Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — H1 FY2017 Earnings Presentation
44 slides from Fisher & Paykel Healthcare's earnings presentation, November 2016
Slide 1: Half Year Results Presentation FY2017
Half Year Results Presentation FY2017 Care by design 1
Slide 2: H1 FY2017 Business Highlights
H1 FY2017 Business Highlights Innovative new products launched o Released three innovative new products: F&P 950™ heated humidification system, F&P Nivairo™ F&P Nivairo hospital mask hospital mask and F&P Brevida™ OSA mask o Entered agreement for purchase of a new 15 hectare site in Mexico F&P 950 h
Slide 3: Hospital Product Group
Hospital Product Group Operating revenue growth H1 FY2017 NZ$ +19% Constant currency +23% New applications consumables revenue growth H1 FY2017 (Noninvasive ventilation (NIV), Optiflow™ nasal high flow, Surgical) NZ$ +30% Constant currency +35% o New applications consumables make up 52% of Hospital
Slide 4: Homecare Product Group
Homecare Product Group Operating revenue growth H1 FY2017 NZ$ +5% Constant currency +8% Mask revenue growth H1 FY2017 Constant currency +14% o Masks continue to take market share 4
Slide 5: First Half Financial Highlights
First Half Financial Highlights H1 FY2017 (6 months to 30 September 2016) NZ$M PCP^ CC * Record operating revenue 425.2 +12% +16% Record Hospital operating revenue 236.6 +19% +23% Record Homecare operating revenue 183.2 +5% +8% Hospital new applications consumables revenue +30% +35% OSA masks reve
Slide 6: Dividend and Gearing
Dividend and Gearing o Increased interim dividend by 23%: • 8.25 cps + 3.2083 cps imputation credit for NZ residents (gross dividend of NZ 11.4583 cps) • Fully imputed • 1.455882 cps non-resident supplementary dividend • Dividend reinvestment plan available for New Zealand and Australian residents,
Slide 7: Outlook FY2017
Outlook FY2017 Expect at exchange rates of NZD:USD 0.70, NZD:EUR 0.66 for the balance of the financial year: • Operating revenue – approximately NZ$880 million • Net profit after tax – towards the middle of a NZ$165 – NZ$170 million range 7
Slide 8: Overview
Overview. 8
Slide 9: Fisher & Paykel Healthcare at a Glance
Fisher & Paykel Healthcare at a Glance Global leader in respiratory Global presence humidification devices 36 o Medical device manufacturer with 258 Our people are located in 36 leading positions in respiratory care of our people countries and obstructive sleep apnea in Europe 922 of our people in o
Slide 10: Our Competitive Advantage
Our Competitive Advantage o Significant expertise in, and history of, changing clinical practice to therapies that improve clinical outcomes, are more effective and efficient and that ultimately reduce cost to the healthcare system • Heated humidification in invasive ventilation • Heated humidificat
Slide 11: ~US$6+ Billion and Growing Market Opportunity
~US$6+ Billion and Growing Market Opportunity HOSPITAL HOMECARE Invasive Noninvasive Hospital Surgical Home CPAP Ventilation Ventilation Respiratory Support Humidification Respiratory Support Therapy “NEW APPLICATIONS” Applications outside of invasive ventilation 11
Slide 12: Markets & Products
Markets & Products o Hospital Revenue by Product Group • Heated humidification 6 months to 30 September 2016 1% • Respiratory care • Neonatal care • Surgery o Homecare • Masks 43% • Flow generators • Data management tools • Respiratory care in the home Recurring items, consumables and accessories ap
Slide 13: Impact of Changing Demographics
Impact of Changing Demographics o Population age and weight both US Population over age 65 increasing 100 (millions) • US population 65 years+ to grow 90 ~80% over next 20 years1 • US males 60 - 74 years, 80 average weight increased 70 0.4 kg/year since 19602 60 o 60% of US healthcare cost is after
Slide 14: Hospital Cost Breakdown
Hospital Cost Breakdown 6% Medical devices Other – includes labour, utilities, drugs, supplies, 94% food, depreciation. Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014 14
Slide 15: Lower Care Intensity = Lower Cost
