Summary

Other Scenarios:

Buyer: Covance Inc. (CVD) Last Price: 78.85 Market Cap.: 5.02B
Target: Penwest Pharmaceuticals (PPCO) Last Price: 8.55 Market Cap.: 200.03M

Lines of Business Summary:

Product Summary:

Overlap & Complementary Sectors

Sector Buyer Target # of Focused Companies
Healthcare 931
Biopharmaceuticals   377
Healthcare Services   153
Medical Devices   255
Outsourced Services 69
Scientific Products   36

- Focused. Denotes that the company is considered focused in this area. In general, Focused Companies draw the majority of their earnings in the sector/product area specified.

- Sector Pure-Plays. Denotes that the company is focused in the selected sector and generates nearly all earnings in the sector/product area specified.

- Sector Participation. Denotes that the company develops products in this line of business.

Sample Products in Similar Lines of Business

Sample Products in Complementary Lines of Business
Buyer (Total: 12)
  • Covance Clinical Research Services
  • Antibody Products And Services
  • Clinical Development Services
  • Central Laboratory Services
Target (Total: 12)
  • SyncroDose
  • Geminex
  • TIMERx
  • Gastroretentive Drug Delivery System
Buyer
  • Early Development Consulting Services
  • Preapproval Commercialization Services
  • Signet Laboratories Prostate 63 Diagnostic Kits
  • Covance Clinical Research Services
Target
  • Nifedipine XL
  • PW2132 (Torsemide ER)
  • PW4110
  • PW4153

Business Relationship Summary:

Top Key Suppliers

Top Key Customers
Buyer (Total: 2)
  • International Business Machines Corp. (IBM)
  • Bio-Imaging Technologies, Inc. (BITI)
Target (Total: 2)
  • Mylan Inc. (MYL)
  • DRAXIS Health Inc. (USA) (DRAX)
Buyer (Total: 0)

n/a
Target (Total: 4)
  • Mylan Inc. (MYL)
  • sanofi-aventis (ADR) (SNY)
  • Endo Pharmaceuticals (ENDP)
  • Merck KGaA

Key Financial Summary:

Key Metrics

  Buyer Target
Number of Employees 8,100 75
Revenue Per Employee 200,140.4 35,697.8
Total Revenue 404.2 0.7
Total Expenses 348.7 9.9
Other Revenue 0.0 0.0
Cost of Revenue 274.1 0.1
SG&A Expense 58.1 3.7
Research & Development 0.0 6.0
Other Operating Expense 0.0 0.0
Operating Income 55.5 -9.1
Unusual Income 0.0 0.0
LT Debt to Capital 0 25.18
Fwd P/E 29.70 -5.18
Fwd P/Rev 3.26 64.18
Book Value 980.6 32.1
Curr Portion of LTD/Cap Lease 0.0 1.2

Individual Company Summary

Focused

Buyer

Focused (): Healthcare > Outsourced Services > Development/Manufacturing Services > Contract Research Organizations (CRO) > Full Service

Target

Focused (): Healthcare > Outsourced Services > Drug Delivery Technology > Oral Delivery

Business Description

Buyer

Covance Inc. is a drug development services company that provides a range of early-stage and late-stage product development services on a worldwide basis primarily to the pharmaceutical, biotechnology and medical device industries. The Company also provides laboratory-testing services to the chemical, agrochemical and food industries. The services it provide constitute two segments, early development services, which includes preclinical services and clinical pharmacology services, and late-stage development services, which includes central laboratory, clinical development, periapproval, cardiac safety services and market access services. In 2006, the Company acquired Radiant Research Inc.

Target

Penwest Pharmaceuticals Co. (Penwest) develops pharmaceutical products based on drug delivery technologies with a focus on products that address disorders of the nervous system. In June 2006, the United States Food and Drug Administration (FDA), approved for marketing Opana ER, an extended release formulation of oxymorphone hydrochloride that the Company developed with Endo Pharmaceuticals Inc (Endo), using its TIMERx drug delivery technology. Penwest is also developing product candidates designed for the treatment of pain, epilepsy, Parkinson?s disease and spasticity, as well as a product candidate for the treatment of edema resulting from congestive heart failure. The Company conducts its business primarily in North America.

