States Securities and Exchange
Commission" or "SEC" or the Commission
"Commission"
"Transaction" the proposed acquisition of Warner Chilcott
by way of the Scheme
"Transaction Agreement" the agreement dated as of 4th May, 2000
entered into by Galen and Warner Chilcott
relating to the Transaction
"UK" the United Kingdom of Great Britain and
Northern Ireland
"UK GAAP" generally accepted accounting principles
and practices in the UK
"UK Listing Authority" means The Financial Services Authority in
its capacity as the competent listing
authority in the UK
"United States" or "US" the United States of America, its
territories and possessions, any State of
the United States of America and the
District of Columbia
"Warner Chilcott" Warner Chilcott, Public Limited Company
"Warner Chilcott ADSs" American Depositary Shares, each
representing one Warner Chilcott Share
"Warner Chilcott ADS holders" holders of Warner Chilcott ADSs
27
"Warner Chilcott Shareholders" holders of Warner Chilcott shares
"Warner Chilcott shares" ordinary shares of US$0.05 each in the
capital of Warner Chilcott
"(pound sterling)" UK pounds sterling
"$" US dollars
28
[GALEN LOGO]
GALEN HOLDINGS PLC
ACQUISITION OF WARNER CHILCOTT PLC
"BUILDING AN INTERNATIONAL SPECIALTY PHARMACEUTICAL
PRODUCTS AND SERVICES BUSINESS"
29
GALEN HOLDINGS PLC
PRESENTATION TEAM(1)
JOHN KING EXECUTIVE CHAIRMAN
ROGER BOISSONNEAULT CHIEF EXECUTIVE OFFICER
GEOFFREY ELLIOTT CHIEF FINANCIAL OFFICER
Note: (1) Positions following completion of the Transaction
[GALEN LOGO]
30
GALEN HOLDINGS PLC
AN INTEGRATED PHARMACEUTICAL COMPANY
[GALEN LOGO]
ETHICAL PHARMACEUTICAL ETHICAL PHARMACEUTICAL
PRODUCTS SERVICES
PRESCRIPTION R&D SERVICES FOR
MEDICINES INTERNATIONAL PHARMA
[GALEN LOGO]
31
GALEN HOLDINGS PLC
GROUP DIVISIONS
PRODUCTS
[GALEN LOGO]
The Galen pharmaceutical division manufactures and markets prescription
medicines to healthcare professionals in key therapeutic areas: analgesics,
antibiotics, gastrointestinal, respiratory and cardiovascular. Research and
development is focused on applications of drug delivery technology for
international exploitation.
[IVEX LOGO]
The Ivex division manufactures and supplies intravenous and other
sterile solutions, primarily for human use. The sterile manufacturing facility
at Larne contains a suite for the production of flexible PVC pouches and, along
with the broad range of facilities at Galen, provides a strong base for the
specialty manufacturing business.
SERVICES
[CTS LOGO]
Clinical Trial Services (CTS) designs, manufactures and tracks patient
packs used in clinical trials, which are then distributed to investigator sites
worldwide. From its state-of-the-art facilities in Craigavon and Pennsylvania,
CTS provides a global service to several of the world's largest multinational
pharmaceutical companies.
[SYNGAL LOGO]
SynGal operates a cGMP custom chemical development service for the
pharmaceuticals industry. From its facility at CraigavonSynGal manufactures
highly active pharmaceutical ingredients (APIs), intermediates and fine
chemicals to pilot plant scale.
[ICTI LOGO]
Interactive Clinical Technologies Inc (ICTI) provides interactive voice
response systems (IVRS) for clinical trials' management from its bases in
Lambertville, NJ and San Francisco, CA. ICTI's systems and technology enable
clients to efficiently manage drug supplies and collect real-time patient
enrolment data.
[QUCHEM LOGO]
QuChem offers a complementary service to SynGal, providing laboratory
scale research in pharmaceutical chemistry. QuChem is based at Queen's
University Belfast, which provides access to an extensive technology base.
