American Medical Systems Holdings Inc
American Medical Systems — Investor Day (September 2006)
74 slides from American Medical Systems's investor day presentation, Sep 15, 2006
Slide 1: American Medical Systems Investor Forum
American Medical Systems Investor Forum September 15, 2006 | 8 am - 12 pm | East Side Marriott
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation contains forward-looking statements relating to the market opportunities, future products, sales and financial results of American Medical Systems and Laserscope and the combined business. These statements and other statements contained in this presentatio
Slide 3: Agenda
Agenda Base AMS Business Review Marty Emerson 8:00 am Ross Longhini Physician Perspective on HPS Dr. Terry Malloy 8:45 am Break 9:00 am Laserscope Integration Summary Ross Longhini 9:15 am Sales Organization Overview Stephen McGill Combined Company Projections Marty Emerson 10:00 am Q&A 10:15 am Bre
Slide 4: Base Business Review: AMS Historical Performance
Base Business Review AMS Historical Performance AMMD Investor Forum September 15, 2006
Slide 5: History 1972 - 1985
History 1972 - 1985 Small, privately held company Focused on male prosthetic urology (penile implants & AUS) 1985 - 1998 Division of Pfizer Low-growth, conservative investment profile Focused on male prosthetic urology Creation of a global sales force
Slide 6: History 1998 - Today
History 1998 - Today From venture-backed to publicly-held Transformed from: To: Male prosthetic urology Leader in men's and women's pelvic health Low growth/lower margins High growth, highly profitable Conservative Entrepreneurial No new products Innovative; 6 - 8 new products per year
Slide 7: Consistent Revenue Growth
2000 2001 2002 2003 2004 2005 H1 '06 Revenue 100 118 142 168 209 263 309 Revenues (dollars in millions) Revenue Growth 2000 2001 2002 2003 2004 2005 H1 '06 Revenue 100 118 142 168 209 263 309 $100 $118 $142 $168 $209 $263 $309-$314 23% 18% 20% 19% 24% 26% 18%-19% Strong Organic Growth Consistent Rev
Slide 8: Strong Operating Performance
2000 2001 2002 2003 2004 2005 H1 '06* OP Margin 7 25 29 34 49 72 33 2000 2001 2002 2003 2004 2005 H1 '06* Gr Margins 78.2 80.4 80.6 81.9 81.6 82.4 84.7 Gross Margins Cash from Operations (dollars in millions) Operating Margins 2000 2001 2002 2003 2004 2005 H1 '06* OP Margin 5.4 13.2 24.8 22.9 26.1 2
Slide 9: Proven Business Management Skills
Proven Business Management Skills Operating margin improvement +7 pts Gross margin improvement +3 pts Opex management Working capital management Annual Turns improvement +0.8 turns Effective business processes development P&L forecasting History of meeting/exceeding expectations Organizational Devel
Slide 10: Competitive Advantages
Competitive Advantages Single-minded focus Urology, gynecology, urogynecology Thought-leader access - globally Product development process that delivers InVance, InhibiZone, 700 MS, Continuum, AdVance SPARC, Monarc, BioArc, Perigee, Apogee, InteXen
Slide 11: Competitive Advantages
Competitive Advantages Reimbursement - globally 2006: best position ever for AMS Direct sales force - globally Organizational culture Entrepreneur-oriented We exist to deliver innovation
Slide 12: Intellectual Property
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Slide 13: Base Business Review: Men's Health
Base Business Review Men's Health AMMD Investor Forum September 15, 2006
Slide 14: Erectile Restoration
Erectile Restoration Market characteristics: Size $120M (Globally) 25,000 procedures Growth rate: 7 - 8% annually Units +4% ASP & Mix +4% AMS product offering: Malleables ("1 piece") Ambicor ("2 piece") 700 ("3 piece") Inhibizone Tactile Pump 700 MS AMS Coloplast Market Share 75 25
Slide 15: Erectile Restoration Organic Pipeline
Erectile Restoration Organic pipeline R&D pipeline: Product/Technology Launch Opportunity E-stim 2011 Mid-spectrum ED Downstream marketing: Formal referral path - Cardiologist to Urologist 10 % of Viagra, Cialis, and Levitra prescriptions written by cardiologists Community Health Talks Topics (post-
Slide 16: Male Continence
