wright medical investor presentation · 2015-09-16 · wright medical: a leader in our space...
TRANSCRIPT
Investor Presentation
November 26, 2013
This presentation may contain “forward-looking statements” as defined under U.S. federal securities laws. These statements reflect management's
current knowledge, assumptions, beliefs, estimates, and expectations and express management's current view of future performance, results, and
trends. Forward-looking statements may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan,
predict, project, will, and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual
results to materially differ from those described in the forward-looking statements. The reader should not place undue reliance on forward-looking
statements. Such statements are made as of the date of this presentation, and we undertake no obligation to update such statements after this date.
Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements are discussed in our
filings with the Securities and Exchange Commission (including those described in Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2012, and as may be supplemented in our Quarterly Reports on Form 10-Q). By way of example and without implied limitation, such
risks and uncertainties include: failure to realize the anticipated benefits of the Biotech International acquisition in whole or in part, and unexpected
liabilities and/or erroneous financial estimates and projections for the acquired business; failure to realize the anticipated financial and other benefits
from the acquisition of BioMimetic Therapeutics, Inc. or a delay in realization thereof; failure to obtain, or a delay in obtaining, FDA approval of
Augment Bone Graft, or a material limitation on the scope of such approval; lower than anticipated market acceptance of, or annual market demand
for, Augment Bone Graft; failure to obtain necessary approvals, or other intervening events, which could delay or prevent the previously announced
sale of our hip/knee business from closing; future actions of the United States Attorney's office, the FDA, the Department of Health and Human
Services or other U.S. or foreign government authorities, including those resulting from increased scrutiny under the Foreign Corrupt Practices Act
and similar laws, that could delay, limit or suspend our development, manufacturing, commercialization and sale of products, or result in seizures,
injunctions, monetary sanctions or criminal or civil liabilities; failure to obtain the FDA or other regulatory clearances needed to market and sell our
products; any actual or alleged breach of the Corporate Integrity Agreement to which we are subject through September 2015 which could expose us
to significant liability including exclusion from Medicare, Medicaid and other federal healthcare programs, potential criminal prosecution, and civil and
criminal fines or penalties; adverse outcomes in existing product liability litigation; new product liability claims; inadequate insurance coverage; the
possibility of private securities litigation or shareholder derivative suits; demand for and market acceptance of our new and existing products;
potentially burdensome tax measures; recently enacted healthcare laws and changes in product reimbursement which could generate downward
pressure on our product pricing; lack of suitable business development opportunities; inability to capitalize on business development opportunities;
product quality or patient safety issues; challenges to our intellectual property rights; geographic and product mix impact on our sales; our inability to
retain key sales representatives, independent distributors and other personnel or to attract new talent; inventory reductions or fluctuations in buying
patterns by wholesalers or distributors; inability to realize the anticipated benefits of restructuring initiatives; negative impact of the commercial and
credit environment on us, our customers and our suppliers; and the potentially negative effect of our ongoing compliance enhancements on our
relationships with customers and our ability to deliver timely and effective medical education, clinical studies, and new products.
Forward-Looking Statements
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Wright Medical uses certain non-GAAP financial measures in this presentation. Wright Medical uses
non-GAAP financial measures as supplemental measures of performance and believes these measures
provide useful information to investors in evaluating our operations, period over period. However,
non-GAAP financial measures have limitations as analytical tools, and should not be considered in
isolation or as a substitute for or as superior to Wright Medical’s financial results prepared in
accordance with GAAP. In addition, investors should note that any non-GAAP financial measures
Wright Medical uses may not be the same non-GAAP financial measures, and may not be calculated
in the same manner, as that of other companies. We have posted a reconciliation of our non-GAAP
financial measures to the most directly comparable GAAP financial measures on our website at
www.wmt.com.
Use of Non-GAAP Financial Measures
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Wright Medical: A Leader in Our Space
Orthopaedic medical device company Global
Sales from continuing operations 2013E ~$238M(1)
Market cap (as of 11/26/13) ~$1.4B
Countries >60
1 Midpoint of guidance range communicated on 11/4/2013. The fact that we include these projections in this presentation should not be taken to mean that these amounts continue to be our projections as of any subsequent date.
