Fresenius Kabi Pharmaceuticals (APCVZ)

[d'anconia]

IMPORTANT DD: APCVZ's price is a factor in the ADJUSTED EBITDA

The 2 FDA approvals on Friday were great news for APCVZ and many believe the increased sales from the approval(s) will bring APCVZ closer to meeting the 1.267 B adjusted EBITDA threshold.

However, there is an added factor that hasn't been discussed yet and that is APCVZ's share price. By looking at the latest 10-Q, I noticed that APCVZ's share price is a component of the adjusted EBITDA.

Note: It is the ADJUSTED EBITDA and not the EBITDA that determines whether shareholders get nothing or up to $6/share and that threshold is 1.267 B.


This is explicitly stated in their latest 10-Q located here on page 29.

http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=7224448


Under the terms of the CVR Indenture, the amount, if any, payable in respect of each CVR on June 30, 2011 is determined based on
Adjusted EBITDA (as defined by the CVR indenture). As a result, in addition to reporting financial results in accordance with generally
accepted accounting principles (“GAAP”), FKP Holdings also must calculate and present Adjusted EBITDA, which is a non-GAAP financial
measure, for the cumulative period from January 1, 2008 to the current reporting date until the expiration of the CVR measurement period
(December 31, 2010) and settlement of the CVRs.

Now on page 29, take a look at Reconciliation to Adjusted EBITDA
and you will see Change in the value of contingent value rights

As you can see, for the latest quarter from Jan. 1 to March 31 2010, this was calculated as a loss of 24.488 M.

How did they get this value?

January 1 closing price was 0.30
March 31 closing price was 0.15

* so this is a loss of ~0.15/share for the quarter

* We also know APCVZ's O/S = 163,456,000

So 163,456,000 shares * loss of 0.15/share = 24.488 Million.

Now take a look at the far right column where it says
For the Cumulative
Period Beginning January 1, 2008 and Ending March 31, 2010

The Change in the value of contingent value rights for this period is a loss of 133.867 M.


We know that the closing price on March 31 2010 was 0.15

The closing price that I calculated for August 1 2008 is ~ $0.97. (I had to calculate this b/c I couldn't find the closing price on Aug. 1 )

This is a loss of ~$0.82/share.

When you multiply the 163,456,000 O/S by the loss of 0.82/share

= loss of 133.867 M.


Bottom line:
What does this mean?



To summarize, APCVZ's price IS A FACTOR in the adjusted EBITDA. The higher APCVZ's price goes, the better it is for the adjusted EBITDA.

For every $0.01 APCVZ goes up, it helps reduce the loss in the ADJUSTED EBITDA by 1.63 Million. (163,456,000 O/S * $0.01 = 1.63 Million)

Note: The threshold value is $0.97.

For every $.01 above $0.97, it will actually ADD 1.63 M in value to the adjusted EBITDA.

So it's not only about the sales, APCVZ's share price will also determine if we get to the 1.267 B Adjusted EBITDA threshold.