Male Continence Market characteristics: Size $~55M (Globally) 11,000 procedures Growth rate: 12 - 14% annually Units +10% ASP & Mix +2 - 4% AMS product offering: Artificial Urinary Sphincter (AUS) - severe incontinence InVance (Male Sling) - moderate incontinence AdVance - mild incontinence AMS Mark
Slide 17: Male Continence AdVance Opportunity
Male Continence AdVance opportunity Market dynamics 2.1 million men suffer from mild incontinence 35% of urologists today treat male incontinence 60% of urologists today treat female incontinence Launch focus Build clinical data Pull in general urologists who are not treating male incontinence today
Slide 18: Male Continence Organic Pipeline
Male Continence Organic pipeline R&D pipeline: Product/Technology Launch Opportunity E-stim 2011 Urge Incontinence Downstream marketing: AdVance launch Community Health Talks Post-radical focus (leveraging ED attendance)
Slide 19: Prostate Treatments
Prostate Treatments In-office BPH market characteristics: Size $90M (US only) 90,000 procedures Growth rate: 7 - 9% annually Units +7 - 9% AMS product offering: TherMatrx Microwave Urolume stent ($3 - $4M/year) Primary clinical use - strictures Continuum Anastomosis device AMS Urologix BSX MDT JNJ O
Slide 20: Prostate Treatments Continuum Opportunity
Prostate Treatments Continuum opportunity Market dynamics >200,000 radical prostatectomies per year globally Up to 60 minutes for the anastomosis of the urethra (all techniques) <10 minutes with Continuum Launch focus Build clinical data Europe launch early-2007 U.S. launch projected to be early 200
Slide 21: Prostate Treatments Organic Pipeline
Prostate Treatments Organic pipeline R&D pipeline: Product/Technology Opportunity TMX 3000 Thermatrx Upgrade Radiation Tx PCa, KCa, BICa Cryo Tx KCa, BICa TUDD Prostatitis Downstream marketing: Continuum launch Launch of TMX 3000 (Q1 '07) Integration of in-office therapies into urology practices Mar
Slide 22: Base Business Review: Women's Health
Base Business Review Women's Health AMMD Investor Forum September 15, 2006
Slide 23: Female Continence
Female Continence Market characteristics (stress): Size $250M (globally) 500,000 procedures Growth rate: 9 - 10% annually AMS product offering: Stress incontinence Monarc (TO) SPARC (Supra pubic) InFast (Bone anchors) BioArc (Biologic + Synthetic) Solarant (In office) Urge incontinence Miniaturo AMS
Slide 24: Female Incontinence Miniaturo Opportunity
Female Incontinence Miniaturo opportunity Urge Incontinence market dynamics today $100M market, growing at 17% Medtronic (Interstim) only current player (nerve stimulation) Difficult procedure, limited number of implanters Full reimbursement in place US, Western Europe, Australia, Canada Miniaturo c
Slide 25: Miniaturo Opportunity (continued)
Female Incontinence Miniaturo opportunity (continued) OUS market development pathway Utilize OUS approvals to build procedural data in 2007 CE, TGA, and Canadian Meaningful revenue generated OUS in 2008 US market development pathway FDA clinical plan Up to 200 patients Up to 12 months follow up IDE
Slide 26: Female Incontinence Solarant Opportunity
Female Incontinence Solarant opportunity Market dynamics today Stress incontinence primarily OR-based Next inflection point in growth rate from office-based Tx Solarant characteristics RF energy, passed through vaginal wall into pelvic floor Development/approval pathway Additional anesthesia work re
Slide 27: Female Incontinence Organic Pipeline
Female Incontinence Organic pipeline R&D pipeline: Product/Technology Launch Opportunity Less Invasive SUI Late 2007 Stress incontinence E-stim 2008 (OUS) Interstitial cystitis Downstream marketing: WomenShare Physician-led discussions of women's health issues and concerns
Slide 28: Prolapse Repairs
Prolapse Repairs Market characteristics: Size ~$65M (globally) 450,000 total procedures, new + traditional (globally) Penetration should grow to ~85% (equal to FSI) 55,000 procedures supported by devices Growth rate: 70% AMS product offering: Straight In (SCP) Perigee (Cystocele) Apogee (Vaginal vau
Slide 29: Prolapse Repairs Organic Pipeline