Deal Summary

Key Ratios

  Buyer Target
Gross Margin % 32.92 85.73
Operating Margin % 13.89 -1,171.13
Quick Ratio 1.46 6.99
Current Ratio 2.25 7.23
Coverage Ratio 0.04 -0.05
Total Assets 1,363.2 51.4
Return on Equity % 15.8 -104.45
Return on Assets % 11.36 -65.22
Cash+ ST Inv. Per Share 3.22 1.62
Total Debt 0.0 12.0
Total Debt to Equity % 0 37.41
Total Debt to Tangible Equity % 0 41.44
Debt to Asset % 0.00 23.36

Product Summary

Sector Buyer Target
Healthcare
Biopharmaceuticals  
Cardiovascular System
The Cardiovascular System Subsector includes therapeutics that treat disorders affecting the heart and blood vessels.
  
Neurology
The Neurology Subsector includes therapeutics that treat disorders of the central nervous system, including the brain, spinal cord, and nerves.
  
Pain Management
The Pain Management Subsector includes therapeutics that treat and management pain.
  
Healthcare Services  
Support Services
The Support Services Subsector is comprised of companies that provide non-medical services for managing, enhancing, facilitating, and enabling the healthcare delivery process.
  
Medical Devices  
Clinical Diagnostics
The Clinical Diagnostics Subsector includes medical devices that analyze human body specimens within a medical setting. These devices, including equipment, biological and chemical reagents are primarily used for the diagnosis of diseases.
  
Outsourced Services
Analytical Services
The Analytical Services Subsector includes outsourced services that utilize analytical instruments to analyze biological and chemical samples.

Buyer Products:

  • Covance Clinical Research Services
  
Bioanalytical Services
The Bioanalytical Services Subsector includes outsourced services that utilize bioanalytical instruments to analyze biological samples.
  
Development/Manufacturing Services
The Development/Manufacturing Services Subsector includes companies that provide research, development, manufacturing, sales and marketing to biopharmaceutical and medical device companies.
  
Drug Delivery Technology
The Drug Delivery Technology Subsector includes companies that develop novel delivery methods for therapeutics.
  
Scientific Products  
Consumables
The Consumables Subsector includes chemicals, reagents, standards, media, and disposable labware that are normally depleted or worn out by continuous use.
  

- Focused. Denotes that the company is considered focused in this area. In general, Focused Companies draw the majority of their earnings in the sector/product area specified.

- Sector Pure-Plays. Denotes that the company is focused in the selected sector and generates nearly all earnings in the sector/product area specified.

- Sector Participation. Denotes that the company develops products in this line of business.

Product Details

Sector Buyer Target
Healthcare
Biopharmaceuticals  
Cardiovascular System  
Heart Disorders  
Angina  
Calcium Channel Blocking Agents
Therapeutics that treat chest pains by preventing the entry of calcium into heart muscle cells.

Target Products:

  • Nifedipine XL
  
Phase I/Phase II Clinical Stage Products
Therapeutics that are being investigated for the treatment of heart and circulatory system disorders in early stages of clinical research where human subject is involved.

Target Products:

  • PW2132 (Torsemide ER)
  
Vascular Disorders  
Hypertension  
Calcium Channel Blocking Agents
Therapeutics that treat high blood pressure by blocking the beta adrenergic receptors of the heart muscle and increasing the excretion of sodium ions, potassium ions, and water through urine.

Target Products:

  • Nifedipine XL
  
Neurology  
Phase I/Phase II Clinical Stage Products
Therapeutics that are being investigated for the treatment of nervous system and mental disorders in early stages of clinical research where human subject is involved.

Target Products:

  • PW4110
  
Research/Preclinical Stage Products
Therapeutics that are being investigated for the treatment of nervous system and mental disorders in very early stages of research where no human subject is involved.

Target Products:

  • PW4153
  • PW4159
  • PW4158
  
Pain Management  
Narcotics  
Opioids
Therapeutics that treat pain by binding to certain nervous system receptors which alter both the perception of pain as well as the emotional response to pain.

Target Products:

  • Opana ER (Oxymorphone Hydrochloride Extended Release)
  
Phase I/Phase II Clinical Stage Products
Therapeutics that are being investigated for the treatment of pain in early stages of clinical research where human subject is involved.

Target Products:

  • PW4142 (Nalbuphine ER)
  
Healthcare Services  
Support Services  
Consulting
Services providing advice, assistance, and information to a wide range of healthcare companies, including pharmaceutical, medical devices, and health services companies.

Buyer Products:

  • Early Development Consulting Services
  • Preapproval Commercialization Services
  
Medical Devices  
Clinical Diagnostics  
Immunoassays  
Reagents  
Test Kits  
Special/Immuno Chemistry  
Cancer Marker  
PSA/Prostate Specific Protein
Immunoassay test kits which quantitatively measures for prostate specific antigen or prostate specific protein in plasma or serum.