Lower Care Intensity = Lower Cost Mean Annual COPD-Related Medical, Pharmacy, and Total Costs by Care Intensity Cohort $50,000 $40,000 Mean cost (2008 US$) $30,000 $20,000 $10,000 $0 Outpatient cohort Urgent outpatient cohort ED cohort Standard admission cohort ICU cohort Source: Anand A Dalal, Laur
Slide 16: Hospital Product Group
Hospital Product Group Invasive Noninvasive Hospital Surgical Ventilation Ventilation Respiratory Support Humidification “NEW APPLICATIONS” Applications outside of invasive ventilation 16
Slide 17: Respiratory Humidification
Respiratory Humidification o Normal airway humidification is bypassed or compromised during ventilation or oxygen therapy o Mucociliary transport system operates less effectively o Need to deliver gas at physiologically normal levels • 37°C body core temperature • 44mg/L 100% saturated 17
Slide 18: Optiflow - Displacing Conventional Oxygen Therapy
Optiflow - Displacing Conventional Oxygen Therapy CONVENTIONAL NONINVASIVE OXYGEN THERAPY VENTILATION 18
Slide 19: Clinical Outcomes of Optiflow Nasal High Flow Therapy
Clinical Outcomes of Optiflow Nasal High Flow Therapy Optiflow NHF therapy is associated with: ADULTS: PAEDIATRICS: o REDUCED intubation5 o REDUCED intubation9 o REDUCED re-intubation6, 7, 8 o REDUCED length of stay10 o REDUCED bilevel ventilation7 o REDUCED respiratory distress11 o REDUCED nursing
Slide 20: Optiflow NHF - A Growing Body of Clinical Evidence
Optiflow NHF - A Growing Body of Clinical Evidence Nasal High Flow Clinical Papers Published Annually 80 70 60 50 40 30 20 10 0 2000 2003 2006 2009 2012 2015 Adult Neonatal & Paediatric Source: PubMed 20
Slide 21: Consistently Strong Growth in Hospital New Applications
Consistently Strong Growth in Hospital New Applications Constant Currency Revenue Growth Rate in New Applications Consumables 35% 30% 25% 20% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 2016 o New applications consumables now make up 52% of Hospital consumables revenue, up from 46% in FY2015 and 51%
Slide 22: Homecare Product Group
Homecare Product Group Home CPAP Respiratory Support Therapy 22
Slide 23: Obstructive Sleep Apnea
Obstructive Sleep Apnea o Temporary closure of airway during sleep o Can greatly impair quality of sleep, leading to fatigue; also associated with hypertension, stroke and heart attack o Estimated US$3+ billion worldwide market. We estimate the market is growing approximately 6-8% p.a. o Estimate >5
Slide 24: Revolutionary Masks
Revolutionary Masks o Market leading mask technology o Unique, patented designs o Mask Matters Most • Masks are key to compliance F&P ESON 2™ F&P SIMPLUS™ F&P BREVIDA™ 24
Slide 25: Home Respiratory Support
Home Respiratory Support o Chronic obstructive pulmonary disease (COPD) is a lung disease which is commonly associated with smoking o Emphysema and chronic bronchitis are both forms of COPD o Chronic respiratory disease, primarily COPD, is the third leading cause of death in the US16 o 6% of US adul
Slide 26: High Level of Innovation and Investment in R&D
High Level of Innovation and Investment in R&D o R&D represents 9.8% of operating revenue:1 NZ$41.6M o Product pipeline includes: • Humidifier controllers • Masks • Respiratory consumables • Flow generators • Compliance monitoring solutions o 147 US patents, 358 US pending, 654 ROW, 666 ROW pending2
Slide 27: Growing Patent Portfolio
Growing Patent Portfolio Fisher & Paykel Healthcare US Patent Portfolio (2006 – 2016) 350 300 250 200 150 100 50 0 2006 2008 2010 2012 2014 2016 US Patents US Patent Applications Average remaining life of FPH patent portfolio: 15.8 years* 27 * As at 31 March 2016
Slide 28: Manufacturing & Operations
Manufacturing & Operations o Vertically integrated • COGS improvements: Mexico, lean manufacturing, supply chain o Ample capacity to grow Auckland, New Zealand • Three buildings: 82,000 m² / 885,000 ft² total • 100 acres / 40 hectares land • Fourth building planned Tijuana, Mexico • 18,000 m2 / 200,
Slide 29: Strong Global Presence
Strong Global Presence o Direct/offices Revenue by Region • Hospitals, home care dealers 6 months to 30 September 2016 • Sales/support offices in North America, Europe, Asia, South 4% America, Middle East and Australasia, 15 distribution centres 19% • More than 800 staff in 29 countries • Ongoing in
Slide 30: Our Global Coverage
