1 Recommendation for Abbott Laboratories | Board of Directors Discussion Materials | April 24th, 2022 Strictly Confidential
2 Table of Contents I. Executive Summary II. Industry Overview III. Company Overview IV. Target Overview V. Acquisition Thesis VI. VII.ValuationAppendix
• Due to the strengthening of Abbott's balance sheet since 2018, we believe they are in a great position to make an acquisition.
Overview
• Perella Weinberg recommends the acquisition of the firm Supernus Pharmaceuticals. at an offer price of $46.35 per share at an implied equity offer price of $2,465M ($985.5M in cash, $1,479.5M in debt).
• They currently serve 160 countries with their lineup of products and services and are currently the 9th largest pharmaceutical company worldwide by market cap.
The Abbott Board of Directors has requested a presentation of strategic alternatives most beneficial to the company, and Perella Weinberg believes a tactical acquisition is the most viable option for Abbott Laboratories.
• According to Supernus’s SEC filings, abuse-deterrent and extended-release ADHD and PD remedies are increasingly sought after and substitutable compared to its traditional counterpart. Customers are increasingly shifting demand towards these new drugs due to their greater safety and effectiveness.
Abbott Laboratories is an American multinational medical device and healthcare services firm headquartered in Abbott Park, Illinois.
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Scope AssessmentStrategicProposalof Proposal
• Recently, ADHD and Parkinson’s has become a growing issue to the American public. By bringing safer, more effective drugs to the market, Abbott Laboratories has the perfect opportunity to capitalize on a growing market.
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3 Executive Summary
• A key part of Abbott Laboratories business strategy includes acquiring and divesting in companies to support growth and enhance their product portfolio, spending over $30 billion on M&A activity in the last 7 years.
• Abbott is currently in an optimal spot to expand further into different aspects of the pharmaceutical industry, more specifically ADHD and Parkinson’s. This proposal will cover the strategic acquisition of Supernus Pharmaceuticals, INC. (SUPN), which aims to continue the company's expansion, through the manufacturing of more effective treatments for ADHD and Parkinson’s.
4 Industry Overview Health Market Performance Acute Care 150% Relative Market Performance ADHD Market Future Projections: As of 2019, US consumer spending within this field was around 3.8 trillion dollars. This number is expected to double by the year 2028 at a value of 6.2 trillion Historicaldollars.Analysis: The pharmaceutical industry spent around 83 Billion dollars on Research and Development alone in 2019. This is roughly 50% higher to what was invested in 2015, this trend will likely increase in the coming years. Parkinson’s Disease Market CAGR 3.6% Increase Impact 29M With ADHD in US Global GDP 9.8% As of 2018 Market Value 11.9T By 2022 ADHD Market 23.8% Increase(2020-2026) Parkinson’s Market 86.3% Increase(2018-2028) Death Multiple 2x From 1999 to 2019 CAGR 7.1% Increase Industry Highlights
5 Company Overview Financial Highlights Total Revenue $43.08B EBITDA $12.76B EBITDA % Margin 29.6% Net Income $7.071B April 2022: Receives FDA Approval for VR Pacemaker System for patients with slow heart rhythms November 2021: Abbott achieves highest score in its industry for the 9th consecutive year on the Dow Jones Sustainability Index January 2021: Abbott to Launch the NeuroSphere™ myPath™ Digital Health App Designed to Track and Report Pain Relief in Chronic Pain Patients With Physicians Prior to Device Implant January 2020: Receives expanded indication from the FDA for directional deep brain stimulation system to treat Parkinson’s disease Company Highlights Market Capitalization $107.55B Enterprise Value $218.99B Total Debt $19.251B Total Assets $75.2B
6 Target Overview Total Revenue $676.76 M EBITDA $132.00M EBITDA % Margin 19.51% Net Income $88.5 M Financial Highlights Proprietary Pharmaceutical Products •
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Abbott Current Debt/EBITDANet 0.86x Industry Comps Debt/EBITDANetAverage 1.30x Abbott Net Debt/EBITDA After Acquisition 0.975X Leverage Measurement Recent Strategic Acquisition Relevant Medical Remedies
• Gocovri is an extended-release formulation of amantadine that is employed to address Parkinson Disease related symptoms in patients. Gocovri is used in conjunction with Levodopa and has seen significant effectiveness within patients in addressing serious Dyskinesias and “off episodes” due to prolonged Levodopa exposure. The more Leveopa one takes, the worse the symptoms will be.
Qelbree is a drug created for the management of attention deficit hyperactivity disorder, which is taken daily which is safe for the use of children. Qelbree v. Strattera, Qelbree is an extended-release pill which provides many benefits than a concentrated release pill. Some include but are not limited to the mitigation of side effects and maintaining consistent levels In addition to providing extended-release delivery, Qelbree exceeds other drugs by also providing barriers to common methods of abuse and misuse (e.g., crushing, chewing, heating and injecting). This technology nullifies any application of chemical exploitation which safeguards the user.
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• Cost Synergy: Abbott Laboratories has extensive PP&E including over 31 manufacturing sites and 12 R&D plants internationally. These can be employed to boost production of the new drugs acquired from Supernus Pharmaceuticals reducing production and research costs.
• Integration Issues: Although Supernus does have strong positions in ADHD and PD remedies, they do have drugs that focus on mild Central Nervous System pain management remedies and seizures, implementation into Abbott’s business strategy may be difficult.
Synergies
• Supernus Pharmaceuticals, Inc. (NASDAQ: SUPN) is focused on providing responsible, ethical ADHD and Parkinson’s Disease Remedies to patients. Consequently, the ramifications of such actions allow for Supernus to enter two rapidly growing markets with much promise.
