Conceptus, Inc. Mark M. Sieczkarek President and Chief Executive Officer. Raymond James 32nd Annual Institutional Investors Conference.

Transcription

1 Conceptus, Inc. Mark M. Sieczkarek President and Chief Executive Officer Raymond James 32nd Annual Institutional Investors Conference March 9, 2011

2 Safe Harbor Except for the historical information contained herein, the matters discussed in this presentation include forward-looking statements, the accuracy of which is subject to risks and uncertainties. These forward-looking statements include discussions regarding: projected net sales and earnings before interest, taxes, depreciation, amortization and equity-based compensation ( EBITDA ) for the full year 2011, and the expected impact of the economy on consumer spending on non-urgent medical procedures such as Essure, trends in and market share related to competitive trialing, growth in physician metrics, our ability to increase utilization of Essure through the promotion of a compatible endometrial ablation product, and the expected attainment of strategic initiatives intended to grow the business. These discussions and other forward-looking statements included herein may differ significantly from actual results. Such differences may be based upon factors such as changes in strategic planning decisions by management, re-allocation of internal resources, changes in the impact of recessionary pressures, decisions by insurance companies, changes in Medicaid reimbursement, scientific advances by third parties, litigation risks, effect of, funding of, amendments to, and regulations promulgated pursuant to the Health Care Reform Act, and the introduction of competitive products, as well as those factors set forth in the Company's most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q, and other filings with the Securities and Exchange Commission. These forward-looking statements speak only as to the date on which the statements were made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. 2

3 Conceptus At a Glance Conceptus is a leader in the design, development and marketing of innovative solutions in women's healthcare: Founded in 1992 Company manufactures and markets Essure permanent birth control (PBC), the most effective PBC method available. Essure was FDA approved in 2002 Entered strategic partnership to promote GYNECARE THERMACHOICE (1) starting in 2011 Annual net sales: $141 million (1) Global endometrial ablation (GEA) product manufactured for and marketed by ETHICON Women s Health & Urology, a division of Ethicon, Inc. 3

4 Investment Highlights Essure Opportunity Market Positioning Challenges and Growth Drivers Large existing market Most effective PBC method Benefits to payors, patients and physicians Market penetration In-office expertise: Essure and GYNECARE THERMACHOICE Vision: Standard of Care for PBC OB/GYN office visits impacted by economy Competitive trialing Drive utilization of Essure through the promotion of GYNECARE THERMACHOICE in U.S. physician offices 4

5 Large Existing Market U.S. PBC market is a multi-billion dollar opportunity Women who rely on PBC including vasectomies and Essure Our future market: women who are not done having children feeds into our addressable market Our future market: million women in the U.S. based on intent to have children (1) Intend to have more children and use temporary birth control Our addressable market Sweet Spot : women who are done having children and use temporary birth control feeds into women who rely on PBC (1) CDC report, data from the National Survey of Family Growth, published May 2010 Do not intend to have more children and use temporary birth control Do not intend to have more children and use permanent birth control 5

6 Essure: Beats PBC Competition PBC pregnancies per 1,000 women at 3 years: Essure: 1.6 (1) Tubal ligation: 9.9 (2) Vasectomy: 11.3 (3) Competitor s procedure: 16 (4) Failure to block rates: At 3 months: At 6 months: Essure (5) : 3.5% 0.0% Competitor s procedure (6) : 8.8% 5.6% (1) Essure Effectiveness Report (data 12/16/04) page 14 (2) Peterson, H.B., et al. The risk of pregnancy after tubal sterilization: findings from the U.S. Collaborative Review of Sterilization. Am J Obstet Gynecol Apr; 174(4): (3) Jamieson DJ et al. For the U.S. Collaborative Review of Sterilization Working Group. The Risk of Pregnancy After Vasectomy. Obstet Gynecol. 2004;103: (4) Competitor s Instructions for Use, Rev 3. (5) Essure Instructions for Use (6) Competitor Panel Briefing Information for December 14, 2007 FDA Panel, Clinical Report page 586 6

7 Easy and Fast Essure placement is easy, fast, secure and verifiable at 3 months Radiopaque micro-inserts securely placed procedure takes 9 minutes Tissue ingrowth occurs through the micro-insert Tubal Ostium Deployed micro-insert Essure Confirmation Test (HSG) at 3 months verifies tubal occlusion and proper device location Uterine Cavity Confirmation Coils Utero-Tubal Junction 7

8 Benefits of Essure Payors pay less patients pay less physicians more productive Payors pay less: Essure would save the healthcare system $1.2 billion in annual costs if Standard of Care (vs. tubal ligation) Patients pay less: can be an office copay vs. major medical percent of total cost Physicians more efficient and productive in the office setting $1.2 B savings TOTAL COST (1) $1.3 B Essure $2.5 B Tubal Average Essure procedure cost in office: $1,925 Average tubal ligation cost: $3,664 (1) 2011 Medicare costs per procedure x 675,000 PBC procedures per year 8

