2. Confidential
1
This presentation may contain “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties
ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-
looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to,
any projections of financial information; any statements about historical results that may suggest trends for our business and results of
operations; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or
belief regarding future events, health care developments, or specialty pharmaceutical industry market sizes, shares, trends or growth; and
any statements of assumptions underlying any of the foregoing.
Any forward-looking statements contained in this presentation are based on management's good-faith belief and reasonable judgment
based on current information, and these statements are qualified by important factors, many of which are beyond our control, that could
cause our actual results to differ materially from those in the forward-looking statements, including changes in global, regional or local
economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, including but not limited to
the following risks related to our business: our ability to adapt to changes or trends within the specialty pharmacy industry; significant and
increasing pricing pressure from third-party payors, our relationships with key pharmaceutical manufacturers; our limited history with
integrating acquisitions; and the effects of competition. These and other risks and uncertainties associated with our business are described
in the prospectus for our proposed follow-on offering, including under the heading “Risk Factors.” We assume no obligation and do not
intend to update these forward-looking statements.
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These historical and forward-looking
non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with
GAAP. A reconciliation between GAAP and non-GAAP measures is included in the appendix to this presentation.
Diplomat is a registered trademark of Diplomat Pharmacy, Inc. This presentation also contains additional trademarks and service marks of
ours and of other companies. We do not intend our use or display of other companies’ trademarks or service marks to imply a relationship
with, or endorsement or sponsorship of us by, these other companies.
Important note
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Diplomat continues to deliver on key growth drivers
130bps gross
margin and 170bps
Adj. EBITDA margin
expansion y-o-y
Focused on growing
our specialty
infusion
platform
organically
Manufacturer
Services
59% y-o-y revenue
growth relative to
industry growth of
~20%
Continued
new limited distribution
drug contracts won in
2015
2
(1)
Strong
financial
position to
pursue additional
strategic acquisitions
Sales
synergies are
out performing
5 incremental limited
distribution drugs
Continue
to Gain Share
in Core Therapeutic Areas
Grow
High Margin
Businesses
Selectively
Pursue Strategic
Acquisitions
Hep C and
Technology
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3
Multiple Components to Revenue Growth...
Price inflation has comprised only
5-8% of revenue over the last 5
quarters
Political pressure on price
inflation, if successful, will have
limited impact on Diplomat
Value added services to pharma
manufacturers are an
opportunity to offset
Chronic disease expertise
provides a stable and growing
annuity-like revenue base
Limited distribution leadership
and rich drug pipeline driving
considerable revenue growth
from new drugs
Diplomat remains an organic
growth story
Strategic M&A has
complemented growth
49% YOY
Growth
(42% organic)
49% YOY
Growth
(41% organic)
34% YOY
Growth
(29% organic)
QuarterlyRevenue
Inflation
Impact
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4
Enhanced by diversified revenue and profit streams…
Complementary Opportunities Minimize Payer/PBM Risk,
AND Mitigate any risk of Inflation abatement
Other Services
Retail Specialty Network
Hospital Specialty Network
HUB (Envoy Health)
340(b)
PAP
All services enhance DPLO’s
relevant in healthcare
Specialty Infusion
Subset of specialty pharmacy
Many similar characteristics (chronic, high cost,
etc.)
Few differentiators (nursing component, more
medical billing)
Higher margin business
Unique/separate payer networks
Payer-driven site of care transition opportunities
Core Specialty Pharmacy
(orals and self-injectables)
Oncology dominance
Limited distribution expertise
Outpacing industry revenue growth
organically
Mix shift driving revenue and profit growth
Price inflation a very small component of
revenue
Serving open, preferred, narrow, and
exclusive payer networks
Pharmaceutical Manufacturer Services
Discounts, rebates, performance, services, data fees
High margin
Not dependent on payers or price inflation
Making progress, but significant upside opportunity remains
Revenue Source: Payers
Revenue Source: Pharma
& Others
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Diplomat’s base business continues to gain momentum…
Specialty pharmacy market grew 24%
from $63bn in 2013 to $78bn in 2014
Specialty drug approvals comprised
~50%+ of all FDA drug approvals in
2014; momentum continuing in 2015
3,000+ oncology and immunology drugs
in global drug development
Increased prevalence of limited
distribution panels
Biosimilars launching in U.S.
Improving trends across specialty
pharmacy…
…driving key milestones and
achievements at Diplomat
Diplomat grew revenues by 59% from
3Q’14 to 3Q’15
Recent new drug contracts
The majority of which are
limited distribution drugs
Oncology
Hepatitis C
Cystic Fibrosis
Other
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$185
$301
3Q14A 3Q15A
$10.6
$33.0
3Q14A 3Q15A
$596
$947
3Q14A 3Q15A
6
…with strong financial performance
(1) Based on dispensed scripts only.
