Slide 1: HAPC, Inc. Investor Presentation
HAPC, Inc. Investor Presentation September 2007 1
Slide 2: Disclosure
Disclosure The attached presentation was filed with the U.S. Securities and Exchange Commission (“SEC”) as part of the Form 8-K filed by HAPC, Inc. (“HAPC”) on September 18, 2007. HAPCis holding presentations for its stockholders regarding its purchase of InfuSystem, Inc. (“InfuSystem”). A copy of t
Slide 3: Safe harbor
Safe harbor This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, about HAPC, InfuSystem and their combined business after completion of the proposed transaction. Forward-looking statements are statements that are not his
Slide 4: Agenda
Agenda Overview Industry overview InfuSystem overview Growth strategy Financials and valuation Summary 4
Slide 5: Acquisition details
Acquisition details Buyer: HAPC, Inc. (OTCBB: HAPN, HAPNW, HAPNU) is a blank check company (SPAC) formed for the purpose of acquiring one or more operating businesses in the healthcare sector Target: InfuSystem, Inc., (a subsidiary of I-Flow Corporation, NASDAQ: IFLO), a leading provider of ambulato
Slide 6: Investment highlights
Investment highlights Nation’s largest continuous chemotherapy infusion services (DME) company in a high growth, highly fragmented market High barriers to entry – 60% penetration of oncology offices – Contracts with managed care organizations representing 125 million covered lives Significant near-t
Slide 7: Agenda
Agenda Overview Industry overview InfuSystem overview Growth strategy Financials and valuation Summary 7
Slide 8: Continuous infusion cancer treatment
Continuous infusion cancer treatment Continuous Infusion (CI) allows for gradual administration of chemotherapy via a small portable pump over several days as opposed to traditional chemotherapy treatments given in a single high dose over a short period of time (known as bolus infusion) CI has achie
Slide 9: Representative growth of continuous infusion
Representative growth of continuous infusion Sales of Oxaliplatin (used in continuous infusion protocol)¹ $2,500 $2,000 $2,127 $1,948 $1,500 $1,517 $1,000 $932 $500 $368 $0 2002 2003 2004 2005 2006 1 sanofi-aventis’ Eloxatin (oxaliplatin) – utilized in FOLFOX protocol in conjunction with continuous
Slide 10: Market acceptance of CI growing and accelerating
Market acceptance of CI growing and accelerating InfuSystem’s early adopters and innovators consist of 5 of the top 10 cancer centers in the US Estimated position of continuous infusion for cancer treatment Source: Everett RogersDiffusion of Innovations model 10
Slide 11: Near-term opportunities for continuous infusion in cancer
Near-term opportunities for continuous infusion in cancer Estimated 2007 Cancer type new cases Opportunity1 CRC –Stage III & IV 84,600 $169mm Potential continuous infusion CRC –Stage II 20,000 $40mm market that requires no additional (high risk) regulatory approval and minimal CRC –Stage II 40,000 $
Slide 12: Agenda
Agenda Overview Industry overview InfuSystem overview Growth strategy Financials and valuation Summary 12
Slide 13: InfuSystem overview
InfuSystem overview Leading healthcare services company that provides ambulatory infusion pumps for oncologists and their patients in the U.S. – Pumps are primarily used for the continuous infusion (CI) of chemotherapy drugs for patients with colorectal cancer InfuSystem provides a complete solution
Slide 14: Compelling value proposition to all players
Compelling value proposition to all players Patients, Physicians and Payors all benefit with InfuSystem Physicians Win Patients Win Higher professional service Continuity of care fees Reduced side effects Improved patient outcomes Comfort and convenience Physicians Strengthens relationship with pati
Slide 15: Significant competitive advantages
Significant competitive advantages Home care Regional DME Providers Takes revenue from No significant scale physician office Limited pump selection More costly for patients and payors Limited insurance Less convenient for contracts Vast pump selection patients Covers approximately 65% of managed car
Slide 16: Board and management team with deep healthcare expertise
Board and management team with deep healthcare expertise Sean McDevitt, Chairman Steve Watkins, CEO – Alterity Partners, founder (sold to FTN Midwest) – Co-founder of InfuSystem; serial entrepreneur – Goldman Sachs, investment banking – Former VP of Aventric Medical, a Midwest distributor of high te
Slide 17: Agenda
Agenda Overview Industry overview InfuSystem overview Growth strategy Financials and valuation Summary 17
Slide 18: Growth strategy 2008 and Beyond
Growth strategy 4 2008 and Beyond Untapped international CI market Other cancer types Acquire regional “mom & pop” Expand Product DME providers 3 Fragmented market Portfolio Companies typically have less Distribution of other products & than $10m in revenue and can be purchased at 4-6x EBITDA servic
Slide 19: 1. Immediate Impact Initiatives
1. Immediate Impact Initiatives Goal: Increase pump utilization from 60% to 75-80% Invigorate sales force New marketing initiatives Expected Results: Decreased capex A 4% increase in pump utilization would have eliminated 2006 pump capex spending Increased EBITDA –capex (cash flow) 75% pump utilizat
Slide 20: 2. Extend CI services
2. Extend CI services Goal: Expand deeper & wider within current established base of oncologists Extend continuous infusion services to CRC Stage II & other cancers indications – Other cancers are a growing part of InfuSystem’s business – Recent drug protocol approvals for head and neck, lung, pancr
Slide 21: Agenda
Agenda Overview Industry overview InfuSystem overview Growth strategy Financials and valuation Summary 21
Slide 22: InfuSystem financial performance
InfuSystem financial performance InfuSystem Q1 '07 2006 2005 2004 Net rental revenue 7.9 31.7 28.5 19.3 Revenue Revenue growth 2% 11% 47% 49% Cost of revenues 2.3 8.5 7.7 5.6 $35,000 Gross profit 5.6 23.3 20.8 13.8 $30,000 $31,716 Gross margin 71% 73% 73% 71% $28,525 Selling & marketing exp. 1.0 3.8
Slide 23: Structure and valuation
Structure and valuation Pre-Merger 20% Officers and Directors 4,166,667 20% HAPN Public Stockholders 16,875,251 80% 80% Total Shares Outstanding 21,041,918 100% Post-Merger Basic Fully-Diluted 4% Officers and Directors 4,166,667 20% 4,166,667 7% 9% HAPN Public Stockholders 16,875,251 80% 16,875,251
Slide 24: Public company comparables
Public company comparables High Growth/Margin Healthcare Companies ($ in millions) Market Enterprise Revenue Growth EBITDA Margin EV / Revenue EV / EBITDA Company Ticker Cap Value 2007P 2008P 2007P 2008P 2006A 2007P 2008P 2006A 2007P 2008P Healthways, Inc. HWAY $ 1,854 $ 2,112 51% 29% 21% 23% 4.8x 3
Slide 25: Agenda
Agenda Overview Industry overview InfuSystem overview Growth strategy Financials and valuation Summary 25
Slide 26: Summary
Summary Business historically run for cash will be free to grow Significant near-term opportunities for growth with minimal execution risk Achievable growth strategy Increase pump utilization to 75-80% Extend CI services Expand coverage Use of leverage in purchase price will increase ROE High margin