Buyer Products:

  • Signet Laboratories Prostate 63 Diagnostic Kits
  
Outsourced Services
Analytical Services
The Analytical Services Subsector includes outsourced services that utilize analytical instruments to analyze biological and chemical samples.

Buyer Products:

  • Covance Clinical Research Services
  
Bioanalytical Services  
Protein Purification
Bioanalytical services that isolate and characterize proteins from genomic clones.

Buyer Products:

  • Antibody Products And Services
  
Protein Synthesis
Bioanalytical services that produce proteins from nucleic acids.

Buyer Products:

  • Antibody Products And Services
  
Development/Manufacturing Services  
Contract Research Organizations (CRO)  
Full Service
Contract Research Organizations (CROs) that conduct both preclinical and clinical studies in the development of new therapeutic products.

Buyer Products:

  • Covance Clinical Research Services
  
Limited Service  
Clinical
Limited Service Contract Research Organizations that design, manage, and monitor human studies of new therapeutics. Other services include project management, patient recruitment, data management, biostatistical analysis, medical and regulatory affairs, and quality assurance.

Buyer Products:

  • Clinical Development Services
  • Central Laboratory Services
  
Preclinical
Limited Service Contract Research Organizations that design, manage, and monitor animal studies of new therapeutics. In addition to animal studies, these limited service companies also provide formulation development services.

Buyer Products:

  • Preclinical Services
  • Clinical Pharmacology Services
  
Sales/Marketing
Outsourced companies that provide biopharmaceutical and medical device companies with contract sales and marketing services.

Buyer Products:

  • Market Access Commercialization Services
  • Preapproval Commercialization Services
  
Drug Delivery Technology  
Oral Delivery  
Hydrogel Based/Polymer Coated
Drug Delivery Technologies used to deliver drugs in a jelly like base which are enclosed using a polymer matrix.

Target Products:

  • SyncroDose
  • Geminex
  • TIMERx
  
Polymer Coated
Drug Delivery Technologies used to deliver drugs in a polymer based matrix to hold/enclose the drug.

Target Products:

  • Gastroretentive Drug Delivery System
  
Scientific Products  
Consumables  
Bioanalytical Chemistry  
Cell Biology  
Cell Culture  
Reagents  
Antibodies
Cell culture reagents that are used during cellular assays.

Buyer Products:

  • Covance Clinical Research Services
  • Signet Immunopathology Antibodies
  • Signet Laboratories Neuropathology Antibodies
  
Immunology  
Reagents  
Proteins  
Antibodies
Immunology proteins that are used for the detection of specific substances, including conjugated, unconjugated, monoclonal and polyclonal antibodies.

Buyer Products:

  • Antibody Products And Services
  • Signet Immunopathology Antibodies
  • Signet Laboratories Neuropathology Antibodies
  

- Focused. Denotes that the company is considered focused in this area. In general, Focused Companies draw the majority of their earnings in the sector/product area specified.

- Sector Pure-Plays. Denotes that the company is focused in the selected sector and generates nearly all earnings in the sector/product area specified.

- Sector Participation. Denotes that the company develops products in this line of business.

