8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 5, 2013

PATHEON INC.

(Exact name of registrant as specified in its charter)

Canada	000-54283	Not Applicable
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
c/o Patheon Pharmaceuticals Services Inc. 4721 Emperor Boulevard, Suite 200 Durham, NC		27703
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (919) 226-3200

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02     Results of Operations and Financial Condition

On September 5, 2013, Patheon Inc. (the “Company”) issued a press release announcing its financial results for the three and nine months ended July 31, 2013. The full text of the press release was posted on the Company’s internet website and is attached as Exhibit 99.1 to this Current Report on Form 8-K (this “Report”) and incorporated by reference into this Item 2.02.

Item 7.01     Regulation FD Disclosure

As previously announced and as disclosed in the press release attached as Exhibit 99.1 to this Report, the Company plans to hold a conference call at 10:00 a.m. ET on September 5, 2013. A copy of the presentation the Company plans to discuss on the conference call, which will be available on the Company’s website prior to the start of the call, is attached as Exhibit 99.2 to this Report and incorporated by reference into this Item 7.01.

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in Items 2.02 and 7.01 of this Report, including the press release attached as Exhibit 99.1 and the presentation attached as Exhibit 99.2, is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, such information shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, as amended.

Item 9.01     Financial Statements and Exhibits

(d) Exhibits.

See the Exhibit Index attached hereto.

1

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: September 5, 2013	PATHEON INC.
	By:	/s/ Stuart Grant
		Stuart Grant
		Executive Vice President, Chief Financial Officer

2

EXHIBIT INDEX

Exhibit No.	Description of Document
99.1	Press release dated September 5, 2013.
99.2	Presentation for the Company’s conference call on September 5, 2013.

EX-99.1

Exhibit 99.1

PATHEON REPORTS FISCAL 2013 THIRD QUARTER RESULTS

Top-line growth at 30.4 percent; Banner integration complementing business lines

TORONTO (September 5, 2013) – Patheon Inc. (TSX: PTI), a leading provider of contract development and commercial manufacturing services to the global pharmaceutical industry, with recently acquired proprietary products, announced today fiscal 2013 third quarter results.

Third Quarter Fiscal 2013 Financial Highlights

• Revenues in the quarter increased to $265.7 million from $203.7 million in the same period last year, an increase of $62.0 million or 30.4 percent. Revenue resulting from the Banner acquisition was $66.4 million in the quarter.

• Gross profit in the quarter improved to $71.1 million from $55.5 million in the same period last year, an increase of $15.6 million or 28.1 percent.

• Adjusted EBITDA increased in the quarter to $41.0 million from $36.4 million in the same period last year, an increase of $4.6 million.

• Income from continuing operations in the quarter was $4.3 million compared to income from continuing operations of $15.5 million in the same period last year. This decrease was due to higher repositioning and interest expenses, as well as higher selling, general and administrative expenses, research and development expenses and other charges associated with the Banner acquisition, partially offset by higher gross profit.

“This was another successful quarter for Patheon, and we are pleased with the ongoing performance of our business. The integration of Banner is complete, and our transformation initiatives continue to yield results as we implement operational excellence activities across our global network,” stated Jim Mullen, Chief Executive Officer. “Overall, revenue flow across quarters has been more balanced this year, and we are encouraged by this continuing trend. We continue to drive additional margin from the business with our year-to-date Adjusted EBITDA margin of 13 percent compared to 9.5 percent in the prior period. We believe that Patheon remains on track to achieve anticipated revenues in excess of $1 billion this fiscal year.”

Fiscal 2013 Third Quarter and Nine Month Period Ended July 31, 2013, Operating Results from Continuing Operations

Revenues for the third quarter increased $62.0 million, or 30.4 percent, to $265.7 million, from $203.7 million in the same period last year driven by $66.4 million of additional revenues resulting from the Banner acquisition. Commercial manufacturing (CMO) revenues for the third quarter increased $59.5 million, or 35.4 percent, to $227.8 million, from $168.3 million in the same period last year, primarily due to the additional revenues resulting from the Banner acquisition. Pharmaceutical Development Services (PDS) revenues for the third quarter increased $2.5 million, or 7.1 percent, to $37.9 million, from $35.4 million in the same period last year.

