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[GRAPHIC OMITTED] [GRAPHIC OMITTED] Charles River and WuXi PharmaTech: The First Global Early-Stage CRO [C] 2010 Charles River Laboratories International, Inc. |
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Safe Harbor Statement
This document includes "forward -looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward -looking statements
may be identified by the use of words such as "anticipate," "believe," "expect,"
"estimate," "plan," "outlook," and "project" and other similar expressions that
predict or indicate future events or trends or that are not statements of
historical matters. These statements are based on current expectations and
beliefs of Charles River Laboratories ("Charles River" or "CRL") and WuXi
PharmaTech (Cayman) Inc ("WuXi" or "WX"), and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
stated or implied by the forward -looking statements. Those risks and
uncertainties include, but are not limited to: 1) the possibility that the
proposed combination may be delayed or not completed due to the failure to
obtain stockholder or regulatory approvals or otherwise satisfy the conditions
to the proposed combination as set forth in the acquisition agreement for the
proposed combination; 2) problems may arise in successfully integrating the
businesses of the two companies (including retention of key executives); 3) the
acquisition may involve unexpected costs; 4) the combined company may be unable
to achieve the expected transaction benefits, including improved customer
service levels and anticipated cost and revenue synergies, or achieve potential
revenue growth and non-GAAP margin expansion; 5) the businesses may suffer as a
result of uncertainty surrounding the acquisition; and 6) the industry may be
subject to future regulatory or legislative actions and other risks that are
described in Securities and Exchange Commission ("SEC") reports filed or
furnished by Charles River and WuXi. For additional information on these and
other important factors that could adversely affect Charles River's or WuXi's
business, financial condition, results of operations and prospects, see "Risk
Factors" (i) beginning on page 18 of Charles River's Annual Report on Form 10-K
and (ii) beginning on page 6 of WuXi's 2009 Annual Report on Form 20-F, each
filed at the SEC's website www.sec.gov.
Forward -looking statements are based on Charles River's current expectations
and beliefs, and involve a number of risks and uncertainties that are difficult
to predict and that could cause actual results to differ materially from those
stated or implied by the forward -looking statements. Those risks and
uncertainties include, but are not limited to: the ability to successfully
integrate the businesses we acquire; the ability to successfully develop and
commercialize SPC's technology platform; a decrease in research and development
spending, a decrease in the level of outsourced services, or other cost
reduction actions by our customers; the ability to convert backlog to sales;
special interest groups; contaminations; industry trends; new displacement
technologies; USDA and FDA regulations; changes in law; continued availability
of products and supplies; loss of key personnel; interest rate and foreign
currency exchange rate fluctuations; changes in tax regulation and laws; changes
in generally accepted accounting principles; and any changes in business,
political, or economic conditions due to the threat of future terrorist activity
in the U.S. and other parts of the world, and related U.S. military action
overseas. A further description of these risks, uncertainties, and other matters
can be found in the Risk Factors detailed in Charles River's Annual Report on
Form 10-K as filed on February 19, 2010 and Quarterly Report on Form 10-Q as
filed on April 29, 2010, as well as other filings we make with the SEC.
Because forward -looking statements involve risks and uncertainties, actual
results and events may differ materially from results and events currently
expected by Charles River and WuXi. Charles River and WuXi assume no obligation
and expressly disclaim any duty to update information contained in this document
except as required by law.