9 Market Penetration Hysteroscopic sterilization procedures are estimated to be only 14% of the PBC market (1)(2)(3) 675,000 PBC procedures in the U.S. in 2010 Hysteroscopic sterilization Tubal ligation 14% Hysteroscopic sterilization market in 2010 (in $): 13% 87% Competitor s procedure Essure procedure (1) 2006 baseline of U.S. PBC procedures calculated as 643,000 tubal ligations plus 31,000 Essure procedures (2006) equals 675,000. Tubal ligations source: Tubal Sterilization Trends in the United States, Chan and Westhoff, published June 2010 with 2006 data from CDC report. (2) 2010 U.S. hysteroscopic sterilization procedures of 93,000 includes approximate Essure procedures and approximate competitor s procedures estimated tubal ligations calculated as 2006 baseline of 675,000 U.S. PBC procedures minus 93,000 hysteroscopic sterilization procedures equals 582,000 (3) Based on dollar equivalence using a $1,300 ASP and company estimates 9

10 In-Office Channel Strength Physician office vs. hospital: office site-of-service is beneficial to payors, patients and physicians 70% in Q4 10 Office-based procedures as % of total volume 64% 67% 44% 52% 30% 15% 15% Essure GYNECARE THERMACHOICE 10

11 Essure: Road to Standard of Care FUTURE MILESTONES: FDA approves Essure 500,000 women rely on Essure Obtain ACOG endorsement: Standard of Care for PBC procedures 20% hysteroscope trained OB/GYNs 50% hysteroscope trained OB/GYNs Increase number of hysteroscopically trained physicians to 100% of all U.S. OB/GYNs Minimal consumer awareness 30% consumer awareness Improve consumer awareness Conceptus founded Essure receives CE mark Essure physician base = 12,530 OB/GYNs Gain additional Medicaid support in 17 states that lag reimbursement Goal: Essure becomes Standard of Care for PBC market 11

12 Financial Snapshot Net Sales ($mm) Gross Margin (%) Operating Margin (%) EBITDA (1) ($mm) Net cash from operating activities Diluted GAAP EPS $131.4 $ % 80.9% 11.1% $26.4 $24.8 $2.59 (2) 6.8% $ (1) Earnings before interest, taxes, depreciation, amortization and equitybased compensation. See reconciliation in Appendix (2) Includes benefit of $2.52 primarily due to the release of the Company's deferred tax valuation allowance 12

13 Worldwide Sales Expansion through International Sales 2010 Net Sales: $140.7 million (+7% Y/Y) 2010 Units: thousand (+11% Y/Y) $ $109.2 International (22%) Domestic (78%) International (37%) Domestic (63%) The difference between dollar growth and international unit growth is primarily due to average selling price reductions due to customer mix 13

14 Guidance Net Sales Gross Profit Margin Operating Expenses EBITDA (1) FY 11E as of 2/24/11 $135mm to $150mm 82.0% to 82.5% $102mm to $105mm $24.7mm to $34.7mm FY 10 Actual $140.7mm 80.9% $104.3mm $24.8mm (1) See appendix 14

15 Today s Environment Challenges 1. Economic headwinds = reduced OB/GYN office visits 2. Competitive trialing 3. Increase physician utilization of Essure Key Growth Drivers Sales force expansion Cost-effective marketing Promote GYNECARE THERMACHOICE Plus many others 15

16 -15.1% -14.5% -18.5% Reduced Office Visits Macro-economic headwinds are expected to continue to impact domestic OB/GYN office visits in % 15% 5% Monthly Y/Y Change: Domestic OB/GYN office visits (1) 21.5% 16.6% 8.2% 6.7% 2.3% 0.9% 2010: Average Y/Y decrease = -14% 10.3% -5% -1.3% -1.1% -4.0%-4.2% -15% -10.8% -14.3% -14.0% -13.1% -12.1% -13.8% -25% -23.6% -22.6% -22.0% -22.7% -35% -31.0% (1) IMS Data provided by Credit Suisse Healthcare Team 16

17 Status of Competitive Trialing Competitor market share is estimated to have flattened at 15% to 16% in Q4 10 1,000 Essure accounts have trialed out of 1,500 to 2,000 accounts anticipated to trial Pace has slowed: The number of accounts entering trialing and the number of competitor cases has decelerated in recent months Trialing expected to last 12 to 15 months at a rate of 200 accounts entering trialing per quarter + one year to trial 300+ accounts signed 1-3 year agreements by the end of Q

18 Secured Strategic Partnership We began to promote GYNECARE THERMACHOICE in U.S. physician offices in early 2011 Essure and GYNECARE THERMACHOICE are compatible inoffice procedures Patients are strongly advised not to get pregnant if they have a GEA procedure, making Essure medically necessary An estimated 50% of GEA patients do not have permanent birth control Goal: Leverage our in-office channel strength to increase physician utilization of Essure 18

