Office ofthe President
December 13, 2011
Members, Board of Trustees:
APPROVAL OF INVESTMENT IN COLDSTREAM LABORATORIES INC.
Recommendation: that the Board of Trustees authorize the President to approve the transfer of
up to $4,000,000 to the University of Kentucky Research Foundation (UKRF) to be used for
investment in Coldstream Laboratories, Inc. ("CLI”) to fund operations and capital
improvements. In addition, it is recommended that the Board of Trustees authorize the President
to transfer up to $3,000,000 to UKRF to be used as a line of credit to CLI for working capital.
Background: The University, with state assistance, constructed a new facility at Coldstream
Research Campus for a substantial expansion ofthe College of Phannacy’s Center for
Phannaceutical Science and Technology ("CPST”). As previously reported to the Board, CLI
was fonned to expand and commercialize pharmaceutical manufacturing, research, and
development in Coldstream facilities.
CLI continues to pursue its role in phannaceutical manufacturing at Coldstream and assist
economic development efforts in Kentucky by transferring appropriate technology and programs
to the public sector. CLI also provides educational opportunities for the College of Pharmacy as
well as unique opportunities for collaborative research projects.
CLI continues to build a client base but has not yet become self-sufficient. As described to the
Board of Trustees at its December 2010 meeting, additional investments were required at that
time to position CLI for aggressive growth. CLI has made significant progress during the last
year to improve efficiency and has continued to make strategic changes to personnel and
production. Sales in 2011 have increased more than 50 percent over 2010. Approximately
$2,000,000 of the $4,000,000 investment will be used to improve systems, build redundancy,
and implement a risk reduction strategy. CLI will use $2,000,000 to fund operations due to the
planned reduction in plant capacity while these strategies are implemented. Additional funds
may be needed on a temporary basis to cash flow operations. A memorandum of agreement
shall be executed by the Executive Vice President of UK HealthCare and CLI for the cash
advance including the tenns of interest and repayment.