2
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Non -GAAP Financial Measures This presentation includes discussion of non-GAAP financial measures. We believe that the inclusion of these non-GAAP financial measures provides useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company's performance. The non-GAAP financial measures included in this presentation are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. The company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations. Additional Information This document may be deemed to be solicitation material in respect of the proposed combination of Charles River and WuXi. In connection with the proposed transaction, Charles River has filed a definitive proxy statement with the SEC. Before making any voting or investment decisions, Charles River's stockholders are urged to read the definitive proxy statement and any other relevant documents filed with the SEC because they will contain important information. The definitive proxy statement has been mailed to the stockholders of Charles River seeking their approval of the proposed transaction. Charles River's stockholders may also obtain a copy of the definitive proxy statement free of charge by directing a request to: Charles River Laboratories, 251 Ballardvale Street, Wilmington, MA 01887, Attention: General Counsel. In addition, the definitive proxy statement is available free of charge at the SEC's website, www.sec.gov or stockholders may access copies of the documentation filed with the SEC by Charles River on Charles River's website at www.criver.com/specialwuxi2010 . This document is not a solicitation of proxies from WuXi's shareholders to approve the proposed combination. In connection with the proposed transaction, WuXi has filed a scheme document with the SEC on Form 6-K. Before making any voting or investment decisions, WuXi's shareholders are urged to read the scheme document and any other relevant documents filed with the SEC because they will contain important information. The scheme document has been mailed to WuXi's shareholders seeking their approval of the proposed combination. WuXi's shareholders may also obtain a copy of the scheme document free of charge by directing a request to: 288 Fute Zhong Road, Waigaoqiao Free Trade Zone, Shanghai 200131, People's Republic of China, Attention: Genyong Qiu. In addition, the scheme document is available free of charge at the SEC's website, www.sec.gov. WuXi's shareholders may also access copies of the documents filed with the SEC by WuXi on WuXi's website at www.wuxiapptec. com. Charles River, WuXi and their respective directors and executive officers and other members of management may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Charles River's directors and executive officers is available in Charles River's proxy statement for its 2010 annual meeting of shareholders, which was filed with the SEC on March 30, 2010. Information regarding the interests of Charles River's directors and certain members of Charles River's management in the proposed transaction is set forth in the definitive proxy statement, which was filed with the SEC on July 1, 2010. Information regarding WuXi's directors and executive officers is available in WuXi's annual report on Form 20-F for the fiscal year ended December 31, 2009, which was filed with the SEC on April 23, 2010. Information regarding the interests of WuXi's directors and certain members of WuXi's management in the proposed transaction is available in WuXi's scheme document, which was filed on Form 6-K with the SEC on July 1, 2010. This document does not constitute an offer of any securities for sale or a solicitation of an offer to buy any securities. The Charles River shares to be issued in the proposed transaction have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Charles River intends to issue such Charles River shares pursuant to the exemption from registration set forth in Section 3(a)(10) of the Securities Act. 3 |
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Charles River and WuXi:
The Future of Early -Stage Contract Research
[] The combination creates the first fully integrated global early-stage
contract research organization (CRO)
* Offers a full range of products and services from molecule creation to
first-in-human testing
* Leverages increasing strategic importance of China
[] Drives Charles River (CRL) shareholder value through profitable growth and
higher combined margins
* Expanded portfolio drives increased sales
[] Provides compelling value to clients, meeting their needs for early-stage
drug development efforts on a global basis
* Enables clients to work with one provider through the early-stage pipeline,
speeding the development process by reducing cycle time
4
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Table of Contents 1. Transaction Timing Update 2. Charles River Overview 3. WuXi Overview 4. Strategic Rationale for Transaction 5. Financial Rationale for Investors 5 |
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Transaction Timeline
[] Definitive proxy statement filed/mailed July 1, 2010
[] On July 12, received "Second Request" from FTC requesting additional
information relating to viral clearance, cell line characterization and lot
release testing services
[] Grand Court of the Cayman Islands approved the date of the WuXi shareholder
meeting and the mailing of the WuXi document on June 29
[] Both companies' shareholder meetings scheduled for August 5
[] Still on track to close by 4Q10, subject to approval by each company's
shareholders and the satisfaction of customary closing conditions and
regulatory approvals
Charles River will not proceed with the transaction without its shareholders'
approval
6
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Table of Contents 1. Transaction Timing Update 2. Charles River/WuXi Overview 3. Strategic Rationale for Transaction 4. Financial Rationale for Investors 7 |
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Charles River Today
[] A leading in vivo biology company* $1.20B in net sales (FY '09)