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W R I G H T M E D I C A L
Historically Positioned in Two Large Markets
• Recognized leader in Foot & Ankle
• Primarily US
• Focus: growth
~45% of sales
Ortho-Recon (Hips and Knees)
Size: ~$13B(2)
Market Growth: ~0-3%
• Mid-sized player
• Primarily International
• Focus: efficiency, cash generation
~55% of sales
Business Market Size / Growth Our Position / Strategic Focus
1 US Market – 2012 Millennium Research Group, Management Estimates 2 Worldwide Market – 2011 Millennium Research Group, Management Estimates
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Market Growth: ~8-10%
Size: ~$3.5B(1)
Extremities (incl. Biologics)
Entered Into Agreement to Divest OrthoRecon Business
June 19, 2013: Wright and MicroPort Scientific Corporation
Enter Into Definitive Agreement Under Which MicroPort
Will Acquire Wright’s OrthoRecon Business
• Transaction transforms Wright Medical into high-growth Extremities and Biologics pure play
• Purchase price of $290 million in cash, subject to a net working capital adjustment
• Expect to close by end of Q4 of 2013
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L A S T T W O Y E A R S
A Transformed Business
Growth
Profile
High
Low Low High
Business Focus
Wright Medical
• Focus on strengthening
Extremities
• Divest slower growth
OrthoRecon segment
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Focused On Higher Growth Segments of the Orthopedics Market
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2011-2016 CAGR
10%
7-8% 7% 7%
6%
3-4% 3%
2-3%
Foot & Ankle SportsMedicine
Biologics Extremities Trauma Knee Spine Hip
Source: 2011 & 2012 Millennium Research Group, 2012 Life Science Intelligence, Management Estimates
T R A N S F O R M I N G T H E C O M P A N Y
Results Indicate Execution is On Track
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A Few Key Numbers
Increase US Foot and Ankle
Sales Productivity Q3, 2013
$780K vs. $700K in 2012 and $600K in 2011
Continued Investment in
Physician Training 2013
~2,100 trained vs. 2,000 in
2012 and 600 in 2011
Accelerate Growth in Global
Foot & Ankle Q3, 2013
+22%
vs. 14% in Q3, 2012
Sales from Continuing
Operations Q3, 2013
+14%
vs. 2% in Q3, 2012
Accelerating Foot & Ankle Growth
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Foot & Ankle Growth (Global Constant Currency)
9%
15%
23%
2011 2012 YTD 3Q 2013
T H E M A R K E T
Focused on Most Attractive Segment of Extremities Market
Upper Extremity
$2.4B
27,000 surgeons
Foot & Ankle $1.1B
7,500 surgeons and
podiatrists
Breakdown of $3.5B US Extremities Market
More concentrated call point
Complex treatment issues, less mature products – need innovative solutions
– significant mix opportunity
Strong growth drivers – trauma – osteoarthritis
– diabetes – obesity
High margin
Underpenetrated market – significant opportunity for
international expansion
Foot & Ankle: An Attractive Segment
Source: Millennium Research Group, Management Estimates
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S T R E N G T H S :
Recognized Leader in Foot and Ankle
CHARLOTTE® CLAW® 3.5mm Implant
BIOFOAM® Wedge
LIS FRANC Plate
ORTHOSPHERE® Implant
SWANSON Hammer Toe Implant
CHARLOTTE® Snap-Off Screw
GRAFTJACKET® Regenerative Tissue Matrix
LPT® Toe Implant
MTP Plate
DARCO® BOW® Plate
BIOARCH® Implant
ENDO-FUSE® Rods and Beams
CHARLOTTE® Compression
CHARLOTTE® CLAW® 2.7mm Implant
CHARLOTTE® Jones Fracture Screw
DART-FIRE® Screws
CHARLOTTE® 3.0 MUC Screw
DARCO® Screws
SWANSON Great Toe
DARCO® RPS Plate
DARCO® MPJ Plate
DARCO® LPS Plate
DARCO® PIA Plate
DARCO® DPS Plate
ORTHOLOC® Plate
CHARLOTTE® 7.0 MUC Screw
AM™ Surgical Endoscopic Blade
SIDEKICK® Stealth Fixation
CORETRAK® Tube Fixator
ORTHOLOC® Plate
SIDEKICK® Fixation
VALOR® NAIL Fixation
PRO-TOE® Hammer Toe Fixation
INBONE® Total Ankle
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• Direct US foot & ankle sales organization
• Most comprehensive foot & ankle product portfolio
• Continued investment in R&D
S T R A T E G I C F O C U S : G R O W T H
Maximize the Foot & Ankle Opportunity
• Grow base business – next generation products
