Analyst Presentation. Milan - January 16, 2004

Transcription

1 Analyst Presentation Milan - January 16, 2004

2 DISCLAIMER This presentation contains management preliminary estimates and forward-looking statements, including information related to Sorin projected financial performance and the expected development of the med-tech industry, in particular in the cardiovascular and renal care segments. These statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, as of this date, though by their nature future estimates are uncertain and difficult to predict. Actual results or experience could differ materially from the information contained herein. This communication does not constitute an offer or solicitation for the sale, purchase or acquisition of securities of any of the companies mentioned in any jurisdiction. 1

3 AGENDA Background and history of the Sorin Group Achievements to date and current performance The new Sorin: marketdriven strategy and aligned organization Umberto Rosa, Chairman Drago Cerchiari, CEO Aldo Lombardi, CFO Drago Cerchiari, CEO Eric Beard, President International Bruno Inguaggiato, President CRM Stefano Rimondi, SVP RC Franco Vallana, President CS 2

4 SORIN GROUP PROFILE The Sorin Group, created through the demerger of Snia s biomedical operations, is the largest cardiovascular medical device group in Europe The Sorin Group operates in the following segments of the medical technology market: Cardiac Surgery (CS) Vascular Therapy (VT) Cardiac Rhythm Management (CRM) Renal Care (RC) 3

5 MILESTONES: HOW WE CREATED THE NEW SORIN GROUP Company Foundation Entering the Sorin Group 40 s s 70 s 80 s Listing on MTA Jan

6 CARDIOVASCULAR: A LARGE AND FAST GROWING MARKET 14 billion Cardiovascular market, high-growth expectations due to: - Aging population and changes in lifestyle = expanding customer base and increasing penetration rate - Economic development and wealth distribution = new geographical markets, increasing market size - Technological innovation = new and less invasive therapies, driving demand for new products with higher ASP Significant barriers to entry = competition restricted to established players An attractive business with significant and sustainable growth 5

7 KEY FACTS 2003E Net Revenues of 715 million 4,800 employees 500+ patents and 1,000+ trademarks 450+ R&D people across Europe and North America Excellence in technology built on 30+ years of experience 5,000+ health care centers served, approx. 900 salespeople Over 1 million cardiovascular devices sold and over 3.5 million dialyzers per year 6

8 AGENDA Background and history of the Sorin Group Achievements to date and current performance The new Sorin: marketdriven strategy and aligned organization Umberto Rosa, Chairman Drago Cerchiari, CEO Aldo Lombardi, CFO Drago Cerchiari, CEO Eric Beard, President International Bruno Inguaggiato, President CRM Stefano Rimondi, SVP RC Franco Vallana, President CS 7

9 WHAT WE HAVE ACHIEVED TO DATE What we have achieved to date: a global presence in the most attractive segments of Cardiovascular Development of key assets BUT Some key factors limiting performance The new Sorin: leveraging key assets to achieve sustained profitable growth Market-driven strategy AND Aligned organization 8

10 KEY ASSETS 1 2 WW technological and commercial leadership in Cardiac Surgery Strong technology and intellectual property platform also in high growth segments (Vascular Therapy, Cardiac Rhythm Management) 3 Unprecedented product reliability 4 Global reach 9

11 KEY ASSET 1 - WW LEADERSHIP IN CARDIAC SURGERY Leading market share (both in Cardiopulmonary and valves) Global and effective distribution network Excellence in manufacturing Strong R&D pipeline due to continuous innovation 21% WW 80 countries 400+ dedicated direct salespeople Excellence in design-to-manufacturing process Low costs in cardiopulmonary High quality valves Synergy: the new mini by-pass system Soprano: tissue valve with optimal haemodynamics Revolutionary Percutaneous valve technology 10

12 KEY ASSET 2 - STRONG TECHNOLOGY IN HIGH GROWTH SEGMENTS: CARBOFILM TM APPLICATION IN STENTS Market need / opportunity Stents (used to treat coronary artery desease) are among the largest and fastest growing product segments in Cardiovascular Stents can cause thrombosis if not completely biocompatible One of the most important clinical needs is minimize the risk of thrombosis Sorin solution: Carbofilm TM coating for stents Carbofilm TM, a thin film of turbostratic carbon, originally developed by Sorin for heart valves It has been proven to be one of the most bio-compatible materials with excellent mechanical properties and manufacturability Impact 180,000 stents implanted so far 7,000+ patients in 14 clinical studies/34 centers Zero thrombosis 11