Risks
• Revenue Synergy: By utilizing Abbott’s extensive network of influence and sales channels, Supernus can sell more volume, driving sales growth.
• Product Synergies: Abbott Laboratories has been developing a product known as Infinity™ Deep Brain Stimulation(DBS), a therapy procedure employed to treat patients with Parkinson’s disease. Research suggests the use of medication alongside therapy is an effective way of addressing Parkinson’s Disease within clients.
• New Technologies: While unlikely, AbbVie is the primary manufacturer for Levodopa the best remedy for Parkinson’s. AbbVie may take on an initiative to manufacture a drug that addresses the issues of extensive Levodopa treatment which may pose a threat.
• Return to ADHD production: Prior to the firm’s split in 2013(from AbbVie Pharmaceuticals) Abbott had a strong space in ADHD remedies last accounted in 2008. However, after the split, sister firm, AbbVie, began acquiring and producing ADHD drugs, return to this space may be difficult.
• ADHD and Parkinson’s disease are without a doubt one of the most detrimental issues to both population, younger and older. With raging population growth the planet is bound to see significant increases in ADHD and PD cases. According the medical professionals ADHD cases have rose 30% with 10% of US children having a case. In addition, in the trailing 20 years, Parkinson’s fatality rate has increased 2x.
Acquisition Thesis Strategy
• ADHD and PD is still persistent, and remedies will always be required. In the United States, over 29 million citizens suffer from ADHD. The industry is speculated to grow at a CAGR of 3.6%, leading to a market size of $16,930M by 2026.
• Parkinson’s Disease is also a notable adversary to the aging population, affecting over 10 Million individuals worldwide. With "off episodes" becoming exponentially common, Gocovri is imminent to prevent overdose deaths and mitigate the symptoms of Levedopa.
• Because of these underlying figures, Supernus Pharmaceutical poses as a phenomenal ally due to their strong growth and performance in both referenced markets(ADHD and Parkinson’s) which allows Abbott to hit the ground running upon entry.
8 Strategic Alternatives iliiFnancaFt Strategic Fit • Funded by Pfizer and Bain Capital(Cerevel) • Producing developinginmarkets • ValuationUnattractive • Moderate Presence • Limited production in markets(CNS)developing • High Market Cap • High Market Cap • Not producing in growing markets
9 Comparable Company Analysis Supernus Pharmaceuticals Company Data Ticker Market Data Financial Data Valuation Price 52 WK High EV Sales EBITDA EBIT EV/Sales EV/EBITDA EV/EBIT ($/share) % ($M) ($M) ($M) ($M) x x x Amphastar Pharmaceuticals AMPH 28.77 99% 1,368 470 116.5 98.6 2.9x 11.7x 13.9x Assertio Holdings ASRT 2.3 48% 127 108 47.7 39.4 1.2x 2.7x 3.2x Aquestive Therapuetics AQST 3.04 48% 129 133 26.0 49.8 1.0x 5.0x 2.6x Lannett Company, Inc. LCI 0.78 11% 550 349 46.4 11.9 1.6x 11.8x 46.2x Harmony Biosciences Holdings, Inc. HRMY 40.24 88% 2,411 443 168.0 154.2 5.4x 14.4x 15.6x Pacira Biosciences, Inc. PCRX 72.33 97% 3,663 726 295.1 257.4 5.0x 12.4x 14.2x Amneal Pharamceuticals, Inc. AMRX 4.04 54% 3,281 2,186 546.3 466.2 1.5x 6.0x 7.0x Hikma Pharmaceuticals PLC HIK 1904.95 70% 6,354 2,714 803.5 700.1 2.3x 7.9x 9.1x Vanda Pharamceuticals Inc. VNDA 10.84 50% 195 269 22.7 25.6 0.7x 8.6x 7.6x Prestige Consumer Healthcare Inc. PBH 59.9 93% 4,526 1,078 367.2 332.9 4.2x 12.3x 13.6x Average 2.6x 9.3x 13.3x Median 2.0x 10.2x 11.3x Valuation (EV/EBITDA) Competitor Median EV/EBITDA 10.16x Supernus Pharmaceuticals, Inc. EBITDA132.00 Implied Total Enterprise Value 1340.90 Add: Cash and Cash Equivalents 433.90 Less: Total Debt 418.00 Less: Preferred Stock Less: Non-Controlling InterestImplied Equity Value 1356.80 Shares Outstanding 53.2 Implied Price Per Share $25.50 Valuation (EV/EBITDA) Competitor Mean EV/EBITDA 9.28x Supernus Pharmaceuticals, Inc. EBIT 132.00 Implied Total Enterprise Value 1224.65 Add: Cash and Cash Equivalents 433.90 Less: Total Debt 418.00 Less: Preferred Stock Less: Non-Controlling InterestImplied Equity Value 1240.55 Shares Outstanding 53.2 Implied Price Per Share 23.32$
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Precedent Transactions
Novo Nordisk purchased Dicerna where they paid an 80% premium at $38.25 a share in cash.
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Bayer purchased Bluerock to acquire Bluerock's gene therapy technology and bolster Bayer's gene therapy business specifically relating to Parkinsons.
Pfizer's acquisition of Arena Pharmaceuticals where they paid a 100% premium by purchasing at $100 a share in cash.
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Bayer purchased Bluerock at a 124% premium at $24.25 a share. EBITDA rose by 47% after the acquisition on September 15, 2021.
