A reliable solution provider Gilbert Achermann, CEO Sanford Bernstein Strategic Conference 2009
Agenda Straumann in brief Future market dynamics Recent market trends Straumann further sustainable growth ahead Appendix 2 Straumann in brief
Case Management DICOM Import Implant Planning Product Library Product Library Live Support Straumann serves three dental specialty segments and offers bone to tooth solutions CADCAM Prosthetics Regeneratives Dental Implant System 4 Straumann s company history CADCAM tooth restoration Oral tissue regeneration Implant dentistry Guided surgery 70s 2002 2007 2009? 5
Dental implants - Straumann s largest business segment CHF 3.6bn Global market size 18% Straumann s market share #2 Market position (active since 70 s) Main Nobel Biocare, Biomet 3i, competitors Zimmer, Dentsply Dental Implant System Tissue level Bone level Straumann entered the Bone level segment end of 2007! 6 In 2002, we strategically expanded beyond implants and into regeneratives CHF 500m Global market size * <5% Straumann s market share #4 Market position (entered the market in 2002) Main competitors Geistlich/Osteohealth, Zimmer, Dentsply, Biomet 3i Regeneratives Membranes Tissue regeneration Bone graft materials Straumann will launch a new high performance membrane in 2010! * Comprises bone graft materials, tissue regeneration products and membrane materials. Straumann is not active in the later, but is going to launch a state-of-the-art membrane product in the near future. 20 to 40% of all implant procedure require some form of bone augmentation 7
CADCAM prosthetics offer high-end esthetic replacement solutions CHF 1.5bn Global market size <5% Straumann s market share >#5 Market position (active since 2007) Main competitors Sirona, 3M Espe, 3shape, Nobel Biocare, Dentsply CADCAM Prosthetics Equipment Elements Data source: MRG, idata and Straumann estimates. 8 Straumann serves all customer segment Implants & Prosthetics Regeneratives CADCAM Dental specialists* General dentists (DMD/DDS)** Dental technician Patient * Surgically active dental professionals irrespective of specialty ** Restoratively/prosthetically active dental professionals irrespective of specialty 9
Solid market position in challenging market environment underpinned # 2 market # share 2 market share # 1 market share # 4 market share * Bubble size indicates regional implant market size in 2008. 10 Future market dynamics
Lab Management Model Scanning Prosthetic Design Implant Planning Product Library Implant Planning Product Library Straumann growth ambition - in excess of overall dental markets Low penetration New materials Innovation growth + Straumann s relevant markets Demographics Regional growth Awareness + Dental markets Global GDP 12 Low implant penetration makes market highly attractive Only around 15% of patients affected by tooth loss, who are seeking treatment are treated with implants Source: 2008 data - MRG 2008, idata, OECD and Straumann estimates 13
Future growth drivers are unchanged Demographics Longer life expectancy Wider insurance coverage and discontinuation of discriminative reimbursement systems Superior treatment options Better esthetics Less invasive, more predictable outcome Shorter treatment durations Improved materials Improved working efficiency 14 Crown and bridges involve many labour-intensive manual worksteps. 15
CADCAM means outsourcing these labourintensive steps Dental practice Tooth Preparation Impression taking Restoration (cementing) Dental laboratory Master model production Scanning / Digitalization Design (CAD) Veenering (Porcelain Layer) Straumann CADCAM (etkon) production Milling (CAM) 16 Progressive industrialization in dentistry Dentist Dental Lab Digital impression Lab Management Model Scanning Prosthetic Design Implant Planning Implant Planning Oral scan Product Library Product Library Impression Model scanned Prosthetic delivered to lab Prosthetic designed on computer Straumann CADCAM production Data transfer via internet 17
