Formosa Laboratories Ltd.

2015H1&Jul Operating Results

TWSE 4746

1

Disclaimer

This material has been prepared by Formosa Laboratories Inc. (“Formosalab”).

Any opinions expressed in this material are subject to change without notice as a result of using

different assumptions. Formosalab is under no obligation to update or keep current the information

contained herein. The information contained in this presentation is Formosalab’s confidential

information.

Any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it is

prohibited and may be unlawful.

No representation or warranty, express or implied, is or will be made in or in relation to, and no

responsibility or liability is or will be accepted by the Company as to, the accuracy or completeness

of this material and any liability therefore is hereby expressly disclaimed.

Statements made in this material include forward-looking statements, which include, without

limitation, statements about the issues, plans and expectations of Formosalab. Without limiting the

foregoing, statements including the words “believes”, “anticipates”, “plans”, “expects” and similar

expressions are also forward-looking statements. Forward-looking statements reflect, among other

things, management’s plans and objectives for future operations, current views with respect to future

events and future economic performances and projections of various financial items. These forwardlooking

statements involve known and unknown risks, uncertaint ies and other factors which

may cause actual results to differ materially from those implied by such forward-looking

statements.2

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Agenda

� Introduction

� 2015H1 and Jul. Results

� Business Development

� Business Outlook

Introduction

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• Established on Dec. 29, 1995

• Capital：NTD 851 million

• Employee headcount：580persons

• Area：45,508 m2

• Business scope ：APIs (34 US DMFs)

UV filter (One of top three makers)

Contract API RD & Manufacturing

• Inspected by Taiwan TFDA, US FDA, Japan PMDA, German BGV,

EU EDQM and Mecican COFEPRIS

2015H1 and Jul. Results

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GM v. API extension

19

34%

33%

40%

62%

75%

22%16%

14%

28%

33%

10%

15%

20%

25%

30%

35%

40%

2011 2012 2013 2014 up to 2015Q2

20%

30%

40%

50%

60%

70%

80%

90%

API GM

8

34%

8%

10%

49%

48%

85%

74% 64%

73%

71%

39%30%

27%

46% 41%

0%

15%

30%

45%

60%

75%

90%

2011 2012 2013 2014 up to 2015Q2

Cholesterol and Phosphate Binders Vit.D Derivatives API Average

API GM 2011~now

9

23.9

12.8

9.8

22.3

9.3 8.8

15.5

1.50.2

13.7

-3 -2.8

27.5

11.0 10.5

32.8

10.9

5.7

-5

0

5

10

15

20

25

30

35

Gross margin Operating Profit Margin Net Profit Margin

2010 2011 2012 2013 2014 up to 2015Q2

Back on track value delivery

10

NT$ MM

except for EPS2014Q3 2014Q4 2015Q1 2015Q2

Revenue 576 526 528 485

API % 79% 77% 81% 68%

Gross profit 212 127 183 150

Gross margin 37% 24% 35% 31%

Operating expenses 115 91 114 108

Operating income 97 36 69 42

Operating margin 17% 7% 13% 9%

Non-operating income 10 29 (19) (17)

Net Income after Tax 89 59 42 16

Pretax Margin 18% 12% 10% 5%

Net Margin 15% 11% 8% 3%

EPS 1.06 0.69 0.49 0.20

Consolidated Income Statement

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NT$ MM

except for EPS2014H1 2015H1 YoY

Revenue 1,395 1,013 -27%

API % 49% 75%

Gross Profits 348 333 -4%

Gross Margin 25% 33%

Operating Expenses 207 222 7%

Operating Income 141 111 -21%

Operating Margin 10% 11%

Non-operating income (3) (36)

Net Income after Tax 115 58 -50%

Pretax Margin 10% 7%

Net Margin 8% 6%

EPS 1.36 0.69 -49%

2014H1 v. 2015H1

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NT$ MM 2013 2014 2015Q2

Cash & cash equivalents 413 8% 405 7% 423 7%

Receivable-net 779 16% 684 12% 687 12%

Inventories 679 14% 957 17% 1,089 19%

Long-term investments 270 5% 554 10% 465 8%

Total fixed assets 2,307 46% 2,562 45% 2,625 45%

Total other assets 543 11% 528 9% 515 9%

Total assets 4,991 100% 5,690 100% 5,804 100%

Total current liabilities 1,772 36% 1,469 26% 1,688 30%

Long-term liabilities 520 10% 673 12% 733 13%

Other liabilities 183 4% 513 9% 513 8%

Total liabilities 2,475 50% 2,655 47% 2,934 51%

Total shareholders' equity 2,516 50% 3,035 53% 2,870 49%

Book Value per share 29.93 35.96 33.72

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Consolidated Balance Sheet

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NT$ MM 2013 2014 2015Q2

Cash and cash equivalents at

beginning of period255 413 404

Cash flows from operating activities 32 280 63

Additions to property, plant and

equipment(549) (457) (256)