Revenues for the nine month period ended July 31, 2013 increased $194.0 million, or 36.0 percent, to $733.1 million, from $539.1 million in the same period last year, driven by growth in existing business and $144.2 million of additional revenues resulting from the Banner acquisition.

CMO revenues for the nine month period ended July 31, 2013 increased $189.3 million, or 43.2 percent, to $627.4 million, from $438.1 million in the same period last year, primarily due to additional revenues resulting from the Banner acquisition. PDS revenues for the nine month period ended July 31, 2013 increased $4.7 million, or 4.7 percent, to $105.7 million, from $101.0 million in the same period last year.

Gross profit for the third quarter improved by $15.6 million to $71.1 million, from $55.5 million in the same period last year, primarily due to an increase in volumes from the Banner acquisition. Patheon standalone margins improved primarily as a result of favorable foreign exchange rates.

Gross profit for the nine month period ended July 31, 2013 increased $66.6 million to $170.5 million, from $103.9 million for the same period last year. The increase in gross profit margin was driven by higher volumes and savings from operational excellence initiatives, partially offset by $5.0 million in increased costs of goods sold related to the fair value mark-up of Banner’s inventory from the acquisition, $5.0 million in higher inventory write-offs and $3.1 million in product returns from a packaging site attributed to Banner operations.

Income from continuing operations for the third quarter was $4.3 million, or 3.1¢ per share for basic and 3.0¢ per share for diluted, compared to income from continuing operations of $15.5 million, or 12.0¢ per share, both basic and diluted, in the same period last year.

Loss from continuing operations for the nine month period ended July 31, 2013 was $46.9 million, or (33.7)¢ per share, both basic and diluted, compared to a loss from continuing operations of $83.3 million, or (64.3)¢ per share, both basic and diluted, in the same period last year.

Adjusted EBITDA increased in the quarter to $41.0 million from $36.4 million in the same period last year, an increase of $4.6 million. Higher volumes and the results of operational excellence programs contributed to the increase. The Adjusted EBITDA margin for the third quarter was 15.4 percent compared to 17.9 percent in the same period last year.

2013 Outlook

The company anticipates revenues for the combined enterprise to be in excess of $1 billion for fiscal 2013.

Conference Call

Patheon will host a conference call and webcast on Thursday, September 5, 2013, at 10 a.m. Eastern Daylight Time. Interested parties are invited to access the conference call, via telephone, in listen-only mode, toll free at 1-888-231-8191 (U.S., including Puerto Rico) and 1-647-427-7450 (Canada and International). Listeners are encouraged to dial in five to 15 minutes in advance to avoid delays. The webcast and slides will be available for viewing during the call by accessing Patheon’s website at http://ir.patheon.com/events.cfm.

A telephone replay of the conference call will be available between Thursday, September 5, 2013 and Thursday, September 12, 2013, by dialing 1-855-859-2056 (toll-free) or 1-403-451-9481, and by entering identification number 29239924, followed by the number key. The webcast and slides will be archived at http://ir.patheon.com/events.cfm.

About Patheon

Patheon Inc. (TSX: PTI) is a leading provider of contract development and commercial manufacturing services to the global pharmaceutical industry for a full array of solid and sterile dosage forms. Through the company’s recent acquisition of Banner Pharmacaps – a market leader in soft gelatin capsule technology – Patheon now also includes a proprietary products and technology business.

Patheon provides the highest quality products and services to approximately 300 of the world’s leading pharmaceutical and biotechnology companies. The company’s integrated network consists of 17 locations, including 13 commercial contract manufacturing facilities and 8 development centers across North America and Europe. Patheon enables customer products to be launched with confidence anywhere in the world. For more information, visit www.patheon.com.

