Sorin Group Strategic Plan 2005-09files.investis.com/sorin_en/presentations/sorin_analyst_presentation_010305.pdf · 4 Sorin Group today: the largest European cardiovascular medical

Sorin Group Strategic Plan 2005-09

Analyst Presentation - March 1st, 2005

2

Disclaimer

This presentation contains management preliminary estimates and forward-looking statements, including information related to Sorin projected financial performance and the expected development of the med-tech industry, in particular in the cardiovascular and renal care segments. These statements are based on estimates and assumptions made by management of thecompany and are believed to be reasonable, as of this date, though by their nature future estimates are uncertain and difficult to predict. Actual results or experience could differ materially from the information contained herein.

This communication does not constitute an offer or solicitation for the sale, purchase or acquisition of securities of any of the companies mentioned in any jurisdiction.

For more information please contact Sorin Investor Relations Department:

[email protected]

Tel. +39 02 6332201 / 316

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Drago Cerchiari

Chief Executive Officer

Sorin Group

4

Sorin Group today: the largest European cardiovascular medical devices company

•Strong competitive position in a large natural growth

and technology driven sector

•Proprietary technology platform across product

portfolio

•Global footprint: global production, R&D, sales &

marketing operations

5

President, BU Cardiac Rhythm Management

André-Michel Ballester *

President,BU Vascular Therapy

& New BusinessesGregory Cash *

President, BU Cardiac Surgery

Franco Vallana *

President, InternationalEric Beard *

President, North America

Rodger Stewart *

Chief Executive Officer

Drago Cerchiari *

Chairman

Umberto Rosa *

Regions• Geographical P&L accountability

for all businesses• Customer centric approach• Account management • Leverage local market

opportunities • Strong, focused tactical marketing

supported by strategic marketing

Business Units• WW P&L accountability for a

given business

• Drive innovation

• Strategic marketing

• Drive manufacturing & supply chain excellence

Sorin Group management team

Corporate functions *

Vice President,BU Renal Care

Alberto Cantaluppi

* Executive Committee members

CFO Anton G. Failla

HRO Giovanni Caruso

Legal Brian Sheridan

Corporate Development Marco Chiadò Piat

6

Integrating a global presence …

Mitroflow

…into one Sorin Group with strong worldwide product brands

7

2004: setting the base for profitable growthSales growth

Costs reduction

* At comparable FX rates

Performance driven culture

Innovation

• Solid platform in CS: +3.3% FY04E*• Continuous growth in CRM: +6.5% FY04E* (+13.9% Q4 04 vs Q4 03*)• Promising growth in VT: +6.1% FY04E* (+33.7% Q4 04 vs Q4 03*)

• Manufacturing restructuring • Operational reorganization • Systems & processes

• Stock option plan• Aggressive performance management system• Talent management program• Systematically raise the level of performance

–New “best-in-class” COBE CV - DIDECO integrated oxygenator platform

–Percutaneous Heart Valve human implant in 2005–Stentless valve Freedom Solo

CS

CRM –New Ovatio Defibrillator System based on GXD platform and with AAIsafeR

–Peak Endocardial Acceleration (PEA) sensor in CHF –Alto2 MSP CRT-D–Symphony AAIsafeR

VT

Bottom up 5-year strategic plan

–Janus DES

8

Agenda

•Sorin in the cardiovascular market

•Strategic plan 2005-09

9

Cardiovascular is the fastest growing among the large medical devices segments

Miscellaneous instruments

9

1

10

15

25

40

70

14

Diagnostic equipment

Miscellaneousdisposables

CardiovascularCardiovascularOrthopedics

Dental

Neurosurgery

Other

5-7%

6-8%

4-6%

10-15%

10-12%

10-12%

15-20%

4-6%

Market size 2004 (€ bn) Market growth

Source: Merrill Lynch, Lazard, Julius Baer, Company estimates

Key Growth Drivers

Demographics

Globalization and increased wealth

Unmet clinical needs/ customers embracing new technologies

10

Sorin today: a full range player in a € 15 bncardiovascular market

Cardiac Surgery (CS)