[] Unique portfolio of products and services focused on the research and
development continuum for new drugs
[] A multinational company with ~8,000 employees worldwide
* ~70 facilities in 16 countries
[] Continuous expansion to support client needs
NonCommercial 16%
Commercial 84%
Client Base
ROW 34%
North America 66%
Geographic Sales by Facility Location
PCS 45% RMS 55%
Segment Revenue
8 Source: Based on Charles River's FY 2009 net sales.
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WuXi Today
[] A leading chemistry company
* $270M in net sales (FY '09)
[] Service portfolio supports clients early with molecule creation, extending
downstream through laboratory and manufacturing services
[] Largest China-based CRO with ~4,300 employees worldwide including ~3,500
scientists
* One of the largest employers of chemists in the world
* 7 facilities in China and US to support clients globally
Client Base
[GRAPHIC OMITTED]
Geographic Sales by Facility Location
[GRAPHIC OMITTED]
9 Source: Based on WuXi's information as disclosed in its Form 20-F filed with
the SEC on 04/23/2010 and other public documents.
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WuXi Overview
Headquarters [] Shanghai, China
[] Laboratory services, consisting of synthetic and medicinal chemistry, DMPK/ADME, biology,
microbiology, in vivo pharmacology, toxicology, pharmaceutical development, analytical
Service Offerings services, biopharmaceutical, in vitro and in vivo biocompatibility testing and efficacy testing
[] Manufacturing services, focusing on advanced intermediates and active pharmaceutical
ingredients (APIs)
Employees [] ~4,300 employees (~3,900 in China and ~400 in the US)
~ 2.0M ft(2) of lab facilities and manufacturing space
[] China:
* 1.3M ft[] total research facilities in Shanghai and Tianjin
* 293K ft[] total cGMP* quality process development and manufacturing facilities
Facilities in Shanghai
* 314K ft[] drug safety evaluation center in Suzhou
[] United States:
* 209K ft[] total three state-of-the-art FDA-registered facilities in St. Paul, MN,
Philadelphia, PA and Atlanta, GA
[] Approximately 150 clients of China-based laboratory and manufacturing services businesses
Customers with average revenue per customer of ~$1.4M
[] 100% repeat business from top 10 customers
[] Only public CRO and leader in China's highly fragmented (>300 as of '06) CRO industry
CRO Market [] Market leader in providing integrated preclinical services in China
[] Provides immediate access to China outsourcing market, with significant market share,
deep industry experience, and established relationships with clients and authorities
* Current Good Manufacturing Practice
Source: Based on WuXi's information as disclosed in its Form 20-F filed with the
SEC on 04/23/2010 and other public documents.
10
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WuXi History of Growth [GRAPHIC OMITTED] |
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WuXi is the Leading CRO in China
Employees / Facilities
[] ~4,300
[] ~2M ft(2) in both China and the US
WuXi
[] ~1,500
[] ~600K ft(2), mainly in Shanghai
ShangPharma
[] >650
[] ~110K ft(2) Beijing laboratory
BioDuro
[] >400
[] ~218K ft(2)
Medicilon
12 Source: Based on WuXi's information as disclosed in its Form 20-F filed with the
SEC on 04/23/2010 and other 12 companies' public documents.
