This proposal outlines a strategy to build a $80-150 million revenue company that manufactures and distributes fine chemical and biologic products. The plan involves acquiring several complementary companies and integrating their operations to achieve efficiencies and expand sales and marketing globally. The life science industry is large, complex, and fragmented, creating opportunities to consolidate segments profitably. The proposal discusses targeting small companies for acquisition and leveraging the proposing team's experience in operations and industry knowledge to increase acquired companies' profitability through direct distribution and other means.

1. ProposalFine Chemical & Biologic Products Prepared by: P. Scott Waterhouse Copyright: 2011

2. Background Highlights University of Cincinnati w/ MA Economics Minors in Chemistry & Math 1st half of career with Fortune 500 in finance, operational, strategic & product planning. Lots of international. CFO of $400 million energy company. Transition to operations, line & general management with Sigma Chemical in 1988. ICN Biomedicals & W. Europe for ICN Pharmaceuticals. Biopharmaceutical Company start-up. Chemdex – B2B Internet start-up Start-up tech consulting & LBOs 20 years in Fine Chemicals & Biologic Products.

3. Outline What Why How Details Appendix – Product Examples

4. What? Build a $80 to $150 million revenue company through acquisition and organic growth that manufactures and distributes fine chemical and biologic products to the worldwide life science market.

5. What? The life science industry is huge, complex, highly fragmented, growing and very profitable. There are numerous opportunities to consolidate segments of the industry through acquisition and claim large profits and extremely high rates of return.

7. Effective & expanded global sales & marketing.

9. Solid, industry norm profit margins.

10. Consolidated profitability substantially higher than the acquired components.How? - Overview

11. Why? Overwhelming customer need. It’s been done successfully. We know how to do it. Numerous opportunities. Highly profitable, stable, growing & “low risk” business.

12. Why? Overwhelming Customer Need. Difficult and costly to find, qualify and purchase the right product for highly specific applications. Sourcing mistakes & delays are very costly. Typically 150+ suppliers to multiple facilities. Very high transaction cost per purchase order.( Customers value quality, availability and reliability over price.)

14. Achieved “critical mass”, expanded customer base & increased GPM.

15. Strategic acquisition by eMerck in 1999

16. $150 million purchase price

17. 3 times sales

20. Supplier lists at major labs through Chemdex

22. More than 300 negotiations.

23. Touched more than 450 suppliers.Why? We know how to do it.

24. Why? Numerous opportunities. A huge, complex and highly fragmented industry. $37 billion market. Dozens of product categories. Hundreds of thousands of products. Thousands of manufacturers, most small. Worldwide customer base. Engineer a valuable enterprise by acquiring leading product-market combinations within this complex matrix.

25. Why? Highly Profitable & Stable

28. Strategy – Target Company Profile Products 200 to 4000 Often specialized in a single application, process or technique. May have patented technologies. Often weakly supported with technical and customer service. Nearly 100% self manufactured.

29. Strategy – Target Company Profile Management CEO is the owner/founder. Usually with a science background. Receptive to a combination, buy-out or other strategy to build a solid, sustainable business. Little managerial depth. Often a strong technical employee responsible for manufacturing and product development. Short on general management and marketing capabilities.

30. Strategy – Target Company Profile Other Usually a single manufacturing facility. ISO 9001 & 13485 certified. Weak Internet presence. Poor pricing execution. Additional margin of 10% to 20% may be available. Minor catalog. Often not more than a price list. Low visibility to potential customer base. Technically innovative, but lacking capital. Motivated toward security rather than growth. Product quality good. Delivery often not reliable.

31. How? Strategy Summary Operational integration will create a powerful foundation to build the business through: Direct product distribution to end use customers* Improved quality, availability & reliability Expanded global sales & market reach Improved research & product development Modern business processes

32. How? Strategy Summary Profitability will be increased by: Higher GPM from direct distribution to customers * Rationalizing manufacturing & complementary product lines Spreading fixed cost burdens over higher volume High marginal contribution from incremental revenue

33. How? Strategy Summary Revenue growth with improved marginal contribution will result from: Combining customer bases: acquired products to existing customers; existing products to newly acquired customer base. Access to new geographic markets – achieving a 50/50 sales mix. New products – Internal New products – As a Reseller Enhanced product marketing, including Internet sales. Access to Bulk Sales/Trading or Tender business.

34. Profit Leverage from Direct Distribution

36. Greater than 80% of sales directly to end-users.

37. A modern Internet site where customers can easily locate, qualify and order products.

38. Cost economies in physical distribution and facilities.

40. Improved company resources to support the customer.

41. Access to a broader technology toolbox.

42. A planned, prioritized and effective product development program.

44. Development of the Idea Sigma-Aldrich 80% GPM Concerned customers. Little management sophistication. ICN Biomedicals Manufacture almost nothing. Customers searching for products. High, increasing margins. Lots of new business. Small, specialty suppliers. Management buy-out?

45. Chemdex In depth with supplier development & good at it. Loads of business & industry intelligence. Confirmed all that I had been thinking. Contacts Buy ICN Biomedicals Package the idea THP Research Expanded Strategy Development of the Idea

46. Fine (Synthetic) Chemical Biologic Products

47. Fine Chemical:a chemical element or compound of known purity with specific performance characteristics related to molecular structure often modified through chemical synthesis. Biologic:a chemical compound or process naturally occurring within biologic organisms. The tools and techniques for assessing or modifying biologic compounds is different from synthetic chemistry. Products

48. Alfa Aesaris a leading fine chemical company & division of Johnson-Matthey. Organic reagent chemicals used in research are one of several product categories. Products

49. R&D Systems is the main brand name for Techne Corp. products. Products for molecular biology & cell research are a leading product line. Products

50. Among Sigma’s line of products is an extensive offering of antibodies. Antibodies fight bacteria & viruses. Sigma-Aldrich is the market leader in biological reagents. Products

51. Biologic: Agarose (used in electrophoresis) extracted from Seaweed Fine Chemical: Acetominophen (Tylenol) Products - Example

52. Product - Example Electrophoresisis a common biologic technique for measuring and separating proteins and DNA. The basic chemicals that comprise the genetic code; adenine, thymine, guanine & cytosine are isolated for research from salmon sperm.

53. Titanium – a non reactive metal often used in protective coatings and paints. Many synthesized variations of titanium meet differing application requirements. Products - Example

54. Solvents – one of numerous fine chemical categories. Solvents are used to dissolve, clean or decontaminate. Solvents used in biotech research & applications require ultra high levels of purity. Products - Example

55. Acetone is a common solvent also used in household applications. Products - Example

56. eCommerce Dynamic Products are numerous and extremely complex. It is difficult and costly to locate primary suppliers. The supplier base is huge and fragmented. The customer base is huge and fragmented. The market is global. Purchase specifications and decisions are made primarily by individual laboratory or facility and scientist. Accessibility is the key. eCommerce is an EQUALIZER.