(2) Gross profit / net sales (i.e., based on dispensed and serviced scripts).
Revenue
EBITDA
margin
1.8%
Adjusted EBITDAGross Profit /Script
($ in millions) ($ in millions)
3.5%8.0%6.7%
(1)
Gross
margin
(2)
130 bps expansion 170 bps expansion
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$27 $58
$167 $271 $377
$578
$772
$1,127
$1,515
$2,215
$3,325
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E
8
Diplomat: Largest independent specialty pharmacy
Founded: 1975; Headquarters: Flint, MI
Employees: ~1,550
FY 2014 revenue: ~$2.2 billion
Diversified base of marquee partners
Diplomat at a glance
CVS Health/
Omnicare
33%
Express Scripts
25%
Walgreens
10%
3%
OptumRx/
Catamaran
8%
Avella 1%
Others
20%
2014 Market share ($78 billion total market size) (1)
Exceptional above market revenue growth
Scaled business: National footprint
($ in millions)
(1) Source: 2014 – 2015 Economic Report on Retail, Mail and Specialty Pharmacies, Drug
Channel Institute and Morgan Stanley Research
(2) Based on mid-point of management’s estimate range for FY 2015
(2)
Pharmacy Locations
Arizona
California
Connecticut
Florida
Illinois
Iowa
Massachusetts
Michigan
Minnesota
North Carolina
Ohio
Pennsylvania
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Diplomat controls the journey of a specialty patient
9
Patient
Physician
Payor
Patient
Patient visits
physician
Payor approves script
Diplomat monitors adherence and
collects data for manufacturers
Diplomat
dispenses drug
Diplomat provides:
Benefit verification
Prior authorization
Clinical intervention
Physician
writes script
Patient
receives
drugs
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10
Specialty spend under pharmacy benefit to more than
double(2)
Specialty pharmacy industry continues to show
exceptional growth
Specialty share of spend growing dramatically(1)
Specialty continues to dominate top 10 drug spend(3)
Source:
(1) Specialty Drug Trend Across the Pharmacy and Medical Benefit – Artemetrx 2013.
(2) 2013-2014 Economic Report on Retail, Mail and Specialty Pharmacies.
(3) Pembroke Consulting analysis of World Preview 2015, Outlook to 2020, EvaluatePharma.
7 out of top 10 9 out of top 10
2014A 2020E
70%
30%
42%58% 50%50% Traditional
58%
Diplomat 2%
$51 million
$118 billion
2012A 2018E
Traditional
2012A 2015E 2018E
$51 billion
Specialty
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Limited distribution a central and growing theme in Specialty
11
Benefits to DiplomatBenefits to biotech / pharma
Completely eliminate or reduce
reliance on wholesaler
Real-time clinical data
Commercialization assistance
Improves appropriate utilization
Barrier to entry
Deeper, and earlier, partnerships with
pharma / biotech
Increased value proposition to payors
Market share opportunity
Portfolio of over 90 limited distribution drugs, comprising approximately 40% of revenue in 2014,
and well positioned for disproportionate growth from future drug approvals
Recent unique limited panels…Diplomat exclusive or semi-exclusive
What is limited distribution?
Targeted channel strategy
Provides certain specialty pharmacies
with exclusive or preferred
dispensing rights to certain drugs
Fast-growing trend
(2013) (2015)(2012) (2014)
Diplomat is an opportunity to invest in the specialty drug pipeline, without the binary risk
Traditional:
Limited:
Manufacturer Multiple Wholesalers 65,000 Pharmacies Patient
Manufacturer One/few pharmacies Patient
DPLO EXCLUSIVE DPLO LARGEST OF 4 DPLO LARGEST OF 4 DPLO EXCLUSIVEDPLO LARGEST OF 3
(2015)
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12
Unique competitive position
LARGE PBM / RETAIL
PHARMACY
SMALLER SPECIALTY
PHARMACIES
Diversification
distracts from
specialty pharmacy
Less flexible / less
nimble
Limited scale
Most focused on one
or a few disease
states
Fragmented market
Consolidation
opportunity for
Diplomat
Singularly focused
on specialty
High-touch model
Flexible and nimble
Entrepreneurial
culture
National reach
Scalable
infrastructure
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Acquisition Revenue Synergy Examples
Recent acquisitions of Burman’s Specialty Pharmacy and BioRX have created
significant revenue synergies
BioRX
Acquired by Diplomat on April 1, 2015
Burman’s Specialty Pharmacy
Acquired by Diplomat on June 19, 2015
• Strengthens Diplomat’s relationships with Neurologists
• Provides BioRX sales force a broader portfolio of
drugs including Multiple Sclerosis services
• Cross selling infusion services to existing managed
market clients
Synergies
• Roll out software technology across our national
platform to drive patient adherence and physician
transparency
• Increased access to Gastroenterology thought leaders
• Provides Burman’s sales force Diplomat’s full
therapeutic mix (incl. Crohn’s disease)
Synergies
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Future M&A Interests
When considering acquisitions, we look for targets that will potentially benefit
Diplomat in one or more of the following ways:
Accelerate our higher margin business opportunities
Expand into new therapeutic areas and/or geographic regions
Enhance clinical capabilities to improve competitive advantage
Access to Limited Distribution drugs
Bring new services and technologies under our umbrella
Makes DPLO better, not just bigger
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Traditional Drug Specialty Drug A Specialty Drug B Specialty Drug C Specialty Drug B
(10% price incr.)
