Rita Medical Systems Inc
Rita Medical Systems — Horizon Medical Products — Merger or Acquisition (June 2004)
38 slides from Rita Medical Systems's merger presentation, Jun 2, 2004
Slide 1: Joseph M. DeVivo, President, CEO and Director
Joseph M. DeVivo President, CEO and Director RITA Medical Systems
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation includes forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Forward looking statements are based on current expectations as of today. We undertake no
Slide 3: New Treatment Options
New Treatment Options Norton Healthcare surgeon Dr. Kelly McMasters treated Charlie Morgan for liver cancer using the RITA System™ for radiofrequency ablation (RFA)
Slide 4: The RITA RFA Opportunity
The RITA RFA Opportunity • Millions of cancer patients with very few treatment options available • High margin disposable model • Emerging clinical data shows RFA plus chemotherapy provides survival benefits • FDA approved for unresectable liver cancer tumors, and pain associated with bone lesions •
Slide 5: Minimally Invasive Liver Tumor Treatment
Minimally Invasive Liver Tumor Treatment Radiofrequency probe placed centrally in liver tumor: percutaneous, laparoscopic, or open. Leads deployed and energy applied to achieve 1000 C temperature for total cell death. Electrode positioned Molecular heating Tumor destroyed
Slide 6: Trends in Ablation Procedural Growth by Organ
Trends in Ablation Procedural Growth by Organ Estimated Procedural Trends in Ablation Ablation Procedure Volume in Thousands Breast Lung Bone Kidney Liver 499.0 366.7 254.7 138.8 82.4 43.5 27.5 50 16.3 6.3 8.6 4.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year Source: MedMarket Diligenc
Slide 7: RITA: The Leader In RFA
RITA: The Leader In RFA Surgery & Radiology Products RITA’s Single-Use Disposable Needle Electrode Devices 1500X Radiofrequency Generator
Slide 8: Typical Ablation Using the RITA System
Typical Ablation Using the RITA System Original Tumor Ablated Tumor CT film shows pre and post procedure tumor (circled); dark image at tumor site in post-procedure film confirms destruction of cells with predictable and well-defined margins.
Slide 9: Liver Tumor RFA: Long Term Results
Liver Tumor RFA: Long Term Results Buscarini et al HCC 5 yr survival Guglielmi et al HCC 3 yr survival Nicoli et al HCC 2 yr survival Siperstein et al HCC & Mets 3 yr survival Lencioni et al RCT of RFA vs. PEI 2 yr survival >50 peer-reviewed reports of RITA safety & effectiveness US & Intl US Liver
Slide 10: Long-Term Survival: RITA-RFA vs Surgery
Long-Term Survival: RITA—RFA vs Surgery (all patients with liver cancer) Percent survival RITA—RFA (n = 187, current study) Surgery (n = 249, Wayne et al, 2002) 60 48% 40 42% 0 12 24 36 48 60 Months Lencioni R et al, presented at the RSNA 2003 (in press)
Slide 11: Long-Term Survival: RITA-RFA vs Surgery (solitary tumor)
Long-Term Survival: RITA—RFA vs Surgery (patients with a solitary tumor smaller than 5 cm) Percent survival RITA—RFA (n = 116, current study) Surgery (n = 77, Llovet et al, 1999) 80 61% 51% 0 12 24 36 48 60 Months Lencioni R et al, presented at the RSNA 2003 (in press)
Slide 12: RAPTURE Trial
RAPTURE Trial (Radiofrequency Ablation of Pulmonary Tumors Response Evaluation) (Pisa, UCLA, London, Munich, Turin, Sydney, Essen) Tumor response rate at 1 year 91% Complete ablation Partial ablation Disease-specific survival in stage I NSCLC Treatment 6 mo.’s 1 year RITA-RFA 95% 89% Radiation * 88%
Slide 13: Confirmed Blue Cross Blue Shield & Top Private Payer Plans Cover RFA
Confirmed Blue Cross Blue Shield & National Top Private Payer Plans Cover RFA Liver* Ablation Private Payers *58 Million Lives * 44 Million Lives Written Policy 14 Million Lives Payment Process Without Policy 14 Million Non-Confirmed Lives Blue Cross Blue Shield *84 Million Lives *64 Million Lives W
Slide 14: Competition Matrix
Competition Matrix Tissue Temperature Lesion Speed Control Size RITA RTC1 Radionics2 The RITA System is the only available product suite in the industry to offer the combined features of temperature controlled ablation, effective treatment of the largest lesions, and reduced procedure times. 1 Divis
Slide 15: Market Share – Estimated 2002 Sales by Company
Market Share – Estimated 2002 Sales by Company Estimated Market Share of the U.S. Suppliers of Directed Energy-Based Tumor Ablation Products 2002 Source: Medtech Insight, “Pharmacological and Device-Based Therapeutic Approaches To Cancer Management,” #A415, December 2003
Slide 16: RITA Medical Systems Business Case
RITA Medical Systems Business Case
Slide 17: Historical Operations Summary
Historical Operations Summary March 31, FY 2003 2004 2003 Sales $ 16,607 $ 4,644 $ 4,497 1 Gross Profit 10,441 3,029 2,923 Gross Profit Margin 63% 65% 65% Total Operating Expenses 21,712 5,209 5,922 Net loss $ (11,236) $ (2,170) $ (2,933) Net loss per share, basic and diluted $ (0.63) $ (0.12) $ (0.
