Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — FY2017 Earnings Presentation
44 slides from Fisher & Paykel Healthcare's earnings presentation, May 2017
Slide 1: Presentation FY2017
Presentation FY2017 Fisher & Paykel HEALTHCARE
Slide 2: Business Highlights
Business Highlights a o Released five innovative new Innovative new products launched products over the last year: * F&P 950™ heated humidification system * F&P Nivairo™ hospital mask « F&P Brevida™ OSA mask ¢ F&P Optiflow Junior™ 2 nasal cannula range an * F&P SleepStyle™ CPAP device € sar omen =.
Slide 3: Hospital Product Group
Hospital Product Group a Operating revenue growth H2 FY2017 NZ$ +11% Constant currency +16% New applications consumables revenue growth H2 FY2017 (Noninvasive ventilation (NIV), Optiflow™, AIRVO, Surgical) NZ$ +19% Constant currency +24% o New applications consumables made up 55% of H2 FY2017 Hospit
Slide 4: Homecare Product Group
Homecare Product Group Operating revenue growth H2 FY2017 NZ$ +4% Constant currency +7% Mask revenue growth H2 FY2017 Constant currency +12% o Masks continue to take market share (V4 ei Aa) 'vi tes y Mp } iO ee i | a’ Simplus” Eson”2 Brevida” SleepStyle” 4 These products are not available in all reg
Slide 5: Second Half Financial Highlights
Second Half Financial Highlights a H2 FY2017 (6 months to 31 March 2017) OPCP* OCc* Operating revenue +8% +12% Gross margin (bps increase) +250bps +]120bps Net profit after tax +12% +14% Hospital operating revenue +11% +16% Hospital new applications consumables revenue +19% +24% Homecare operating r
Slide 6: Full Year Financial Highlights
Full Year Financial Highlights a FY2017 (12 months to 31 March 2017) NZ$M OPCP* OCC* Record operating revenue 894.4 +10% +14% Gross margin (bps increase) +205bps +206bps Record net profit after tax 169.2 +18% +21% Record Hospital operating revenue 500.4 +15% +19% Hospital new applications consumable
Slide 7: Dividend and Gearing
Dividend and Gearing a o Increased final dividend by 13%: ¢ 11.25 cps + 4.375 cps imputation credit for NZ residents (gross dividend of NZ 15.625 cps) ¢ Fully imputed * 1.9852 cps non-resident supplementary dividend ¢ Dividend reinvestment plan available for New Zealand and Australian residents, no
Slide 8: Outlook FY2018
Outlook FY2018 2 o Expect at current exchanges rates (of NZD:USD 0.69 and NZD:EUR 0.63 as at 22 May 2017): * Operating revenue - approximately NZ$1 billion * Net profit after tax - approximately NZ$180 - NZ$190 million 8 Fisher& Paykel HEALTHCARE
Slide 9: Overview
Slide 10: Healthcare at a Glance
Fisher & Paykel Healthcare at a Glance mi SCSC*~*~*S ae) Global leader in respiratory humidification devices Medical device manufacturer with leading positions in respiratory care and obstructive sleep apnea 45+ years’ experience in changing clinical practice to solutions that provide better clinica
Slide 11: Our Competitive Advantage
Our Competitive Advantage a 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 humidif
Slide 12: ~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 7) Fisher & Paykel HEALTHCARE
Slide 13: Markets & Products
Markets & Products oO Hospital « Heated humidification ¢ Respiratory care ¢ Neonatal care ¢ Surgery o Homecare « Masks « Flow generators « Data management tools ¢ Respiratory care in the home Recurring items, consumables and accessories approximately 86% of operating revenue (H1 FY17: 86%) Revenue b
Slide 14: Impact of Changing Demographics
Impact of Changing Demographics a o Population age and weight both US Population over age 65 increasing 100 (millions) ¢ US population 65 years+ to grow «0 ~80% over next 20 years! « US males 60 - 74 years, 80 average weight increased 0 0.4 kg/year since 19602 o 60% of US healthcare cost is after ”
Slide 15: Hospital Cost Breakdown