Revenue $100 $3,700 $10,000 $27,000 $11,000
Gross Profit ($) $10 $185 $400 $810 $440
Gross Margin (%) 10% 5% 4% 3% 4%
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Revenue
Payors
Distributors /
pharmaceutical
manufacturers
Patient
Diplomat
COGS
Physical drug movement
$ flows
How we make money and grow profitability(Illustrative example)
How we make money
Drug mix and positive pricing trends are tremendous profit tailwinds for Diplomat
Inflation
Impact
Diplomat mix shift movement over time
Our core
focus
(AWP – Y%)
(WAC – X%)
Note AWP = WAC x 1.20
(1)
(1)
Example:
AWP $12,000 - 15% = $10,200 Revenue
WAC $10,000 - 3% = $9,700 Cost
$500 Gross Profit
4.9% Gross Margin
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$25
$67
First Nine Months
of 2014
First Nine Months
of 2015
$1,603
$2,380
First Nine Months
of 2014
First Nine Months
of 2015
$8
$15
$11
$19
$35
96% (28%) 75% 86%
1.3% 2.0% 1.0% 1.3%
2010A 2011A 2012A 2013A 2014A
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Strong financial performance…
Adjusted EBITDA
2010 –
First Nine Months of 2015
Total Revenue
2010 –
First Nine Months of 2015
% margin
% growth
($ in millions)
$578
$772
$1,127
$1,515
$2,215
34% 46% 34% 46%
2010A 2011A 2012A 2013A 2014A
% growth
($ in millions)
1.5% 2.8%
Infrastructure investments including IT,
facilities and personnel
Volume, price and mix all driving superior revenue growth
Natural operating leverage and acquisitions driving EBITDA growth and
margin expansion
53%
27%
Note: Historical financials are not pro forma for any acquisitions.
1.6%
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$161
$269
First Nine Months
of 2014
First Nine Months
of 2015
18
… with continued growth in profitability
Gross Profit / Script (1)
2010 –
First Nine Months of 2015
Note: Financials are not pro forma for BioRx acquisition.
(1) Based on dispensed scripts only.
(2) Gross profit / net sales (i.e., based on dispensed and serviced scripts).
$71
$93 $97
$116
$167
2010A 2011A 2012A 2013A 2014A
% growth 12% 20%31% 4%
% margin 7.1% 5.9%7.3% 6.2%
Several factors drive growth in our Gross Profit / Script(1):
Continued mix shift towards higher price, higher profit drugs (including acquisitions)
Favorable pricing trends
(2)
Gross margin expansion opportunities:
Recent acquisitions with higher gross margins (%)
Fee-for-service/rebate opportunities with pharmaceutical manufacturers
Specialty generics and biosimilars (longer term)
44%
6.3% 6.2% 7.8%
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Balance Sheet summary (as of September 30, 2015)
(1) Includes $6mm in cash-based contingent consideration
($ in millions) Actual
Cash $16
Total Debt $147
Shareholders’ equity $502
Net Debt/Pro Forma EBITDA ~1.1x
Modest leverage
Ample dry powder for the right opportunities
(1)
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Recent Acquisitions
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Acquired Company Consideration Rationale Other
June 19, 2015
• $87M gross purchase price*
• $77M cash*, $10M stock
• ~4.2x CY 2014 EBITDA
• Hep C dominance in Mid Atlantic
• Hep C is a fast growing and highly profitable disease state
• Proprietary technology (HealthTrac) with applicability across Diplomat’s
Hep C platform
• Proven management team
• 50 year old company, run by 2nd generation pharmacist
• No marketed sales process – Diplomat had a one-off look
• Lack of
auction/marketed
process
• Founder/owner led
• Management all on
board at DPLO
April 1, 2015
• $272M adjusted purchase price*
(~$50M tax benefit)
• $217M cash*, $105M stock
• ~11.8x CY 2014 EBITDA
• One year earnout of 1.35M shares
(all stock)
• Adds significant scale to specialty infusion business
• Provides ability to compete for national contracts
• Increases exposure to higher margin businesses
• Addition of new disease states, therapeutic categories & 5 new LD’s
• Lack of
auction/marketed
process
• Founder/owner led
• Management all on
board at DPLO
June 27, 2014
• $68.5 million gross purchase price*
• $52M cash upfront, $12M stock
• ~8x CY 2013 EBITDA
• Two year earnout max. $11.5M (all
cash)
• Strong management team
• Strong therapy mix: IVIG and Hemophilia
• Favorable geographic footprint
• Lack of
auction/marketed
process
• Founder/owner led
• Management all on