Slide 18: Growth Strategies
Growth Strategies • Utilization Focus • Drive New Regulatory Clearances • Kidney Ablation • Lung Ablation • Generation “Three” Product Development • Broaden Market Opportunity • Set New Ablation Standards • Reduce Cost – Improve Ease of Use • Japan Reimbursement • Lean Operational Focus
Slide 19: Q3 2003 Through Q1 2004 Performance
Q3 2003 Through Q1 2004 Performance US Sales Int. Sales
Slide 20: Q3 2003 Through Q1 2004 Performance
Q3 2003 Through Q1 2004 Performance New Business Utilization
Slide 21: RITA Medical Strategic Options
RITA Medical Strategic Options • Raise capital, drive to profitability as a single product company • Competition/Resources/Opportunity • Grow through adding more products to RITA • Build around team/preserve upside/invest • Market business for sale • Timing/Proof of business
Slide 22: Merger Overview: Medical Oncology Devices
Merger Overview Medical Oncology Devices
Slide 23: Horizon Medical Products
Horizon Medical Products Horizon Medical Products, Inc., headquartered in Atlanta, primarily markets oncology product lines including implantable ports, tunneled central venous catheters, and safety needles used primarily in cancer treatment protocols. In addition, Horizon has exclusive U.S. rights
Slide 24: Merger Strategic Benefits
Merger Strategic Benefits • Opportunity to develop an independent, broad-based Medical Oncology Device business • Increasing trends in devices playing important roles in Cancer Treatment. Merged entity can capitalize on this trend. • Develops platform company for the acquisition and/or licensing of
Slide 25: Medical Oncology Device Company
Medical Oncology Device Company MEDICAL ONCOLOGY • Interventional Radiologists • Surgical Oncologists • Medical Oncologists Horizon Products Vortex® MP Port System LifeValve™ Technology LifeGuard™ Safety Infusion Set IsoMed Pump RITA Products StarBurst™ Xli enhanced StarBurst™ SEMI-FLEX StarBurst™ M
Slide 26: Merger Strategic Benefits
Merger Strategic Benefits Medical Oncology Surgical Oncology Interventional Radiology Hospital Administration The merged company will have more products and more reasons to call on the key constituencies in the hospital, increasing strategic value, customer touches, and increased productivity for ea
Slide 27: Merger Strategic Benefits
Merger Strategic Benefits • Benefits For RF ablation product line • Doubles our domestic field selling effort • Improves competitiveness and market development • Increases our reach to more hospitals • Allows for greater concentration on new RF procedures • Increases productivity at each hospital •
Slide 28: Transaction Overview
Transaction Overview • Each Horizon shareholder will receive 0.4212 of a RITA share • RITA and Horizon shareholders will own 47.5% and 52.5%, respectively, of the combined company (1) • RITA expects to issue 18,644,039 shares and assume options and warrants for an additional 3,935,110 shares • The c
Slide 29: Transaction Overview
Transaction Overview • Board of Directors of the combined company will be comprised of 6 members from RITA and 3 members from Horizon • Joseph DeVivo will be named President, CEO and Director • Robert Wenzel will be named COO • Don Stewart will be named CFO • The combined company headquarters will b
Slide 30: Key Financial Statistics FY 2003
Key Financial Statistics FY 2003 RITA HMP Revenue $16.6MM $28.0MM Gross Profit $10.4MM $16.7MM EBITDA ($9.6MM) $ 3.1MM Cash $9.5MM $ 1.8MM Debt $0 $18.4MM S&M Employees 28 56 Employees 80 138
Slide 31: Merger Financial Impact
Merger Financial Impact • The transaction is expected to significantly increase RITA’s revenue base • On a pro forma basis, the combined company would have reported approximately $45 MM of revenue in 2003 • The combined company is expected to derive significant operating leverage from combining this
Slide 32: Valuation
Valuation • How do the implied multiples for the transaction compare to market trading multiples? • What are RITA shareholders receiving in return for giving Horizon shareholders 52.5% of the combined company?
Slide 33: Valuation: Comparable Companies Analysis
Valuation Comparable Companies Analysis as of May 12, 2004 ($ in millions) Enterprise Value as a Multiple of Revenue Company CY 2003A LTM as of 3/31/04 Possis Medical Inc. (1) 7.36x 7.01x Arthrocare Corp. 4.15x 3.88x Merit Medical Systems Inc. 3.03x 2.90x Kensey Nash Corp. 7.11x 6.58x Aspect Medical
Slide 34: Valuation: Contribution Analysis
Valuation Contribution Analysis ($ in millions) RITA Medical Horizon Medical $ % of $ %of Amount NEWCO Amount NEWCO Revenues CY 2003A $16.6 37.3% $28.0 62.7% Q1 2004A 4.6 39.6% 7.1 60.4% Gross Profit CY 2003A $10.4 38.5% $16.7 61.5% Q1 2004A 3.0 41.8% 4.2 58.2% EBITDA CY 2003A ($9.6) - $3.1 - Q1 200
Slide 35: Debt Payment Strategies
Debt Payment Strategies • Negotiated $8.262mm Comvest/Medtronic Senior Notes to be due 2008 •$ 6.501 million of Comvest LP Senior Subordinated Notes due July 2005 • Broad range of alternatives depending on market conditions and speed and success of integration • Internally generated funds from combi
Slide 36: Summary: Why Invest in RITA
Summary Why Invest in RITA • The largest pure play medical oncology device company, second only to Boston Scientific oncology division in terms of revenue and sales force size • Critical mass to operate as profitable organization • Positive earnings and cash flow following successful integration of
Slide 37: Questions
Questions
Slide 38: Additional Information About the Merger and Where to Find It
Additional Information About the Merger and Where to Find It In connection with RITA Medical Systems’ proposed merger with Horizon Medical Products, RITA intends to file with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 that will include a joint proxy statement
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