IPO Report: Catalent (CTLT)

Francis Gaskins |

Catalent (CTLT) is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products. It is headquartered in Somerset, NJ,

Nineteen other companies are scheduled to IPO for the week of July 28, 2014. The full IPO calendar is available at IPOpremium.

The manager and co-managers are Morgan Stanley, J.P. Morgan, BofA Merrill Lynch, Goldman Sachs, Jefferies & Co., Deutsche Bank.

The joint managers are Blackstone Capital Markets, Piper Jaffray, Raymond James, Wells Fargo Securities, William Blair, Evercore Partners.

CTLT scheduled a $871 million IPO with a market capitalization of $2.4 billion at a price range midpoint of $20.50 for Thursday, July 31, 2014 on the NYSE.  SEC filings

CTLT IPO Overview

CTLT is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products.

CTLT’s oral, injectable, and respiratory delivery technologies address the full diversity of the pharmaceutical industry including small molecules, large molecule biologics and consumer health products.

CTLT Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizng March 9 mos

.

.

.

.

.

.

Catalent (CLTL)

$2,405

1.4

-164.0

7.0

-2.3

36%

             

Conclusion on CTLT IPO

CTLT is a Blackstone deal with tier 1 underwriters.

However, CTLT has a -$1.5 billion deficit and has never made money.

In addition, CTLT has a low top line revenue growth coupled with high interest payments

The rating is neutral minus.

CTLT Business

CTLT is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products.

CTLT’s oral, injectable, and respiratory delivery technologies address the full diversity of the pharmaceutical industry including small molecules, large molecule biologics and consumer health products.

Through its extensive capabilities and deep expertise in product development, CTLT helps its customers take products to market faster, including nearly half of new drug products approved by the FDA in the last decade.

CTLT’s advanced delivery technology platforms, broad and deep intellectual property, and proven formulation, manufacturing and regulatory expertise enable its customers to develop more products and better treatments.

Across both development and delivery, CTLT’s commitment to reliably supply its customers’ needs is the foundation for the value CTLT provides; annually, CTLT produces more than 70 billion doses for nearly 7,000 customer products.

CTLT believes that through its investments in growth-enabling capacity and capabilities, its ongoing focus on operational and quality excellence, the sales of existing customer products, the introduction of new customer products, its patents and innovation activities, and its entry into new markets, CTLT will continue to benefit from attractive and differentiated margins, and realize the growth potential from these areas.

Since 2010, CTLT has made investments to expand its sales and marketing activities, leading to growth in the number of active development programs in both strategic platforms for its customers.

This has further enhanced CTLT’s extensive, long-duration relationships and long-term contracts with a broad and diverse range of industry-leading customers.

In the fiscal year ended June 30, 2013, CTLT did business with 85 of the top 100 branded drug marketers, 20 of the top 25 generics marketers, 41 of the top 50 biologics marketers, and 19 of the top 20 consumer health marketers globally.

Selected key customers include Pfizer, Johnson & Johnson, GlaxoSmithKline, Merck, Novartis, Roche, Actavis and Teva.

CTLT has many long-standing relationships with its customers, particularly in advanced delivery technologies, where CTLT tends to follow a prescription molecule through all phases of its lifecycle, from the original brand prescription, development and launch to generics or over-the-counter switch.

A prescription pharmaceutical product relationship with an innovator will often last for nearly two decades, extending from mid-clinical development through the end of the product’s life cycle.

CTLT serves customers who require innovative product development, superior quality, advanced manufacturing and skilled technical services to support their development and marketed product needs.

CTLT’s broad and diverse range of technologies closely integrates with its customers’ molecules to yield final dose forms, and this generally results in the inclusion of Catalent in its customers’ prescription product regulatory filings. Both of these factors translate to long-duration supply relationships at an individual product level.

CTLT's Dividend Policy

No dividends are planned.

Intellectual Property

CTLT has applied in the United States and certain foreign countries for registration of a number of trademarks, service marks and patents, some of which have been registered and issued, and also hold common law rights in various trademarks and service marks.

CTLT holds 1,300 patents and patent applications worldwide in advanced drug delivery and biologics formulations and technologies, and manufacturing and other areas.

CTLT's Competition

CTLT competes on several fronts both domestically and internationally, including with other companies that offer advanced delivery technologies or development services to pharmaceutical, biotechnology and consumer health companies based in North America, South America, Europe and the Asia-Pacific region.

CTLT also may compete with the internal operations of those pharmaceutical, biotechnology and consumer health manufacturers that choose to source these services internally, where possible.

Competition is driven by proprietary technologies and know-how (where relevant), consistency of operational performance, quality, price, value and speed.

While CTLT does have competitors who compete with it in its individual offerings, CTLT does not believe it has competition from any directly comparable companies.

5% Stockholders

Blackstone        86.27%

Genstar Capital   9.42%                                                 

Use of Proceeds

CTLT intends to use the $820 million in proceeds from its IPO as follows:

pay a termination fee equal to approximately $29.8 million to Blackstone and certain of the other existing owners;

redeem the outstanding $297.1 million aggregate principal amount of CTLT’s 9 3⁄4% Senior Subordinated Notes due 2017 for a total redemption price of $313.2 million (including accrued and unpaid interest);

redeem the outstanding $350.0 million aggregate principal amount of its 7 7⁄8% Senior Notes due 2018 for a total redemption price of $365.0 million (including accrued and unpaid interest); and

use the remaining proceeds to repay $112.6 million of the $275.0 million aggregate principal amount outstanding under its senior unsecured term loan facility.

Any remaining net proceeds will be used for general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CTLT Catalent Inc. 23.61 0.00 0.00 0
BBD.PR.C:CH Bombardier Inc. 6.25% Series 4 Cumulative Redeemab n/a n/a n/a n/a

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