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WuXi's Unique Competitive Strengths
[] Unmatched scale of World-Class [] State of the art research
Integrated RandD China-based service Facilities in China and manufacturing facilities
offering in China and US
Service Platform and the United
[] Seamless delivery of States
complex integrated
services
------------------ -------------------------------- ------------------- ---------------------------------
[] Proven track record of
delivering growth and Intense Focus on a [] Established, long-term client
Experienced profitability relationships
Diversified, High-
International [] Experience is developing [] Deep knowledge of how to
Management Team and retaining business with Quality Customer effectively and efficiently
leading western pharma and Base meet unique client
biotech companies requirements
------------------ -------------------------------- ------------------- ---------------------------------
[] Employer of choice for top [] Proven history of protecting
Highly Educated, Strong Protection
Chinese talent clients' intellectual property
Trained, and of Clients'
[] Highly effective training
Motivated system for college Intellectual
Workforce graduates Property
------------------ -------------------------------- ------------------- ---------------------------------
[] Trusted by clients to deliver [] Significantly lower labor
Reputation for high-quality services costs combined with
China Cost
Operational unmatched service delivery
Excellence Advantage capabilities make WuXi an
essential partner for leading
pharma and biotech clients
13
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WuXi's 2008-2012 Margin Performance
[GRAPHIC OMITTED]
2010 margin trends 2011 and 2012 margin trends
Margin pressure in 2010 driven by: Margin turnaround in 2011-2012 driven by:
China Lab [] Investments in toxicology and biology businesses [] Contribution from biology and toxicology
Services [] Moderate labor cost increases businesses with little incremental investment
[] Some volume-based price erosion due to impact [] Continuous operational improvements partially
of large pharma mergers offset by direct labor and inflation
------------- --------------------------------------------------- ---------------------------------------------------
[] Some margin pressure due to depreciation and [] Strong improvement in margins forecasted as
Manufacturing low utilization of large-scale GMP manufacturing utilization increases with little incremental
facility investment
------------- --------------------------------------------------- ---------------------------------------------------
US Lab [] Improving margins driven by business mix shift [] Similar trends forecasted in future, albeit at a
Services towards higher-margin services and lean sigma slower rate
initiative
------------- --------------------------------------------------- ---------------------------------------------------
SGandA [] 2010 operating margin reflective of increased [] SGandA leverage forecasted to increase as
Leverage SGandA leverage utilization in new businesses such as toxicology
and large-scale manufacturing improves
WuXi margins have been and are expected to remain strong due to productivity
improvements and increasing economies of scale
Note: Non-GAAP margins exclude amortization of acquired intangible assets and
share-based compensation expense.
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Table of Contents 1. Transaction Timing Update 2. Charles River/WuXi Overview 3. Strategic Rationale for Transaction 4. Financial Rationale for Investors |
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The New CRL: Global Integrated Services [GRAPHIC OMITTED] |
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With this Transaction CRL will Offer Unmatched Portfolio of Services
Discovery Services Research Models and Services Preclinical Services
[]A leader in discovery []The market leader in [] A leader in GLP safety
chemistry services research model production assessment
[]A leading position in []Largest number of most * Both in Western markets and
non-GLP efficacy testing widely used models China
* Breadth and depth of
* DIS * Disease-specific models specialty services is key
[]Developing position in []A leading service provider competitive advantage
chemistry-based with broad capabilities [] A leader in worldwide
manufacturing * GEMS, RADS, CSS biopharmaceutical services
(BPS)
* Research and commercial []A leader in
scale [] Phase I clinic in US
endotoxin detection
* Endosafe([R])-PTS[]
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Leverages Increasing Strategic Importance of China
[] Supportive of global pharmas who view China as the new frontier for drug
development
[] Pharmas are taking advantage of cost leverage by placing chemistry in
China* Lower cost, highly skilled scientists with advanced degrees
[] Emerging opportunities for chemistry, safety assessment and manufacturing
services as clients advance development activities in China* Charles River
gains largest early-stage provider in China
[] Enables clients to choose where to place work
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Declining Pharma RandD Productivity Drives Need for Outsourcing
[GRAPHIC OMITTED]
[] Drug companies are producing half as many new drugs at twice the cost as a
decade ago
[] These companies are forced to reinvent themselves, concentrating on their
core strengths and outsourcing functions like RandD
[] In partnership with the pharmaceutical industry, CROs will assume a greater
role in developing new drugs to meet unmet medical needs
Source: FDA, Pharmaceutical Research and Manufacturers Association
19
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There is Growing Interest in Outsourcing Upstream Discovery Activities
[] All stages of pharmaceutical RandD are now outsourced
[] Drug discovery, a significant area of expenditure and WuXi's strength, is
still at an early stage of outsourcing
[GRAPHIC OMITTED]
Source: Barclays Capital.