13 KEY ASSET 2 - STRONG TECHNOLOGY IN HIGH GROWTH SEGMENTS: CRM Sorin solutions Market need/opportunity CRM, 6.6 bn market growing at 11% per year Increasing importance of intelligent devices that clearly diagnose heart electrical activity, delivering as needed stimulation Alto 2 PEA (Peak Endocardial Acceleration) An implantable sensor that can measure the actual beating of the heart and thus provide the right therapy both for brady and tachy arrhythmias AAIsafeR The only algorithm that paces the heart physiologically (i.e. from the atrium) avoiding unnecessary ventricular stimulation PARAD/PARAD+ Proprietary software that discriminates fibrillation episodes (potentially lethal) from physiological heart rhythm accelerations 12

14 KEY ASSET 3 - UNPRECEDENTED PRODUCT RELIABILITY: THE HEART VALVES EXAMPLE 30+ years of experience 750,000 implants since the 70 s Approx. 40 million cycles (open/close) per year Zero structural defects Superior haemodynamics and design skills Fully integrated manufacturing process Impeccable quality control Carbon coating skills 13

15 KEY ASSET Brand portfolio 4 - GLOBAL REACH 11 brands with strong global reputation 1,000+ trademarks Sales and distribution Manufacturing Direct and indirect sales force in approx. 80 countries worldwide Approx. 900 salespeople worldwide European and US production sites Research centers 450+ R&D people across Europe and North America Approx. 60 joint projects with universities and hospitals worldwide 14

16 FACTORS LIMITING SORIN PERFORMANCE Multiple acquisitions Strong technology focus... but synergies and integration potential still to be fully captured... but relatively lower focus on marketing and time-to-market Part of a diversified holding company... with management focus not fully dedicated to medical technology 15

17 RECENT PERFORMANCE mm Net Revenues % EBITDA E 20% 15% 10% 5% 0% Size doubled in 5 years, growth mainly driven by acquisitions, but: Declining profitability Flat 2003 to 2002 Net Revenues 16

18 FINANCIAL HIGHLIGHTS mm 2002 PF 1 9m ended 30/09/2003 PF E Net Revenues ~ 715 Gross profit EBITDA EBIT Net income Gross profit margin 47.2% 47.2% EBITDA margin 14.7% 11.7% ~ 12% EBIT margin 5.5% 1.8% ~ 2% Net debt ~ 310 Shareholders equity n.a. n.a. Gearing 0.37 n.a. n.a. (1) 2002 Pro-forma accounts to reflect retroactively the capital increase, the dividend payment and the partial proportional demerger; 2002PF does not include Carbomedics (acquired on ). 9 months ended 30/09/2003 PF accounts to reflect retroactively the partial proportional demerger. (2) Before goodwill amortization and grants (3) EBITDA equals EBIT plus depreciation and amortization, write -downs and provisions 17

19 NET REVENUES Variance analysis 2003E vs 2002 mm (33) (4) Exchange rate effect Change in consolidation area* Operations 2003E * Carbomedics and Soludia 18

20 SALES BY GEOGRAPHY AND BUSINESS UNIT Percent By Geography * By Business Unit * Japan RoW Renal Care 14.5 Vascular Therapy 3.3 Europe North America Cardiac Rhythm Management 59.1 Cardiac Surgery * 100% = mm as of 30 September

21 CAPITAL STRUCTURE Total capitalisation and gearing Net debt (30/09/2003PF) mm Net debt mm Shareholders' equity Gearing 73% % PF 1H03 PF 0 ST Net Debt LT Debt Net Debt Long term debt includes mm for the financing of recent acquisitions Net debt as of is expected around mm 20

22 AGENDA Background and history of the Sorin Group Achievements to date and current performance The new Sorin: marketdriven strategy and aligned organization Umberto Rosa, Chairman Drago Cerchiari, CEO Aldo Lombardi, CFO Drago Cerchiari, CEO Eric Beard, President International Bruno Inguaggiato, President CRM Stefano Rimondi, SVP RC Franco Vallana, President CS 21