Prolapse Repairs Organic pipeline R&D pipeline: Product/Technology Launch Next Generation Kit 2007 Next Generation Material 2007 Vault concomitant w/ Hysterectomy 2008 Downstream marketing: WomenShare Physician training 3,500 physicians trained in the U.S. (from Q3 2004) Target to train 500 physicia
Slide 30: Uterine Health
Uterine Health Market characteristics: Size ~$350M (globally) 350,000 procedures Growth rate: +25% In-office growth rate: 100%+ AMS product offering: Her Option Ovion AMS Cytyc Gynecare BSX Microsulis Market Share 0.04 0.5 0.4 0.05 0.01
Slide 31: Uterine Health Ovion Opportunity
Uterine Health Ovion opportunity Market dynamics today Conceptus experiencing strong sequential growth Majority of CPTS growth/opportunity OR-based Ovion characteristics Differentiated from CPTS in critical areas: Delivery system supports flexible hysteroscopy Enables office-based procedures No mate
Slide 32: Ovion Opportunity (continued)
Uterine Health Ovion opportunity (continued) US market development pathway Full PMA clearance required Complete IDE approval Q4'06 400 patients, 1 yr follow-up Approval early 2010 OUS market development pathway Utilize OUS approvals to build market presence and procedural data in 2007 CE, TGA, and C
Slide 33: Uterine Health Organic Pipeline
Uterine Health Organic pipeline Product/Technology Launch Optimized Her Option 2006 Further Her Option refinements 2007 Next Generation DUB Therapy 2010 Fibroids TBD Downstream marketing priorities: WomenShare Her Option physician awareness investments Her Option "Optimized" System launch Q4 '06 "Ex
Slide 34: GreenLight - Dr. Terry Malloy
GreenLight GreenLight PV’ Dr. Terry Malloy
Slide 35: Overview
Overview Introduction Review of Laser Physics HPS vs. PV Overview
Slide 36: Laser/Tissue Interaction
Laser/Tissue Interaction Depends upon the following variables: Tissue structure Laser wavelength Power/energy settings Mode of laser operation (pulsed vs. continuous wave length) Surgical Technique
Slide 37: Characteristics of 532nm Wavelength
Characteristics of 532nm Wavelength Fully transmitted through water (no energy absorption in irrigant) Selectively absorbed by hemoglobin Coagulation zone depth of 1 - 2 mm GreenLight wavelength is ideal tool for soft tissue removal in an aqueous environment
Slide 38: Why GreenLight for BPH?
Why GreenLight for BPH? Absorption Characteristics: Physics Tell the Story
Slide 39: Tissue Ablation Comparison
Tissue Ablation Comparison GreenLight Holmium Visual depiction of the therapy Optical penetration depth 0.8mm 0.4mm Energy delivery Continuous Pulsed Tissue contact required No Yes Laser pulse energy efficiency 100% laser Laser energy partially energy delivery consumed by fluid Wavelength characteri
Slide 40: Why Choose GreenLight Over Other Wavelengths?
Why Choose GreenLight Over Other Wavelengths? Evidence-based medicine and science: 140,000 procedures performed over 4 years Vaporization vs. Coagulation 35 peer-reviewed papers Broad academic acceptance Less invasive with TURP like outcomes
Slide 41: TURP Like Outcomes
TURP Like Outcomes Pre-operative IMMD. post-operative 3-month post-operative
Slide 42: GreenLight HPS vs. PV Overview
GreenLight HPS vs. PV Overview
Slide 43: GreenLight HPS vs. PV Overview
GreenLight HPS vs. PV Overview HPS Launched June 2006 Increased power = Procedural time improvements up to 40% PV = 80W, HPS = up to 120W Reduced anesthesia times Improved power allows for the efficient treatment of larger gland sizes Side-firing fiber in a true non-contact mode With PV, a tissue to
Slide 44: GreenLight HPS vs. PV Overview
GreenLight HPS vs. PV Overview Rapid and efficient vaporization of tissue in hemostatic fashion Vaporization vs Coagulation Does not lose efficiency in fibrous tissue Tighter collimation of energy, improved vaporization efficiency With PV a physician must slow sweep speed down to achieve vaporizatio
Slide 45: GreenLight Summary
GreenLight Summary GreenLight treatments result in: Complete vaporization of hyperplastic tissue Significant improvement in flow rate Significant reduction of residual urine and prostatic volume Low incidence of post-op discomfort Catheter-free patients in 24 hours
Slide 46: Physicians Choose GreenLight Because...