[GALEN LOGO]
32
GALEN HOLDINGS PLC
FIVE YEAR EARNINGS PROGRESS
TURNOVER
[BAR CHART ILLUSTRATING INCREASE IN GALEN HOLDINGS PLC TURNOVER
(IN MILLIONS OF POUNDS STERLING) FROM 1995 THROUGH 1999
(DIFFERENTIATED TO SHOW EUROPE AND US COMPONENTS OF TURNOVER)]
1999 TURNOVER WAS (POUND STERLING) 67.0 MILLION,
A 187% INCREASE FROM 1995
OPERATING PROFIT BEFORE GOODWILL
AND EXCEPTIONAL ITEMS
[BAR CHART ILLUSTRATING INCREASE IN OPERATING PROFIT OF GALEN HOLDINGS PLC
FROM 1995 THROUGH 1999 (IN MILLIONS OF POUNDS STERLING)
BEFORE GOODWILL AND EXCEPTIONAL ITEMS]
1999 OPERATING PROFIT BEFORE GOODWILL WAS (POUND STERLING) 19.4M, A
401% INCREASE FROM 1995
[GALEN LOGO]
33
ETHICAL PHARMACEUTICAL SERVICES [CTS LOGO] [ICTI LOGO]
FIVE YEAR SALES PROGRESS [SYNGAL LOGO] [QUCHEM LOGO]
TURNOVER
[BAR CHART ILLUSTRATING INCREASE IN TURNOVER IN ETHICAL PHARMACEUTICAL
SERVICES FROM 1995 THROUGH 1999 (IN MILLIONS OF POUNDS STERLING)
(DIFFERENTIATED TO SHOW EUROPE AND U.S. COMPONENTS OF TURNOVER)]
1999 TURNOVER WAS (POUND STERLING) 28.4 MILLION,
A 417% INCREASE FROM 1995
- CLINICAL TRIALS' MATERIALS: CHEMICAL SYNTHESIS
- TURNOVER (POUND STERLING) 7.8M AT FLOTATION
- ACQUISITION OF ICTI
- 41% TURNOVER NOW IN USA SUBSIDIARIES
[GALEN LOGO]
34
ETHICAL PHARMACEUTICAL PRODUCTS
FIVE YEAR SALES PROGRESS [GALEN LOGO] [IVEX LOGO]
TURNOVER
[BAR CHART ILLUSTRATING INCREASE IN TURNOVER FROM ETHICAL PHARMACEUTICAL
PRODUCTS (IN POUNDS STERLING) FROM 1995 THROUGH 1998]
1999 TURNOVER WAS (POUND STERLING) 38.6 MILLION,
A 117% INCREASE FROM 1995
- STRONG PRESCRIPTION BASE (UK & IRELAND)
- ANALGESIA, GASTROENTEROLOGY, RESPIRATORY AND FEMALE HEALTH
- INTEGRATED INFRASTRUCTURE
- PRODUCT ACQUISITION
- PRODUCT DEVELOPMENT
- NO PRESENCE IN USA
[GALEN LOGO]
35
RESEARCH AND DEVELOPMENT
PROPRIETARY PRODUCTS FOR INTERNATIONAL EXPANSION
[PICTURE OF INTRAVAGINAL DRUG DELIVERY SYSTEM]
CONTROLLED RELEASE OVER 90 DAYS
[LINE CHART ILLUSTRATING CONTROLLED RELEASE OF ESTRADIOL OVER A PERIOD OF 90
DAYS (MEASURED IN PG/ML)]
INTRAVAGINAL DRUG DELIVERY (IVR) SYSTEM
- TECHNOLOGY PLATFORM FOR INTERNATIONALISATION
- THREE PRODUCTS IN DEVELOPMENT
- HRT
- CONTRACEPTION
- OTHER APPLICATIONS: INFECTION CONTROL
- OTHER DRUG DELIVERY APPLICATIONS
- EUTECTIC TECHNOLOGY
- CORE THERAPEUTIC AREAS
- ANALGESIA
- GASTROINTESTINAL
[GALEN LOGO]
36
THE ACQUISITION OF WARNER CHILCOTT PLC
BACKGROUND
- - 1992 - COMPANY FOUNDED BY ELAN
- - 1996 - ACQUIRED WARNER CHILCOTT INC. FROM WARNER-LAMBERT
- - 1997 - INITIAL PUBLIC OFFERING; INITIATED PLAN TO RESTORE WARNER
CHILCOTT TO ITS ROOTS AS A BRANDED PHARMACEUTICAL COMPANY
- - GREW US SALES FORCE FROM ZERO TO APPROXIMATELY 260 OVER THREE YEARS
- - LAUNCHED THREE INTERNALLY DEVELOPED PRODUCTS AND ACQUIRED FIVE BRANDED
PRODUCTS FROM WARNER-LAMBERT
- - INITIATED BENEFICIAL CO-MARKETING ALLIANCES WITH BMS & SCHERING-PLOUGH
- - FEB 2000: ACQUIRED ESTRACE AND OVCON WOMEN'S HEALTHCARE BRANDS FROM BMS
[GALEN LOGO]
37
THE ACQUISITION OF WARNER CHILCOTT PLC
OVERVIEW
- - US-BASED SPECIALTY PHARMACEUTICAL BUSINESS
- - WOMEN'S HEALTHCARE FOCUS - BRANDED PRODUCT PORTFOLIO
- - ONE OF THE LARGEST WOMEN'S HEALTHCARE SALESFORCES IN THE US
- - WARNER CHILCOTT NAME ASSOCIATED WITH BRANDED PHARMACEUTICALS FOR OVER
90 YEARS
- - STRONG MANAGEMENT TEAM WITH PROVEN PHARMACEUTICAL INDUSTRY TRACK RECORD
- - ACQUIRED MAJOR WOMEN'S HEALTHCARE PRODUCTS ESTRACE AND OVCON
- POSITIONED FOR PROFITABILITY AND GENERATION OF STRONG CASH
FLOW IN 2000