20
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Timing of the Acquisition is Key
[] CRL will improve its competitive position by increasing global presence and
providing integrated services clients demand
* Significant first-mover advantage in providing an integrated portfolio of
services
[] The combined company will have the broadest early-stage portfolio of any
CRO
[] Critical inflection point in terms of rapid client consolidation and
infrastructure reductions
* Accelerating need for strategic outsourcing
[] Clients are reducing the number of strategic partners to those with
financial strength, scientific depth, global footprint and an expanding
portfolio of services
[] As client strategies evolve, next 12-24 months are key to gaining
significant business pursuant to longer-term contracts
[] Advantages of doing work in China paramount to clients
[] CRL ownership will accelerate WuXi's ability to capitalize on expansion
opportunities
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Enthusiastic Client Response
[] Senior management of CRL and WuXi have each reviewed the transaction with
their respective top 20 pharmaceutical and biotechnology clients
* Response has been overwhelmingly positive
* Follow-up meetings have been scheduled/initiated
[] Clients are viewing this transformational combination as a strategic fit
for the combined company, which offers them the opportunity to acquire more
products and services from a single, larger entity
* Clients are requesting a more integrated approach to buying end-to-end
services across the drug development continuum
[] Value of CRL brand seen as an advantage in terms of standardizing products
and services in China
22
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Enthusiastic Client Response (cont'd. ) What our clients have said "We have great respect for and work with both organizations. When combined with WuXi, Charles River will be able to provide a unique set of end-to-end services which we believe will help accelerate our drug development process. We look forward to working in a more holistic fashion with the combined entity." Senior Vice President and Head of Worldwide Research of a top-five global pharmaceutical company "Charles River-WuXi's unique early-stage portfolio of products and services provides a transformational opportunity for the drug development industry. The availability of a new CRO paradigm will allow companies like us to explore innovative strategic relationships and RandD business models which could dramatically change the RandD productivity equation. We very much look forward to having a company like CR-WuXi in the marketplace and to working with the new organization. " Senior Vice President of Research and Early Development of a top-five global pharmaceutical company "The combination of these two companies is the most visionary and promising approach to drug development I've seen in this field in the last three decades. To be able to access the power of your integrated drug discovery and early development platform offers us tremendous opportunities to speed affordable and transformational medicine to patients. " Executive Vice President and Chief Scientific Officer of a first-tier biotechnology company 23 |
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Cultural Fit
[] WuXi is a client-focused service organization
* Excellent client retention
[] 100% retention of top 10 clients ('07-'09)
* ~90% of WuXi's sales generated from US and European clients
[] WuXi shares CRL's employee -centric culture
[] Scientific depth and expertise
differentiates CRL and WuXi from the competition
* WuXi has ~2,000 scientists with advanced degrees
* CRL has ~500 scientists with advanced degrees
[] WuXi operates a "Westernized" culture
* Most of management team has graduate degrees from US universities and
significant work experience at US pharma and biotech companies
* NYSE-listed company, foreign filer with the SEC and uses a "Big 4" auditor
(Deloitte and Touche)
* SOPs and client communications in English
24
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High Degree of Management Continuity
[] Top WuXi executives to join CRL management team (3-year employment
agreements)