board at DPLO
December 16, 2013
• $13.4 million gross purchase price*
• $12M cash upfront
• ~6x CY 2013 EBITDA
• Two year earnout max. $2M (all
cash)
• First DPLO acquisition
• More than doubled hemophilia/specialty infusion business
• High margins
• Lack of
auction/marketed
process
• Management all on
board at DPLO
* Value includes closing working capital adjustments
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Calendar year ending December 31,
($ in millions) 3Q'15 3Q'14 2014A 2013A 2012A 2011A 2010A
Net income (loss) attributable to Diplomat $16.0 $4.5 $4.8 ($26.1) ($2.6) $9.2 ($7.8)
Depreciation & Amortization $9.9 $2.8 $8.1 $3.9 $3.8 $3.1 $2.2
Interest Expense $1.5 $0.7 $2.5 $2.0 $1.1 $0.6 $0.5
Income tax expense $9.8 $2.4 $4.7 - - - -
EBITDA $37.2 $10.5 $20.1 ($20.2) $2.3 $12.8 ($5.2)
Share-based compensations expense $1.3 $0.7 $2.9 $0.9 $0.9 $1.4 $0.8
Change in fair value of redeemable common shares $(6.9) ($9.1) $34.3 $6.6 $10.7
Termination of existing stock redemption agreement $4.8 $4.8
Employer payroll taxes - option repurchases - -
Restructuring and impairment charges - - - $1.0 $0.4 $0.4 $1.5
Equity loss of non-consolidated entity - $0.4 $6.2 $1.1 $0.3 $0.1 -
Severance and related fees $0.1 $0.1 $0.4 $0.2 $0.4 $0.7 -
Merger and acquisition related expenses ($6.3) $0.6 $7.2 $0.7 - - -
Private company expenses - - $0.2 $0.2
Tax credits and other - - $1.0 - ($0.1) ($0.6) -
Other items $0.7 $0.4 $1.4 $0.7 $0.1 $0.2 ($0.0)
Adjusted EBITDA $33.0 $10.6 $35.2 $19.0 $10.9 $15.1 $7.7
Reconciliation of Net income (loss) and Adjusted EBITDA
23
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Note: Financials are not pro forma for acquisitions.
Detailed footnotes on the following page.
25. Confidential
Reconciliation of Net income (loss) and Adjusted EBITDA
24
1) Share-based compensation expense relates to director and employee share-based awards.
(2) Restructuring and impairment charges reflect decreases in the fair market value of non-core property and assets, or actual losses on disposal of
such assets. 2013 charges primarily relate to the $932 write-down of our former Swartz Creek, Michigan headquarters facility to its fair value, after
we vacated it in favor of our present Flint, Michigan facility. 2012 charges primarily relate to our write-down of an externally purchased software
package we no longer utilize, as well as sales of Company-owned vehicles. 2011 charges include expense associated with the closure of our former
Cleveland, Ohio facility, the move of our Chicago, Illinois area facility, and sales of Company-owned vehicles.
(3) During the fourth quarter of 2014, we reassessed the recoverability of our investment in our non-consolidated entity, Ageology. Based upon this
assessment, we determined that a full impairment of $4,869 was warranted, primarily due to updated projections of continuing losses into the
foreseeable future. The remaining amounts in 2014, 2013 and 2012 represents our share of losses recognized by Ageology, using the equity method
of accounting. We first invested in Ageology, an anti-aging physician network dedicated to nutrition, fitness and hormones, in October 2011, in
connection with its formation.
(4) Employee severance and related fees primarily relates to severance for former management.
(5) Fees and expenses directly related to merger and acquisition activities, and the impact of changes in the fair value of related contingent
consideration liabilities.
(6) Primarily includes philanthropic activities performed at the direction of our majority shareholder.
(7) Represents (a) various tax credits received from the state of Michigan for facility improvement and employee hiring initiatives, (b) the one-time
costs associated with converting from an S-Corporation to a C-Corporation, and (c) a 2014 charge of $1,825 related to non-income tax obligations.
(8) Includes other expenses, predominantly option redemption payroll taxes and IT operating leases. Operating leases were initiated, in lieu of
purchases or capital leases for a subset of our IT spend, for a short period of time in 2013 and 2014 for liquidity purposes. We have since
discontinued the practice of leasing IT equipment. The cost of purchased IT equipment is reflected in depreciation and amortization.