Physician

Pathology -procedure

Market size2004 (€ bn)

MarketCAGR 04-09

Market share (value)

Main players

Vascular Therapy (VT) Cardiac Rhythm Management (CRM)

Cardiac surgeon and team

Interventional cardiologist/radiologist

Cardiologist / electro-physiologist

Coronary diseases (by-pass), valve dysfunction

Coronary and vascular occlusions (Angioplasty)

Arrhythmia, Heart Failure

2.0 5.8 7.2

5% 7% 13%

Oxys: 40% WWMech.Valves: ~45% EU

~15% USTissue Valves: ~13% EU

IDE in US

Coated (non DES): 5% EUDES: Janus launched in

Nov 04

Pacemakers: ~12% EUICDs: ~ 3% EUCRT-D: ~ 2% EU

Medtronic, Edwards, Guidant, St. Jude, Terumo

J&J, Guidant, Boston Sc., Medtronic, Abbott, Terumo

Medtronic, Guidant, St. Jude, Biotronik

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Achieving Sorin’s 5-year vision

SORIN GROUP VISION

From strength in Cardiac Surgery to worldwide Cardiovascular leadership

Vascular Therapy

Cardiac Rhythm

Management

Cardiac Surgery

12

Agenda



– Strategic guidelines

– 2005-09 Objectives

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Strategic guidelines: paving the way for a profitable growth

Complete integration and extract synergies from core businesses

Build platform for focused business growth in Cardiovascular

Grow our presence in highly profitable and under-penetrated US and Japanese markets while strengthening current position in Europe

Leverage our technology platform and customer base

HOW

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Sorin market priorities across technologies and customer segments

Sorin applicationsCardiac surgeon

Perfu-sionist

Interv. Cardio-logist

Implan. Cardio-logist

Electro-physio-logist Sorin priority markets

Mech. HV First priority

Tissue HV Second priority

Annuloplasty rings

HLM+Oxy/cust. pack

ATS

PM

CRT-P

ICD

CRT-D

Non drug eluting stent

Drug eluting stent

Peripheral stents

VT

CS-Heart Valves

CRM

Cardiovascular customers

CS-CPB/ATS

15

Sorin applicationsCardiac surgeon

Perfu-sionist

Interv. Cardio-logist

Implan. Cardio-logist

Electro-physio-logist Sorin priority markets

Mech. HV First priority

Tissue HV Second priority

Annuloplasty rings

HLM+Oxy/cust. pack

ATS

PM

CRT-P

ICD

CRT-D

Non drug eluting stent

Drug eluting stent

Peripheral stents

VT

CS-Heart Valves

CRM

Cardiovascular customers

CS-CPB/ATS

Sorin presence across technologies and customer segments

strong

strong

strong

strong

strong

strong

strong

16

Agenda




– Cardiac Surgery strategy

– Cardiac Rhythm Management strategy

– Vascular Therapy strategy

– Geographic perspective

– Integration program


17

Franco Vallana

President,

Cardiac Surgery BU

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Cardiac Surgery vision

Wide, bestWide, best--inin--class product offering class product offering

for the cardiac surgeon and teamfor the cardiac surgeon and team

19

Cardiac Surgery current product portfolio

Mechanical HV

Tissue HV

Annuloplasty Rings

Oxygenators

Heart Lung Machine Autotransfusion

20

Cardiac Surgery strategy and market shares evolution

HEART VALVES• Market share growth in Mechanical HV

• Tissue HV: filling the gap with mechanical HV in EU, building platform in US

• Leadership position in the Percutaneous HV market

• Market share growth in rings

• Expansion in under-penetrated markets

CARDIOPULMONARY

• Customer and patient oriented ECC1 integrated system(s) as a competitive advantage

