Solutions For The Aging Spine NASDAQ: ATEC February 2009 www.alphatecspine.com Slide 0 5818 El Camino Real, Carlsbad, CA 92008 www.alphatecspine.com
Forward Looking Statements This presentation and our responses to your questions during the question and answer period will contain our estimated or anticipated future results. These forward-looking statements are typically identified by the words "anticipates," believes," "expects," "intends," "plans," "future," "strategy," or words of similar meaning. These statements reflect our current analysis of existing trends and information, and represent our judgment only as of today. Actual results could differ materially from those anticipated. As a result, you are cautioned not to rely on these forward-looking statements. You should refer to the "Risk Factors" and other information in the reports that we file from time to time with the Securities & Exchange Commission. The Company disclaims any intent or obligation to update any forward-looking statements made here today. Slide 1
Our Mission Alphatec Spine's Mission is to be the leading independent, full-line spine company, with a focus on solutions for the aging spine. Our goal is to improve the aging patient s quality of life. Slide 2
Alphatec Spine Today A Platform to Drive Growth Core product portfolio Fully integrated product portfolio Ongoing product enhancements and line extensions Development of disruptive technologies to address MIS market The aging spine Fastest growing segment of spine market Focus of our innovation Address disease states unique to aging population Leverage distribution and technology platform Expanding and improving distribution platform Vertically integrated product development capabilities Management team expertise across all key disciplines Slide 3
Delivering Financial Results Six consecutive quarters of record revenues Consistent and sustainable 20+% growth Improving margins Driving to earnings 2008 preliminary revenues of $101.2M (Dollars in millions) $18.8 $20.3 $21.3 $23.2 $23.9 $25.8 $28.4 33% YEAR OVER YEAR GROWTH Revenues Growth rate Slide 4
Overview of US Spine Market Spinal implants, VCF and biologics market 10.4% CAGR (Dollars in millions) Source: idata Research, Inc. Slide 5
Alphatec Spine Growth Drivers Core business expansion Full product offering to address fusion market Ongoing line extensions and product upgrades Development pipeline of disruptive technologies with focus on MIS Aging spine focus of innovation Products and marketing strategy address the aging spine Early adoption and success in Europe International expansion Geographical expansion European launch of OsseoFix US sales force expansion Territory strengthening throughout the US Transition to exclusivity 70% exclusive as of Year End 2008 Slide 6
Core Business Consistent and Sustainable Growth 2008 US revenue breakdown 2008 US growth rates Diverse business mix with all product families growing above market rates Source: idata Research, Inc. and Company internal reports. Slide 7
Core Product Introductions Driving Growth 3 products 8 products 11 products 2009 product introductions Thoracolumbar Scoliosis Extension ALIF Plate (Product introductions) Cervical Posterior Cervical Occipital Interbody ALIF Universal Biologics AlphaGRAFT ProFuse ALIF Bone Instruments Cervical Allografts Cervical Instruments MIS Percutaneous Screw System GLIF Slide 8
Product Highlight Biologics Vacuum Infusion Packaging AlphaGRAFT Allografts in VIP Rapid hydration saves valuable OR time Decreased brittleness of freeze-dried allografts Deep, uniform distribution of fluids Saline, bone marrow aspirate, other fluids AlphaGRAFT ProFuse Spongy inserts to fit Novel interbody cages, cortical cervical allografts and cortical ALIF spacers VIP allows for infusion of liquids Natural osteoconductive construct and osteoinductive potential Potential US market size - $540M in 2009 Data source: idata Research Inc. Slide 9
Product Highlight MIS Solutions Guided Lumbar Interbody Fusion (GLIF) Lateral approach through curved cannula No patient repositioning Proprietary direct visualization Neuro-monitoring compatible Potential to reduce OR time, trauma and recovery time Expected US commercial launch 2009 Potential US market size - $225M in 2009 Data source: Millennium 2007 Slide 10
The Aging Spine Market Growth Opportunity US demographics are a key driver of market growth Over 65 population will more than double to 70+ million by 2030 45-65 year old patient population Over 65 year old patient population 20 year forecasted growth rate: 7.6% US Population: 71.6 million US Hospitalizations: 8.3 million 20 year forecasted growth rate: 100+% US Population: 36.4 million US Hospitalizations: 13.3 million Aging spine disease states Osteoporotic Bone Fractures Stenosis Acquired Spondilolythesis Adult Deformity Significant unmet clinical needs Limited products currently treat specific diseases of aging spine Slide 11