23 THE NEW SORIN What we have achieved to date: a global presence in the most attractive segments of Cardiovascular Development of key assets BUT Some key factors limiting performance The new Sorin: leveraging key assets to achieve sustained profitable growth Market-driven strategy AND Aligned organization 22

24 CARDIOVASCULAR: WHERE WE START FROM Cardiac Surgery (CS) Vascular Therapy (VT) Cardiac Rhythm Management (CRM) Physician Cardiac surgeon and team Interventional cardiologist/radiologist Cardiologist / electrophysiologist Pathology - procedure Coronary diseases (bypass), valve dysfunction (replacement and repair procedures), heart transplant Coronary and vascular occlusions (Angioplasty) Arrhythmia, Heart Failure Market size 2003 ( bn) CAGR % 11% 11% Market share Europe: 36% North America: 14% WW: 21% Europe: 3.1% WW: 0.5% Europe: 8.1% North America: 0.4% WW: 2.2% Main players Medtronic, Edwards, Guidant, St. Jude, Terumo J&J, Guidant, Boston Sc., Medtronic, Abbott, Terumo Medtronic, Guidant, St. Jude, Biotronik 23

25 CARDIOVASCULAR: MARKET-DRIVEN STRATEGY Sorin group vision A recognized worldwide leader in haemodynamics and a true innovator in Cardiac Rhythm Management by building on leadership in Cardiac Surgery and delivering on innovation Vascular Therapy Cardiac Surgery Cardiac Rhythm Management 24

26 CARDIAC SURGERY: MARKET-DRIVEN STRATEGY Cardiac Surgery Innovate and extend product range Expand in underpenetrated geographies Leverage commercial synergies in the US (Cobe/Carbomedics in mechanical valves) and worldwide 25

27 CS: STRATEGY BY PRODUCT SEGMENT Market size Market CAGR ~ 100 mm Leverage leadership in perfusion and mechanical valves to penetrate high growth segments Leading technology in tissue valves Technologies across BUs to develop minimally invasive devices (%) Minimally invasive Annuloplasty rings 10 5 Tissue valves 0-5 Mechanical valves Perfusion disposables & equipments ~ 500 mm Maintain leadership Innovate product range Mini by-pass Broader CS product range Improve market share in US through Cobe/ Carbomedics integration Sorin 2003 WW market share (%) 26

28 SYNERGY: A REVOLUTIONARY MINI BY-PASS SYSTEM Synergy Customer requirements for still-heart surgery Physiological/less invasive extracorporeal circulation Symplification of cardiopulmonary by-pass set-up State-of-the-art cardiopulmonary system that integrates in a single unit all the main elements of a cardiopulmonary bypass Lower patient blood dilution and related side effects Utilisation in both traditional by-pass and beating-heart surgical procedures; optimal to address paediatric patients Already launched in US (Premium pricing) 27

29 LEADING TISSUE VALVES TECHNOLOGY TO BE APPLIED TO PERCUTANEOUS HEART VALVE REPLACEMENT Today Leading Tissue valve technology Tomorrow Revolutionary Percutaneous valve Prosthesis wrapped on a percutaneous catheter and introduced through femoral access (no chest opening) Pericardial tissue valve for the aortic position, with superior haemodynamic performance Supra-annular seating allows for the maximization of blood flow Patented detoxification process Over 18 years of clinical experience with bovine pericardium heart valves 28

30 VASCULAR THERAPY: MARKET-DRIVEN STRATEGY Vascular Therapy Maximize the potential of our innovative technologies to become a player in the highest growth segments 29

31 VT: STRATEGY BY PRODUCT SEGMENT Market CAGR (%) Drug eluting stents Peripheral stents Passive stents 5 Marketing and clinical investments to prove superiority of Sorin stents (in particular on thrombosis and restenosis) Explore partnerships to maximize US value and to develop peripheral stents Sorin 2003 WW market share (%) Market size ~ 0.3 bn ~ 1 bn Unique proprietary Carbofilm technology ensures zero thrombosis rate on all Sorin stents 30