[BAR CHART ILLUSTRATING BRANDED PRODUCT REVENUE(1)
($ million)
1997 1998 1999 1999(PF)
---- ---- ---- --------
$8 $16 $35 $85 ]
[BAR CHART ILLUSTRATING NET (LOSS)/PROFIT(1)
($ million)
1997 1998 1999 1999(PF)
---- ---- ---- --------
($28) ($20) ($7) $5 ]
(1) Except in 1999(PF), excludes benefit from the acquisition of Estrace Cream
and Ovcon in February 2000
[GALEN LOGO]
38
THE ACQUISITION OF WARNER CHILCOTT PLC
WOMEN'S HEALTHCARE BRANDED PRODUCT PORTFOLIO
PRODUCT YEAR LAUNCHED MARKET POSITION(1)
------- ------------- ------------------
OB/GYNAECOLOGY
NataFort(R) Prenatal Vitamin 1998 - Internally Developed #1
NataChew(TM) Chewable Prenatal Vitamin 1999 - Internally Developed #2
Estrace(R) Cream Estrogen Replacement 2000 - Acquired from BMS New
Ovcon(R) 35 Oral Contraceptive 2000 - Acquired from BMS New
Ovcon(R) 50 Oral Contraceptive 2000 - Acquired from BMS New
UROLOGY
Pyridium/Plus(R) Urinary Tract Analgesia 1999 - Internally Developed #1
Estrace(R) Cream Urogenital Atrophy 2000 - Acquired from BMS New
DERMATOLOGY
Doryx(R) Antibiotic 1997 - Acquired from W-L #2
Lotrisone(R) Antifungal/Anti-inflammatory 1999 - Promote for S-P #1
(1) Source: IMS
[GALEN LOGO]
39
THE ACQUISITION OF WARNER CHILCOTT PLC
WOMEN'S HEALTHCARE FOCUS - STRONG MARKET DYNAMICS
1999 US MARKET ESTIMATES(1)
---------------------------
- PRENATAL VITAMINS $100 MILLION
- URINARY TRACT ANALGESICS $50 MILLION
- ORAL CONTRACEPTIVES $1,800 MILLION
- HORMONE REPLACEMENT $2,500 MILLION
- INCONTINENCE $400 MILLION (RX),
$2,000 MILLION (OTC)
IN THE US, MANY WOMEN VIEW THEIR OB/GYN AS THEIR PRIMARY CARE PHYSICIAN
(1) Source: IMS
[GALEN LOGO]
40
THE ACQUISITION OF WARNER CHILCOTT PLC
SALES AND MARKETING EXPERTISE
KEY STRENGTHS:
- SALES FORCE FULLY BUILT
- BRAND MANAGEMENT
- SALES EXECUTION
- PRECISION MARKETING
SALES FORCE GROWTH 1997-1999
[BAR CHART ILLUSTRATING SALES FORCE GROWTH FROM DECEMBER 1996 THROUGH DECEMBER
1999 (MEASURED IN NUMBER OF SALES REPRESENTATIVES)]
[GALEN LOGO]
41
THE ACQUISITION OF WARNER CHILCOTT PLC
MULTIPLE AVENUES OF GROWTH
- INCREASE FREQUENCY OF FACE-TO-FACE MEETINGS
DRIVE INTERNAL GROWTH WITH HIGH VOLUME PRESCRIBERS
THROUGH PRECISION MARKETING - CROSS-MARKET A VARIETY OF PRODUCTS
- LEVERAGE BRAND NAMES
PRODUCT LINE EXTENSIONS - CREATE PRODUCT DIFFERENTIATION
- EXTEND MARKET EXCLUSIVITY
- NON-CONTRACEPTIVE BENEFITS OF ORAL
NEW APPLICATIONS OF EXISTING CONTRACEPTIVES
PRODUCTS - EXPAND ESTRACE TO NEW MARKETS INCLUDING
URINARY INCONTINENCE
- MARKET EXCLUSIVITY
PRODUCT ACQUISITIONS - LEND THEMSELVES TO PRODUCT LINE EXTENSIONS
IN-LICENSING OPPORTUNITIES - PROMOTION SENSITIVE
- COMPLEMENT EXISTING PRODUCT LINES OR
THERAPEUTIC FOCUS
[GALEN LOGO]
42
[GALEN LOGO]
GALEN HOLDINGS PLC
+
WARNER CHILCOTT PLC
"BUILDING AN INTERNATIONAL SPECIALTY PHARMACEUTICAL
PRODUCTS AND SERVICES BUSINESS"
43
GALEN HOLDINGS PLC
BUILDING AN INTERNATIONAL SPECIALTY PHARMACEUTICAL
PRODUCTS AND SERVICES BUSINESS
- - INTERNATIONALISATION IS KEY - SIGNIFICANT US SERVICES PLATFORM HAS ALREADY
BEEN BUILT
- OPPORTUNITY FOR FURTHER SERVICES ACQUISITIONS
- - THE ACQUISITION OF WARNER CHILCOTT INTERNATIONALISES THE PRODUCTS BUSINESS
AND PROVIDES
- US BRANDED PRODUCTS BUSINESS WITH SIGNIFICANT WOMEN'S HEALTHCARE FOCUS
- ONE OF THE LARGEST WOMEN'S HEALTHCARE SALESFORCE IN US
- COMMERCIALISATION OF IVR IN LARGEST MARKET
- - OPPORTUNITY TO ACCELERATE R&D
- - ENHANCED OPPORTUNITIES FOR IN-LICENSING/PRODUCT ACQUISITIONS