19 GEA In-Office Opportunity Our focus is to take share from the leading competitor, whose procedure is primarily done in the hospital. We expect to drive incremental growth for GYNECARE THERMACHOICE by migrating competitor share to the office. All GEA brands Current GYNECARE THERMACHOICE procedures by site-of-service GYNECARE THERMACHOICE Leading competitor Other GEA procedures 63% 14% 18% 15% 85% In-office procedures Hospital procedures $400 million annual GEA market in U.S. Based on company estimates 19

20 Partnership Synergies Benefits for Ethicon: Increase in-office procedures Establish larger in-office market share by leveraging Conceptus in-office channel strength Benefits for Conceptus: Increase utilization of Essure Accounts perform 3 to 4 GEA procedures per month 50% of patients already have PBC Perhaps 10% to 15% of Essure procedures are already done sequentially with a GEA procedure Utilization of Essure could increase from 1 to 2 procedure(s) per month 20

21 Additional Growth Drivers Leverage sales force expansion: we are one of the industry s largest medical device sales teams dedicated to OB/GYN physicians Increase market awareness and adoption of Essure through cost effective direct-to-consumer marketing initiatives Washington DC focus: Gain ACOG recognition of hysteroscopic sterilization as Standard of Care for PBC Achieve inclusion of all FDA approved forms of permanent contraception in the list of preventative health services for women required to be provided without cost-sharing 21

22 Additional Growth Drivers Add product enhancements: begin clinical trials for (1) fifth generation Essure and (2) transvaginal ultrasound for Essure confirmation instead of HSG Focus on Medicaid reimbursement issues Create a pipeline of women s health products and services that accelerate adoption of Essure 22

23 Investment Highlights Essure Opportunity Market Positioning Challenges and Growth Drivers Large existing market Most effective PBC method Benefits to payors, patients and physicians Market penetration In-office expertise: Essure and GYNECARE THERMACHOICE Vision: Standard of Care for PBC OB/GYN office visits impacted by economy Competitive trialing Drive utilization of Essure through the promotion of GYNECARE THERMACHOICE in U.S. physician offices 23

24 Appendix

25 Use of Non-GAAP Financial Measures The Company has supplemented its GAAP operating income with a non-gaap measure of earnings before interest, taxes, depreciation, amortization and equitybased compensation ( EBITDA ). Management believes that this non-gaap financial measure provides useful supplemental information to management and investors regarding the performance of the Company s business operations, facilitates a better comparison of results for current periods with the Company s previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of non-gaap EBITDA to GAAP operating income and a reconciliation of the guidance of non-gaap EBITDA to GAAP operating income, in each case the most directly comparable GAAP measure, are provided in the following schedules. There are limitations in using these non-gaap financial measures because they are not prepared in accordance with GAAP and may be different from non-gaap financial measures used by other companies. These non-gaap financial measures should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-gaap financial measures only in conjunction with the Company s consolidated financial statements prepared in accordance with GAAP and the reconciliations of the non-gaap financial measures provided in the following schedules. 25

26 GAAP to Non-GAAP Reconciliation Conceptus, Inc. Reconciliation of Operating Income to Earnings Before Interest, Taxes, Depreciation, Amortization and Equity-Based Compensation (EBITDA) (Unaudited) (In thousands) Three Months Ended Twelve Months Ended December 31, December 31, Operating income, as reported $ 6,148 $ 8,195 $ 9,549 $ 14,643 Adjustments to net income: Amortization of intangibles (a) ,254 1,387 Equity-based compensation (b) 1,833 1,726 7,246 6,282 Depreciation expense (c) 1,283 1,124 4,701 4,101 Adjustments to operating income 3,933 3,679 15,201 11,770 Non-GAAP EBITDA $ 10,081 $ 11,874 $ 24,750 $ 26,413 (a) Consists of amortization of intangible assets, primarily licenses and customer relationships (b) Consists of equity-based compensation in accordance with ASC 718 (c) Consists of depreciation, primarily on property, plant and equipment 26

27 GAAP to Non-GAAP Reconciliation Conceptus, Inc. Reconciliation of Forward-Looking Guidance For Non-GAAP Financial Measure To Projected GAAP Operating Income (Unaudited) Twelve Months Ending December 31, 2011 From To Operating Income Guidance $ 8,592 $ 18,592 Estimated Non-GAAP Guidance Amortization of intangibles (a) $ 3,261 $ 3,261 Equity-based compensation (b) $ 7,571 $ 7,571 Depreciation expense (c) $ 5,250 $ 5,250 Adjustments to operating income $ 16,082 $ 16,082 Non-GAAP EBITDA Guidance $ 24,674 $ 34,674 (a) Consists of amortization of intangible assets, primarily licenses and customer relationships (b) Consists of equity-based compensation in accordance with ASC 718 (c) Consists of depreciation, primarily on property, plant and equipment 27

28 Conceptus, Inc. Revolutionizing women s healthcare with innovative solutions NASDAQ: CPTS CC MAR11F