* Ge Li, PhD: Corporate EVP and President, Global Discovery and China
Services
[] Joins CRL Board, along with two additional directors chosen by WuXi
[] Founded WuXi in 2000; previously helped found Pharmacopeia; PhD in organic
chemistry from Columbia University* Edward Hu: Corporate SVP and General
Manager, Global Discovery and China Services
[] 11 years of US pharmaceutical/biotech experience; held managerial positions
at Merck and Biogen Idec; Chief Operating Officer at Tanox* Shuhui Chen,
PhD: Corporate SVP and General Manager, Chemistry Services and Chief
Scientific Officer, China
[] 13 years of US pharmaceutical/biotech experience at Vion, Eli Lilly and
Bristol-Myers Squibb; PhD in organic chemistry from Yale University* Suhan
Tang, PhD: Corporate VP and General Manager, Manufacturing Services
[] 7 years of US pharmaceutical experience at Schering -Plough; PhD in organic
chemistry from Columbia University
25
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Integration Planning Well Underway
[] Minimal business overlap simplifies integration process
[] Corporate integration team jointly headed by:
* CRL: David P. Johst, EVP, Human Resources, General Counsel and CAO
* WX: Edward Hu, COO
[] Nine operational sub-teams already established and meeting to develop
100-day plan to be implemented immediately following close
[] Primary focus on revenue synergies
* Maximize sales organization* Cross selling opportunities
26
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Table of Contents 1. Transaction Timing Update 2. Charles River/WuXi Overview 3. Strategic Rationale for Transaction 4. Financial Rationale for Investors 27 |
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Impressive Record of Revenue Growth
[GRAPHIC OMITTED]
[] 2007-2010E global discovery/chemistry industry CAGR of ~7%(2)
[] 2010-2015E global discovery/chemistry/preclinical industry CAGR of
~10%(2)
[] WuXi expected to continue to outpace global industry due to:
* China outsourcing expected to outpace global industry growth
* Discovery outsourcing currently underpenetrated
* WuXi is the leader in China and well positioned for continued growth
2004 2005 2006 2007 2008 2009 2010
======================= ==== ==== ==== ==== ==== ==== ======
WuXi China lab services NA 81% 103% 71% 44% 26% 13-16%
(1) Based on estimated organic revenue of $248 million in 2010.
(2) Wall Street equity research.
28
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Drives Accelerated Revenue Growth
[] Global outsourced discovery chemistry segment is estimated to be at least
$2B in 2010, with a mid-teens CAGR over the next 3-5 years*
* Currently ~20-30% outsourced
[] Growth in Discovery Chemistry and other downstream services accelerated by
pharma outsourcing* Service biology, DMPK/ADME, formulation, process
research, bioanalytical chemistry, manufacturing
[] Emerging opportunity for Manufacturing services
* Active pharmaceutical ingredients (APIs) for clinical trials and commercial
-scale manufacturing
[] Emerging opportunity for GLP safety assessment in China
29 * Source: Citigroup Global Markets, Deutsche Bank and Company estimates.
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Enhances Top-Line Growth Potential by 200 BPS
'11-'13E Growth Potential
Research Models and Services
Mid-single-digit revenue CAGR
Preclinical Services
Up to 10% revenue CAGR
WuXi's Discovery Services Segment*
Mid-teens revenue CAGR
0% +10% +20%
Growth Drivers
[] Improved demand for models used in toxicology[] Standard ~2% average annual
price increase
[] Continued double-digit growth of In Vitro business
[] Demand improves as clients refocus spending on preclinical compounds and
reduce internal infrastructure
[] Pricing gradually improves as capacity fills
[] Enhanced outsourcing penetration for discovery chemistry and other services
[] Ramp up of commercial -scale manufacturing services
[] Continued growth of China-based laboratory services
* Based on 2009 reported revenues, Discovery Services is comprised of WuXi's
business ($270M), excluding 30 its US-based Laboratory Services business
($64M) and toxicology services, and including Charles River's Discovery and
Imaging Services business (~$20M -- partial year for Piedmont and
Cerebricon) .
