Catalent, Inc. 2016 Annual Report

2016 annual report 2016 Financial Performance Strong Historical Financial Performance net revenue1 adjusted ebitda1 usd m usd m 2 4.1% CAGR 2 1,848 5.6% CAGR 401 1,399 274 $1,831 22% 20% MARGIN 2009 2016 2009 2016 1 Fiscal years end June 30th. For an explanation of how we determined ADJUSTED EBITDA and how this financial measure reconciles to our reported results, please see page 64 of the enclosed Annual Report on Form 10-K. 2 CAGRs represent FY’09 – FY’16 financials, including acquisitions from the point of inception. Diverse Revenue Base & Operating Platform geography product type united states branded drugs 12% europe 16% vms & other row otc 13% 45% 40% biologics 39% 13% generics 22% Revenue growth of 6% Adjusted EBITDA of $401 Leverage ratio of 4.3x in constant currency million and adjusted EBITDA as of 6/30/16; interest compared to FY’15 margin of 22% in FY’16 coverage ratio of 4.5x john chiminski Chief Executive Officer Dear Shareholders, Fiscal 2016 was a year of both opportunity and challenge for Catalent. We generated strong organic revenue growth at constant exchange rates versus the prior year across both Advanced Delivery Technologies and Development Solutions. We realized market-leading Development Solutions revenues, and launched a record number of new prescription and consumer health products for our customers, bringing important new treatments to patients around the world. Recent strategic investments contributed materially to 2016 growth, including biologics, consumer health products, and our fast-growing Asia-Pacific business. Muting the earnings impact of this strong demand, however, was a six-month operational suspension at our Beinheim, France facility, which returned to active operational status in late April following intensely focused efforts from Catalent associates around the globe. As we look ahead to 2017, we believe Catalent is well positioned—and more operationally prepared than ever—to benefit from the robust, organically growing market across both strategic platforms. 2016 in review Financial Performance The Company delivered strong organic revenue growth of 6% in 2016 at constant exchange rates,i with our consolidated revenues reaching $1,848.1 million, despite the revenue loss due to our French facility suspension. We delivered $401.2 million of Adjusted EBITDAii in 2016, down 4.8% against the prior year at constant exchange rates, driven primarily by a $32 million adverse impact of the French facility shutdown. Adjusted EBITDA margin was 21.7% at constant exchange rates in the current year, and fully diluted earnings per share were $0.89 in 2016, both reflecting the impact of the French facility suspension. Beinheim, France Facility Operational Suspension In November 2015, our Beinheim softgel facility, one of eleven softgel facilities in our global network of thirty-three facilities, received a notice from the ANSM, the French pharmaceutical regulatory authority, suspending manufacturing at the site. The suspension followed a series of incidents within the facility involving the malicious misplacement of capsules. The Catalent team, in accordance with our Quality Management System, conducted a risk assessment of these incidents, including re-assessment and re-inspection of batches produced during the period in which these incidents occurred, as did customers i Comparisons “at constant exchange rates” exclude the effects of foreign currency fluctuations against the U.S. dollar during the year. For a reconciliation of constant currency results to our reported results, please see page 47 of the enclosed Annual Report on Form 10-K. ii For an explanation of how we determine Adjusted EBITDA, a non-GAAP measure, and how this financial measure reconciles to our reported results, please see page 60 of the enclosed Annual Report on Form 10-K. of the facility. We also implemented significant operational changes, enhanced our security and access control measures, and reinforced and strengthened our operational and quality policies and procedures at the site and throughout Catalent. The ANSM reinstated our license on April 28th, and the site has restarted production activities. The Beinheim facility suspension reduced our 2016 revenues by $35 million, and Adjusted EBITDA by $32 million, both at constant exchange rates. The learnings from this incident have already been transferred across all our sites and driven policy, procedural, and cultural changes. While we have substantially transformed and driven excellence into our operational, quality, and regulatory performance over the last decade, there is always more to do. We must—and will—continuously improve and do everything in our power to prevent a repeat of this incident. Strategic Growth Drivers in 2016 In 2016, we realized substantial top-line growth driven by recent and ongoing investments in facilities and people, as well as strategies begun in past years. Our recent Catalent Biologics investments are delivering favorable results, driving the fastest growing business area within the Company. We’ve built a uniquely different biologics portfolio, including expression, formulation/delivery, manufacturing, and analysis services, with strong new business wins and a rapidly growing sales funnel. Our strategy to add greater focus to Consumer Health played an important part in delivering 2016’s strong organic revenue growth. We successfully brought into our softgel network new over-the-counter and nutritional supplement volumes in Europe, Latin America and Asia-Pacific, filling available capacity and driving maximum leverage of our industry leading global softgel infrastructure. In recent years, we have invested in and devoted substantial organizational focus to expand Catalent’s presence in the important Asia-Pacific region. Our two recently added China sites are contributing to organic growth. In 2016, we further expanded our clinical supply capacity, adding to our Singapore site and establishing new clinical supply capacity in Japan. Reinvesting for the Future In 2016, Catalent continued to invest a significant portion of its free cash flow in growth-generating assets, including $139.6 million in property, plant and equipment. Major projects include construction of commercial-scale metered dose inhalation capacity in North Carolina, and build-out of customer-driven capacity in our New Jersey and Illinois facilities, driven by current product pipeline programs. looking ahead Looking to 2017 and beyond, Catalent is well-positioned in an attractive, robustly growing industry, where we have leadership, scale, and diversification across products, geographies, and markets. Our strong business development performance; our proven “follow the molecule” strategyiii; and our recent and ongoing investments in biologics, inhalation, and consumer health, will further sustain favorable organic revenue and earnings growth in the future. We have consistently viewed our ability to reliably supply our customers as our #1 growth program, and we remain rigorously focused on improving our excellence. Because an important foundation of Catalent’s culture is continuous improvement, we are always looking for ways to enhance our processes and systems. As one aspect of this effort, we have engaged in a company-wide effort to focus our team on the ultimate beneficiary of our excellence—the patient—as a critical guidepost to the interests we serve. One in every twenty doses of prescription and consumer health products taken by people globally each year comes from Catalent. From operators to lab technicians, from plant managers to senior leadership, decisions we make each day with respect to those products can affect the health and well-being of patients and consumers. We will unfailingly seek to put patients’ interests first in all that we do. We continue to believe Catalent is uniquely positioned to consolidate the highly fragmented advanced delivery technologies and development solutions markets, and that our customers continue to seek broader outsourcing relationships with fewer, larger partners. In 2016, we continued to actively identify and review potential acquisition targets, assessing them using our rigorous, value-oriented, and disciplined model. We believe that Catalent is first and foremost an organic growth company, as we demonstrated in 2016. We will, however, continue to look for acquisitions that make strategic and financial sense. 2016 was a year of substantial opportunity and critical challenges for Catalent— and our people consistently stepped up and delivered on our values. This is a team our patients, customers, and investors can be proud of. On behalf of Catalent’s 9,200 employees around the world and our Board of Directors, I thank you for your investment in Catalent, Inc. John Chiminski iii For more information on our “follow the molecule” strategy, please see page 9 of the enclosed Annual Report on Form 10-K. our mission is to develop & reliably supply products that help people live better, healthier lives. 33 facilities on 5 continents More than 1,000 customers in ~7,000 products 80+ countries branded, generic, consumer health 22 of top 25 generics 24 of top 25 biotechs 87 of top 100 pharma new development 500+ programs UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________ FORM 10-K ______________________________ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2016 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

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