Use of Non-GAAP Financial Measures

Commencing in fiscal 2013, we revised our calculation of Adjusted EBITDA to exclude stock-based compensation expense, consulting costs related to our operational initiatives, purchase accounting adjustments, and acquisition-related litigation expenses. We believe that excluding these items from Adjusted EBITDA better reflects our underlying performance. Based on the revisions to the definition of Adjusted EBITDA, we have recast the presentation of Adjusted EBITDA for the three and nine months periods ended July 31, 2012 to be consistent with the current period presentation. Our Adjusted EBITDA is now income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition and integration costs (including certain product returns and inventory write-offs recorded in gross profit), gains and losses on sale of capital assets, income taxes, asset impairment charges, depreciation and amortization, stock-based compensation expense, consulting costs related to our operational initiatives, purchase accounting adjustments, acquisition-related litigation expenses and other income and expenses. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of revenues. Since Adjusted EBITDA is a non-GAAP measure that does not have a standardized meaning, it may not be comparable to similar measures presented by other issuers. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with U.S. GAAP as an indicator of performance. Adjusted EBITDA is used by management as an internal measure of profitability. We have included Adjusted EBITDA because we believe that this measure is used by certain investors to assess our financial performance before non-cash charges and certain costs that we do not believe are reflective of our underlying business. A reconciliation of Adjusted EBITDA to the closest U.S. GAAP measure is included with the financial statements in this press release.

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements which reflect our expectations regarding our future growth, results of operations, performance (both operational and financial) and business prospects and opportunities. All statements, other than statements of historical fact, are forward-looking statements. Wherever possible, words such as “plans”, “expects” or “does not expect”, “forecasts”, “anticipates” or “does not anticipate”, “believes”, “intends” and similar expressions or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved have been used to identify these forward-looking statements. Although the forward-looking statements contained in this press release reflect our current assumptions based upon information currently available to us and based upon what we believe to be reasonable assumptions, we cannot be certain that actual results will be consistent with these forward-looking statements. Our current material assumptions include assumptions related to our operational excellence initiatives and transformation activities, customer volumes, regulatory compliance, foreign exchange rates, employee severance costs associated with termination, and projected integration savings related to the Banner acquisition. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause our actual results, performance, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to international operations and foreign currency fluctuations; customer demand for our services; regulatory matters affecting manufacturing and pharmaceutical development services; impacts of acquisitions, divestitures and restructurings, including our ability to achieve our intended objectives with respect to such transactions and integrate businesses that we may acquire; implementation of our operational excellence initiatives and transformation activities; our ability to effectively transfer business between facilities; the global economic environment; our exposure to complex production issues; our substantial financial leverage; interest rate risks; potential environmental, health and safety liabilities; credit and customer concentration; competition; rapid technological change; product liability claims; intellectual property; the fact that we have a majority shareholder that can exercise significant influence over our company; supply arrangements; pension plans; derivative financial instruments; and our dependence upon key management, scientific and technical personnel. For additional information regarding risks and uncertainties that could affect our business, please see Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended October 31, 2012 and our subsequent filings with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators. Although we have attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date of this press release and, except as required by law, we assume no obligation to update or revise them to reflect new events or circumstances.