- - STRONG COMBINED MANAGEMENT TEAM WITH GOOD CULTURAL FIT AND SHARED VISION
[GALEN LOGO]
44
COMBINED GROUP
PROFORMA REVENUES - BUSINESS AND GEOGRAPHIC
1999 PROFORMA REVENUES BY BUSINESS(1)
PROFORMA REVENUES = (POUND STERLING) 143.1 MILLION ($233.2 MILLION)
[PIE CHART ILLUSTRATING THE BREAKDOWN OF PROFORMA REVENUES BY GEOGRAPHY AMONG
THE FOLLOWING AREAS IN THE FOLLOWING PERCENTAGES:
32% WOMEN'S HEALTHCARE
6% GENERICS
11% ROYALTIES
31% OTHER PRODUCTS
20% ETHICAL SERVICES]
1999 PROFORMA REVENUES BY GEOGRAPHY(1)
PROFORMA REVENUES = (POUND STERLING) 143.1 MILLION ($233.2 MILLION)
[PIE CHART ILLUSTRATING THE BREAKDOWN OF PROFORMA REVENUES AMONG THE FOLLOWING
BUSINESS CATEGORIES IN THE FOLLOWING PERCENTAGES:
7% REST OF WORLD
67% UNITED STATES
26% UNITED KINGDOM]
(1) Warner Chilcott proforma for the acquisition of Estrace cream and Ovcon from
Bristol-Myers Squibb for the year ended December, 1999, Galen for the year ended
September, 1999
[GALEN LOGO]
45
COMBINED GROUP'S PRODUCT BUSINESS
KEY WOMEN'S HEALTHCARE PRODUCTS
MARKETED PRODUCTS INDICATION STATUS
- ----------------- ---------- ------
Estrace Cream HRT Marketed
Ovcon 35 Oral Contraceptive Marketed
Ovcon 50 Oral Contraceptive Marketed
NataChew Prenatal Vitamin Marketed
Pyridium/Plus Urinary Analgesic Marketed
NataFort Prenatal Vitamin Marketed
PRODUCT PIPELINE INDICATION STATUS
- ---------------- ---------- ------
IVR HRT (EU) In Registration
IVR HRT (US) Late Phase III
IVR Continuous Combined Phase III
IVR Testosterone Phase II
IVR Contraceptive Phase II
IVR Infection Control Development
FUTURE OPPORTUNITIES
The enlarged group is expected to be well placed to take advantage of licensing
and acquisition opportunities in the Women's Healthcare Sector
[GALEN LOGO]
46
COMBINED GROUP
PRODUCT SALESFORCE
- - ONE OF THE LARGEST US WOMEN'S HEALTHCARE SALESFORCES, INCLUDING
- JOHNSON & JOHNSON (ORTHO)
- AHP
- GALEN/WARNER CHILCOTT
- WARNER-LAMBERT
- - INCREASED GLOBAL SALESFORCE
- GALEN/WARNER CHILCOTT US 260 SALES REPS
--------------
- GALEN/WARNER CHILCOTT UK/IRELAND 65 SALES REPS
- TOTAL 325 SALES REPS
[GALEN LOGO]
47
COMBINED GROUP
FUTURE PRODUCT GROWTH OPPORTUNITIES
- - EXPAND WOMEN'S HEALTHCARE FOCUS
- EXPAND PRESENCE IN HRT/OC MARKETS
- COMMERCIALIZATION OF IVR TECHNOLOGY PLATFORM
- - DEVELOPMENT AND MANUFACTURE OF US PRODUCTS
- - IN-LICENSING/PRODUCT ACQUISITION OPPORTUNITIES
- - PLATFORM TO EXPAND INTO EUROPE
- - OPPORTUNITY TO ACCELERATE R&D
[GALEN LOGO]
48
KEY TRANSACTION TERMS
- - SCHEME OF ARRANGEMENT
- - 2.5 NEW GALEN SHARES FOR EVERY WARNER CHILCOTT SHARE
- - VALUES EACH WARNER CHILCOTT SHARE AT $23.94, A PREMIUM OF 33% OVER CLOSE ON
3RD MAY, 2000
- - WARNER CHILCOTT SHAREHOLDERS OWN 25% OF ENLARGED GROUP ON A FULLY DILUTED
BASIS
- - CONDITIONAL ON SHAREHOLDER AND OTHER APPROVALS
- - TIMETABLE
- INDICATIVE DATES
- - NEW LISTING ON NASDAQ
WARNER CHILCOTT
12.4 million shares
4.2 million options and warrants
GALEN
41.5 million new shares
127.3 million existing shares
- -----------------------------
168.8 million enlarged shares
=============================
[GALEN LOGO]
49
FINANCIAL IMPACT
- - REVENUE SYNERGIES
- MARGIN CAPTURE ON THE IVR PRODUCT RANGE IN THE US
- - EARNINGS ACCRETIVE ON A PRE-AMORTISATION AND PRE-GOODWILL BASIS IN 2001
- - COST SYNERGIES
- ADMINISTRATION AND GENERAL EXPENSES
- SWITCHING MANUFACTURE OF NATAFORT/NATACHEW TO GALEN'S FACILITY
- FULL BENEFIT IN YEAR ENDING 30TH SEPTEMBER, 2001
[GALEN LOGO]
50
PROFORMA PROFIT & LOSS