– INBONE® II and PROPHECY® Total Ankle Replacement System
– PRO-TOE®
Hammertoe Fixation System
– ORTHOLOC® 3Di Foot Reconstruction Plating System
– CLAW® II Polyaxial Compression Plating System
• Planned 2014 launches
– INFINITY™ Total Ankle Replacement System, New PRO-TOE® offering
• Continued investment in medical education
• Targeting >50% increase in US sales force productivity to $1M in 2014
• International market development
Our Goal
Accelerate Growth in Foot & Ankle Market
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What’s Next? Near-Term Priorities
Productivity gains in US Foot & Ankle
Momentum is Building
Close MicroPort transaction
Targeted M&A
Continued progress on inventory initiatives
Improve gross margins
International expansion
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I N T E R N A T I O N A L E X P A N S I O N : Acquisition of Biotech International
November 15, 2013: Wright Completes Acquisition of Biotech
International
• Significantly expands Wright’s direct sales channel in France and international distribution network
• Adds complementary extremity product portfolio to further accelerate growth opportunities in global Extremities business
• Total consideration up to $80 million:
– $75M paid at closing (~$55M cash and ~$20M in stock); plus contingent payments of up to $5M cash upon achievement of revenue milestones in 2014 and 2015
– All Wright common stock subject to one-year lockup
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• Received Not Approvable Letter for Augment® Bone Graft from FDA dated August 6, 2013:
– FDA stated the following:
• “concerned that the population enrolled was predominantly low risk and, therefore, may not have warranted the use of either autograft or Augment Bone Graft.”
• “it will be necessary to perform a new clinical study that evaluates the use of Augment Bone Graft as a substitute for autograft in hindfoot and ankle fusion procedures in a well-defined high-risk target population, where the use of autograft would be clinically warranted.”
• “the patient population studied in the clinical study, the amount of graft material implanted, and the uncertainty as to whether any graft material would be needed or if the use of no graft material in a fusion procedure of the hindfoot and ankle in the population studied would have achieved similar results.”
– FDA provided a number of additional observations on clinical study design and results.
• Wright submitted formal appeal to FDA on Sept 5, 2013
• On October 31, 2013, Wright was notified by the FDA that the agency has elected to convene a Dispute Resolution Panel to consider the scientific issues in dispute before making a decision on the Company’s request that FDA withdraw its August 6, 2013 not approvable letter for Augment® Bone Graft.
• At this time, no date for when Dispute Resolution Panel will be convened
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A U G M E N T ® B O N E G R A F T :
Status of FDA Appeal of Not Approvable Letter
2013 Guidance for Continuing Operations
• $237M - $240M Revenue(1)
• $(0.55) - $(0.59) Adj. EPS(1,2)
1 Guidance range communicated on 11/4/2013. The fact that we include these projections in this presentation should not be taken to mean that these amounts continue to be our projections as of any subsequent date.
2 Includes stock-based compensation and impact of acquisition of BioMimetic Therapeutics, Inc.
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W H Y I N V E S T I N W R I G H T M E D I C A L
Repositioning for Improved Growth and Performance
Focused on areas where we can win
The Strategy
Building high-growth, pure play Extremities-
Biologics business
The Platform
Clear goal – improved performance
The Future
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Accelerated
growth,
improved
profitability,
strong cash
flow
For additional information, please contact:
Julie Tracy Chief Communications Officer
[email protected] (901) 290-5817
www.wmt.com
NASDAQ: WMGI
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Investor Presentation
November 26, 2013