• Cost leadership position

• ATS2 technology optimisation

• Complementary CS products offering

WW Market share

28%

4%

-

6%

40%

51%

42%

‘09‘04

Mechanical HV

Tissue HV

Percutaneous HV

Annuloplasty Rings

Oxygenators

Heart Lung Machines

Autotransfusion

Product lines

1 Extra Corporeal Circulation2 Autotransfusion System

↑

↑↑

↑↑

↑↑

↑

↑

↑

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Sorin percutaneous heart valve project

PERCUTANEOUS APPROACH ADVANTAGES

• No chest opening

• No Extra Corporeal Circulation

• Short hospitalization

• Use of a proven and well known biological stentless valve, in clinical

use since 1985, with 30K implants and zero structural failures

• Treatment of patients at high risk in open heart surgery

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RETROGRADE ANTEGRADE

Minimally Invasive Surgical Approach

Percutaneous Approach

Sorin percutaneous heart valve application One valve to meet cardiac surgeon and interventional cardiologist expectations

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Cardiac Surgery product pipeline2005 2006 2007 2008 2009

Commercial launches

EU US Japan

HEART VALVES•Tissue

–New anticalcification treatment

•Repair –Semi Rigid Ring

•Percutaneous valve

CBP & ATS•CPB

–New adult oxy–New pediatric oxy–New ECC System–S5 HLM

•ATS–Next Generation

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Agenda










25

André-Michel Ballester

President,

Cardiac Rhythm Management BU

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Cardiac Rhythm Management vision

Pacing Leadership to invest in Pacing Leadership to invest in

future innovation in Heart Failurefuture innovation in Heart Failure

27

CRM current product portfolio

Brady

ICDs

CRT-D

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CRM innovation: focus on patients benefits

AAISafeR Exclusive mode to preserve spontaneous

AV conduction

Parad+ Most specific VF detection algorithm

(according to recent publication in PACE 2004;

27:976-982)

PEA Peak Endocardial Acceleration (PEA) sensor to

optimize automatically AV and VV delays

29

CRM strategy and market shares evolution

• Strength in pacing leveraged across all CRM segments

• Rapid innovator in Tachy

• Field coverage and competencies expansion

• ‘System approach’ for total therapy delivery

• HF research investments for future innovation

Brady

Tachy

Product lines

US Market share

n.s.

n.s.

‘09‘04EU Market share

12%

3%

‘09‘04

↑↑↑

↑↑

↑↑

↑↑↑

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Stabilize and Execute

Growth Expansion

CRM summary of strategic direction

Continuous Innovation

Rapid Introduction of New Products

Field Coverage and Training

Talent Management

Product Portfolio Rationalization

Share Gains in all Therapy Segments

US Penetration

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CRM product pipelineCommercial launches

EU US Japan

BRADY (pacemakers)•Symphony/AAIsafeR• New Living• New Living CHF• Hi Perf PM1• Hi Perf PM2• Hi Perf CRT-P1

ICDs• Alto 2• Ovatio • Hi Perf Def1• Hi Perf Def2• Hi Perf Def3

CRT-D• Ovatio CRT• Hi Perf CRT-D1• Hi Perf CRT-D2• Hi Perf CRT-D3

2005 2006 2007 2008 2009

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Agenda










33

Gregory Cash

President,

Vascular Therapy BU

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Vascular Therapy vision

A leader in vascular therapy through A leader in vascular therapy through

development and marketing of development and marketing of

innovative systemsinnovative systems

35

VT current product portfolio

DES

Non DES

Peripheral

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Vascular Therapy strategy

• Superior DES technology

− Strong EU market entry (marketing and clinical trials)

− Strategic partner for North America and Japan

• New generation DES platform

• Profitably expand peripheral business

EU Market share

n.s.*

‘09‘04

5%

3%

DES

Non DES

Peripheral

Product lines

↑↑↑

↑↑

↑↑

*launched in November 2004

37

Stent strutcross section

Release in the blood

Effective release

Stent strutcross section

Effective release

Targeted drug delivery Non-targeted drug delivery

VS

Other DES with integral coating

JANUS: unique targeted drug delivery

JANUS

38

SEM – porcine coronary arteries – 7-day follow-upENDOTHELIALIZATION STUDY IN ANIMAL MODEL