UNAUDITED UK/IRISH GAAP PROFORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
[pound sterling]000
-------------------
Turnover 143,127
Cost of sales (50,725)
-------
Gross profit 92,402
Net operating expenses (65,011)
-------
EBITDA and non operating exceptional items 47,719
Depreciation - tangible fixed assets (3,184)
- intangible fixed assets (7,462)
Amortisation of goodwill (9,682)
-------
Operating profit/(loss) 27,391
Gain/(loss) on fixed asset disposals 1,684
Investment income 3,113
Interest payable (17,097)
-------
Profit/(loss) before tax 15,091
Tax (5,043)
-------
Profit/(loss) after tax 10,048
Minority interests (19)
-------
Profit/(loss) for the financial year 10,029
=======
[GALEN LOGO]
51
PROFORMA BALANCE SHEET
UNAUDITED UK/IRISH GAAP PROFORMA NET ASSET STATEMENT
(pound sterling)'000
--------------------
FIXED ASSETS
Intangible assets 341,789
Tangible assets 65,888
--------
407,677
--------
CURRENT ASSETS
Stock 11,273
Debtors 23,380
Cash at bank and in hand 50,298
--------
84,951
CREDITORS: amounts falling due within one year (27,348)
--------
Net current assets 57,603
--------
TOTAL ASSETS LESS CURRENT LIABILITIES 465,280
CREDITORS: amounts falling due in more than one year (144,465)
Deferred income (6,270)
--------
NET ASSETS 314,545
========
[GALEN LOGO]
52
SUMMARY
ENLARGED MANAGEMENT TEAM
EXECUTIVE DIRECTORS NON-EXECUTIVE DIRECTORS
John King Executive Chairman Allen McClay President
Roger Boissonneault Chief Executive Harold Ennis Vice Chairman
Geoffrey Elliot CFO David Gibbons
Alan Armstrong Chief Executive Michael Carter
(EPS Division)
Paul Herendeen Director of Business and
Corporate Development
[GALEN LOGO]
53
SUMMARY
BENEFITS OF TRANSACTION
- --------------------------------------------------------------------------------
* EXPANSION OF GALEN'S PHARMACEUTICAL PRODUCTS BUSINESS INTO THE US
* ACQUISITION OF BRANDED PHARMACEUTICAL COMPANY WITH FOCUS ON WOMEN'S
HEALTHCARE
* MARKETING INFRASTRUCTURE TO COMMERCIALISE IVR TECHNOLOGY IN THE US
* OPPORTUNITIES FOR FURTHER GROWTH IN PRODUCTS BUSINESS
* IN-LICENSING
* ACQUISITIONS
* EARNINGS ENHANCEMENT
* INCREASED INTERNATIONAL INVESTOR PROFILE AND LIQUIDITY
[GALEN LOGO]
54
SUMMARY
- --------------------------------------------------------------------------------
"BUILDING AN INTERNATIONAL
SPECIALTY PHARMACEUTICAL
PRODUCTS AND SERVICES BUSINESS"
[GALEN LOGO]
55
PROFORMA PROFIT & LOSS
- --------------------------------------------------------------------------------
ADJUSTMENTS
-------------------------------------------------------------------
WARNER CHILCOTT
GALEN RESULTS FOR RESULTS FOR THE WARNER CHILCOTT
THE YEAR ENDED 30 YEAR ENDED 31 WARNER CHILCOTT PURCHASE
SEPTEMBER 1999 DECEMBER 1999 TRANSACTIONS ADJUSTMENTS GALEN PLACING
NOTE 1 NOTE 2 NOTE 3 NOTE 4 NOTE 5
(pound (pound (pound (pound (pound
sterling)000 sterling)000 sterling)000 sterling)000 sterling)000
- -----------------------------------------------------------------------------------------------------------------------------
Turnover 67,010 45,434 30,683 -- --
Cost of sales (32,558) (17,000) (1,166) -- --
------- ------- ------- ------ ------
Gross profit 34,452 28,433 29,517 -- --
Net operating expenses (15,762) (32,759) (7,696) (8,794) --
------- ------- ------- ------ ------
- -----------------------------------------------------------------------------------------------------------------------------
EBITDA and non operating 22,423 (1,897) 27,193 -- --