30
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Revenue Synergy Opportunities
[] Cross-selling and combined sales force create incremental opportunity to
drive more business upstream and downstream with existing and prospective
clients based on unprecedented scope of early-stage portfolio
[] Increased presence and scale in the emerging China market
[] Mid-tier and academic accounts where WuXi has limited penetration and CRL
has significant share
* Leverage CRL sales force of ~200 professionals to drive strategic
outsourcing
[] Focus on expanding existing client partnerships
* Cross-selling opportunities
These synergies further enhance top-line growth potential
31
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Significant Cross-Selling Opportunities
CRL WX
Combined Top 20 Clients ('09) Rank Rank
1 Large Pharma Top 10 Top 5
2 Large Pharma Top 5 Top 10
3 Large Pharma Top 5 Top 5
4 Large Pharma Top 5 Top 5
5 Large Biotech Top 5 Top 10
6 Academic/Government Top 5 **
7 Large Pharma Top 10 Top 5
8 Large Pharma Top 10 Top 10
9 Large Pharma Top 10 **
10 Large Biotech Top 10 **
11 Large Pharma Top 20 Top 10
12 Mid-tier Pharma Top 20 Top 5
13 Mid-tier Pharma Top 20 **
14 Large Pharma Top 20 **
15 Large Pharma Top 20 Top 10
16 Large Biotech Top 20 **
17 Mid-tier Pharma Top 20 **
18 Large Biotech Top 20 **
19 Mid-tier Pharma Top 20 **
20 Large Biotech Top 20 **
--- ------------------------- ------ ------------
Top 20 Clients ~45% of Combined '09 Sales
Each Top 3 client 5%-6% of combined '09 sales
WX holds more significant presence
CRL holds more significant presence
Similar exposure for CRL and WX
Less than 1% of WX
** '09 sales (or no sales)
32
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Estimated Revenue Synergies
[] Expect annual revenue synergies of at least $75-$100M by 2013* Ramp up
starting in 2011
[] Leveraging services areas including:* Chemistry* Discovery* Toxicology (GLP
and non-GLP) and Phase I
* Manufacturing* Other
[] Developed by CRL-WX Global Sales and Marketing integration team working
diligently together
[] Revenue synergies of $75-$100M expected to drive incremental operating
income of approximately $20-$30M
33
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Estimated Cost Synergies
Public Company [] Reduction of Board, SOX, audit, legal, stock exchange,
insurance and related expenses ~ [] of cost
and Corporate [] Elimination of duplicative corporate overhead and synergies
Expenses support functions
[] Leverage greater purchasing power in vendor
Other procurement relationships ~ [] of cost
SGandA [] Streamline duplicative sales and marketing efforts synergies
[] Improve working capital management
Refinement of [] Rationalization of duplicate facilities ~ [] of cost
Certain Operating [] Specific plans to be determined post-close
Units synergies
------------------ --------------------------------------------------------- ------------
Total Annual Pre-
Tax Cost Synergies $20M
34
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Charles River's Relative Share Price
Performance
April 23-- April 23--
Share price performance June 4 June 30
========================= ========== ==========
Charles River (17.1%) (14.0%)
Covance (16.4%) (17.6%)
SandP 500 (12.5%) (15.3%)
========================= ========== ==========
Charles River vs. Covance (0.7%) 3.6%
Charles River vs. SandP 500 (4.6%) 1.3%
------------------------- ========== ==========
[] Post announcement of WuXi acquisition, Charles River (CRL) share price was
down initially but ultimately traded in line with its closest peer, Covance
(CVD), once market understood deal rationale
* From deal announcement to market weakness (June 4), CRL was down 17% vs.
CVD down 16% and the market down 13%
[] Some portion of the drop in CRL shares was attributable to missed earnings
* In conjunction with the acquisition, CRL announced Q1 EPS of $0.45 which
was $0.02 lower than consensus and guided to Q2 EPS range of $0.49 -$0.50
which was ~14% below consensus
[] On April 29, CVD announced Q1 revenue and EPS of $482mm and $0.60,
respectively, compared to consensus estimates of $494mm and $0.60
* CVD simultaneously lowered FY 2010 EPS guidance by $0.10 to $2.40 -$2.65
and annual revenue growth to 5%-8% from 10%
Prior to June 4, CRL shares performed in line with its closest peer, Covance,
which had a similar weak earnings report
35 * Source: Factset
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Charles River and WuXi:
The Future of Early -Stage Contract Research
[] The combination creates the first fully integrated global early-stage CRO
* Offers a full range of products and services from molecule creation to
first-in-human testing
* Leverages increasing strategic importance of China
[] Drives Charles River shareholder value through profitable growth and higher
combined margins* Expanded portfolio drives increased sales
[] Provides compelling value to clients, meeting their needs for early-stage
drug development efforts on a global basis
* Enables clients to work with one provider through the early-stage pipeline,
speeding the development process by reducing cycle time
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[GRAPHIC OMITTED] Accelerating Drug Development. Exactly. [C] 2010 Charles River Laboratories International, Inc. |