Stephen J. Fanning Chairman, CEO, & President

Transcription

1 Stephen J. Fanning Chairman, CEO, & President

2 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding potential transaction timing, projected financial results, and anticipated cost savings, synergies and other opportunities. Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from the statements contained herein. Further information on potential risk factors that could affect Solta Medical's business are detailed in the Company's Form 10-K for the year ended December 31, 2010 and other filings with the SEC. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Solta Medical undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events. Management has provided non-gaap gross profit, non-gaap operating income (loss), non-gaap EBITDA, non-gaap net income (loss) and non-gaap earnings (loss) per share measures that exclude the impact of purchase price related adjustments, severance costs, and stock-based compensation expenses, all net of income taxes. The Company believes that these non-gaap financial measures provide investors with insight into what is used by management to conduct a more meaningful and consistent comparison of the Company's ongoing operating results and trends, compared with historical results. A reconciliation of the differences between the non-gaap financial measures and the most comparable financial measures presented in accordance with GAAP can be found in the Investor Relations section of the Company s website ( 2

3 Compelling Competitive Advantages in the Aesthetic Device Industry The most recognized brands in the leading procedure segments dominate share of voice & innovative use of PR and social media Industry leading recurring revenue business model over one-half of revenue from treatment tips and other consumables Market segmentation strategy to expand addressable market for added growth Expansive worldwide distribution system with a unique, multi-level sales force focused on systems, tip sales and clinical training Demonstrated success in cross selling brands Proven track record of innovative, organic growth and successful M&A transactions 3

4 Solta Cutera Ulthera Syneron Pelleve Zeltiq Erchonia Palomar Cynosure Lumenis Alma Solta Dominates Share of Voice Media Exposure Drives Procedure Growth Solta Media Share of Voice is over 4 TIMES its nearest competitor with over 523 Million Impressions in Q Impressions (in thousands) 600, , , , , ,000 Q Media Impressions 0 Source: PRIME Research, Cohn & Wolfe PR, VMS 4

5 Industry Leading Recurring Revenue Business Model 60% Revenue Streams for the 9 Months Ended 9/30/11 50% 57% 40% 30% 37% 20% 10% 0% Tips & other consumables Systems Service & other 6% Treatment Tips Provide Attractive Gross Margins of ~90% 5

6 The Opportunity: Market Size, Market Segmentation & Product Strategy 6

7 Aesthetic & Acne Markets: Long-Term Growth Drivers Aesthetic Market Worldwide global sales of $5B Aging of U.S. population Broader range of non-invasive treatments Changing practitioner economics managed care and government reimbursement restrictions Increased acceptance of aesthetic procedures Acne Market Worldwide global sales of $5B, including OTC remedies One of the primary reasons patients visit a dermatologist million individuals suffer from acne in the U.S. alone Over 5 million prescriptions written annually 7

8 Market Segmentation Strategy 8

9 User Explosion With new products and channels, our patient potential grows exponentially Transformative 36,000 Locations Physician Led By Appointment 200,000 Locations Professional Assisted Everyday 104 Million Women yrs old, >$100k Personal Care 9 Transformative Appointment Everyday 9

10 Current Product Portfolio Physician Led Professional Assisted Personal Care M&A M&A M&A M&A 10

11 Physician-Led Products 11

12 Thermage CPT: A Leap Forward in Skin Tightening & Contouring Technology Enhanced efficacy and consistent results more uniform energy delivery and greater volume of tissue reaching therapeutic temperature Superior patient comfort produced by Comfort Pulse Technology new energy delivery system and vibrating hand piece vastly improves the treatment experience High patient satisfaction redesigned Face Tip 3.0 and seamless integration with the Thermage Body Tip 16.0 for faster, more comfortable face and body treatments Greater ease of use with a new ergonomically designed multifunctional hand piece makes the procedure more efficient for the operator This is what I have been waiting for from Thermage advanced skin tightening and body contouring results in a procedure that is both comfortable for the patient and more user friendly for the physician. A. Jay Burns, MD, assistant professor of plastic surgery at the University of Texas 12

13 Thermage Skin Tightening and Contouring 13

14 Fractional photothermolysis technology for skin resurfacing Key differentiators: Fractional approach (treating a portion of the skin) reduces immediate side effects and leads to rapid healing Immediate and delayed therapeutic results - Superficial resurfacing for immediate results - Deeper dermal impact improves results over time Stratum corneum remains intact (i.e., makeup can be applied after treatment) Paintbrush technology for how laser is applied to the skin 14

