Catalent to Acquire Gene Therapy Leader Paragon Bioservices, Inc. for $1.2 Billion

Will provide new expertise and capabilities in one of the
fastest-growing areas of healthcare, positioning Catalent for
accelerated long-term growth

SOMERSET, N.J. & BALTIMORE–(BUSINESS WIRE)–Catalent, Inc. (NYSE:CTLT), the leading global diversified provider of
advanced delivery technologies and development solutions for drugs,
biologics and consumer health products, and Paragon Bioservices, Inc., a
leading viral vector development and manufacturing partner for gene
therapies, today announced they have entered into a definitive agreement
under which Catalent will acquire Paragon for $1.2 billion.


“Paragon’s unparalleled expertise in the rapidly growing market of gene
therapy manufacturing will be a transformative addition to our business
that we believe will accelerate our long-term growth. Paragon brings to
Catalent a complementary capability that will fundamentally enhance our
biologics business and our end-to-end integrated biopharmaceutical
solutions for customers,” said John Chiminski, Catalent’s Chair & Chief
Executive Officer. “We look forward to working with Paragon’s incredibly
talented team and world-class customers to complete the significant
ongoing investments into expanded state-of-the-art facilities and
deliver revolutionary, lifesaving treatments to patients.”

Paragon’s differentiated scientific, development and manufacturing
capabilities have positioned it to capitalize on strong industry
tailwinds in the potentially $40 billion addressable market for gene
therapy. Paragon brings specialized expertise in adeno-associated virus
(AAV) vectors, the most commonly used delivery system for gene therapy,
as well as unique capabilities in GMP plasmids and lentivirus vectors.

For over 25 years, Paragon has partnered with some of the world’s best
biotech and pharma companies to develop and manufacture products based
on transformative technologies, including AAV and other gene therapies,
next-generation vaccines, oncology immunotherapies (oncolytic viruses
and CAR-T cell therapies), therapeutic proteins, and other complex
biologics.

Pete Buzy, Paragon’s President and CEO, said, “Our existing investors,
NewSpring Health Capital and Camden Partners, were extremely supportive
in getting us to where we are today. We are excited to join forces with
the leading drug development and manufacturing partner in our industry.
This transaction will enable us to achieve our next stage of development
and expand our capabilities and platform for the benefit of our
customers and their patients.”

Financial Impact and Value Creation

The transaction will deliver highly compelling value to Catalent’s
shareholders. Although Paragon will represent a small percentage of
Catalent’s business in the near term, it will transform the company’s
business profile and meaningfully accelerate its revenue and EBITDA
growth over time. Paragon is expected to achieve more than $200 million
in revenue in calendar year 2019, with nearly 90% of this revenue target
already reflected in signed contracts. The gene therapy market is
expected to have sustained growth of 25% in the medium term, and, as a
leader in the industry, Paragon is expected to outpace this market
growth for the foreseeable future. Catalent expects the transaction to
be accretive to its Adjusted Net Income per share in the second full
fiscal year after closing, and significantly accretive thereafter.

Financing and Approvals

The definitive merger agreement for the acquisition contemplates an
all-cash purchase of all of Paragon’s outstanding equity for $1.2
billion on a cash-free, debt-free basis. Catalent intends to fund the
transaction with the proceeds of a $650 million incremental term loan
under its existing senior secured credit facilities and the issuance of
$650 million of a new series of convertible preferred stock to funds
affiliated with Leonard Green & Partners, L.P. (“LGP”), although the
acquisition is not subject to a financing condition. Catalent will use
the funds remaining from these financings, after the payment of the
purchase price and the fees and expenses associated with the
transaction, to pay a portion of the costs of capital expansion projects
currently underway at Paragon’s facilities in Maryland, with the
remaining costs to be paid with cash on hand. The incremental term loan
and the issuance of the convertible preferred stock are each conditioned
upon the closing of the acquisition.

The transaction is subject to customary closing conditions, including
the expiration of the waiting period under the U.S. antitrust laws, and
is expected to close in the second quarter of 2019. At June 30, 2019,
after the expected closing of the acquisition and related financings,
Catalent’s pro forma net leverage ratio, after taking into account the
acquisition and the related financings, is expected to be approximately
4.0x, with plans to deleverage to 3.5x within 12 to 18 months of closing.