Our Global Coverage mi SCSC*~*~*S @ Direct Sales @ Distributed sales with FPH staff © Distribution Centres © Manufacturing Facilities Germany sweden perenne cried olstum Eroarah Aaa Satin [ Textera land | fi SS eq — a a Dae __ ee? ce e a -— = eS By | 4 | . —_lil = Pega arse — = Taiwan ene) ta , sora
Slide 31: Doubling our Constant Currency Revenue every 5-6 Years
Doubling our Constant Currency Revenue every 5-6 Years Constant Currency Operating Revenue NZ$000 800 800 700 700 600 600 500 500 CAGR*: 13% 400 400 CAGR*: 12% 300 300 200 200 CAGR*: 15% 100 100 0 0 Mar-06 Mar-16 Mar-06 Mar-16 Total Group Revenue Hospital Homecare 31 * Compound Annual Growth Rate (C
Slide 32: Long Term Margin Targets
Long Term Margin Targets Gross Margin Operating Margin 70% 30% 60% 25% 50% 20% 40% 15% 30% 10% 20% 10% 5% 0% 0% 2012 2013 2014 2015 2016 1H17 2012 2013 2014 2015 2016 1H17 Gross margin target Operating margin target Note: the long term margin targets are based on an assumption of a continuation of t
Slide 33: Ownership Structure and Listings
Ownership Structure and Listings o Listed on NZX and ASX (NZX.FPH, ASX.FPH) Shareholding Structure as at Geographical Ownership as at 30 September 2016 30 September 2016 2% 3%2% 4% 17% 32% 15% 46% 30% 49% NZ Institutions Other Institutions New Zealand Australia North America Brokers & Retail Other U
Slide 34: Consistent Growth Strategy
Consistent Growth Strategy o Improving care and outcomes o Four key pillars: o Reducing cost to the Continuous product healthcare system improvement Increase Broadening the range of • Effectiveness of care devices for each patient • Efficiency of care Serve more patient Reduce groups • Intensity of
Slide 35: Product
Product. 35
Slide 36: Hospital Hardware
Hospital Hardware o F&P 950 and F&P 850 respiratory humidification systems • Invasive ventilation, nasal high flow therapy and non-invasive ventilation o 810 respiratory humidification system • Entry level system o AIRVO 2 flow generator/humidifier • OptiflowTM nasal high flow therapy o HumiGard sur
Slide 37: Hospital Single Use Consumables
Hospital Single Use Consumables o Single-use chambers • Patented auto filling MR290 o Single-use breathing circuits • Patented spiral heater wire • Proprietary Evaqua expiratory tube • Minimal condensation • Delivery of optimal humidity o Breathing circuit components • Filters, catheter mount, weani
Slide 38: Optiflow Nasal High Flow Therapy – Delivery Options
Optiflow™ Nasal High Flow Therapy – Delivery Options 38 These products are not available in all regions until regulatory clearance has been obtained.
Slide 39: Homecare Hardware and Consumables
Homecare Hardware and Consumables 39 These products are not available in all regions until regulatory clearance has been obtained.
Slide 40: Financials
Financials. 40
Slide 41: Half Year Operating Results
Half Year Operating Results H1 FY2017 (6 months to 30 September 2016) % of Revenue NZ$M PCP^ CC* Operating revenue 100% 425.2 +12% +16% Cost of sales 35.1% 149.3 +7% +6% Gross profit 64.9% 275.9 +14% +21% Other income (R&D grant) 2.5 0% 0% SG&A 29.7% 126.1 +12% +17% R&D 9.8% 41.6 +16% +16% Total o
Slide 42: Cash Flow & Balance Sheet
Cash Flow & Balance Sheet H1 FY2017 (for the 6 months ended 30 September 2016) NZ$M Operating cash flow (+117%) 76.2 Capital expenditure 30.5 Depreciation and amortisation 19.9 H1 FY2017 (as at 30 September 2016) NZ$M Debt (net) 43.7 Total equity 590.0 Total assets 805.0 % Pre-tax return on average
Slide 43: Foreign Exchange Effects
Foreign Exchange Effects o 52% of operating revenue in USD (1H FY16: 51%) and 20% in €. Six months to 31 March Year to 31 March Hedging position for our main exposures 2017 2018 2019 2020 2021 USD % cover of expected exposure 90% 55% 23% 20% 17% USD average rate of cover 0.694 0.670 0.643 0.626 0.61
Slide 44: Important Notice and References
Important Notice and References Disclaimer The information in this presentation is for general purposes only and should be read in conjunction with Fisher & Paykel Healthcare Corporation Limited’s (FPH) 2017 Interim Report and accompanying market releases. Nothing in this presentation should be cons
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