Trend to high-esthetic ceramic materials Crowns and Bridges market by material type Porcelain fused to precious metal Porcelain fused to semi-precious metal 2015 2008 Porcelain fused to non-precious metal All ceramic crowns Full cast crowns 0 5 10 15 20 25 30 million units p.a. Source: idata US 2009, Straumann estimates 18 The CADCAM future is bright 100% 80 Percentage of prosthetics devices fabricated with CADCAM vs. conventional methods Overall US and European crown and bridge element market is currently worth around $4.5bn 60 40 20 10 2005 2009 2015 Today, only 1 out of 10 C&B are produced with CADCAM technology, by 2015 the CADCAM share may raise to 30% Data source: idata 2009, Straumann estimates, each prosthesis is counted as one unit 19
Recent market trends Dentistry remains affected by overall economy; no signs of market recovery Weakness of the global economy and consumer confidence further affect patient traffic in dental practices Increased unemployment, reduced healthcare coverage and restricted access to credit limit patients ability to afford treatment Non-critical and complex procedures are being postponed General practitioners are tending to treat patients in house with conventional, cheaper/temporary solutions Customers are carrying lower stocks Demand is more stable in reimbursed countries and emerging markets CADCAM scanner market is depressed; dental labs hesitant to invest First signs of dental industry consolidation 21
Implants are an affordable, preferable alternative; Non-critical procedures are being postponed Comparative costs Germany US Indication Implant solution* Conventional Implant solution* Conventional Single tooth 1 850 2 100 1 700 $ 3 350 3 600 $ 2 700 Multiple tooth** 3 700 4 300 800 2 900 $ 5 000 8 050 $ 2 700 3 600 Full denture 4 200 4 900 > 900 $ 6 000 10 300 >$ 1 200 * Without bone augmentation ** e.g. 3-unit bridge supported on 2 implants or tooth stumps Source: Straumann 22 Single tooth replacements are most common Number of implants placed per operation 10% Average number of implants (per treatment) is just around 2 * 25% 60% 1 2 3-4 5-7 >8 Source: Straumann estimates, Finnish National Agency of Medicines 2007 * Average number of implants per procedure may vary regionally and between maxilla and mandible 23
Straumann gains further market share in H1 and secures a firm base for future growth In line with Group forecasts, H1 revenue reaches CHF 384 million, 3% down in l.c. (-7% in CHF) from strong, pre-recession H1 in 2008 (+22% in l.c.) Successful efficiency measures result in margins above expectations: EBITDA sustained above 30%; net profit margin 22% Strong cash flow of CHF 92million due to improved net working capital (free cash flow margin of 24%) Full-year guidance of above-market performance and EBIT margin >20% confirmed, despite higher investments in growth initiatives Anticipated market growth: Contraction of 5 to 10% in 2009, low-single digit in 2010, high single-digit to low double-digit in 2011 l.c. = local currencies 24 Straumann further sustainable growth ahead
Innovative products fuel Straumann s growth in coming years Bone Level range CADCAM Prosthetics Expanded Roxolid New SLActive Guided Surgery New Regeneratives Upcoming 26 Recent strategic acquisitions/partnerships complete organic portfolio Regeneratives Guided surgery Implants Standard prosthetics CADCAM tooth-borne or implant prosthetics Predictable highend esthetics 27
Scientific credibility built on ITI relationship Largest and fastest growing network in implant dentistry >600 Fellows, >5000 Members, 24 Sections Renowned academics at leading universities and dental schools Responsibilities and Collaboration 28 Restorative dentist is the gatekeeper to the patient and is key for further implant penetration Implant customer Implant & prosthetic customer CADCAM customer Surgeon ~15% of patients affected by tooth loss are treated with implants Restorative dentist ~10-15% of all crowns and bridges are produced with CADCAM Dental technician Gatekeeper Patient 29