Hospital Cost Breakdown ee Medical devices Other - includes labour, utilities, drugs, supplies, food, depreciation. Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014 15 Fisher &Paykel HEALTHCARE
Slide 16: Lower Care Intensity = Lower Cost
Lower Care Intensity = Lower Cost 2 Mean Annual COPD-Related Medical, Pharmacy, and Total Costs by Care Intensity Cohort $50,000 $40,000 $30,000 $20,000 $10,000 - . —_ co LJ Outpatient cohort Urgent outpatient cohort ED cohort Standard admission cohort ICU cohort Mean cost (2008 US$) Source: Anand A
Slide 17: Hospital Product Group
Hospital Product Group Invasive Noninvasive Hospital Surgical Ventilation Ventilation Respiratory Support Humidification V “NEW APPLICATIONS” Applications outside of invasive ventilation V7 Fisher & Paykel HEALTHCARE
Slide 18: 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 Ly en * 44mg/L 100% saturated . - 18
Slide 19: Optiflow - Displacing Conventional Oxygen Therapy
Optiflow - Displacing Conventional Oxygen Therapy CONVENTIONAL NONINVASIVE OXYGEN THERAPY VENTILATION £5 Fisher& Paykel HEALTHCARE
Slide 20: Clinical Outcomes of Optiflow Nasal High Flow Therapy
Clinical Outcomes of Optiflow Nasal High Flow Therapy a Optiflow NHF therapy is associated with: ADULTS: o REDUCED intubation o REDUCED re-intubation® 7 § o REDUCED bilevel ventilation’ o REDUCED nursing workload’ o INCREASED ventilator free days® o IMPROVED comfort & patient tolerance® o IMPROVED c
Slide 21: Optiflow NHF - A Growing Body of Clinical Evidence
Optiflow NHF - A Growing Body of Clinical Evidence a Nasal High Flow Clinical Papers Published Annually 2000 2002 2004 2006 2008 2010 2012 2014 2016 —Adult — Neonatal & Paediatric Source: PubMed a Fisher & Paykel HEALTHCARE
Slide 22: Consistently Strong Growth in Hospital New Applications
Consistently Strong Growth in Hospital New Applications a Constant Currency Revenue Growth Rate in New Applications Consumables* 35% 30% 25% SN 20% 15% 10% 5% 0% 2011 2012 2013 2014 2015 2016 2017 o New applications consumables made up 54% of Hospital consumables revenue in FY2017, up from 51% in FY
Slide 23: Homecare Product Group
Homecare Product Group uuu Home CPAP Respiratory Support Therapy 23 Fisher & Paykel HEALTHCARE
Slide 24: Obstructive Sleep Apnea
Obstructive Sleep Apnea Nee oe 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 Esti
Slide 25: Revolutionary Masks
Revolutionary Masks oO Market leading mask technology o Unique, patented designs o Mask Matters Most ¢ Masks are key to compliance F&P Eson 2” F&P Simplus” 25 F&P Brevida™ Fisher & Paykel HEALTHCARE
Slide 26: 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 US'6 o 6% of US adul
Slide 27: High Level of Innovation and Investment in R&D
High Level of Innovation and Investment in R&D o R&D represents 9.6% of operating revenue: NZ$86M o Product pipeline includes: « Masks « Respiratory consumables « Flow generators * Compliance monitoring solutions o 161 US patents, 357 US pending, 714 ROW, 732 ROW pending’ 27 * As at 31 March 2017 Fi
Slide 28: Growing Patent Portfolio
Growing Patent Portfolio a Fisher & Paykel Healthcare US Patent Portfolio (2007 - 2017) 150 100 Whol I 0) 2007 2009 2011 2013 2015 mUS Patents mm US Patent Applications o Average remaining life of FPH patent portfolio: 12 years* 28 * As at 31 March 2017 Fisher& Paykel HEALTHCARE
Slide 29: Manufacturing & Operations
Manufacturing & Operations oO Vertically integrated ¢ COGS improvements: Mexico, lean manufacturing, supply chain o Ample capacity to grow Auckland, New Zealand ¢ Three buildings: 82,000 m? / 885,000 ft? total * 103 acres / 42 hectares land Tijuana, Mexico * One building: 18,000 m2 / 200,000 ft2 * 3
Slide 30: Strong Global Presence
