Artivion, Inc. · NYSE:AORT
Artivion — Cryolife — Investor Presentation (February 2016)
44 slides from Artivion's investor presentation, Feb 16, 2016
Slide 1: Forward Looking Statement
Forward Looking Statement Statements made in this presentation that look forward in time or that express management's beliefs, expectations, or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the
Slide 2: Forward Looking Statement (continued)
ated products such as PhotoFix; our expectations regarding our ability to execute on the PerClot clinical trial and our belief that we can obtain PMA approval for PerClot in the US by 2019; the anticipated benefits for our business development program, including double digit CAGR in adjusted non-GAA
Slide 3: My Background (1988-2015)
My Background (1988-2015) 1988-1991 1991-2002 2002-2014 2014-Present U.S.ARMY
Slide 4: CryoLife - Cardiovascular Technology Business
id CryoLife- Cardiovascular Technology Business ‘ BioGlue’ CryoValve Sura Acheshe Aortic Allograft CryoValve' SG Pulmonary Allograft,
Slide 5: CryoLife Vision Slide
CryoLife Vision Slide Become a leader in providing unique and differentiated technologies and solutions for patients with structural heart disease that will improve clinical outcomes as well as reduce the overall cost to the healthcare system
Slide 6: Investment Rationale
Investment Rationale Established Product Portfolio Driving Profitable Growth On-X Acquisition Accelerates Growth and Margin Expansion Highly Experienced Direct Sales Organization Active Business Development Program Proven Leadership
Slide 7: Recent Additions to Leadership Team
Recent Additions to Leadership Team PAT MACKIN, Chairman, President & Chief Executive Officer 20 + Years Experience Previous Companies: Medtronic, Genzyme, Deknatel/Snowden-Pencer Education: B.S. United States Military Academy at West Point and M.B.A. Kellogg Graduate School of Management at Northwe
Slide 8: Growing Annual Revenues
. cia Growing Annual Revenues Mix Shift to Higher Margin Medical Device Products 150 Product 125 CAGR 45 10-15 2 | 8.1% £ | = 50 _ ea Tissue CAGR . 25 40-15 % Product 1.0% Tesue ° | 2010 2011 2012 2013 2014 2015 wTissue | 597 598 636 645 628 628 mProduds| 564 504 675 762 819 831 Total” 116.1 119.2 1
Slide 9: CryoLife Major Product Lines
CryoLife Major Product Lines Allograft Tissues 37% of Revenue 20% of Revenue 35% of Revenue -nue calculated as pro forma 2015
Slide 10: CryoLife Products - Cryopreserved Tissue
CryoLife Products- Cryopreserved Tissue 15% 18% 38% 12% 10% 7% BUSINESS MIX Aortic valve Pulmonary valve Saphenous vein Cardiac Patch Femoral Vein/Artery Other Vascular Cryopreserved Tissue: Five-Year Tissue Revenue Pulmonary valve Aortic valve Saphenous vein Picture of Cardiac Patch Cardiac patch R
Slide 11: CryoValve SG Pulmonary Valves
Note: Market procedures, share, size, and CAGR are approximate annual U.S. numbers based on actual CryoLife data and market reports, including LSI, iData and IMS. CryoValve® SG Pulmonary Valves Pulmonary Valve Homografts SynerGraft® decellularized technology + Seven published papers with >2,000 pati
Slide 12: Aortic Homograft Recommendations and Market
Society of Thoracic Surgeons recommendation1 Class I - Homograft replacement of the aortic root should be considered for patients with extensive active endocarditic destruction of the aortic annulus. (Level of evidence B) Class IIa - Homograft replacement of the aortic valve can be considered for pa
Slide 13: BioGlue Revenue and Indications
REVENUE BioGlue Indications 2010 2011 2012 2013 2014 2015 Revenue $47.3 $49.3 $53.0 $57.6 $61.7 $59.0 13
Slide 14: Global Expansion - Direct in France
Global Expansion- Direct in France • No revenue from France January-September 2015 as distributor sold off inventory • June 22nd announced agreement with French distributor to take business direct on October 1st, 2015 • 2014 revenue of BioGlue and PerClot was $3 million • Expect 2016 revenue and gro
Slide 15: Indication Expansion - Japan BioGlue
Indication Expansion- Japan BioGlue • Current indication only for aortic dissection (5,500 procedures) • Expanded approval for thoracic aneurysm, Bentall & LVAD (5,500 procedures) • Doubles existing market from $5 million to $10 million • PMDA approval July 2015 • MHLW reimbursement September 2015