Aging Spine Product Innovation Aging spine pipeline (2009 2011) Osteopenic bone: OsseoScrew OsseoSleeve Osteoporotic compression fractures: OsseoFix (US Market) OsseoFix+ Stenosis: HeliFix HeliFuse Spinous Process Clamp Facet Fixation System Spondilolythesis: Lateral Interbody with Expandable Cage Spondy Reduction Instrumentation Slide 12
OsseoScrew: The New Standard Thorocolumbar fixation market 2009 procedures - 250,000 2008-2012 CAGR - 7% Osteopenic market - 44 million people Largely underserved Limitations of current pedicle screws for osteopenic patients Limited purchase Reduced pullout and holding strength Need to use PMMA bone cement Often cannot be revised Potential OsseoScrew US market $1.8 billion Data source: Company estimate Slide 13
OsseoScrew: The New Standard Example of OsseoScrew in osteopenic bone Slide 14
OsseoScrew: The New Standard Pedicle screw for poor (osteopenic) bone Significantly increased pullout and holding strength Improved purchase in osteopenic bone Can be used without PMMA bone cement Can be used open or MIS Can be revised Can be used with current Zodiac system Expected US market launch 2H 2009 Slide 15
OsseoFix - Improved VCF Solution Providing a better solution for patients with vertebral compression fractures 700,000 vertebral fractures in US 350,000 vertebral fractures in Europe 500,000 vertebral fractures in Japan Approximately 238,000 fractures globally were treated in 2007 with either Kyphoplasty or Vertebroplasty Potential US market size $540M in 2008 2008-2012 CAGR -- 12% Slide 16 Data source: Millennium 2007
OsseoFix Procedure Osseofix Surgical Implantation Data source: Dr Rudolf Bertagnoli, St Elizabeth Hospital Straubing Germany Slide 17
OsseoFix - Improved VCF Solution Advantages of Alphatec Spine s OsseoFix solution Controlled placement and deployment Creation of bony channels allowing cement interdigitation - no void created Titanium implant mechanically restores and maintains height EU market launch Q4 2008 US 510K clinical to start Q2 2009 Slide 18
HeliFix/HeliFuse Lumbar Spinal Stenosis (LSS) In 2008, more than 2 million people 65 years and older in the U.S. were diagnosed with LSS 37% of spine surgeries in aging spine will be for spinal stenosis HeliFuse Minimally invasive fusion device US market launch - 2009 HeliFix Minimally invasive Non-fusion device EU launch 2010 US PMA Potential US market size $309M in 2009 2008 2011 CAGR 30% Slide 19 Data source: Millennium 2007
HeliFix/HeliFuse Lumbar Spinal Stenosis Comparison of interspinous devices MIS-insertion and removal Self Distracting Alternate Materials Fusion or Non-Fusion Non-Spine Surgeons HeliFix / Yes Yes Yes Yes Yes HeliFuse TM X-Stop No No Yes No No CoFlex No No No No No N-Space Yes No Yes No Yes Bac Jac No No Yes No No Asperius Yes No Yes No Yes Flexus No No No No No Extensure No No? Yes No Slide 20
Robust Product Pipeline Driving Growth 15 products 2009 product introductions Thoracolumbar Scoliosis Extension ALIF Plate (Product Introductions) 3 products 9 products Cervical Posterior Cervical Occipital Interbody ALIF Universal Biologics AlphaGRAFT ProFuse ALIF Bone Instruments Cervical Allografts Cervical Instruments MIS Percutaneous Screw System GLIF Aging Spine OsseoFix+ OsseoScrew Spinous Process Clamp HeliFuse Slide 21
International Expansion Europe Currently in: Greece and Turkey 2009 Priorities: Benelux, Czech Republic, Germany, Italy, Spain, UK Aging spine products driving new distributor relationships and surgeon adoption OsseoFix is the gateway for the European footprint Asia Japan mix shifting toward proprietary, higher-margin Alphatec Spine products Adding new distributors in rest of Asia Slide 22
US Sales Force Expansion Is Delivering Results US sales force expansion 2009 priorities: Continued geographic expansion Selected distributor upgrading Increase percent of exclusive reps Sales reps % Exclusive Surgeon base expanded 30% in 2008 Slide 23
Financial Overview and Guidance Revenues (Dollars in millions) 31% CAGR $80.0 $74.0 $42.3 $101.2 $123-125 2009 guidance: Revenue $123-125 million Revenue growth 23% Adj. EBITDA $12-14 million Adj. EBITDA positive in Q1 09 GAAP EPS positive in Q3 09 Slide 24
Investment Opportunity Core business expansion Growing >20% per year Pipeline of disruptive technologies Aging spine focus of innovation Rapidly growing underserved market segment Early adoption and success in Europe International expansion Geographical expansion European launch of OsseoFix US sales force expansion Territory strengthening throughout the US Transition to exclusivity Demonstrated financial results 6 consecutive record quarters Driving for net earnings Solutions for the Aging Spine Slide 25
Solutions For The Aging Spine Slide 26 5818 El Camino Real, Carlsbad, CA 92008 www.alphatecspine.com