15 Fraxel re:store DUAL: Breakthrough Skin Resurfacing Technology FDA 510(k) clearance for the treatment of Actinic Keratosis (AK) Increased procedure speed 25% (Greater Physician ROI) Superior results Faster clearance of pigment Non-invasive treatment with CO 2 like results No striping effects to fix later as with IPL treatments More precise treatments Accelerated clearance of unwanted pigmentation via Thulium 1927nm laser now offered on a standalone platform Ease of operation and improved patient comfort Treatment of larger and multiple body areas "In our study, we found the Fraxel re:store Dual to be the most effective treatment of multiple facial AKs, as it is safe and requires minimal downtime while simultaneously improving other signs of photodamage," Roy G. Geronemus, MD, Director of the Laser & Skin Surgery Center of New York 15

16 Fraxel re:store DUAL Laser Treatment 16

17 Fraxel re:store DUAL Laser Treatment 17

18 Fraxel re:store DUAL Laser Treatment 18

19 An Effective Alternative in Treating Acne Impacts acne in hours Painless No-pre-treatment or topical anesthetics Rapid: treatments in 10 to 20 minutes Broad applicability: FDA cleared for four acne indications Prescriptions Concerns regarding side effects Delay for medication to work effectively Resistance to medication Other Energy Devices Limited differentiation Limited efficacy Often painful Anesthetic is usually required 19

20 Combines vacuum with a painless broadband light 1 st Pass Light Tip 2 nd Pass Profusion Tip Cleanses Treats Delivers Penetrates Pneumatics brings target closer to skin s surface mechanically cleansing sebaceous gland Lower energy light delivered to treat acne and vascular and pigmented lesions more effectively Applicator Tip delivers therapeutic material through intercellular spaces and inverted pores Material penetrates into skin. Skin is released to normal position 20

21 Transformative Effects of 21

22 Investment Highlights One Procedure, One Hour, One Pant Size Targeting non-invasive fat reduction, next key market opportunity in aesthetics procedure CAGR from 2011 through 2016 projected to be 42% per Millennium Research Group Clinically proven results supported by scientific fundamentals Proprietary technology with over 15 issued patents and 27 pending applications in the U.S. and 168 issued or pending patents internationally Anticipate launch of second generation technology in Q1:2012 Compelling physician economics that draw new entrants Attractive recurring revenue and high margin business model Strong opportunities for growth in expanding markets and new indications 22

23 The Next Generation in Body Contouring Gen 1 Gen 2 Gen 2: Ready for Commercialization Gen 2 Features 2.7x larger treatment area - speeds treatment time Improved ergonomics and ease of use Lighter handheld transducer system (no reticulating arm) Touch screen interface Smaller footprint in the physician s office Improved serviceability 23

24 Transaction Analysis Initial Consideration $15,000,000 Cash payment made at close on November 1 Gen 2 FDA Approval $20,000,000 Payment made in November Additional Annual Contingent Payments 1 Contingent 2 100% of Incremental year-over-year net sales of transducers related to the LipoSonix product 100% of Incremental year-over-year gross profit on LipoSonix product systems Duration of Contingent Payments Seven years from FDA approval (1) An additional contingent payment of $30 million will be required to be made by Solta following the first year in which net sales/gross profits of LipoSonix products exceed $300 million. (2) 75% of the Incremental year-over-year net sales and gross profits will be paid to LipoSonix shareholders under the LipoSonix Agreement and under certain circumstances would be payable to Medicis, and 25% of the Incremental year-over-year net sales and gross profits will be paid to Medicis under the Medicis Agreement. The definition of LipoSonix product differs between the two agreements. In addition to all products covered in the LipoSonix Agreement, the Medicis Agreement s definition includes all products that apply HIFU and incorporate LipoSonix technology. 24

25 Transaction Analysis (cont.) The incremental transducer sales and systems gross profit amounts from 2012 (i.e., Year 1) will represent a significant percentage of total LipoSonix sales 15% of our estimated 2011-base business revenue => $17.5M 2012 revenue 80/20 product split between systems and transducer revenue Implies a contingent payment of ~$11 million Payable in Q A liability related to the estimated total contingent payments over the next seven years will be recorded to the balance sheet in Q and contingent payments will not flow through subsequent P&L s Subsequent years contingent payments as a percentage of total sales will likely fall substantially By year 7, the contingent payment as a percentage of total sales is likely to look more like a royalty payment 25