Physicians Choose GreenLight Because... Can be done as an outpatient procedure Less invasive alternative to TURP Patients can normally return to work within 2 - 3 days Is a safe procedure with little blood loss; patients on anti-coagulants can be treated Is user-friendly and easy to learn New GreenL
Slide 47: Laserscope Business: BPH & Stone Management
Laserscope Business BPH & Stone Management AMMD Investor Forum September 15, 2006
Slide 48: Laserscope Business BPH
Laserscope Business BPH market characteristics: Size ~$130M (globally) 110,000 procedures supported by lasers Growth rate: 25% 1.1M total procedures, new + traditional (global) Penetration should grow to ~85% (equal to FSI) AMS product offering: PV & HPS boxes PV & HPS fibers StoneLight fibers AMS B
Slide 49: Laserscope Business StoneLight Opportunity
Laserscope Business StoneLight opportunity: >200,000 stone procedures per year in the U.S. 120,000 using laser therapy (ASP $300-500 each) 15% per year growth rate InnovaQuartz fiber technology strongly positioned Broad range of product Bladder, Ureter & Kidney stone application Reliable, high perfo
Slide 50: Laserscope Business Organic Pipeline
Laserscope Business Organic pipeline R&D pipeline: Product Opportunities Improved Stone and BPH Tx Office-based systems Cancers Fibroids Downstream marketing: Physician training - HPS HPS clinical data publication StoneLight product promotion OEM SureFlex StoneLight fibers Strictures Polyps Menorrha
Slide 51: Laserscope Acquisition Integration Milestones
Laserscope Acquisition Integration Milestones AMMD Investor Forum September 15, 2006
Slide 52: Key Deal Valuation Assumptions
Key Deal Valuation Assumptions Revenue Synergies HPS Launch Going Direct OUS (Western Europe, Australia & Canada) Eliminate redundant OPEX Sustainable COGS reductions Per unit cost reductions (fibers & boxes) Increased fiber durability (improve current 1.2 fibers/case)
Slide 53: Key Deal Valuation Assumptions
Key Deal Valuation Assumptions Majority direct in the US (year-end 2007) Incorporate AMS best practices across LSCP business Pull through effect of larger direct presence (all products)
Slide 54: Integration Milestones
Integration Milestones Direct OUS - February 2007 Distributor communications completed by October 31, 2006 AMS Sales people in the field December 1, 2006 Order entry moved to AMS December 31, 2006 Field service process established December 1, 2006 US order entry moved to Minnetonka January 31, 2007
Slide 55: Integration Milestones (continued)
Integration Milestones (continued) Supply chain milestones Cost improvement targets HPS Console - 25% by 2008 All Fibers - 40% by 2008 Capacity HPS Console Double within 6 months Fibers Limited capacity constraints
Slide 56: LSCP Revenue Trends
LSCP Revenue Trends Key historical revenue trends: Strong fiber unit sales through 1H'06 +19% over 1H'05 Offset by 10% ASP decline in same period Box unit sales relatively flat 1H'06 vs 1H'05 171 consoles 1H'05 vs 164 consoles 1H'06 PV ASP's down 15% in same period. OUS vs US mix OUS nearly 30% of c
Slide 57: 2007 Revenue Build
2007 Revenue Build 2006 revenue estimates $95M to $100M 2007 revenue projections $135M to $150M Revenue growth components: Go direct impact OUS (fiber pricing): $10M to $15M HPS launch: $10M to $15M Growth in US fiber sales $8M to $12M Growth in OUS distributor business $5M to $8M Total revenue grow
Slide 58: Long Term Revenue Growth Strategies
Long Term Revenue Growth Strategies Continue penetration into TURP-like procedures: Currently at 23% US and 6% OUS Projected to be at 85% US and 50% OUS OUS Geographic expansion Additional countries in 2008/2009 Utilize refurbished PV boxes from HPS upgrade Pricing Allow box prices to come down Bett
Slide 59: Aesthetics Business Divestiture
Aesthetics Business Divestiture Short list of five acquirers invited to move to next step Mix of strategic & financial buyers Early indications of value in line with our expectations Formal due diligence will commence week of Sep 18 Post-divestiture obligations by AMS to support business uncertain a
Slide 60: Laserscope Integration: Sales Organization