Relationship Details

Key Competitors

  Name Dir Percent Market Cap. P/E Ratio (TTM) Fwd P/E P/R Ratio (TTM) Fwd P/Rev Price To Tang. Book Value
Buyer
  UnitedHealth Group Inc. n/a 65,833.234 14.82 14.18 0.89 0.85 28.15
Quest Diagnostics Incorporated n/a 11,032.253 19.81 19.86 1.75 1.63 n/a
AmerisourceBergen Corp. n/a 8,188.940 16.26 17.77 0.13 0.13 15.63
Pharmaceutical Product Development, Inc. n/a 4,644.765 28.49 28.15 3.51 3.52 5.51
Charles River Laboratories n/a 3,876.106 41.54 22.48 3.42 3.19 8.57
MDS Inc. (USA) n/a 2,652.969 3.27 52.68 2.34 2.29 6.16
ICON plc (ADR) n/a 1,585.508 33.70 30.07 2.98 2.61 6.14
PAREXEL International Corporation n/a 1,252.822 33.60 27.68 1.36 1.39 6.31
PRA International n/a 739.110 41.98 34.66 1.94 2.07 37.65
Kendle International Inc. n/a 637.682 80.96 25.68 1.31 1.59 n/a
PharmaNet Development Group Inc. n/a 623.398 n/a 29.07 1.47 1.72 n/a
eResearch Technology, Inc n/a 618.248 55.71 39.93 7.03 6.10 6.05
Target
  Johnson & Johnson n/a 190,863.999 18.04 16.24 3.34 3.16 13.68
Elan Corporation, plc (ADR) n/a 10,448.804 n/a -34.81 15.97 14.04 n/a
Biovail Corporation (USA) n/a 2,858.171 13.02 10.20 2.75 3.44 4.70
King Pharmaceuticals, Inc. n/a 2,574.611 8.36 5.85 1.25 1.23 1.90
K-V Pharmaceutical Company n/a 1,505.213 31.66 n/a 3.96 n/a 6.07
Alpharma Inc. n/a 929.815 16.08 22.14 1.36 1.29 1.93
Eurand N.V. n/a 731.542 n/a -79.52 6.39 6.35 9.57
Ligand Pharmaceuticals Inc. n/a 603.788 1.51 2.18 8.33 n/a 12.96
SkyePharma PLC (ADR) n/a 256.721 n/a -4.63 2.48 3.36 n/a
SCOLR Pharma Inc. n/a 128.925 n/a n/a 37.40 n/a 9.30
BioDelivery Sciences International, Inc. n/a 66.577 n/a -2.23 24.06 n/a n/a
Elite Pharmaceuticals, Inc. n/a 49.101 n/a -4.42 35.58 6.30 3.48
Purdue Pharma L.P. n/a n/a n/a n/a n/a n/a n/a

- Defined by the Company - Defined by Others

Dependent Suppliers

  Name Dir Percent Market Cap. P/E Ratio (TTM) Fwd P/E P/R Ratio (TTM) Fwd P/Rev Price To Tang. Book Value
Buyer
  International Business Machines Corp. n/a 160,269.550 16.25 16.94 1.69 1.65 109.40
Bio-Imaging Technologies, Inc. n/a 81.598 43.63 43.25 1.86 1.72 5.75
Target
  Mylan Inc. n/a 3,903.698 17.63 12.21 2.17 1.39 5.06
DRAXIS Health Inc. (USA) n/a 226.270 22.92 26.80 2.63 2.60 2.15

- Defined by the Company - Defined by Others

Key Customers

  Name Dir Percent Market Cap. P/E Ratio (TTM) Fwd P/E P/R Ratio (TTM) Fwd P/Rev Price To Tang. Book Value
Target
  Mylan Inc. 89.10% 3,903.698 17.63 12.21 2.17 1.39 5.06
sanofi-aventis (ADR) n/a 120,772.157 22.87 12.33 2.99 3.11 n/a
Endo Pharmaceuticals n/a 3,759.637 21.20 16.09 3.80 3.55 4.11
Merck KGaA n/a n/a n/a n/a n/a n/a n/a

- Defined by the Company - Defined by Others

Key Partners

  Name Dir Percent Market Cap. P/E Ratio (TTM) Fwd P/E P/R Ratio (TTM) Fwd P/Rev Price To Tang. Book Value
Buyer
  International Business Machines Corp. n/a 160,269.550 16.25 16.94 1.69 1.65 109.40
Bio-Imaging Technologies, Inc. n/a 81.598 43.63 43.25 1.86 1.72 5.75
Oxford BioSignals Ltd. n/a n/a n/a n/a n/a n/a n/a
Target
  sanofi-aventis (ADR) n/a 120,772.157 22.87 12.33 2.99 3.11 n/a
Mylan Inc. n/a 3,903.698 17.63 12.21 2.17 1.39 5.06
Endo Pharmaceuticals n/a 3,759.637 21.20 16.09 3.80 3.55 4.11
DRAXIS Health Inc. (USA) n/a 226.270 22.92 26.80 2.63 2.60 2.15
Pharmaceutics International, Inc. n/a n/a n/a n/a n/a n/a n/a
Edison Pharmaceuticals, Inc. n/a n/a n/a n/a n/a n/a n/a
Merck KGaA n/a n/a n/a n/a n/a n/a n/a
Otsuka Pharmaceutical Co., Ltd. n/a n/a n/a n/a n/a n/a n/a

