Emerging pharma markets (

1
Emerging pharma markets (EPM) Opportunities
for Private Equity investors ?

• IFC Annual Global Private Equity Conference
• Washington, D.C.
• May 6th, 2004

2
Content

• Opportunities for PE investors -
  Right investment (lifecycle) stage? -
  Target or exit candidate?
• Hypotheses from transaction analysis
• Required skillset to execute transactions
• Advents experience

3
EPM LBO attractive for entry/
and exit opportunities
Opportunity
Investment stage
EPMs for us are primarily local LBO
opportunities and (increasingly) potential
buyers of our (Western) portfolios
4
Facts Summary of transaction analysis

• Deal value involving emerging pharma players (as
  buyers or sellers) represents only 3 of overall
  transaction market in sector (2002)
• Generally smaller deals
• Apart from very few strategic mega-deals (i.e.
  Novartis buying LEK for gt 800 mio)a) more
  EPMs buy in the West than v.v. - driven by
  Ranbaxy, Pliva et.al.b) most other EPM-deals are
  insular, not cross- border
• Doing pharma-deals in emerging countries has
  unique challenges

• Not surprising
• Restricted debt markets
• PE-portfolio exit opportunites!
• You have to be local!
• You have to be local!

5
Facts Summary of transaction analysis

• Deal value involving emerging pharma players (as
  buyers or sellers) represents only 3 of overall
  transaction market in sector (2002)
• Generally smaller deals
• Apart from very few strategic mega-deals (i.e.
  Novartis buying LEK for gt 800 mio)a) more
  EPMs buy in the West than v.v. - driven by
  Ranbaxy, Pliva et.al.b) most other EPM-deals are
  insular, not cross- border
• Doing pharma-deals in emerging countries has
  unique challenges

• Not surprising
• Restricted debt markets
• PE-portfolio exit opportunites!
• You have to be local!
• You have to be local!

6
Facts Summary of transaction analysis

• Deal value involving emerging pharma players (as
  buyers or sellers) represents only 3 of overall
  transaction market in sector (2002)
• Generally smaller deals
• Apart from very few strategic mega-deals (i.e.
  Novartis buying LEK for gt 800 mio)a) more
  EPMs buy in the West than v.v. - driven by
  Ranbaxy, Pliva, et.al.b) most other EPM-deals
  are insular, not cross- border
• Doing pharma-deals in emerging countries has
  unique challenges

• Generally, not mega-deals (not surprising)
• Restricted debt markets
• PE-portfolio exit opportunites!
• You have to be local!
• You have to be local!

7
Facts Summary of transaction analysis

• Deal value involving emerging pharma players (as
  buyers or sellers) represents only 3 of overall
  transaction market in sector (2002)
• Generally smaller deals
• Apart from very few strategic mega-deals (i.e.
  Novartis buying LEK for gt 800 mio)a) more
  EPMs buy in the West than v.v. - driven by
  Ranbaxy, Pliva et.al.b) most other EPM-deals are
  insular, not cross- border
• Doing pharma-deals in emerging countries has
  unique challenges

• Generally, not mega-deals (not surprising)
• Restricted debt markets
• PE-portfolio exit opportunites!
• You have to be local!
• You have to be local!

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Majority of EPM transactions around orbelow 10
Mio.

• Impact for ROW
• 200-250 pharma transactions
• Value 2-3 bn

• Health Sciences Transactions
• (2002)
• VOLUME
• 1222 transactions (-8.5), of which
  - 70 Pharma, of which -- 50 US
  -- 25 EU and 25 ROW
• VALUE
• Of disclosed transactions (597)- Deal value
  100 bn -- 83 US -- 14 EU -- 3 ROW
  

Value 1/3 insular, 1/3 local PE-entry, 1/3
cross-border PE-exit
Source ErnstYoung
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Who buys EPM-players ?
... good share of PE-backed transactions
10
Modest, but increasing EPM acquisitions in the
West so far
... represents PE investor exit potential
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Skillset You have to be local!
Common issues that have to be resolved

• Lack of transparency
• Long process of extracting data
• Environmental issues
• Who stands behind reps warranties?
• Financial reports and management reports not up
  to
• usual standards

... requires local operating partners and risk
assessment
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Solution
Catalysts for adding true value
Hands-on local operating partner support
Strong local presence
Deep industry knowledge
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Greater Advent synergies with and adding
value to the Buyout program
Cumulative funds raised 6 billion Across
Buyouts, Venture, Emerging Markets
90 investment professionals, 19 nationalities

• 6 Active Programs
• Buyouts/ expansion
• 1.9bn USA/Europe
• 263m Latin America
• 180m Central Europe
• Venture-mainly USA
• 100m Biotech
• 345m Technology
• 88m Energy..
• .. and Corporate
• programs

400 portfolio companies in 35 countries since
1984
14 offices in 13 countries . half in place for
10 years Substantial Additional Resources and
Expertise to better source evaluate deals add
value to portfolio companies