Commercial DES

Incomplete endothelial coverage

100 100 µµmm

Janus Carbostent

Excellent endothelial coverage

100 100 µµmm

Animal study: Safety & Efficacy

39

VT product pipeline2005 2006 2007 2008 2009

NON DES- Tecnic Plus- Tecnic 2- Next Generation

Commercial launches

EU US

DES- Janus- Janus Plus- Janus 2- Janus 3

CORONARY

Japan

BALLOONS- Aria- New Aria - Next Generation

PERIPHERALLOWER LIMBSRENALCAROTID

40

Long term clinical follow-up

Study duration

Study definition & Regulatory approval

30 days clinical outcome

Six, nine months angiographic or clinical driven TLR

1. Jupiter I

2. Jupiter II

3. eJanus

4. Diabetes III

5. Janus in small vessels

6. Janus in AMI

7. Stellar (Tecnic 2)

8. Janus vs. Other DES

11. Janus 2P (2nd gen.)

10. Janus 3rd generation

11. Inperia Randomized

12. Flype Study

2008 2009Project/Product 2004 2005 2006 2007

Regulatory studies for homologationin EU, USA and Japan

VT clinical studies plan

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Agenda







– Regions Perspectives



42






HOW

43

Rodger Stewart

President,

North America Region

44

Growth in US

US

1. Expand the CRM business

• Complete FDA approvals

• Strengthen sales force

• Focus on major metropolitan areas

• Focus on:– Implanting Cardiologists (PM and ICD with

MADIT II and SCD-HeFT)

– Surgeons (through Cardiac Surgery sales force)

– Electrophysiologists (through innovative technology)

45

2. Increase penetration of CS customers

• Gain market share in Mechanical HV

• Tissue HV approval will allow leveraging strong mechanical presence

• Drive new generation ECC concept

• New market penetration with Angel PRP

• Strengthen sales process and clinical education

• Leverage CS/CRM synergies

US

Growth in US

46

Eric Beard

President,

International Region

47

Growth in the International region

GROUP 1

LOW PENETRATION EUROPEAN MARKETSGROUP 2

LARGE COUNTRIES WITH HIGH CS BASE

GROUP 3 REST OF THE WORLD COUNTRIES

48

Strategic priorities Group 1

•

GERMANY

FRANCE

SPAIN

ITALY

UNITEDKINGDOM

JAPAN

• Gain market share in all lines

• Establish strong position in tachy

• Lead Janus DES share

• Meaningful endovascular player

• Successful new product launches

• Profitability growth through price, mix and margin

improvements

49

Leverage leadership position in CPB

SMALL DIRECTSALES NETWORKSMALL DIRECT

SALES NETWORKINDIRECT SALES

NETWORKINDIRECT SALES

NETWORKCOMBINATION

DIRECT / INDIRECTCOMBINATION

DIRECT / INDIRECT

NordicSwitzerlandPortugal

BelgiumHolland

AustriaGreeceCzech

Strategic priorities Group 2

50

Explore the Market

via Distributors

Explore Explore the Market the Market

via Distributors via Distributors

Establish SpecializedDistributors

Network

Establish Establish SpecializedSpecializedDistributors Distributors

NetworkNetwork

OpenOpenRepresentation Representation

OfficeOffice

Direct BuyDirect Buy--Sell Sell OrganizationOrganization

Latin America,Latin America,South EastSouth East Asia,Asia,MagrebMagreb, , TurkeyTurkey

China, AustraliaChina, AustraliaCzechCzech, Middle , Middle EastEast,,

KoreaKorea, Taiwan, Taiwan

OtherOther

Group 3 ROW development roadmap priorities

Low priorityLow pricesWeak dollar

Business ethicsNeed low cost offering

Focus on bottom line and CF

High priorityMarket size and growthProduct sophisticationTherapy development

Combination price/volume

51

Agenda







– Regions Perspectives



52






HOW

53

Integration rationale

Acquisitions and aggregation of companies

90’s -2003

Sales back to growth2004

Integration to extract underlying synergies

2005 - 2006

HOW Driving cost reduction and rationalization

Leveraging intangibles(core competencies, talents, brands, infrastructures, …)