Slide 16: Global Expansion - BioGlue China
Global Expansion- BioGlue China • Significant market opportunity: >40,000 aortic surgeries • Estimated Timeline – Clinical trial design developed in 2015 – Standards testing completed, clinical trial approval by CFDA, and Ethics Committee submissions/approvals in 2016 – Enroll trial and collect foll
Slide 17: CryoLife Products - On-X Valves
On-X Mitral Valve 2010 2011 2012 2013 2014 2015 Revenue $20.4 $23.1 $25.3 $29.0 $33.1 $33.3 CryoLife Products - On-X Valves REVENUE BUSINESS MIX PRODUCTS 13% 6% 4% 77% AAP OEM Other Valves On-X Aortic Valve On-X Ascending Aortic Prosthesis (AAP) OEM 17
Slide 18: On-X Acquisition Rationale
Transformational acquisition that enhances our growth profile, increases opportunities for cross-selling and drives margin expansion » Provides CryoLife with new addressable market opportunity of ~$220MM » Acquired products generate highly attractive margins » Facilitates increased adoption of On-X
Slide 19: Worldwide Mechanical Valve Market
Worldwide Mechanical Valve Market $000’S 300 275 250 225 200 175 150 125 100 75 50 25 0 2014 2015 2016 2017 2018 2019 2020 US 82 79 77 75 74 73 71 ROW 139 141 143 146 150 154 160 Total 221 220 220 221 224 227 231 Source: Millennium Research Group
Slide 20: Best-in-Class Mechanical Valve Technology
Best-in-Class Mechanical Valve Technology TRADITIONAL MECHANICAL VALVE FLOW ON-X VALVE FLOW ON-X VALVE Aortic Valve Flow Comparison Cuff Two point leaflet contact 90° opening angle On-X® Carbon Optimal length Actuated pivot (hinge) Leaflet Orifice Inlet flare
Slide 21: Best-in-Class Mechanical Valve Technology: Microstructure Comparison
Best-in-Class Mechanical Valve Technology ON-X VALVE Silicon-free On-X® carbon MARKET-LEADING COMPETITOR Microstructure Comparison Steady Growth With Modest Sales Support % US MECHANICAL VALVE MARKET SHARE St. Jude Sorin (LivaNova) Medtronic On-X 5 2 6 11 18 18 11 20 20 19 18 18 14 16 76 70 64 60 53
Slide 22: Steady Growth With Modest Sales Support
on | Steady Growth With Modest Sales Support % US MECHANICAL VALVE MARKET SHARE 80 5 70 60 St.Jude 50 a 7 Sorin (Livatlova) 40 Medtronic jonx 30 20 10 T y T t i 22 2003 2006 2009 2012 2014 Source: Milennium Research Group
Slide 23: Surgeon Prioritized Criteria for Selecting Valves
Surgeon Prioritized Criteria for Selecting Valves 4.4 4.2 4.0 4.0 4.0 3.7 Implant longevity/durability Low Risk of Post Operative Complication Manufacturer has a good track record Implant has a favorable thrombogenic profile Low incidence of pannus ingrowth Implant will minimally disrupt patient lif
Slide 24: Late Outcomes with Tissue Valves Vary by Age
Late Outcomes with Tissue Valves Vary by Age Patients <65 years old start to receive explants at year 7 and 70% are explanted by year 12 Significant Recent Developments PROACT trial results and recent FDA approval of 1.5 to 2.0 INR are catalysts for On-X valve to achieve market leadership
Slide 25: Clinical Data Supports Future Growth
425 Aortic Valve Replacement (AVR) Patients Enrolled 375 Patients 2.0-3.0 INR 81mg Aspirin/day 185 High Risk AVR Patients 1.5-2.0 INR 81 mg Aspirin/day 190 Control AVR Patients 2.0-3.0 INR 81 mg Aspirin/day 50 Patients Excluded 3 Month Randomized Source: PMA P000037 supplement 30, approval date Apri
Slide 26: Clinical Data Supports Future Growth: INR Versus Event Rate
. ond | Se Clinical Data Supports Future Growth INR Versus Event Rate Bleeding 40 TE Q 2.0-<2.5 2. Traditional Mechanical Optimal Range 3.0 3.0-<35 3.5-<4.0 4.0-<4.5 4.5-<5.0 26 Source: Puskas etal, Thorac Cardiovasc Surg 2014;147:1202-11
Slide 27: On-X Only FDA Approved Valve With INR 1.5 to 2.0
On-X has the only FDA approved mechanical aortic valve requiring an INR of just 1.5 to 2.0, substantially reducing a patient's bleeding risk —a significant differentiator and distinct competitive advantage CONTROL Test (ptyr=878.6)(2.0-3.0) (ptyr=766.2)(1.5-2.0) RATERATIO 95% Cl RATE Ischemic Stroke
Slide 28: Surgeon Question: PROACT Results
Surgeon Question Do you think the PROACT results showing 65% reduction in bleeding are compelling enough to get surgeons to change from their current mechanical valve to On-X? 83% Responded Yes N=35
Slide 29: Surgeon Question: Is This a Real Issue?