Patheon Inc.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	As of July 31, 2013		As of October 31, 2012
(in millions of U.S. dollars)	$		$
Assets
Current
Cash and cash equivalents		40.9		39.4
Accounts receivable		181.7		161.7
Inventories		144.3		82.3
Income taxes receivable		21.0		0.4
Prepaid expenses and other		21.7		11.9
Deferred tax assets - short-term		6.6		4.3
Total current assets		416.2		300.0
Capital assets		492.2		416.4
Intangible assets		70.6		—
Deferred financing costs		21.0		4.9
Goodwill		45.3		3.5
Investments		8.5		6.3
Other long-term assets		17.3		11.8
Total assets		1,071.1		742.9
Liabilities and shareholders’ equity
Current
Short-term borrowings		5.2		2.4
Accounts payable and accrued liabilities		205.7		186.2
Income taxes payable		2.2		5.7
Deferred revenues - short-term		14.8		13.9
Deferred tax liabilities - short-term		0.3		—
Current portion of long-term debt		6.8		—
Total current liabilities		235.0		208.2
Long-term debt		598.4		310.7
Deferred revenues		21.8		28.9
Deferred tax liabilities		57.4		23.0
Other long-term liabilities		44.6		47.8
Total liabilities		957.2		618.6
Shareholders’ equity
Restricted voting shares		610.5		572.5
Contributed surplus		15.9		16.5
Accumulated deficit		(525.5)		(478.6)
Accumulated other comprehensive income		13.0		13.9
Total shareholders’ equity		113.9		124.3
Total liabilities and shareholders’ equity		1,071.1		742.9

Patheon Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended July 31,				Nine months ended July 31,
	2013		2012		2013		2012
(in millions of U.S. dollars, except per share information)	$		$		$		$
Revenues		265.7		203.7		733.1		539.1
Cost of goods sold		194.6		148.2		562.6		435.2
Gross profit		71.1		55.5		170.5		103.9
Selling, general and administrative expenses		44.8		29.9		121.6		99.0
Research and development		2.8		—		7.4		—
Repositioning expenses		4.5		0.1		11.0		6.9
Acquisition and integration costs		1.2		—		9.3		—
Impairment charge		1.2		—		11.3		57.9
Gain on sale of capital assets		—		—		(1.6)		—
Operating income (loss)		16.6		25.5		11.5		(59.9)
Interest expense, net		12.6		6.8		35.0		19.8
Foreign exchange loss, net		—		0.4		1.5		0.6
Refinancing expenses		—		—		29.2		—
Other income, net		(1.2)		(0.5)		(1.8)		(0.6)
Income (loss) from continuing operations before income taxes		5.2		18.8		(52.4)		(79.7)
Provision for (benefit from) income taxes		0.9		3.3		(5.5)		3.6
Income (loss) from continuing operations		4.3		15.5		(46.9)		(83.3)
Loss from discontinued operations		—		—		—		(0.2)
Net income (loss) attributable to restricted voting shareholders		4.3		15.5		(46.9)		(83.5)
Basic income (loss) per share
From continuing operations		$0.031		$0.120		($0.337)		($0.643)
From discontinued operations		—		—		—		($0.002)
Net income (loss) per share, basic		$0.031		$0.120		($0.337)		($0.645)
Diluted income (loss) per share
From continuing operations		$0.030		$0.120		($0.337)		($0.643)
From discontinued operations		—		—		—		($0.002)
Net income (loss) per share, diluted		$0.030		$0.120		($0.337)		($0.645)
Weighted-average number of shares outstanding (in thousands)
Basic		140,640		129,639		139,232		129,639
Diluted		145,694		129,692		139,232		129,639