Catalent has obtained a binding commitment for the incremental term loan
facility, subject to customary closing conditions and the execution of
definitive documentation, from JPMorgan Chase Bank, N.A., which will act
as lead arranger for the financing. Catalent has separately entered into
a definitive agreement to issue up to $1 billion of convertible
preferred stock to the funds affiliated with LGP, of which Catalent
intends to issue $650 million. The convertible preferred stock will
initially pay dividends of 5%, subject to later adjustment under
conditions set forth in the stock’s certificate of designation, and may
be converted into common stock or redeemed for common stock or cash on
the terms and subject to the conditions set forth in the certificate of
designation. Catalent intends to file with the Securities and Exchange
Commission a Current Report on Form 8-K that will have further details
concerning the acquisition and the related financings.

Management and Board of Directors

Upon completion of the transaction, Paragon’s entire organization will
remain under the leadership of Pete Buzy, with its industry-leading
management team and approximately 380 employees joining the Catalent
team.

In conjunction with the investment in Catalent by the LGP funds, Peter
Zippelius, a Partner at LGP, will join Catalent’s Board of Directors,
marking the beginning of a long-term strategic partnership.

Advisors

Centerview Partners LLC is serving as exclusive financial advisor to
Catalent, and Fried, Frank, Harris, Shriver & Jacobson LLP is serving as
Catalent’s legal counsel. William Blair & Company is serving as
financial advisor to Paragon, with Kirkland & Ellis LLP and Gordon
Feinblatt LLC serving as Paragon’s legal counsel. UBS Investment Bank is
serving as exclusive financial advisor to LGP and Latham & Watkins LLP
is serving as LGP’s legal counsel.

Conference Call / Webcast

On Monday, April 15, 2019, at 8:30 a.m. ET, Catalent will host a webcast
presentation to discuss the transaction. Links to the webcast and
accompanying documents will be available on the company’s Investor
Relations website, http://investor.catalent.com.

About Catalent

Catalent is the leading global provider of advanced delivery
technologies and development solutions for drugs, biologics and consumer
health products. With over 85 years serving the industry, Catalent has
proven expertise in bringing more customer products to market faster,
enhancing product performance and ensuring reliable clinical and
commercial product supply. Catalent employs over 11,000 people,
including over 1,800 scientists, at more than 30 facilities across five
continents, and in fiscal year 2018 generated approximately $2.5 billion
in annual revenue. Catalent is headquartered in Somerset, New Jersey.
For more information, visit www.catalent.com.

Catalent Biologics provides advanced technologies and integrated
solutions for biologic and biosimilar development and manufacturing,
from DNA to fill/finish and commercial supply, through its extensive
Biologics network including: Bloomington, Indiana, where the company
recently announced a twentieth commercial launch of a fill/finish
product, and Madison, Wisconsin, home of Catalent Biologics’ proprietary
GPEx® technology for stable, high-yielding mammalian cell lines with
eleven approved molecules. For more information on Catalent Biologics,
visit www.catalent.com/biologics.

More products. Better treatments. Reliably supplied.™

About Paragon Bioservices, Inc.

Paragon Bioservices, Inc. is an industry-leading, private-equity-backed
contract development and manufacturing organization (CDMO) whose focus
is the development and manufacturing of cutting-edge biopharmaceuticals.
Paragon aims to build strong client partnerships with the world’s best
biotech and pharma companies, focusing on transformative technologies,
including gene therapies (AAV), next-generation vaccines, oncology
immunotherapies (oncolytic viruses), and other complex biologics.

About Leonard Green & Partners

Leonard Green & Partners, L.P. is a leading private equity investment
firm founded in 1989 and based in Los Angeles. The firm partners with
experienced management teams and often with founders to invest in
market-leading companies. Since inception, LGP has invested in over 90
companies in the form of traditional buyouts, going-private
transactions, recapitalizations, growth equity, and selective public
equity and debt positions. LGP primarily focuses on companies providing
services, including consumer, business, and healthcare services, as well
as retail, distribution, and industrials. Select past and current
investments include IQVIA, MultiPlan, Aspen Dental, Whole Foods Market,
Shake Shack, Activision, and Petco. Its most recent fund, Green Equity
Investors VII, L.P., closed in 2016 with $9.6 billion of committed
capital. For more information, please visit www.leonardgreen.com.

