4 INVESTMENTS

In August 2007 and December 2008, we made an aggregate investment of $7.5 million in Intelliject, Inc. ("Intelliject"), a privately held specialty pharmaceutical company. Intelliject seeks to set a new standard in drug/device combination pharmaceuticals designed to enable superior treatment outcomes, improved cost effectiveness, and intuitive patient administration. Our ownership interest on a fully diluted basis is approximately 20%, and the investment is accounted for under the fair value method. At the time of our initial investment, we elected the fair value option over the equity method of accounting since our investment objectives were similar to those of venture capitalists, which typically do not have controlling financial interests. We recognized an unrealized gain of $16.1 million ($10.2 million after taxes) in 2012 attributed to various factors, most notably:

a favorable adjustment to the timing and amount of anticipated cash flows derived from updated marketing research;
the passage of time as anticipated cash flows associated with achieving product development commercialization milestones are discounted at 55% for their high degree of risk; and
a reduction in the weighted average cost of capital used to discount cash flows in our valuation in the first quarter to reflect the completion of certain process testing and a reassessment of the risk associated with the timing for obtaining final marketing approval from the U.S. Food and Drug Administration ("FDA") for the company's first product.

We recognized an unrealized gain of $1.6 million ($1.0 million after taxes) in 2011 attributed to the appreciation of our interest upon changes in the market dynamics and pricing associated with an upcoming product introduction and the addition of projects to the product pipeline. In 2010, we recognized an unrealized loss of $2.2 million ($1.4 million after taxes) for the estimated changes in the fair value of our investment after Intelliject, which had its new drug application to the FDA accepted for review during the fourth quarter, reassessed its projected timeframe for obtaining final marketing approval from the FDA. Unrealized gains (losses) associated with this investment are included in "Other income (expense), net" in the consolidated statements of income and separately stated in the segment operating profit table in Note 5.

At December 31, 2012 and 2011, the estimated fair value of our investment (included in "Other assets and deferred charges" in the consolidated balance sheets) was $33.7 million and $17.6 million, respectively. Subsequent to our most recent investment (December 15, 2008), and until the next round of financing, we believe fair value estimates are based upon Level 3 inputs since there is no secondary market for our ownership interest. In addition, Intelliject did not have any product sales as of December 31, 2012. Their first product launched in the first quarter of 2013. Accordingly, until the next round of financing or any other significant financial transaction, value estimates will primarily be based on assumptions relating to meeting product development and commercialization milestones, cash flow projections (projections of development and commercialization milestone payments, sales, costs, expenses, capital expenditures and working capital investment) and discounting of these factors for the high degree of risk. As a result, any future changes in the estimated fair value of our ownership interest will likely be attributed to a new round of financing, a merger or initial public offering or adjustments to the timing or magnitude of cash flows associated with development and commercialization milestones. If Intelliject does not meet its development and commercialization milestones and there are indications that the amount or timing of its projected cash flows or related risks are unfavorable versus our most recent valuation, or a new round of financing or other significant financial transaction indicates a lower enterprise value, then our estimate of the fair value of our ownership interest in the company is likely to decline. Adjustments to the estimated fair value of our investment will be made in the period upon which such changes can be quantified.

The fair market valuation of our interest in Intelliject is sensitive to changes in the weighted average cost of capital used to discount cash flow projections for the high degree of risk associated with meeting development and commercialization milestones as anticipated. The weighted average cost of capital used in the fair market valuation of our interest in Intelliject was 55% at December 31, 2012 and 60% at December 31, 2011. At December 31, 2012, the effect of a 500 basis point decrease in the weighted average cost of capital assumption would have further increased the fair value of our interest in Intelliject by approximately $6 million, and a 500 basis point increase in the weighted average cost of capital assumption would have decreased the fair value of our interest by approximately $5 million.

Had we not elected to account for our investment under the fair value method, we would have been required to use the equity method of accounting. The condensed balance sheets for Intelliject at December 31, 2012 and 2011 and related condensed statements of operations for the last three years ended December 31, 2012, that were reported to us by Intelliject, are provided below:


		December 31,					December 31,
(In Thousands)		2012	2011				2012		2011
Assets:					Liabilities & Equity:
Cash & cash equivalents	$	53,288	$	9,625	Current liabilities	$	13,405	$	1,185
Other current assets		686		4,894	Non-current liabilities		1,449		738
Other long-term assets		4,278		691	Long term debt, net of discount		14,696		-
Identifiable intangibles assets		2,152		1,868	Redeemable preferred stock		20,995		20,017
					Equity		9,859		(4,862	)
Total assets	$	60,404	$	17,078	Total liabilities & equity	$	60,404	$	17,078


		2012			2011			2010
Revenues & Expenses:
Revenues	$	38,179		$	8,839		$	29,099
Expenses and other, net		(13,073	)		(10,474	)		(10,426	)
Income tax (expense) benefit		(9,642	)		927			(6,584	)
Net income (loss)	$	15,464		$	(708	)	$	12,089

The audited financial statements and accompanying footnotes of Intelliject as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 have been included as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.

On April 2, 2007, we invested $10.0 million in Harbinger Capital Partners Special Situations Fund, L.P. ("Harbinger"), a private investment fund that is subject to limitations on withdrawal. There is no secondary market for interests in the fund. Our investment in Harbinger, which represents less than 2% of its total partnership capital, is accounted for under the cost method. We recorded unrealized losses of $1.1 million ($0.7 million after taxes) and $0.6 million ($0.4 million after taxes) on our investment in Harbinger in 2012 and 2011, respectively, as a result of a reduction in the estimated fair value of our investment that is not expected to be temporary. The December 31, 2012 and 2011 carrying value in the consolidated balance sheets (included in "Other assets and deferred charges") was $3.6 million and $5.2 million, respectively. The carrying value at December 31, 2012 reflected Tredegar's cost basis in its investment in Harbinger, net of total withdrawal proceeds received and unrealized losses. Withdrawal proceeds were $0.5 million in 2012 and $0.6 million in 2011. The timing and amount of future installments of withdrawal proceeds was not known as of December 31, 2012. There were no realized gains or losses associated with our investment in Harbinger in 2012, 2011 and 2010. Gains on our investment in Harbinger, if any, will be recognized when the amounts expected to be collected from our withdrawal from the investment are known, which will likely be when cash in excess of our remaining carrying value is received. Losses will be recognized if management believes it is probable that future withdrawal proceeds will not exceed the remaining carrying value.