Patheon Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine months ended July 31,
	2013		2012
(in millions of U.S. dollars)	$		$
Operating activities
Loss from continuing operations		(46.9)		(83.3)
Adjustments to reconcile loss from continuing operations to cash (used in) provided by operating activities
Depreciation and amortization		35.6		30.8
Impairment charge		11.3		57.9
Foreign exchange loss on debt		0.4		—
Other non-cash interest		8.2		0.9
Change in other long-term assets and liabilities		(10.7)		(1.7)
Deferred income taxes		0.9		(0.3)
Amortization of deferred revenues		(13.5)		(7.6)
Gain on sale of capital assets		(1.6)		—
Stock-based compensation expense		2.4		2.5
Other		(1.7)		(0.8)
		(15.6)		(1.6)
Net change in non-cash working capital balances related to continuing operations		(22.3)		(9.9)
Increase in deferred revenues		12.3		18.7
Cash (used in) provided by operating activities of continuing operations		(25.6)		7.2
Cash used in operating activities of discontinued operations		(0.1)		(0.4)
Cash (used in) provided by operating activities		(25.7)		6.8
Investing activities
Additions to capital assets		(34.2)		(32.9)
Proceeds on sale of capital assets		6.6		0.1
Acquisitions, net of cash acquired		(256.1)		—
Cash used in investing activities of continuing operations		(283.7)		(32.8)
Cash provided by investing activities of discontinued operations		—		0.1
Cash used in investing activities		(283.7)		(32.7)
Financing activities
Decrease in short-term borrowings		—		(1.3)
Proceeds from long-term borrowings		633.8		35.5
Increase in deferred financing costs		(22.7)		—
Repayment of debt, net of penalty payment		(337.8)		(3.9)
Share issuance costs		(0.8)		—
Proceeds on issuance of restricted voting shares		35.8		—
Cash provided by financing activities		308.3		30.3
Effect of exchange rate changes on cash and cash equivalents		2.6		(2.4)
Net increase in cash and cash equivalents during the period		1.5		2.0
Cash and cash equivalents, beginning of period		39.4		33.4
Cash and cash equivalents, end of period		40.9		35.4

ADJUSTED EBITDA BRIDGE

(unaudited)

	Three months ended July 31,				Nine months ended July 31,
	2013		2012		2013		2012
	$		$		$		$
Total Adjusted EBITDA		41.0		36.4		95.2		51.0
Depreciation and amortization		(12.4)		(9.3)		(35.6)		(30.8)
Repositioning expenses		(4.5)		(0.1)		(11.0)		(6.9)
Acquisition and integration costs		(1.2)		—		(15.4)		—
Interest expense, net		(12.6)		(6.8)		(35.0)		(19.8)
Impairment charge		(1.2)		—		(11.3)		(57.9)
Gain on sale of capital assets		—		—		1.6		—
(Provision for) benefit from income taxes		(0.9)		(3.3)		5.5		(3.6)
Refinancing expenses		—		—		(29.2)		—
Operational initiatives related consulting costs		(0.4)		(1.0)		(2.3)		(13.3)
Acquisition-related litigation expenses		(4.0)		—		(4.0)		—
Stock-based compensation expense		(0.7)		(0.7)		(2.4)		(2.5)
Purchase accounting adjustments		—		—		(5.0)		—
Other		1.2		0.3		2.0		0.5
Income (loss) from continuing operations		4.3		15.5		(46.9)		(83.3)

###

SOURCE: Patheon Inc.

Contact:

Patheon Inc.

Tel: (919) 226-3200

Email: investorrelations@patheon.com

EX-99.2

Patheon

Fiscal 2013 Third Quarter Results

September 5, 2013

Exhibit 99.2

1

Forward-looking statements

This

presentation

contains

forward-looking

statements

or

information

which

reflect

our

expectations

regarding

possible

events,

conditions,

our

future

growth,

results

of

operations,

performance,

and

business

prospects

and

opportunities.

All

statements,

other

than

statements

of

historical

fact,

are forward-

looking

statements.

Forward-looking

statements

necessarily

involve

significant

known

and

unknown

risks,

assumptions

and

uncertainties

that

may

cause

our

actual

results

in

future

periods

to

differ

materially

from

those

expressed

or

implied

by

such

forward-looking

statements,

including

risks

related

to

acquisitions

and

divestitures,

our

operational

excellence

initiatives

and

transformation

activities,

our

exposure

to

complex

production

issues,

our

substantial

financial

leverage,

international

operations,

competition,

government

regulations,

customer

demand,

potential

environmental,

health

and

safety

liabilities,

existence

of

a

majority

shareholder,

and

product

liability

claims.