Cash flows from investing activities (124) (72) 3

Cash flows from financing activities 799 240 209

Cash and cash equivalents at end of

period413 404 423

Consolidated Cash Flow Summary

2015 Jan~Jul sales

1. Cholesterol and Phosphate Binder NT$ 331M，YoY + 29 %

2. Vit. D Derivatives NT$ 205M，YoY + 22 %

3. Inflammatory NT$ 106M，YoY － 47 %

4. Respiratory Agents NT$ 98M，YoY + 104 %

5.Antibiotics NT$ 46M，YoY + 844 %

Unit: NTD (mil) Jan~Jul, 2014 Jan~Jul, 2015YoY

Category Sales % Sales %

UV filters 803.5 49% 313.9 25% -60.94%

API 852.0 51% 939.3 75% 10.25%

Total 1,655.5 100% 1,253.2 100% -24.30%

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Business Development

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Capex

� Cholesterol/Phosphate binder API Capacity Expansion

• US$7M Investment

• 25% capacity increase

• Expected to operate in 2016H2

� High potency plant expansion

• 2014-2016e

• US$22M Investment

• Facilities for products with high entry barrier, vitamin D derivatives, cytotoxic

agents for cancer treatment, hormones, and antibody-drug conjugates

• Expected to operate in 2016Q4

� Advanced Air Pollution Management Facility

• Effective in 2015Q3

• Expected to reduce associated fees by NT$6M per anna

� CMO services

� Strong demand for new drug development companies

� Capacity expansion in line late 2015H2

� To see CMO revenue doubled in 2016

� Antibody Drug Conjugates Development Platform

� Several quotes from clients

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Advanced Service platform

Biosimilar and NCE

� Protein Drug and Biosimilar

� Founded Eirgenix

� Strong capacity demand from clients

� Expected to have first biosimilar IND in 2015H2

� NCE for Cancer Therapeutic Area

� Fully owned subsidiary-Formosa Pharma.

� Cooperated with NTU and TMU in Taiwan

� NCE under development at US and TWN Phase I with

several enrollments

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Business Outlook

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Cholesterol/Phosphate Binder

� Sales distribution 2014=1/1, 2015H1=2/3

� Limited suppliers, strong global demands

� Capacity fully utilized and queue to release after new capacity

in line in 2016Q3

� Sevelamer Carbonate/ HCl

� Monopoly in the Europe, Dominate in the world

� Clients include 5 our of the 7 US P4 challengers, 18 international

clients including top 3 players

� The only one supplier for the five year Brazil Government

Procurement Plan

� Output 2015H2 will be doubled to the amount 2016 whole year

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Cholesterol/Phosphate Binder

� Colesevelam HCl

� Dominate in the world

� Clients include 3 our of the 74P4 challengers, 11 international

clients including top 3 players

� Pre-launch orders in the US prepared, some delivered in 2015H1

� Output 2015H2 similar to the amount 2015H2

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Vitamin D derivatives

� Paricalcitol

� US market counts for 47% of the entire global market

� Clients include 6 out of 8 Us P4 challengers, 2 505(b)(2)

submits and 4 other generic drug clients

� Expected to have 40% of total global market

� Maxacalcitol

� Compound merely marketed in Japan

� Dominate in Japanese generic market

� Expected to have 70% Japanese generic market

� Doxercalciferol

� Compound merely marketed in the US

� 6 clients

� Expected to have 30% of the US market

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Antibiotics and Cancer

� Linezolid

� Supplying API to one of the three ANDA holders

� The client, ranked as top ten generic drug companies, obtained

ANDA for the US and Japanese markets in 2015Q2/3

� Expected to have 10% of the global market

� Temozolomide

� 6 clients

� US ANDA obtained in 2015Q1

� Expected to have European ANDA in 2016Q1

� Expected to have 30% of the global market

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New Drug and UV Fillters

� HETLIOZ & Fanapt

� Assisting Vanda Pharmaceuticals Inc. for the US/ EU NDA

approval

� Good sales, quarterly revenue reached US$ 10M/ US$ 17.6M,

QoQ 34%/20% for HETLIOZ and Fanapt respectively

� UV Fillters

� Demand bounced back in 2015H2, expected to double the output

2015H2 compared to the amount 2015H1

� Improved GM due to effective cost control

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Q&A

Appendix

New Products

Product Therapeutic Use US EU JP Row

Global

Sales

2014 Q2 –

2015 Q1

Colesevelam HCl Antihyperlipidemic 2015Q4 NA NA NA 715

Sevelamer

CarbonateAntihyperphosphatemic 2015Q4 launched NA NA

1,710

Sevelamer HCl Antihyperphosphatemic 2015Q4 NA NA2015Q2

launched

Gadoterate

Meglumine

Diagnostic Aid

(MRI Contrast Agent)2018Q1 2016Q4 NA NA 166

Linezolid Antibiotc2015Q2

launched2016Q1

2015Q2 vial

launched

2015Q4

(pills)

NA 1,293

Maxacalcitol Antihyperparathyroid NA NA 2015Q4 NA 165

Temozolomide Brain Tumor 2015Q2 2016Q1 2016Q4 已上市 821

Doxercalciferol Antihyperparathyroid 2015 Q3 NA NA NA 245

(US$ M)

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Product Therapeutic Use US EU JP Row

Global

Sales

2014 Q2 –

2015 Q1

Benzonatate cough suppressant 2015 Q4 NA NA launched 52

Calcipotriol Psoriasis launched launched NA 2015Q3 (IR) 714

Gadodiamide

Diagnostic Aid

(MRI Contrast

Agent)

NA NA launched 2015Q4 (TR) 86.8

Montelukast asthma treatment 2015 Q4 launched NA launched 2,005

Paricalcitol Antihyperparathyroid launched launched NA 2015Q3 (TR) 281

(US$ M)

New Market Opportunity