32 JANUS DISTINCTIVE FEATURES Customer requirements for Drug Eluting Stents (DES) Janus: the Sorin solution Further reduce restenosis rate Eliminate risk of thrombosis Avoid unwanted impact of drugs Drug releasing sculpture Integral Carbofilm coating 31

33 JANUS CARBOSTENT INTELLECTUAL PROPERTY COVERAGE Carbofilm Coating 2 European Patents 6 US Patents Stent Architecture 4 European Patents (3 pending) 3 US Patents Drug Eluting Machine 3 European Patents (2 pending) 2 US Patents (2 pending) Drug Loading Process 1 European Patent (1 pending) 1 US Patent (1 pending) 32

34 CARDIAC RHYTHM MANAGEMENT: MARKET-DRIVEN STRATEGY CRM Launch of newly registered technologies worldwide Grow CRM in US Gain market share in Europe in ICD and CRT-D Extract synergies from ELA integration (Manufacturing, R&D, Sales & Marketing) 33

35 CRM: STRATEGY BY PRODUCT SEGMENT Market CAGR (%) CRT-D US: accelerate CRT-D FDA approval EU: leverage position in pacemakers to push new product range: Alto 2 ICD, with reduced size (39cc), launched in 2003 Alto 2 MSP CRT-D to be launched in EU in 2004 PEA: potential applications for ICD and CRT-D Market size ~ 1 bn ~ 2 bn ICD Pacemaker Focus on marketing of Sorin outstanding technology: Symphony, the highest standard in pacing, launched in 2003 AAIsafeR proprietary algorithm Full integration of electronic platform (GXD 2) Sorin 2003 ww market share (%) 34

36 NEW CRM PRODUCT RANGE Pacing ICD CRT-D SYMPHONY - The highest standard in pacemaker functionality: wide range of therapies, efficient AF prevention, small (24gr, 10.5 cc, 6.4 mm) and long lasting (8.7 years) Launched in 2003 ALTO 2 - Reduced size (39cc) Prevention algorithms and improved programming SW Launched in 2003 ALTO 2 MSP - High voltage device for Congestive Heart Failure by means of Cardiac Resynchronization Therapy To be launched in EU in 2004 GXD 2 Platform New common platform for all devices (Sorin & ELA brands) Low current consumption, large scale data memory, fast telemetry To be launched in

37 GROW CRM IN US Why US CRM market = 70% of worldwide market, highly profitable Majority of CRM product range already FDA approved Sorin already possesses strong assets in US: Reputation (ELA, Cobe, Carbomedics) Relationships with leading customers Managerial infrastructure (incl. Regulatory and Clinical affairs) How Speeding-up approval of new product range Gaining market acceptance through a dedicated clinical development team Leveraging existing CS infrastructure and customer relationships Further developing a direct salesforce in selected areas Developing partnerships to increase distribution coverage 36

38 RENAL CARE: STRATEGY BY PRODUCT SEGMENT Market CAGR (%) Market size ~ 0.1 bn ~ 0.5 bn 5 New up-to-date machine Bio-feedback Haemodialysis machines All powder concentrate Captive lines 5 Solutions, blood lines & ancillaries Dialyzers Expansion of product range Synthetic membrane dialyzers Sorin 2003 European market share (%) Innovative, singlepatient tailored dialysis techniques (e.g., Haemodia filtration on-line) Technology crossfertilization: new business opportunities in treatment of other diseases (e.g., Congestive Heart Failure) 37

39 EXECUTION BY AN ALIGNED ORGANIZATION 1 Focus on extracting synergies from integration (revenues and costs) 2 Customer-centric organization 3 Strengthened management team 38

40 1 - PRIORITY AREAS FOR SYNERGIES RESULTING FROM INTEGRATION Cardiac Surgery Vascular Therapy Cardiac Rhythm Management Sales and marketing G&A costs Manufacturing costs Account management, customer-centric geographies Leverage on customer relationships and reputation across businesses Optimization of customer support and sales channels within geographies Reduction of legal entities Rationalization and consolidation of overheads Centralization of common purchasing Rationalize/specialize sites by core manufacturing competencies Optimize make/buy Optimize physical distribution and inventory levels across the whole "manufacturing system" R&D Integration of Sorin and Carbomedics Synergies with Cardiac Surgery Integration of Sorin and Ela Regulatory Integrate local teams to leverage relationships with regulatory bodies 39

