2014-15 Annual Review

Broad hospital outsourcing trends and a regulatory-driven flight to quality have positioned the clear market leader in sterile compounding services for accelerated growth

Fund IX’s PharMEDium investment represents the continuation of CD&R’s strategy of investing in market-leading healthcare services businesses that promote healthcare efficiency, improve the quality of care and/or reduce the cost of care, operate business models characterized by low fixed costs, diversified revenue streams, and limited reimbursement risk.

PharMEDium is the clear national leader in the hospital pharmacy outsourced sterile compounding services industry and is estimated to be at least 3x the size of its next largest competitor in the Company’s service categories. PharMEDium’s competitive standing is supported by a best-in-class quality and safety record, differentiated product breadth and continued innovation to deliver customized solutions that meet the specific needs of each hospital customer. The Company’s growth has accelerated in recent periods as a result of the broad outsourcing trend by hospitals, the industry’s flight-to-quality with respect to compounding and continued penetration of its existing customer base.

Company Profile

Using only FDA-approved sterile drugs, diluents and containers, PharMEDium creates compounded sterile preparations (“CSPs”), which are customized drug formulations that meet specific hospital customer needs, but are not otherwise commercially available. The Company provides CSPs to hospitals in a ready-to-use presentation with enhanced safety, labeling, sterility and dating characteristics that are required by its hospital customers. PharMEDium’s CSPs are used for intravenous pain management and anesthesia associated with surgical procedures and and post-operative care, in the intensive care unit (admixtures including antibiotics,

anticoagulants and electrolytes) and in labor and delivery (epidurals and oxytocin). Headquartered in Lake Forest, IL and operating through four compounding facilities, PharMEDium serves more than 2,900 acute-care hospitals, including integrated delivery systems, academic medical centers, hospital groups and standalone urban, suburban and rural hospitals.

The Company has been registered with the FDA as a manufacturer since its inception in 2003, which is truly differentiated in the industry. Recent regulatory changes, including the creation of new, more rigorous “Outsourcing Facility” protocols with direct oversight by the FDA, further enhance PharMEDium’s distinctive competitive positioning. PharMEDium voluntarily registered as an “Outsourcing Facility” in December 2013, the first in the industry to do so, reflecting the Company’s continued commitment to patient safety with enhanced FDA oversight, compliance and information transparency.

Transaction Background

In January 2014, CD&R Fund IX and affiliates invested $343 million to acquire PharMEDium Healthcare Corporation from the company’s founder, David N. Jonas, and other financial investors. Mr. Jonas and the management team retained an approximate 20% ownership stake on a fully diluted basis. The transaction was valued at approximately $940 million, including transaction fees and expenses and net of the transaction tax refund and cash on the balance sheet at closing.

CD&R believes PharMEDium has significant potential for continued robust growth, both through penetrating existing customers with additional service offerings and adding new customers as hospitals continue to outsource. Operating Advisor Ron Williams, the former Chairman and CEO of Aetna Inc. and former Chairman of Envision Healthcare, serves as Chairman of the business.

Value-Building Initiatives

The PharMEDium management team is focused on several key value building initiatives:

• Increase Penetration of Existing Customer Base.
  • Substantial runway with significant opportunity in early stage categories (O.R. and ICU) as well as to penetrate the 900+ customers added in the last 2 years, most of which do not currently purchase O.R. or ICU products
  • Developing key metrics, reporting and market segmentation analysis to better track and target opportunities for further penetration
  • Realigned and meaningfully expanded sales force in key service areas to drive account penetration initiatives

• Add New Customers.
  • Capture additional outsourcing by hospitals currently compounding in-house as well as share gains from smaller, regional outsourced competitors
  • Contracted with 385 new hospitals in 2014, of which 285 have begun purchasing products
  • Continue to capitalize on regulatory environment changes through marketing plans tailored to PharMEDium’s leadership position and clear differentiation under the new regulations
  • Re-commence shipping to customers in New York and Ohio - began shipments in New York in Q4 2014 and contracting with new customers ahead of regulatory approvals in Ohio

• Product and Service Extensions.
  • Strong backlog of “new service requests” to meet unique needs of hospital customers
  • Meaningful opportunities to add services to existing categories (e.g. ICU)
  • Development of new, untapped product categories
• Capacity and Process Improvements.
  • Continue to expand manufacturing capacity - new, state-of-the-art facility in New Jersey to be opened in 2015; clean room expansion and facility enhancements in other facilities
  • Meaningful technology and process improvements, e.g. syringe filling automation, enhanced warehouse and planning systems
  • Investing in quality, compliance and R&D to maintain best-in-class industry practices and procedures

• Alternate Site Expansion.
  • Expand sales of products and services into non-hospital settings
  • Most significant near-term opportunity to penetrate the 6,000+ ambulatory surgery center (ASC) locations in U.S.
  • Business plan and financial targets included in 2015 budget

Looking Forward

With a stellar reputation and track record for product safety and consistent quality, along with the most comprehensive service offering in the industry, management believes PharMEDium is well-positioned to capitalize on the continued outsourcing of CSPs by hospitals. Substantial runway exists to penetrate existing accounts in key growth categories (e.g. ICU and O.R. Syringe) and to continue

to add new customers. Over the past year, PharMEDium has expanded its sales team, increased its manufacturing capacity and implemented process improvements to both stay ahead of and capitalize on this runway. At the same time, as the Company grows, management continues to emphasize a culture focused on patient and employee safety and quality, and the team expects to continue to invest in the continuous improvement of compliance procedures going forward.