C&L Partners, LLC

C&L PARTNERS VALUES

We believe we will be successful if our clients are successful

Put the clients interest ahead of our own

Behave as professionals

Keep our client information confidential

Tell the truth as we see it

Deliver the best of our firm to every client as cost effectively as we can

COMMUNICATIONS IS KEY

This case will be revolving around bonds so before we begin well ask
three questions to ensure everyone is on the same page.

THREE QUESTIONS

What is a bond?
A debt investment in which a an investor loans money to an entity corporate or
government to finance projects and activities

What is yield?
The income return of an investment

What is a coupons rate?

A yield paid by a fixed income security. A fixed income security is annual
payments

COMPANY HISTORY

Founded in 1985

The first in the biotech industry to create biologically derived human

therapeutic drugs, RENGEN AND MENGEN

Both drugs helped offset the damaging effects from chemotherapy for
cancer patents

The leading biotech companies by 2006

Successful portfolio of products that focused on cancer care was made

up of drugs with the highest chance of treating patents.

MERRILL LYNCH EQUITY LINKED ORIGINATION

TEAM

Team was a product group that focused on convertible, corporate

derivative, and special equity transactions for the clients of Merrill
Lynch

Helped educate clients on effects of utilizing equity-linked instruments

Considered to be one of the most profitable businesses at Merrill Lynch

MoGen was very important client to them; already did financing for
them twice

WHAT IS CONVERTIBLE DEBT?

A convertible bond is a type of security where the holder of the bond

receives coupon payments as if it were a normal bond, but has the right
to convert it to equity.

Gives investors the safety of a bond and potential of gains from equity.

Coupon rates are lower than regular bonds

Have unlimited growth potential, with protected risk

CONVERTIBLE BOND EXAMPLE

A convertible bond has a face value of 1000 and maturity of 10 years. It
has the coupon rate of 5% and Company As stock price at the time it
was issued is $40. The conversion price for the bond is $50.

Customer receives coupon payment of $50 (1000 X 5%)

Customer can convert bond for 20 shares ($1000/$50)

Conversion premium is 25% (50-40/40) (how much price has to increase

to realize gain)

If stock price goes up to$ 60 and customer converts, customer can sell
20 shares at $60 for $1200

If stock price goes down, they can wait to maturity date and receive
coupon payments and $1000 face value.

MOGENS FINANCING NEEDS

Mogen needed to make sure they had a consistent amount of cash for R&D
in the event of uncertainties and possible challenges. They concluded
they needed 10 billion dollars in funding for 2006 for the following
areas:

1. Expanding Manufacturing and Formulation

2. Expanding investment in R&D
3. Acquisitions and licensing
4. Stock Repurchase program

EXPANDING MANUFACTURING AND

FORMULATION

MoGen is unable to keep up with the demand of drugs proceeds and

have been unsuccessful

MoGen has been unsuccessful with their increase in production due

their outsourced companies inability to expand their operations

The majority of Mogens drug formulation, fill, and finish are outsourced

MoGens request for funding will remove dependency on outsourced

companies

EXPANDING INVESTMENT IN R&D

R&D stand for research and development

Mogen is currently undertaking 5 drugs currently in their R&D phase

Trials costs are in the area of $500 million

ACQUISITION AND LICENSING

MoGen acquisitions and licensing deals have helped it achieve the

storing growth in revenues and earnings per share and allows the
company to stay viable

The company decided to contiue their strategy of acquisition and

licewnsing and plan to purchase Genix, Inc. in 2006 for $2 billions in
cash

After an average seven years of R&D and three levels of testing by the
FDA is solidified by licensing that allows the company to receive a profit

THE STOCK REPURCHASE PROGRAM

The purpose of this program is to show share holder and the companies
promising future and alleviating the company of paying regular dividend
payouts

This initiative to repurchase stock has been pushed by senior

management

In 2006 Mogen purchased the rest of outstanding shares for $4.4 billion

STATEMENT OF THE PROBLEM

MoGen wants to issue 5 billion of convertible debt. Dar Maanavi suggests
that they offer the debt with a 25% conversion premium at a price of
$97. The board feels that this is too low and send a bad signal to the
market. This signal is that they feel their share price does not have
potential. Maanavi and the board need to figure out a suitable
conversion rate and coupon rate that will still attract investors.

FIND COUPON RATE AND NEW SHARES TO

ISSUE IF CONVERTED

We start with 3 different conversion rates: 25%,35%, and 45% with

conversion prices of 97.48, 105.27, and 113.07

They previously had a convertible bond premium of around 15%, which

makes the convert price at $90 . The interest rate was 1.125%

Find the percentage change from previous convert price for each
situation. Use that percentage change to show the assumed change in
interest

New shares to be issued = Amount of debt to be converted/ Conversion

price

EXHIBIT ONE
Exhibit 1
Covertable Bond Calculations
Face value
Current Stock Price
Amount needed
Conversion Prem.
Conversion Price
Coupon rate
Interest Paid Per year
Shares issued if converted
New Shares Outstanding

1000
77.98
5,000,000,000
0.25
97.48

0.35
105.27

0.45
113.07

0.0122
61000000

0.0131
65500000

0.0141
70500000

51,295,204
1,251,295,204

47,495,559
1,247,495,559

44,220,003
1,244,220,003

EXHIBIT 2
Exhibit 2
Current
EPS
PE Ratio

3.06
25.47

25%
2.94
36.52

35%
2.95
39.32

45%
2.95
42.12