Financials at a glance Market Capitalization ~CHF 4bn Return on equity 28% Return on capital employed 44% Equity ratio 79%; debt-free; cash & cash equivalents of CHF 137m 1 Cash flow margin 24% Employees 2 160 1 Payout ratio 33% of recurring net income in m CHF 800 600 400 200 0 CAGR +17% CAGR +15% 2004 2005 2006 2007 2008 H1'2009 Net Revenue EBITDA 2 Index member Swiss Performance Index, Dow Jones STOXX 600 and Dow Jones STOXX Health Care etc. Listing SIX Swiss exchange 1 As per 30 June 2009 2 Excluding exceptionals 30 Planned leadership succession on 26 March 2010 1 Stepping down at next AGM O. Ronner J. Morant R. Maag B. Spalinger CFO Chairman G. Achermann CEO Succession planned proactively in the interest of continuity and sustainability CEO nominated to succeed Chairman 2 ; CFO to become new CEO Search ongoing for 2 new Board Members and CFO/ EVP Finance & Operations Major shareholders support succession plan and maintain long-term view as investors 1 Date of next Shareholders AGM 2 Subject to Mr Achermann s re-election to the Board by the AGM 31
Investor Days: 17-18 November 2009 Save the date Please contact the Investor Relations team, restricted places available Sharing our vision of value creation 32 Appendix
Calendar of upcoming events 29 October 2009 Third-quarter results 2009 Basel 17-18 November 2009 Investor day 2009 Villeret/Basel 16 February 2010 Full-year results 2009 Basel 26 March 2010 Annual General Meeting Basel Detailed calendar on www.straumann.com 34 Your Investor Relations contacts Fabian Hildbrand Head of Corporate Investor Relations Phone +41 (0)61 965 13 27 Mobile +41 (0)79 392 80 32 Email fabian.hildbrand@straumann.com Déborah van Wessem Investor Relations Coordination Phone +41 (0)61 965 12 66 Fax +41 (0)61 965 11 03 Email deborah.van.wessem@straumann.com 35
Regenerative cooperation Straumann gains distribution rights for dental bone allograft bio-implant products, processed by LifeNet Health LifeNet Health is the world s largest and longest accredited tissue banking organizations in the world US bone augmentation market 2008 (Total value: USD 97m 1 ) 33% Agreement more than trebles Straumann s addressable market for bone augmentation in the US Straumann is able to satisfy preferences for allograft and fully synthetic bone augmentation materials 52% Xenograft Synthetic Allograft 15% 14% Straumann s current share 1 Millennium research 36 Transactional currency exposure Global net revenue distribution in % Global cost distribution in % CHF 11% Others 17% USD/CAD/AUD 22% EUR 50% CHF 46% Others 12% EUR 25% USD/CAD/AUD 17% Charts represent the total net revenues in 2008 and the total cost of goods sold, selling and administrative costs as well as R&D expenses in the various currencies. All numbers are rounded approximations. 37
Further currency headwind expected in H2 1.7 1.6 EUR Currency Ø 2008 Ø 2009 (June) 1.5 EUR 1.59 1.506 1.4 1.3 Q1 Q2 Q3 Q4 USD 1.08 1.117 1.3 USD JPY 0.010 0.012 1.2 1.1 1 0.9 Q1 Q2 Q3 Q4 2008 2009 38 Worldwide production locations Andover (US): Implant production Malmö (S): Regenerative products e Leipzig (D): CAD/CAM milling Gräfelfing (D):Scanner production Arlington (US): CAD/CAM milling Villeret (CH): Implant production 39
Straumann offers implant solutions for ALL indications Soft tissue level First version launched 1974 The most successful single system Microgap vertically offset from bone, respecting biological width and preserving bone Preferred solution for one-stage procedures Pioneered by Straumann Bone level Full launch In 2008 Most popular implant type globally (70% share in North America) Ease of use and Esthetics considered by many dentists as superior Smart Straumann design limits microgap risk ( platform switching ) 40 SLActive: Increased security, cuts healing time in half1 Gold Standard SLA SLA 70% SLActive 30% Platin Standard SLActive 70% 1 Raghavendra, Wood, Taylor, 2005 and Oates et al., 2007 41
Net revenue growth second quarter 2009 CHF million Q1 2008 Q2 2008 Q1 2009 Q2 2009 Europe growth in % CHF growth in % l.c. North America growth in % CHF growth in % l.c. Asia / Pacific growth in % CHF 5.7 196.7 8.5 growth in % l.c. 5.6 197.5 3.3 Rest of the world 6.3 6.2 5.3 growth in % CHF 20.9 24.0 (15.8) growth in % l.c. 20.1 25.8 (8.7) Group growth in % CHF growth in % l.c. 131.6 16.3 17.0 39.0 2.9 15.6 23.6 200.5 12.2 15.4 138.5 15.5 18.2 40.3 3.6 19.8 27.3 212.3 22.7 28.7 125.2 (4.8) 3.1 40.2 3.1 0.7 25.6 196.4 (2.1) 2.3 119.0 (14.1) (7.9) 40.1 (0.5) (4.4) 22.8 (16.3) (19.8) 6.0 (4.0) 5.7 187.8 (11.5) (8.4) 42 H1 revenues 3% (l.c.) off high comparative H1 08 level H1 2009 net revenue growth in % Quarterly growth rates in % Total Group: CHF 384 million 29% 20% 15% 13% 11% 9% Net revenue in CHF Currency effect Local currency growth 4% 5% 2% 2% -3.3% Q1 Q2 Q3 Q4 Q1 Q2-6.9% +3.6% Local currency growth Organic growth 1 (l.c.) -8% -8% 2008 2009 1 Organic growth excl. FX effects and incl. incremental revenue growth of an acquired business upon consolidation 43