- Defined by the Company - Defined by Others

Financials

  Buyer Target Combined Entity
Income Statement
Operating Items
Revenue 1,496.4 3.0 1,499.4
Other Revenue 0.0 0.0 0.0
Total Revenue 1,496.4 3.0 1,499.4
Cost of Revenue 1,003.7 0.4 1,004.1
SG&A Expense 221.7 14.2 235.8
Depreciation & Amortization 63.1 0.0 63.1
Research & Development 0.0 23.7 23.7
Interest Expense 0.0 0.0 0.0
Other Operating Expense 0.0 0.0 0.0
Total Expenses 1,288.4 38.3 1,326.7
Operating Income 207.9 -35.3 172.6
Non Operating Items
Interest Expense (Inc.), Net Non-Oprtng 8.4 1.8 10.1
Other, Net 0.0 0.0 0.0
Income Before Taxes 216.3 -33.5 182.8
Income Taxes 61.4 0.0 61.4
Income After Taxes 154.9 -33.5 121.4
Equity in Affiliates 2.1 0.0 2.1
Net Income - Excl. Xord. Items 157.0 -33.5 123.5
Net Income - Incl. Xord. Items 157.0 -33.5 123.5
Income Avail. to Common 157.0 -33.5 123.5
Share Items
Basic Avg. Shares Outstanding 63.6 23.2 86.8
Basic EPS - Excl. Xord. Items 2.47 n/a 1.42
Basic EPS - Incl. Xord. Items 2.47 n/a 1.42
Full Dilution Adjustment 0.0 0.0 0.0
Fully Diluted Shares Outstanding 64.6 23.2 87.8
F.D. EPS - Excl. Xord. Items 2.43 n/a 1.41
F.D. EPS - Incl. Xord. Items 2.43 n/a 1.41
Balance Sheet
Assets
Cash and Equivalents 208.0 21.0 229.0
ST Investments 0.0 16.6 16.6
Accounts Receivable 220.3 0.6 220.9
Inventory 51.6 0.4 52.0
Prepayments and Advances 70.8 0.9 71.7
Other Current Assets 108.0 0.0 108.0
Current Assets 658.7 39.5 698.2
Accum D&A 0.0 0.0 0.0
PPE, Net 543.2 3.6 546.8
Goodwill & Intangibles 119.7 3.1 122.8
Other Assets 0.0 0.0 0.0
Other LT Assets 41.6 5.1 46.7
Total Assets 1,363.2 51.4 1,414.5
Liabilities
Accounts Payable 32.1 1.3 33.4
Payable/Accrued 0.0 0.0 0.0
Accrued Expenses 120.4 2.6 123.0
ST Debt 0.0 0.0 0.0
Curr Port of LTD & Cap Lease Oblg 0.0 1.2 1.2
Other (Current) Liabilities 140.9 0.3 141.2
Current Liab. 293.4 5.5 298.8
LT Debt 0.0 10.8 10.8
Total LT Debt 0.0 10.8 10.8
Deferred Taxes 30.4 0.0 30.4
Other LT Liab. 58.8 3.0 61.8
Total Liabilities 382.6 19.3 401.9
Shareholders Equity
Common Stock 0.7 0.0 0.8
Additional Paid in Capital 464.3 220.3 684.6
Retained Earnings 837.6 -188.3 649.2
Treasure Stock -335.3 0.0 -335.3
Other Equity 13.2 0.1 13.3
Total Equity 980.6 32.1 1,012.6
Total Liab. & Equity 1,363.2 51.4 1,414.5
Shares Outstanding 63.7 23.4 87.1
Cash Flow
Operating Cash Flow
CF Net Income 157.0 -33.5 123.5
CF Depreciation 63.1 0.0 63.1
CF Deferred Taxes -0.5 0.0 -0.5
Other Non-Cash Items 28.0 0.0 28.0
Change in Working Capital 19.7 4.5 24.1
Total Cash From Operating Activities 267.2 -29.0 238.2
Investing Cash Flow (not calculated)
Capital Expenditures -149.3 -2.4 -151.7
Other Investing Cash Flows -1.0 3.4 2.4
Total Cash From Investing Activities -150.3 1.1 -149.3
Financing Cash Flow (not calculated)
Dividends Paid 0.0 0.0 0.0
Purchase Or Sale of Stock -48.9 3.5 -45.4
Purchase and Retirement of Debt 0.0 12.0 12.0
Other Financing Cash Flow 0.0 -0.1 -0.1
Total Cash From Financing Activities -48.9 15.4 -33.5
Exchange Rate Effects 2.4 0.0 2.4
Net Change in Cash 70.4 -12.6 57.8
Cash Taxes Paid 59.5 0.0 59.5
Cash Interest Paid 0.2 0.0 0.2