About Camden Partners

Camden Partners is a multi-strategy private equity firm based in
Baltimore, MD. Founded in 1995, the firm focuses on both growth and seed
stage investments. Camden Partners’ growth strategy leverages domain
expertise in the technology-enabled business services, healthcare
services and education sectors to turn lower middle market companies in
these sectors into market leaders. Donald W. Hughes, Partner at Camden
Partners, represents Camden’s investment on the Board of Directors of
Paragon Bioservices.

About NewSpring Health Capital

NewSpring Health Capital is the dedicated healthcare fund of NewSpring
Capital, a private equity firm based in Radnor, PA. NewSpring Health
Capital partners with management teams to accelerate the success of
differentiated healthcare companies, delivering capital for growth,
recapitalizations, and mergers & acquisitions within the segments of
technology-enabled services, niche clinical providers and specialty
pharmaceuticals. Kapila Ratnam, PhD, a partner at NewSpring Capital, has
served on the Board of Directors at Paragon Bioservices since 2014
following NewSpring Health Capital’s investment.

Forward-Looking Statements

This press release contains both historical and forward-looking
statements. All statements other than statements of historical fact are,
or may be deemed to be, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These
forward-looking statements generally can be identified by the use of
statements that include phrases such as “believe,” “expect,”
“anticipate”, “intend”, “estimate”, “plan”, “project”, “foresee”,
“likely”, “may”, “will”, “would” or other words or phrases with similar
meanings, and include the statements regarding Paragon’s 2019 revenues
and its future growth rate, as well as the impact of the transaction on
our Adjusted Net Income. Similarly, statements that describe our
objectives, plans or goals, including our plans to close our agreement
to acquire Paragon, to close on the related financing transactions, and
to subsequently deleverage our balance sheet, are, or may be,
forward-looking statements. These statements are based on current
expectations of future events. If underlying assumptions prove
inaccurate or unknown risks or uncertainties materialize, actual results
could vary materially from our expectations and projections. Some of the
factors that could cause actual results to differ include, but are not
limited to, the following: any delay or failure to conclude the
acquisition of Paragon Bioservices, Inc. or the related financings on
the terms previously agreed or difficulty in integrating the acquisition
if closed or realizing on the anticipated business from the acquisition;
changes to our business, our industry, or the overall economic climate
that limit our ability to obtain the desired deleveraging, general
industry conditions and competition; product or other liability risk
inherent in the design, development, manufacture and marketing of our
offerings; inability to enhance our existing or introduce new technology
or services in a timely manner; economic conditions, such as interest
rate and currency exchange rate fluctuations; technological advances and
patents attained by competitors; and our substantial debt and debt
service requirements that restrict our operating and financial
flexibility and impose significant interest and financial costs; or
difficulty in integrating other acquisitions into our existing business,
thereby reducing or eliminating the anticipated benefits of the
acquisition. For a more detailed discussion of these and other factors,
see the information under the caption “Risk Factors” in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2018 filed with
the Securities and Exchange Commission. All forward-looking statements
in this press release speak only as of the date of this press release or
as of the date they are made, and we do not undertake to update any
forward-looking statement as a result of new information or future
events or developments unless and to the extent required by law.

Non-GAAP Financial Measures

Under our credit agreement, our ability to engage in certain activities,
such as incurring certain additional indebtedness, making certain
investments and paying certain dividends, is tied to ratios based on
Adjusted EBITDA (which is defined as “Consolidated EBITDA” in senior
secured credit agreement). Adjusted EBITDA is based on the definitions
in our credit agreement, is not defined under U.S. generally accepted
accounting principles (GAAP), and is subject to important limitations.
Adjusted EBITDA is the covenant compliance measure used in certain
covenants under our credit agreement, particularly those governing debt
incurrence and restricted payments. Because not all companies use
identical calculations, our presentation of Adjusted EBITDA may not be
comparable to other similarly titled measures of other companies. In
this press release, we have referred to Adjusted Net Income, which we
calculate by tax-adjusting our calculation of Adjusted EBITDA after
deducting depreciation and amortization. Adjusted Net Income is also not
a GAAP measure and may also not be comparable to similarly titled
measures of other companies.

Contacts

Catalent

Investors:

Thomas
Castellano, Investor Relations, Catalent
+1 732 537-6325
investors@catalent.com

Media:

Chris
Halling, Global Communications, Catalent
+44 (0)7580 041073
chris.halling@catalent.com

Brunswick
Group
+1 212 333 3810
catalent@brunswickgroup.com

Paragon

Media:

Colleen
Floreck, Paragon Communications
+1 410 975 8708
cfloreck@paragonbiservices.com