Laserscope Integration Sales Organization AMMD Investor Forum September 15, 2006
Slide 61: The Sales Franchise
The Sales Franchise 307 Field-Based Sales and Clinical Personnel Worldwide U.S. - 221 Men's 56 Laserscope TherMatrx (18) Reps 18 Women's 57 Clinical 7 Her Option (20) Field Mgmt 5 Full Line 41 Clinical 16 Field Management 21 O.U.S. - 86 Europe 50 Laserscope Australia/Brazil/ Canada 16 Reps 6 Distrib
Slide 62: Year End 2007 Sales Organization
Year End 2007 Sales Organization Dedicated sales specialists for HPS box sales Including initial fiber commitments Ongoing fiber utilization responsibility of men's health and full line sales reps Leverage AMS reps access to OR suites and physicians Fully integrated field clinical organization Suppo
Slide 63: Year End 2007 Sales Organization
Year End 2007 Sales Organization 394 Field-Based Sales and Clinical Personnel Worldwide U.S. - 290 O.U.S. - 104 Men's 106 Europe 72 MPH (56) Australia/Brazil/Canada 24 TherMatrx (20) Distribution Markets 8 HPS (30) Women's 90 FPH (60) Her Option (30) Full Line 38 Clinical 30 Field Management 26
Slide 64: Combined Company Projections
Combined Company Projections AMMD Investor Forum September 15, 2006
Slide 65: 2006 Financial Projections
2006 Financial Projections Reconfirmed Guidance Full Year 2006 base business revenues $309M-$314M Q3 base business revenues $72M-$75M Q3 + Q4 LSCP revenues $49M-$54M Full year base business EPS $.74-$.77 Q3 base business EPS $.16-$.17 Q3 + Q4 LSCP costs per share $.26 - $.28
Slide 66: 2007 Financial Projections
2007 Financial Projections New Guidance Gross Margin range 75% to 77% Operating Margin range 22% to 24% CAPEX $15M Working Capital $150M - $160M AR + Inventory Debt paydown $30M - $40M
Slide 67: U.S. Pelvic Health Market 2005 vs. 2011
EY 2005 U:S: Pelvic Health Market Projected EY 2011 U.S. Pelvic Health Market $1.0 Billion ee $2.5 Billion Frans ep¥: Costus Female Urge wo Go FRosntinence BPH: Obstricted Alston $270 $280 0 BPH: Non. Obstrsted $200, secu tn esntnanis fe Peluc Orgarh Prolapse $00 eartinenee $0 sonoma ane Abner Uteri
Slide 68: Long Term Financial Targets
Long Term Financial Targets 2010 Financial Targets: Revenue Growth 20%-24% CAGR Gross Margin >80% Operating Margin 30%
Slide 69: Summary
Summary We have best-in-class aspirations: Create and deliver innovation through new products Financial results: Top line & bottom line growth profile Profitability metrics Cash flow results How will we achieve this? The breadth and depth of organizational talent that will execute Exactly as we have
Slide 70: Appendix
Appendix AMMD Investor Forum September 15, 2006
Slide 71: Management Team in Attendance
Management Team in Attendance Marty Emerson - President & CEO Ross Longhini - EVP & COO Jill Burchill - Chief Financial Officer Larry Getlin - SVP, Quality Systems, Legal & Corp Compliance Stephen McGill - SVP Global Sales Andy Joiner - VP & General Manager, Women's Health Greg Slusser - VP, US Sale
Slide 72: Convertible Note Features: Dilution Minimized
Convertible Note Features Dilution Minimized via Net Share Settlement Delays dilution until stock appreciates above $25.23 Avoids dilution until stock appreciates above $19.41 Dilution shares are issued only for the in-the-money portion above $19.41 For example: with a share price of $20.41 = 943,81
Slide 73: Convertible Note Features: Low Borrowing Cost
Convertible Note Features Low Borrowing Cost Coupon rate of 3.25% through July 1, 2011 Tax deduction of interest is based on comparable yield rate of 9.1% - reduces tax payments ** Zero net after tax effective interest rate Contingent interest due only if notes are trading at or above 120% Contingen
Slide 74: Non-GAAP EPS Guidance Definition and Reconciliation
Non-GAAP EPS Guidance Definition and Reconciliation The following footnotes define and reconcile the non-GAAP earnings per share guidance for 2006 and 2007 included in the Slide Presentation for the American Medical Systems Investor Forum on September 15, 2006. Base adjusted EPS of $.74 - $.77 for f
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