Surgeon Question Do you think this is a real is a real issue? 54% Answered Yes N=39 The FDA said the findings, in studies published online Monday by the New England Journal of Medicine, “have raised important questions about bioprosthetic aortic valves.” Evidence suggests minuscule clots on the valv
Slide 30: Surgeon Question
cia Surgeon Question SS The FDA said the findings, in studies published online Monday by the New England Journal of Medicine, “have raised important questions about bioprosthetic aortic valves.” Evidence suggests minuscule clots on the valves “may cause restricted motion,” the agency said in a safet
Slide 31: Meta Analysis Mechanical vs. Bioprosthetic Valves
a Meta Analysis Mechanical vs. Bioprosthetic Valves Mechanical Versus Bioprosthetic Aortic Valve Replacement in Patients Aged 40 to 70 Years: A Systematic Review and Meta-Analysis James J. Wu, BMusStudies, Michael Seco, BMedSc, MBBS, James B. Edelman, MBBS(Hons), PhD, Guy D. Eslick, DrPH, PhD, Micha
Slide 32: Surgeon Prioritized Criteria for Selecting Valve
Surgeon Prioritized Criteria for Selecting Valve 4.4 4.2 4.0 4.0 4.0 3.7 12 years vs. >30 years BV MV Implant longevity/durability Low Risk of Post Operative Complication Manufacturer has a good track record Implant has a favorable thrombogenic profile Low incidence of pannus ingrowth Implant will m
Slide 33: Surgeon Question: Meta Analysis Impact
Surgeon Question Do the previously shown results of the Meta analysis prioritized by physician attributes ranking change the current paradigm in favor of On-X vs. tissue valves in patients <65? 56% Answered Yes N=39
Slide 34: Familiarity With Replacement Valve Manufacturers
Familiarity With Replacement Valve Manufacturers Q11,12: Please list all of the aortic valve replacement manufacturers you are aware of. Please rate how familiar you are with the following aortic valve replacement manufacturers. Survey conducted April 2015 Base: All cardiac surgeons Unaided Awarenes
Slide 35: Percentage of Hospitals Stocking Each Manufacturer
Percentage of Hospitals Stocking Each Manufacturer Mechanical Aortic Replacement Valves Total 120 | Base: all cardiac surgeons On-X St. Jude Medtronic 61% 44% 30% 92% Q13: Does your hospital stock this manufacturer’s aortic replacement valve? Survey conducted April 2015 Base: All cardiac surgeons So
Slide 36: Broadened Direct Sales and Global Distribution
Broadened Direct Sales and Global Distribution Combination will create critical mass in global distribution channels with significant opportunities for cross-selling 2015 2016 17 Reps >50 Reps 17 Reps 2015 2018 23 Reps >30 Reps 0 Reps EU DIRECT SALES FORCE U.S. DIRECT SALES FORCE
Slide 37: PhotoFix Decellularized Bovine Pericardium
PhotoFix™ Decellularized Bovine Pericardium Novel photofixation process promotes crosslinking of internal collagen structure Only truly glutaradehyde-free bovine pericardial patch Handling characteristics similar to autologous pericardium CorMatrix Cardiovascular 33% Baxter BioSurgery 38% St. Jude M
Slide 38: Enhanced Cross-selling Opportunities
Enhanced Cross-selling Opportunities Combination will create critical mass in global distribution channels with significant opportunities for cross-selling On-X Aortic Valve On-X Mitral Valve On-X Chord-X On-X AAP Aortic Homograft Pulmonary Homograft BioGlue PhotoFix
Slide 39: Strategic Focus on Aortic and Mitral Valve Surgery
Strategic Focus on Aortic and Mitral Valve Surgery Aortic Homograft BioGlue PhotoFix On-X Aortic Valve On-X Chord-X On-X Mitral Valve On-X AAP Combination of CryoLife and On-X creates a highly differentiated product portfolio with a strategic focus on aortic and mitral valve repair and replacement s
Slide 40: Indication Expansion: PerClot US IDE Trial
Indication Expansion • Adjunct hemostatic device to control capillary, venular, and arteriolar bleeding • Methods + Prospective, multicenter, randomized, controlled vs. Bard Arista™ + Non-inferior hemostasis at 7 minutes + Bleeding assessed using an objective, validated model + 324 eligible subjects
Slide 41: Active Business Development Program
Active Business Development Program . Physician preference products . Higher growth rate than CRY . Higher margin than CRY . Competitive advantage in market . Synergistic to CRY
Slide 42: Anticipated Financial Benefits
Anticipated Financial Benefits • Acceleration of revenue growth through acquired products, channel expansion and cross-selling opportunities • On-X product portfolio revenues projected to grow at double digit CAGR from 2016 – 2020 • Gross margin expansion • Double digit CAGR in adjusted non-GAAP ear
Slide 43: 2016 Guidance Summary
2016 Guidance Summary February 15, 2016 Total Revenues $178M- $180M Mid-single digits % pro-forma increase over 2015 Product revenues Mid-single digits % pro-forma increase over 2015 Tissue processing revenues Mid-single digit s % increase over 2015 Gross margins Approximately 63% R&D expenses $13.0
Slide 44: CryoLife www.cryolife.com
www.cryolife.com Ge»: 4 CryoLife ray,