exceptional items
Depreciation
- tangible fixed assets (3,026) (158) -- -- --
-intangible fixed assets (36) (2,271) (5,155) -- --
Amortisation of goodwill (671) -- (217) (8,794) --
- -----------------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) 18,690 (4,326) 21,821 (8,794) --
Gain/(loss) on fixed asset disposals -- 1,684 -- -- --
Investment income 925 1,389 (282) (620) 1,701
Interest payable (1,210) (1,848) (14,458) -- 419
------- ------- ------- ------ ------
Profit/(loss) before tax 18,405 (3,101) 7,081 (9,414) 2,120
Tax (4,396) -- -- -- (647)
------- ------- ------- ------ ------
Profit/(loss) after tax 14,009 (3,101) 7,081 (9,414) 1,473
Minority interests (19) -- -- -- --
------- ------- ------- ------ ------
Profit/(loss) for the financial year 13,990 (3,101) 7,081 (9,414) 1,473
======= ======
PRO FORMA RESULTS
(pound sterling)000
- ----------------------------------------------------------
Turnover 143,127
Cost of sales (50,725)
-------
Gross profit 92,402
Net operating expenses (65,011)
-------
- ----------------------------------------------------------
EBITDA and non operating 47,719
exceptional items
Depreciation
- tangible fixed assets (3,184)
-intangible fixed assets (7,462)
Amortisation of goodwill (9,682)
- ----------------------------------------------------------
Operating profit/(loss) 27,391
Gain/(loss) on fixed asset disposals 1,684
Investment income 3,113
Interest payable (17,097)
-------
Profit/(loss) before tax 15,091
Tax (5,043)
-------
Profit/(loss) after tax 10,048
Minority interests (19)
-------
Profit/(loss) for the financial year 10,029
=======
[GALEN LOGO]
56
NOTES TO THE PROFORMA PROFIT & LOSS ACCOUNT
- --------------------------------------------------------------------------------
1. The results of Galen have been extracted from the audited consolidated
financial statements and annual reports of Galen for the year ended 30th
September, 1999.
2. The results of Warner Chilcott have been extracted from the audited
financial statements and annual report of Warner Chilcott and its
subsidiaries for the year ended 31st December, 1999, prepared in accordance
with Irish GAAP, translated at $1.6295=(POUND STERLING)1, the average
exchange rate ruling during the year ended 30th September, 1999. Irish GAAP
are substantially the same as UK GAAP.
* These adjustments, referred to as the `Warner Chilcott transactions',
relate to the acquisition in February 2000 by Warner Chilcott of three
branded pharmaceutical products from Bristol-Myers Squibb for $175.1
million, the issue contemporaneously of $200.0 million of 12 5/8%
senior notes due 2008, the repayment of amounts outstanding under the
company's prior working capital facility, the redemption of remaining
senior subordinated discount notes due 2001 and the closure of a new
senior credit facility.
* Net sales and product contribution of the three products acquired for
the year ended 31st December, 1999 were extracted from the audited
statements of net sales and product contribution included in Form
8-K/A dated 21st April, 2000 which amends the report on Form 8-K of
Warner Chilcott previously filed with the Securities and Exchange
Commission on 28th February, 2000. All transactions were translated at
$1.6295=(pound sterling)1, the average exchange rate ruling for the
year ended 30th September, 1999.
* The turnover adjustment reflects the net sales of the three products
acquired.
