OVERVIEW

NEW YORK (Standard & Poor's) Dec. 5, 2013--Standard & Poor's Ratings Services 
said today it affirmed its 'B' corporate credit rating on West Chester, 
Pa.-based Therakos Inc. The outlook is stable. At the same time, we affirmed 
our 'B' issue-level rating and '3' recovery rating on the company's $275 
million of first-lien debt, which includes an undrawn $35 million revolving 
credit facility, and 'CCC+' issue level rating and '6' recovery rating on the 
$105 million of second-lien debt.   

"Our rating on Therakos reflects a "weak" business profile and "highly 
leveraged" financial risk profile. Our business risk assessment incorporates 
the risks of Therakos' small size, limited addressable market, and heavy 
reliance on one therapy--extracorporeal electrophoresis (ECP)--for all of its 
revenues," said credit analyst Cheryl Richer. "These weaknesses are only 
partially offset by the company's leading position within its niche market, 
strong geographic and customer diversity, sturdy barriers to entry, and 
competitive advantage arising from the strong safety and efficacy profile of 
Therakos' ECP therapy. Founded in 1986, Therakos was carved out of 
Orthoclinical Diagnostic, a division of Johnson & Johnson, in late 2012 as an 
independent operation owned by The Gores Group."

Our stable rating outlook on Therakos reflects our expectation that modest 
revenue growth and some EBITDA margin erosion will result in debt to EBITDA 
above 5.0x over the next 12 months. 

Downside scenario 
We could lower the rating in the unlikely event that revenue decline and 
margin contraction are high enough to result in negative free cash flow, which 
could constrain liquidity. This would require a double-digit revenue decline 
and an EBITDA margin contraction of at least 600 bps. Such a scenario could 
follow a launch of a competitive product, and/or substantially 
higher-than-expected clinical trial expenses.

Upside scenario 
While unlikely, we could raise our corporate credit rating on Therakos if it 
sustains a debt-to-EBITDA ratio of about 4.5x and FFO-to-debt ratio above 12%. 
We estimate this would require double-digit revenue growth and an EBITDA 
margin expansion of 300 bps from our 2014 base case projections. Our belief 
that the financial sponsor is committed to such a financial policy would be a 
prerequisite for an upgrade, and, given recent dividend recapitalization, we 
view this scenario as unlikely.

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