Building a performance-driven culture

54

Cost reduction projects on track

G&A and Legal Entities

• From 64 to 32 legal entities • G&A reduction

• Centralisation and rationalisation under way

Supply chain & Working Capital

• New logistics and distribution model

Manufacturing

Operating cost reduction and working capital containment

Operations re-organization

• Implementation under way

Purchasing

• Integration under wayHeart Valve

Renal Care • Integration under way

CPB/ATS • Integration plan

€ 50 M benefits onEbitda in 2006

55

Agenda





56

Drago Cerchiari

Chief Executive OfficerSorin Group

Anton Giorgio Failla

Chief Financial Officer

Sorin Group

57

P&L 2005 Guidance

2004 E

Net revenues 723.3 > +8%Cardiac Surgery 418.5Cardiac Rhythm Management 174.7

Vascular Therapy 23.8

Renal Care 105.7

EBITDA 68.3 > +30%Ebitda Margin 9.4% ~11.5%

EBIT 4.1 > +400%

0.6% ~3.0%

* At comparable FX rates

€ Million

Ebit Margin

Revenue

+3.8%

2005 Pvs. 2004 E *

58

2005 guidance: key growth drivers

Growth in 2005 will be boosted in 2H thanks to:

VT

• Jupiter II clinical trial data on Janus to be released in September

CS

• Performa, best-in-class adult oxygenator launch (EU, US)

CRM

• New Living and New Living CHF (PEA) launches (EU)

• Ovatio (AAIsafeR, Parad+) launch (EU, US)

• Ovatio CRT-D (Parad+) launch (EU)

59

5-year plan

2004 E 2007 P*

Net revenues 723.3

EBITDA 68.3

9.4%

EBIT 4.1

0.6%

* At an exchange rate €/$ = 1.28

€ Million

2009 P*

~ 1000

~ 140

~ 14%

~ 80

~ 8%

~ 1300

~ 260

~ 20%

~ 190

~ 15%

CAGR 04-09

100%

30%

12%

Ebitda Margin

Ebit Margin

60

EBITDA variance Percent

EBITDA 2004

Product mix

Geogra-phic mix

GP impro-vement(Price/ COGS)*

Cost reduction projects

Additional R&D and S&M expenses

EBITDA 2009

* Most COGS improvements included in cost reduction projects

68 ~30~30

~0~50 ~20

~100

~ 260

Volume effect

at 2004 volumes

61

80% growth from CRM and VT

2004 2007 2009

CS

VT

58%

24%3%

15%

723

45%

34%

10%11%

~300

~ 1000 ~300

~ 1300

38%

40%

12%

10%

57%25%

15%3%

CRMRC

CS

VT

59%22%

15%

4%

VT

RC

CS CRM€ Million, percent

CRM

RC

62

Revenue growth by geography

2004 2007 2009

Europe

Japan

59%

22%7%

12%

58%

24%

8%10%

52%

31%

9%8%

56%29%

10%5%

EuropeRoW

Japan

NA

31%

55%

12%

2%

NA

RoWJapan

Europe€ Million, percent

NA

RoW*

* Includes EW OEM sales

723~300

~ 1000~300

~ 1300

63

A plan designed to maximize shareholders value

Double-Digit Growth• Aggressive growth in the fastest developing segments of CV market

(CRM and VT)

• Balanced geographic growth focusing both on US, Europe and Japan

Doubling Profitability• Significant cost savings via manufacturing restructuring

• Significant efficiency improvement via operational reorganization

Relentless pursuit of Innovation

Performance-driven Culture

Documents

Sorin Group Strategic Plan 2005-09files.investis.com/sorin_en/presentations/sorin_analyst_presentation_010305.pdf · 4 Sorin Group today: the largest European cardiovascular medical