Strong Global Presence mmm SCSC~*~*S o Direct/offices Revenue by Region 12 months to 31 March 2017 * Hospitals, home care dealers * Sales/support offices in North America, Europe, Asia, South America, Middle East and Australasia, 15 distribution centres ¢ More than 700 staff in 29 countries * Ongoin
Slide 31: Our Global Coverage
Our Global Coverage mi =SSCSC*~*~*S iCanada Brazil 31 England Scotland Germany Netherlands Belgium Norther Ireland ireland Wales France Portugal Spain Switzerland italy Austria Norway Denmark ‘Sweden Finland @ Direct Sales @ Distributed sales with FPH staff © Distribution Centres © Manufacturing Fac
Slide 32: Long Term Margin Targets
Long Term Margin Targets 2 Gross Margin Operating Margin 70% 30% ce ee 60% 25% 50% 20% 40% 15% 30% 10% 20% 10% 5% 0% 0% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 — — = Long term gross margin target = = = Long term operating margin target o We expect to see gross margin expansion in FY18 in t
Slide 33: Ownership Structure and Listings
Ownership Structure and Listings a o Listed on NZX and ASX (NZX.FPH, ASX.FPH) Shareholding Structure as at Geographical Ownership as at 31 March 2017 31 March 2017 m= North America @ Other Institutions mNew Zealand wm Australia m Europe (ex UK) Asia Fisher& Paykel NZ Institutions m Retail & Brokers
Slide 34: Consistent Growth Strategy
Consistent Growth Strategy ee Our inputs Our outputs Increased Our efficiency 4000+ peop! 1000+ people fears Over 45 years of trusted relationships Improved care & outcomes for patients Care by Design Improving care & outcomes EX collec through inspired and world-leading healthcat Increased inicio s
Slide 35: Product
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 a iii © 810 respiratory humidification we system 950"System 850"System ¢ Entry level system o AIRVO 2 flow generator/humidifier * Optiflow™ nasal hi
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 oO Breathing circuit components ° ¢ Filters, catheter mount, we
Slide 38: Optiflow Nasal High Flow Therapy - Delivery Options
Optiflow™ Nasal High Flow Therapy - Delivery Options 850” System AIRVO"2 950”System 38 These products are not available in all regions until regulatory clearance has been obtained. Fisher & Paykel HEALTHCARE
Slide 39: Homecare Hardware and Consumables
Homecare Hardware and Consumables Hae ae e ICON"+ SleepStyle” AIRVO"2 810"System Simplus” Eson"2 Brevida™ Optiflow’+ 39 These products are not available in all regions until regulatory clearance has been obtained. Fisher & Paykel HEALTHCARE
Slide 40: Financials
Slide 41: Full Year Operating Results
Full Year Operating Results a FY2017 (12 months to 31 March 2017) % of Revenue NZ$M APCP* ACC* Operating revenue 100% 894.4 +10% +14% Cost of sales 34.0% 304.0 +3% +7% Gross profit 66.0% 590.4 +13% +17% Other income (R&D grant) 5.0 0% 0% SG&A 30.1% 269.3 +11% +16% R&D 9.6% 86.0 +17% +17% Total opera
Slide 42: Cash Flow & Balance Sheet
Cash Flow & Balance Sheet 2 FY2017 (for the 12 months ended 31 March 2017) NZ$M Operating cash flow (+34%) 193.6 Capital expenditure 63.0 Depreciation and amortisation 39.1 FY2017 (as at 31 March 2017) NZ$M Net cash 0.2 Total equity 661.6 Total assets 878.2 % Pre-tax return on average equity 39.6% P
Slide 43: Foreign Exchange Effects
Foreign Exchange Effects 2 o 52% of operating revenue in USD and 20% in €. Year to 31 March Hedging position for our main exposures 2018 2019 2020 2021 2022 USD % cover of expected exposure 88% 59% 39% 21% 0% USD average rate of cover 0.677. 0.671 0.648 0.624 - EUR % cover of expected exposure 85% 6
Slide 44: Important Notice and References
Important Notice and References mmm SCSC~*~*S 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 Annual Report and accompanying market releases. Nothing in this presentation s
Fisher & Paykel Healthcare — FY2017 Earnings Presentation on 6ix