For

additional

information

regarding

risks

and

uncertainties

that

could

affect

our

business

and

our

financial

results,

please

see

our

Annual

Report

on

Form

10-K

for

the

fiscal

year

ended

October

31,

2012

and

our

subsequent

filings

with

the

U.S.

Securities

and

Exchange

Commission

and

the

Canadian

Securities

Administrators.

Accordingly,

you

are

cautioned

not

to

place

undue

reliance

on

forward-looking

statements.

These

forward-looking

statements

are

made

as

of

the

date

hereof,

and

except

as

required

by

law,

we

assume

no

obligation

to

update

or

revise

them

to

reflect

new

events

or

circumstances.

Use of Non-GAAP Financial Measures

Commencing

in

fiscal

2013,

we

revised

our

calculation

of

Adjusted

EBITDA

to

exclude

stock-based

compensation

expense,

consulting

costs

related

to

our

operational

initiatives,

purchase

accounting

adjustments,

and

acquisition-related

litigation

expenses.

We

believe

that

excluding

these

items

from

Adjusted

EBITDA

better

reflects

our

underlying

performance.

Based

on

the

revisions

to

the

definition

of

Adjusted

EBITDA,

we

have

recast

the

presentation

of

Adjusted

EBITDA

for

the

three

and

nine

months

periods

ended

July

31,

2012

to

be

consistent

with

the

current

period

presentation.

Our

Adjusted

EBITDA

is

now

income

(loss)

from

continuing

operations

before

repositioning

expenses,

interest

expense,

foreign

exchange

losses

reclassified

from

other

comprehensive

income

(loss),

refinancing

expenses,

acquisition

and

integration

costs

(including

certain

product

returns

and

inventory

write-offs

recorded

in

gross

profit),

gains

and

losses

on

sale

of

capital

assets,

income

taxes,

asset

impairment

charges,

depreciation

and

amortization,

stock-based

compensation

expense,

consulting

costs

related

to

our

operational

initiatives,

purchase

accounting

adjustments,

acquisition-related

litigation

expenses

and

other

income

and

expenses.

Adjusted

EBITDA

margin

is

Adjusted

EBITDA

as

a

percentage

of

revenues.

Since

Adjusted

EBITDA

is

a

non-GAAP

measure

that

does

not

have

a

standardized

meaning,

it

may

not

be

comparable

to

similar

measures

presented

by

other

issuers.

Readers

are

cautioned

that

Adjusted

EBITDA

should

not

be

construed

as

an

alternative

to

net

income

(loss)

determined

in

accordance

with

U.S.

GAAP

as

an

indicator

of

performance.

Adjusted

EBITDA

is

used

by

management

as

an

internal

measure

of

profitability.

We

have

included

Adjusted

EBITDA

because

we

believe

that

this

measure

is

used

by

certain

investors

to

assess

our

financial

performance

before

non-cash

charges

and

certain

costs

that

we

do

not

believe

are

reflective

of

our

underlying

business.

A

reconciliation

of

Adjusted

EBITDA

to

the

closest

U.S.

GAAP

measure

is

included

with

the

financial

statements

in

this

press

release.