41 2 - CUSTOMER-CENTRIC ORGANIZATION Chairman Umberto Rosa Chief Executive Officer Drago Cerchiari SVP, Corporate Development Carlo Vanoli Chief Scientific Officer TBD VP, Bus. Dev. & Strat. Plan Anton Failla SVP, HR & Organization Giovanni Caruso VP, Chief Financial Officer Aldo Lombardi Chief Information Officer TBD President, BU Cardiac Surgery Franco Vallana President, International Eric Beard President, North America Rodger Stewart RoW A.I. Eric Beard President, BU CRM Bruno Inguaggiato BU Vascular Therapy & New Businesses A.I. Franco Vallana SVP, BU Renal Care Stefano Rimondi Italy France Germany Spain UK Other EU Countries Japan USA Canada Eastern Europe South Africa & Sub Sahara Middle East & North Africa India & Pakistan China & Far East Oceania Latin America 40

42 2 - REGIONS VS. BUSINESS UNITS Chairman Umberto Rosa Chief Executive Officer Drago Cerchiari SVP, Corporate Development Carlo Vanoli Chief Scientific Officer TBD SVP, HR & Organization Giovanni Caruso VP, Chief Financial Officer Aldo Lombardi President, BU Cardiac Surgery Franco Vallana President, International Eric Beard VP, Bus. Dev. & Strat. Plan Anton Failla President, North America Rodger Stewart Chief Information Officer TBD RoW A.I. Eric Beard President, BU CRM Bruno Inguaggiato BU Vascular Therapy & New Businesses A.I. Franco Vallana SVP, BU Renal Care Stefano Rimondi Business Units WW P&L accountability for a given business Drive innovation Strategic marketing Drive manufacturing & supply chain excellence Regions Geographical P&L accountability for all businesses Customer centric approach Account management Leverage local market opportunities Strong, focused tactical marketing supported by strategic marketing 41

43 3 - STRENGTHENED MANAGEMENT TEAM 7 managers with 150 years of cumulated experience in Sorin to ensure continuity 4 new hires with over 100 years of cumulated experience in the industry 4 positions still to be filled SVP, Corporate Development Carlo Vanoli Chief Scientific Officer TBD Chairman Umberto Rosa Chief Executive Officer Drago Cerchiari SVP, HR & Organization Giovanni Caruso VP, Chief Financial Officer Aldo Lombardi VP, Bus. Dev. & Strat. Plan Anton Failla Chief Information Officer TBD President, BU Cardiac Surgery Franco Vallana President, International Eric Beard President, North America Rodger Stewart RoW A.I. Eric Beard President, BU CRM Bruno Inguaggiato BU Vascular Therapy & New Businesses A.I. Franco Vallana SVP, BU Renal Care Stefano Rimondi 42

44 SORIN GROUP ROAD MAP FOR THE NEW SORIN Year Phase Integration and cost reduction Launching new product ranges in EU Investing to prepare US expansion (distribution, clinical trials) Growth and profitability driven by: US expansion Full benefits from integration Main product launches CS Synergy mini by-pass Genius (2nd generation mini by-pass) Percutaneous valve Tissue valve (US) VT Janus (EU) Janus (US) CRM Symphony (pacemaker) Alto2 (ICD) CRT-D (EU) New electronic platform Alto 2 in Japan CRT-D (US) 43

45 GROWTH DRIVERS ( mm) E CS VT CRM RC New Business c.a. 25% Expansion in North America 2008 c.a. 34% Key initiatives Mini by-pass Tissue valve Product range expansion Percutaneous valve International expansion DES in Europe and US Peripheral stents US expansion ICD and CRT-D in Europe New machine New dialyzers Platelet gel Others (Red blood cells drug loading) 44

46 INVESTMENT HIGHLIGHTS Worldwide leader in haemodynamics & the largest European cardiovascular medical devices company Strong competitive positioning in a large and fast-growing market Proprietary technology platform across product portfolio Global footprint: global production, R&D, sales & marketing operations Skilled and international management team Pure play investment Leading med-tech player, well positioned to capitalise on future profitable growth and expansion opportunities 45

47 Analyst Presentation Q&A