Definitive agreement signed for Catalytica's purchase of Glaxo Wellcome's pharmaceutical plant in Greenville, N.C.

MOUNTAIN VIEW, Calif.--(BW HealthWire)--June 26, 1997-- Catalytica, Inc. (NASDAQ:CTAL) and Glaxo Wellcome Inc. today announced the signing of a definitive agreement for Catalytica's subsidiary, Catalytica Pharmaceuticals, Inc. (formerly Catalytica Fine Chemicals, Inc.), to acquire Glaxo Wellcome's pharmaceutical production facility in Greenville, North Carolina. The letter of intent for the acquisition was announced in February of this year.

Under the agreement, Catalytica will purchase all of the buildings, equipment, and other physical assets at the 1.8 million-square-foot facility, the 600 acres of land on which they are located, and all inventories necessary for current operations for $247 million in cash. The purchase price also includes warrants to purchase two million shares of Catalytica, Inc. Common Stock at $12 per share, and 250,000 shares of Junior Convertible Preferred Stock issued by Catalytica Pharmaceuticals, Inc. In addition, Glaxo Wellcome will receive a percentage of the profits, above a specified base, from Catalytica's production in the sterile products portion of the Greenville facility. The acquisition is to be financed through a combination of a $120 million equity investment by Morgan Stanley Capital Partners (MSCP) and a debt facility with a syndicate of banks led by The Chase Manhattan Bank.

The agreement also provides for a five-year manufacturing contract under which Catalytica will supply designated Glaxo Wellcome prescription products, with revenues to Catalytica totaling approximately $800 million over the life of the contract. The volume under the manufacturing contract will be largest in the first year, and decrease over the five-year period. Capacity not dedicated to Glaxo Wellcome will be available to fill orders from other Catalytica customers. Catalytica Pharmaceuticals has entered negotiations with two major companies to use a portion of the available capacity and has begun discussions with several other prospective customers.

Ricardo C. Levy, president and chief executive officer of Catalytica, Inc., said, "The purchase of the Greenville facility and the five-year manufacturing contract establish Catalytica as a leading pharmaceutical manufacturer, with the capacity to supply a comprehensive array of prescription products, bulk actives and intermediates. The arrangement with Morgan Stanley Capital Partners provides the enabling equity capital for the purchase, and a world class partner for Catalytica in the future."

James A. Cusumano, chairman of Catalytica and chief executive officer of Catalytica Pharmaceuticals, said, "Strategically, the acquisition transforms Catalytica Pharmaceuticals from an early stage company with promising technology to a burgeoning enterprise with formidable production capacity. With the combined strengths of Catalytica's production process technology and Greenville's highly experienced workforce and multi-purpose production facilities, we are looking forward to serving Glaxo Wellcome, while aggressively pursuing opportunities to serve our other partners and customers."

In addition to the $120 million in equity, the financing includes a $200 million credit facility of which approximately $140 million will be drawn down at closing. The combination of equity and debt financing is expected not only to provide the financing to consummate the acquisition but also to provide Catalytica the capital and financial flexibility to pursue new business opportunities in pharmaceuticals as well as to continue to invest in Catalytica's Combustion Systems subsidiary.

Morgan Stanley Capital Partners will provide the equity in exchange for a total of 30 million Class A voting and Class B non-voting shares of Catalytica, Inc. Common Stock. Catalytica has the right to repurchase from MSCP up to 5 million of the Class B shares at $4.75 per share on or before Nov. 30, 1997 and at $5.00 per share on or before May 31, 1998. The voting shares will give MSCP a 40% voting stake in the Company. The number of shares reflects the price of Catalytica shares prior to the announcement of the Letter of Intent relating to the acquisition in February 1997.

The MSCP shares will have rights similar to those of the Common Stock currently outstanding, with no special dividend rights, but will have a preference value of $4.00 per share in the event of a merger, sale, liquidation, or dissolution of Catalytica, or other similar events. MSCP will have a redemption right beginning July 2005 at $4.00 per share. In addition, MSCP will have the right to designate three members of Catalytica's board of directors.

The Chase Manhattan Bank ("Chase") has signed a commitment letter to provide $200 million of senior secured credit facilities consisting of a $125 million four and one half year term loan and a $75 million four and one half year revolving credit facility to Catalytica. Chase's commitment is subject to definitive documentation and other conditions.

Catalytica will present those issues necessary for shareholder approval at the Company's annual stockholders meeting in late July 1997. A proxy statement will be mailed to stockholders as soon as the necessary filings with the Securities and Exchange Commission have been completed. Catalytica and Glaxo Wellcome expect to complete the transaction by the end of July 1997.

Catalytica, Inc. develops and produces advanced products that use proprietary catalytic technologies to lower manufacturing costs and reduce hazardous byproducts. Catalytica Pharmaceuticals, Inc., formerly Catalytica Fine Chemicals, which has been renamed to better reflect its capabilities and business focus, develops and manufactures fine chemical building blocks for the pharmaceutical industry. Catalytica Combustion Systems develops advanced systems for the elimination of emissions generated by gas turbines.

Glaxo Wellcome Inc., headquartered in Research Triangle Park, North Carolina, is the nation's leading research-based pharmaceutical firm. A subsidiary of London-based Glaxo Wellcome plc, the company is committed to fighting disease by bringing innovative medicines and services to patients and to the health care providers who serve them.

Morgan Stanley Capital Partners is the private equity unit of Morgan Stanley, Dean Witter, Discover & Co. (NYSE:MWD), the global financial services firm. Consistent with its strategy of building a long-term private equity investment portfolio, Morgan Stanley Capital Partners has sponsored more than $3.2 billion of equity investments during the past 10 years in over 50 separate industrial and service companies around the world, with total underlying assets of approximately $23 billion.

This news release contains forward-looking statements regarding the transaction which is subject to completion of definitive documentation and other conditions for the debt financing arrangements, regulatory approvals and consents, approval by Catalytica shareholders and satisfaction of closing conditions of the MSCP equity purchase and the definitive agreement with Glaxo Wellcome, notification under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary conditions. This news release also contains forward-looking statements regarding Catalytica's future operation of the facility assuming the transaction is completed. These statements involve risks and uncertainty, including without limitation successful transfer to new management, the ability to operate the facility efficiently, product development delays, changes in demand for Catalytica's products, changes in environmental regulations, the impact of FDA and other regulations on fine chemical manufacturing, and competition from pharmaceutical companies that produce their own products and from other fine chemical manufacturers. Investors are encouraged to review Catalytica's Form 10-K/A for the year ended December 31, 1996 (Part II, Item 7) and Form 10-Q for the period ended March 31, 1997 for a more complete discussion of factors that could affect Catalytica's future performance. -0-

Catalytica Web address: http://www.catalytica-inc.com

CONTACT: Catalytica, Inc.

Lloyd Baylis, 415/960-3000