2

•

Revenues increased by 30.4% from prior year

•

Gross profit improved by $15.6 million or 28.1% compared to the

same period last year 

•

Adjusted EBITDA increase of $4.6 million from prior year

•

Banner integration complete and yielding benefits

•

On track to achieve more than $1 billion in revenue in fiscal year 2013

Fiscal 2013 third quarter highlights

3

Strengthen

core operations

Sell business

differently

Enter logical

adjacencies

Drive industry

consolidation

•

Delivered $42M in

Adjusted EBITDA

savings in 2012 and on

track to deliver above

$30M in 2013

•

Right First Time and On

Time Delivery metrics

continue to improve

across our facilities

•

Talent upgrades across

several facilities

•

Executive sponsor

program for key

accounts driving right

level of dialogue

•

New project proposals

continue to grow across

many customers

•

Banner integration

complete and yielding

attractive results

•

Additional technology

and/or company

opportunities being

explored linked to

differentiated model 

•

High degree of consolidation activity

underway across CDMO industry

•

Customer market research indicates

that building an integrated offering at

scale is an attractive proposition

Strategy

4

Key accomplishments

CMO

Revenue increased by 35.4% compared to the

same quarter last year, including Banner

Factory performance, improved customer matrix,

Right First Time, On Time Delivery

PDS

Strong revenue of $37.9 million

7.1% year-over-year growth

Ongoing results from operating

excellence and top line growth

Product Updates

FDA approval of Calcitriol

Positive results from Entericare

(fish oil) clinical trial

First-to-file PIV ANDA for

Diclofenac

5

203.7

210.0

213.5

253.9

265.7

100

120

140

160

180

200

220

240

260

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Revenues increased by $62.0

million from prior year

Banner represented $66.4

million of the increase

Revenues

(U.S. $ in millions)

30.4% yr-yr revenue growth

6

55.5

55.4

42.4

57.0

71.1

10

15

20

25

30

35

40

45

50

55

60

65

70

75

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Gross profit increased by $15.6

million from prior year

Gross Profit

(U.S. $ in millions)

28.1% yr-yr gross profit growth

7

Adjusted EBITDA increase of $4.6 million from prior year

36.4

36.5

19.8

34.4

41.0

-15

-5

5

15

25

35

45

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Adjusted EBITDA

(U.S. $ in millions)

8

Summary financial results

Three months ended July 31,

Statement of Operations

2013

2012

Change

(in millions of U.S. dollars)

$

$

$

Revenues

265.7

203.7

62.0

Gross Profit

71.1

55.5

15.6

Selling, general and administrative expenses

44.8

29.9

14.9

Operating income

16.6

25.5

(8.9)

Income from continuing operations

4.3

15.5

(11.2)

Adjusted EBITDA

41.0                      

36.4                      

4.6

Balance Sheets

Q3 2013

Q4 2012

Cash and cash equivalents

40.9

39.4

Inventories

144.3

82.3

Intangible assets

70.6

-

Goodwill

45.3

3.5

Deferred tax liabilities (LT & ST)

57.7

23.0

Total debt (LT & ST)

610.4

313.1

Undrawn lines of credit

63.4

64.4

9

•

Provide industry leading customer experience

–

Right First Time

–

On Time Delivery

•

Exceed industry growth rates

•

Continue to improve financial results

–

Margin expansion

–

Free cash flow

–

Enhance shareholder value

2013 priorities

10

Thank you

11

Appendix

ADJUSTED EBITDA BRIDGE

Three months ended July 31,

Nine months ended July 31,

2013

2012

2013

2012

$

$

$

$

Total Adjusted EBITDA

41.0

36.4

95.2

51.0

Depreciation and amortization

(12.4)

(9.3)

(35.6)

(30.8)

Repositioning expenses

(4.5)

(0.1)

(11.0)

(6.9)

Acquisition and integration costs

(1.2)

—

(15.4)

—

Interest expense, net

(12.6)

(6.8)

(35.0)

(19.8)

Impairment charge

(1.2)

—

(11.3)

(57.9)

Gain on sale of capital assets

—

—

1.6

—

(Provision for) benefit from income taxes

(0.9)

(3.3)

5.5

(3.6)

Refinancing expenses

—

—

(29.2)

—

Operational initiatives related consulting costs

(0.4)

(1.0)

(2.3)

(13.3)

Acquisition-related litigation expenses

(4.0)

—

(4.0)

—

Stock-based compensation expense

(0.7)

(0.7)

(2.4)

(2.5)

Purchase accounting adjustments

—

—

(5.0)

—

Other

1.2

0.3

2.0

0.5

Income (loss) from continuing operations

4.3

15.5

(46.9)

(83.3)