26 Illustrative Transaction Payment Analysis Cumulative Payments Contingent Payments Q1 of following year Revenue $ $35M Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 26

27 Professional-Assist Products 27

28 28

29 Physician-assisted skin rejuvenation platform using Solta Laser Technology A simple, sophisticated, and elegant user experience laser with unique delivery technology A profitable treatment attracts new patients into this new category A more accessible treatment great for prevention and maintenance brings new patients as an entry point treatment enables leverage of our social media marketing prowess A platform technology reduces COGs opportunity for rapid product development 29

30 Personal Care Products 30

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32 First Personal Care Device from Solta Medical CLARO Intense Pulsed Light (IPL) technology combining both heat and light in a hand-held device to treat acne Provides greater presence in acne market with physicians and consumers Complements Isolaz brand FDA OTC cleared - April 2010 Proven Clinical Results 87% Improvement in Acne Lesions in just 3 days 3 U.S. & 4 OUS patents issued 12 seconds per treatment area twice a day Portable, battery-operated and rechargeable Easy-to-use, painless Retail $195 32

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34 Anti-aging laser skin rejuvenation device for in-home use Based on Fraxel s professional technology Activates natural cell renewal in deep layers of the skin Intelligent optical tracking enables easy consumer use Suitable for any skin type Impressive clinical results, as observed by independent dermatologists after 12 weeks of in-home use: Evened skin tone: 83% Smoothed skin texture: 86% Reduced fine lines: 81% Improved overall appearance: 89% 93% of users saw visible improvement in their skin s appearance 34

35 Performance Drivers 35

36 Performance Driver Industry-leading Sales Force and OUS Distribution System Europe & Middle East 17% of Sales Asia Pacific 34% of Sales North America 44% of Sales Latin America 5% of Sales Multi-level sales force focused on systems, tip sales and clinical training Available in over 100 countries Direct sales forces in North America, Australia, Hong Kong, France, Germany, Spain, Portugal, U.K., and Japan Direct sales represent over 60% of revenue Approximately 56% of revenue generated overseas Percentage of sales reflects the nine months ended 9/30/11. 36

37 Performance Driver Capitalizing on Cross Selling Opportunities in Physician-Led and Professional Assist Markets Installed Base of Over 7,500 * For the last two years, in the U.S. market, over 40% of new systems were placed with customers who already owned either Thermage, Fraxel or Isolaz and then purchased another brand * Thermage 3,400 systems; Fraxel 2,900 systems; Isolaz 1,300 systems 37

38 Performance Driver New Product Development, driven by R&D Spend of $15MM+ Thermage CPT Fraxel Re:store DUAL Fraxel Re:store 1927 Clear & Brilliant RéAura Claro 38

39 Performance Driver Four M&A Transactions in the Last Three Years Reliant Technologies, Inc. December 2008 Approximately $70 million in Stock and Cash Realized $25 million in annual cost savings Aesthera Corporation February 2010 Approximately $5 million in Stock Realized $4 million in annual cost savings CLRS Technology October 2010 Approximately $1 million in Cash LipoSonix November 2011 Approximately $35 million in Cash with Contingent Payments tied to YOY growth of Sales & GM 39

40 Q Financial Performance Total Revenue of $27.4 million Up 10% Year-over-year Product Revenue Up 14% Sales of New Systems and Upgrades Up 19% Treatment Tips & Consumables Up 11% Non-GAAP Gross Margin of 69% - Highest in AED Space Eighth Consecutive Quarter of Non-GAAP Operating Income - $1.8 million Non-GAAP EBITDA of $2.6 million 40

41 Summary The most recognized brands in the leading procedure segments dominate share of voice & innovative use of PR and social media Industry leading recurring revenue business model over one-half of revenue from treatment tips and other consumables Market segmentation strategy to expand addressable market for added growth Expansive worldwide distribution system with a unique, multi-level sales force focused on systems, tip sales and clinical training Demonstrated success in cross selling brands Proven track record of innovative, organic growth and successful M&A transactions 41