* The cost of sales adjustment reflects the cost of sales of the three
acquired products less an adjustment to reflect the amount that Warner
Chilcott would have paid for product purchases under a 10 year supply
agreement with Bristol-Myers Squibb.
* The net operating expenses adjustment includes the selling, general
and administration costs of the three acquired products plus the
amortisation of the intangible assets associated with the product
acquisitions.
* The investment income adjustment is attributable to the reduction in
the amount of cash available for investment of $9.8 million at an
assumed investment rate of 4.7%.
* The interest expense adjustment reflects additional interest payable
resulting from the issuance of the notes at 12 5/8%, the expected
availability fee of 0.375% on the new senior secured credit facility
and the repayment of all other indebtedness.
3. Represents the amortisation of goodwill arising on the Transaction over 20
years and the reduction in investment income arising from the costs of the
Transaction.
4. This adjustment relates to the placing on 25th November, 1999 of 6,000,000
new Galen shares at (pound sterling)6.15 per share. Total proceeds, net of
costs, amounted to (pound sterling)36.4 million. The adjustment to the
consolidated proforma profit and loss account represents the interest
saving on borrowings eliminated by the proceeds and interest income on
additional cash held as if the proceeds had been received on 1st October,
1998. Tax has been adjusted at the corporation tax rate for the year ended
31st December, 1999 of 30.5%.
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57
PROFORMA BALANCE SHEET
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ADJUSTMENTS
--------------------------------------------------------------
WARNER CHILCOTT
GALEN AS AT 30 AS AT 31 WARNER CHILCOTT MERGER
SEPTEMBER 1999 DECEMBER 1999 TRANSACTIONS GALEN PLACING ADJUSTMENT PROFORMA NET
NOTE 1 NOTE 2 NOTE 3 NOTE 4 NOTE 5 ASSETS
(pound (pound (pound (pound (pound (pound
sterling)000 sterling)000 sterling)000 sterling)000 sterling)000 sterling)000
- ------------------------------------------------------------------------------------------------------------------------------------
FIXED ASSETS
Intangible assets 35,337 24,273 106,293 -- 175,886 341,789
Tangible assets 65,173 715 -- -- -- 65,888
-------- -------- -------- -------- -------- --------
100,510 24,988 106,293 -- 175,886 407,677
-------- -------- -------- -------- -------- --------
CURRENT ASSETS
Stock 8,829 2,444 -- -- -- 11,273
Debtors 15,826 7,554 -- -- -- 23,380
Cash at bank and in hand 6,351 30,939 (5,960) 30,000 (11,032) 50,298
-------- -------- -------- -------- -------- --------
31,006 40,937 (5,960) 30,000 (11,032) 84,951
CREDITORS: amounts falling due
within one year (27,112) (6,621) -- 6,385 -- (27,348)
-------- -------- -------- -------- -------- --------
NET CURRENT ASSETS 3,894 34,316 (5,960) 36,385 (11,032) 57,603
-------- -------- -------- -------- -------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES 104,404 59,304 100,333 36,385 164,854 465,280
CREDITORS: amounts falling due in
more than one year (29,981) (13,707) (100,777) -- -- (144,465)
Deferred income (6,270) -- -- -- -- (6,270)
-------- -------- -------- -------- -------- --------
NET ASSETS 68,153 45,597 (444) 36,385 164,854 314,545
======== ======== ======== ======== ======== ========
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58
NOTES TO THE PROFORMA BALANCE SHEET
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1. The net assets of Galen have been extracted from the audited consolidated
financial statements of Galen for the year ended 30th September, 1999.
2. The net assets of Warner Chilcott have been extracted from its audited
financial statements and annual report for the year ended 31st December,
1999, prepared in accordance with Irish GAAP and translated at
$1.6469=(pound sterling)1, being the exchange rate ruling at 30th
September, 1999. Irish GAAP are substantially the same as UK GAAP.
3. These adjustments, referred to as the `Warner Chilcott transactions',
relate to the acquisition in February 2000 by Warner Chilcott of three
branded pharmaceutical products from Bristol-Myers Squibb for $175.1
million, the issue contemporaneously of $200.0 million of 12 5/8% senior
notes due 2008, the repayment of amounts outstanding under the company's
prior working capital facility, the repayment of remaining senior
subordinated discount notes due 2001 and the closure of a new senior credit
facility. Cash in excess of that raised was required to finance the
transaction of $9.8 million. All transactions were translated at
$1.6469=(pound sterling)1, the exchange rate ruling at 30th September,
1999.
4. This adjustment relates to the placing on 25th November, 1999 of 6,000,000
new Galen shares at (pound sterling)6.15 per share. Total proceeds, net of
costs, amounted to (pound sterling)36.4 million.