Regional performance reflects weaker consumer sentiment H1 2009 regional growth in % 1% Net revenue 1 by region in % Total Group: CHF 384 million -3% -2% -5% -2% -3% 13% 3% Europe CHF 244m North America CHF 80m -10% -9% -10% -7% 21% 63% Asia/Pacific CHF 48m ROW CHF 11m Europe North America Asia/Pacific ROW Group l.c. CHF 1 Rounded numbers 44 Limited margin impact despite adverse currencies and contracting revenues in CHF million H1 2008 H1 2009 H1 2008 Reported % Change FX adjusted % Change Net Revenue 412.8 384.1 (6.9%) 397.1 (3%) growth in % CHF 17.4% (6.9%) growth in % l.c. 21.9% (3.3%) Gross Profit 339.2 306.5 (10%) 323.9 (5%) Gross Profit margin 82.2% 79.8% 81.6% EBITDA 150.4 118.8 (21%) 140.5 (15%) EBITDA margin 36.4% 30.9% 35.4% EBIT 119.8 93.8 (22%) 109.7 (14%) EBIT margin 29.0% 24.4% 27.6% Net Profit 100.5 84.6 (16%) Net Profit margin 24.3% 22.0% Free Cash Flow 1 29.6 91.8 210% Free Cash Flow margin 7.2% 23.9% 1 Free cash flow is defined as net cash from operating activities less capital expenditures plus proceeds from sale of property, plant and equipment (PPE) and intangible assets 45
Lower EBIT margin to be expected in the second half 29.0% 25.5% 24.4% >20% H1 08 H2 08 H1 09 H2 09 FY 09 Factors that will negatively affect the second-half margins Higher investments in sales & marketing organization Higher investments to further fuel product innovation Further inventory optimization Lower operational leverage Currency headwind 46 A replenished innovation pipeline (surgical) Project Key benefit Introduction Roll-out Potential SLActive Increased security, cuts healing time to 3-4 weeks Launched in most markets Launches in Korea ( 09) and Japan (expected 10) Up to 35% of implant unit sales by end 2009 Bone Level Implant Expanded options for treatment approaches Launched in Europe, N. America and initial APAC markets Roll-out Asia and RoW ( 09) Addressable segment: ~75% of implant market Roxolid Small diameter implants, high strength and osseoconductivity Initial lunches planned 09 Addressable segment: ~10-20% of future market New implant material Tooth-colored implant for high-end esthetics Initial launches planned 11/ 12 Addressable segment: ~10-20% of future market Computer guided surgery & planning Instruments enabling template based surgery; ease of use Guided Surgery Kit launched in 09 Introduction of IVS based systems later in 09 n.a. 47
A replenished innovation pipeline (regenerative) Project Key benefit Introduction Roll-out Potential Straumann BoneCeramic Fully-synthetic, optimal handling, morphology and resorption Launched in N. America, Europe and initial APAC Launches in Korea ( 09) and Japan (expected 10) Addressable market: Up to 25% of all implant procedures Straumann Emdogain PLUS Convenient combination for wide periodontal defects Launched in Europe and initial APAC markets ( 06) N. America planned 09 Addressable market: Up to 10% of periodontal surgical treatments Membrane Resorbable, easy and precise to use Initial launches planned 09/10 Addressable market: >50% of guided bone regeneration procedures 48 A replenished innovation pipeline (prosthetics) Project Key benefit Introduction Roll-out Potential Straumann CADCAM Full crown restoration Launch 09 in IPS e.max Addressable segment: >30% of CAD/CAM elements market High performance, Straumann Anatomic tooth colored, IPS e.max abutment high-end esthetics Launch 09 Addressable segment: 10-15% of abutment market Straumann Customized abutments High-end esthetics Etkon scanned custom abutments launched in Europe and N. America ( 08) Addressable segment: 10-15% of abutment market Digital dentistry projects Digital workflow: Imaging plus CAD/CAM Initial launch planned 10 n.a. 49