5. Goodwill arising on the acquisition is calculated as follows:
(POUND STERLING)'000s
Consideration (see below) 217,039
Estimated expenses of the Acquisition 4,000
Less: Net tangible assets of Warner Chilcott
at 31st December, 1999 (45,153)
Goodwill on acquisition 175,886
In preparing the proforma statement of new assets, the consideration has
been calculated on the basis of 2.5 new Galen shares for each Warner
Chilcott share. Based on the closing mid-market price per Galen share of
612.5p on 3rd May, 2000, the terms of the Transaction value each Warner
Chilcott share at 1,531.3p and the total issued share capital of Warner
Chilcott at approximately (pound sterling)189.6 million. In addition
consideration includes an amount of (pound sterling)25.4 million relating
to the options and warrants which are to be exchanged for Galen options.
Consideration also takes into account compensation amounts totalling (pound
sterling)2.0 million triggered by the transaction. In accordance with the
requirements of Financial Reporting Standard No. 7 "Fair Values in
Acquisition Accounting" the fair value of the shares at the date of
completion (based on market value at that date) and the fair value of the
tangible net assets of Warner Chilcott at the same date is used for the
calculation of the goodwill for inclusion in Galen accounts.
(pound sterling)11.0 million representing the total estimated transaction
costs are shown as a reduction in cash balances.
6. No account has been taken of any trading or other transactions of Galen or
Warner Chilcott since 30th September, 1999 and 31st December, 1999
respectively.
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59
LEGAL INFORMATION
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* This presentation contains forward-looking statements which are based on
assumptions and external factors, including assumptions relating to, but
not limited to, the compatibility of the combined businesses, regulatory
action, product pricing, competitive market conditions, unaudited financial
data, new product development and other risks or uncertainties. These
forward-looking statements represent the companies' judgement as of the
date of this presentation and any changes in the assumptions or external
factors could produce significantly different results
* This presentation does not constitute an offer to sell or issue, or a
solicitation of any offer to purchase or subscribe for, any ordinary shares
in the Company, nor shall it form the basis of, or be relied upon in
connection with, any contract for such purchase or subscription. No
representation or warranty, express or implied, is made or given by the
Company as to the accuracy or completeness of the information or the
opinions contained in this presentation, and no liability is accepted for
any such information or opinions
* Nothing in this presentation should be construed as a profit forecast or be
interpreted to mean that the earnings per share of Galen as enlarged by
this Transaction for the current year or future years will necessarily
match or exceed the historical published earnings per share of Galen and
Warner Chilcott.
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60
LEGAL INFORMATION (CONTINUED)
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* Investors and security holders are advised to read the proxy statement and
such other documents that may be distributed by Galen and Warner Chilcott
("Shareholder Documentation") regarding the business combination
transaction that is the subject of this slide presentation, when it becomes
available, because it will contain important information. The Shareholder
Documentation will be filed with the Securities and Exchange Commission
(the "Commission") by Galen and Warner Chilcott
* Investors and security holders may obtain free copies of the Shareholder
Documentation (when available) and other documents filed by Galen and
Warner Chilcott with the Commission at the Commission's web site at
www.sec.gov. The Shareholder Documentation and such other documents may
also be obtained for free from Warner Chilcott by directing such requests
to: Warner Chilcott PLC, 80 Corporate Centre, 100 Enterprise Drive, Suite
280, Rockaway, New Jersey 07866, USA, Attention: Investor Relations,
telephone: +1 973 442 3200, e-mail:cst@wclabs.com or from Galen by
directing such requests to: Galen Holdings PLC, Seagoe Industrial Estate,
Craigavon, Northern Ireland, BT63 5UA, Attention: Investor Relations,
telephone: +44 28 3833 4974, e-mail:info@galenplc.co.uk
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61
LEGAL INFORMATION (CONTINUED)
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* Warner Chilcott and its officers and directors may be deemed to be
participants in the solicitation of proxies from shareholders of Warner
Chilcott with respect to the transactions contemplated by the Transaction
Agreement. Information regarding such officers and directors is included in
Warner Chilcott's Proxy Statement for its 2000 Annual Meeting of
Shareholders filed with the Commission on 13th April, 2000 and its Annual
Report on Form 10-K for the year ended 31st December, 1999 filed with the
Commission on 16th March, 2000. This document is available free of charge
at the Commission's web site at http://www.sec.gov and from Warner Chilcott
at the address set forth in the previous slide
* Certain financial data (including the pro forma information) contained in
this documents is calculated on or derived from data which is based on UK
or US generally accepted accounting principles. Investors and security
holders should be award that this financial data may be reconciled to US or
UK generally accepted accounting principles in the Shareholder
Documentation and accordingly such financial data may be different in such
Shareholder Documentation
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