Secnd Quarter 2009 Results Analyst and Media Cnference July 28, 2009 Zurich
This presentatin cntains frward lking statements which invlve risks and uncertainties. The actual perfrmance, results and timing f the business f LifeWatch AG, culd differ materially frm the perfrmance, results and timing in this presentatin. This presentatin des nt cnstitute an ffer t sell r a slicitatin t an ffer t purchase any securities f LifeWatch AG, any such decisin must nt be made n the basis f the infrmatin prvided in this presentatin. This presentatin must nt be distributed in r int the United States f America. 2
LifeWatch Presentatin Team Dr. Yacv Geva Chairman & CEO LifeWatch AG Kbi Ben Efraim Chief Financial Officer LifeWatch AG Brent Atwd Chief Operating Officer LifeWatch Craig Fley VP f Cre Services LifeWatch 3
Agenda Business Highlights Q2/09 Dr. Yacv Geva Financials Review Q2/09 Kbi Ben Efraim Reimbursement Envirnment Craig Fley Grwth Strategy Brent Atwd LifeWatch 2009 Outlk Dr. Yacv Geva 4
Business Highlights Q2/09 Dr. Yacv Geva, Chairman & CEO, LifeWatch AG
6 LifeWatch Overview Headquartered in Switzerland, listed n SIX Exchange Main subsidiary LifeWatch headquartered in Rsemnt, IL Prfitable wireless healthcare mnitring cmpany The leading 24/7/365 cardiac event mnitring cmpany in U.S. Emplys ~760 Delivers Next-Generatin health mnitring platfrm Wireless Ambulatry Cardiac Telemetry LifeStar ACT Cmprehensive platfrm fr multiple markets ehealth, Hme Health, Disease Management and Wellness Increasing market acceptance Cvers >296 millin lives at a higher reimbursement rates fr ACT Over 1.5 millin patients mnitred by LifeWatch Strng financial perfrmance USD 61.96 m H1/09 revenues reflecting 70% grwth ver H1/08 25.5% EBITDA margin
LifeWatch Cntinued Success in USD Millin 7
Fiscal Highlights HY1/09 versus HY1/08 in USD Millin EBIT 12.8 3.2 HY1/08 HY1/09 8
Exceed 75,000 enrlments in 2009 9 LifeStar ACT Grwth 6,132 enrllments in 2007 31,931 enrllments in 2008 34,124 enrllments in 1HY09
Cnverging Technlgies Hlter Mnitr Cardiac Event Mnitr Wireless Mnitr Act Ex Technlgy 10
LifeWatch Clients / Sales Frce Expansin Custmer base: Over 7,000 U.S. custmers including 3,900 private cardilgy grups (serving 23,000 cardilgists) Strng natinwide sales cverage Sales reps expansin f ~70% in 2009 11
Multiple Grwth Opprtunities Demgraphic changes drive demand Aging ppulatin Obesity Cntinued utsurcing f cardiac mnitring Cnslidatin f IDTFs Prduct innvatin Expansin int additinal disease states 12
Demgraphic Changes Driving Demand fr Cardiac Mnitring Graying f America: Percent f U.S. Ppulatin Over 65 Obesity: Prevalence f Overweight and Obese in U.S. Surce: Ppulatin Divisin, U.S. Census Bureau; August 14, 2008 Surce: Centers f Disease Cntrl; Natinal Health and Nutritin Examinatin Survey (NHANES); 2002 As peple get lder the risk f cardiac arrhythmias increase Obesity is a majr risk factr fr heart attack, accrding t the American Heart Assciatin. Aging and besity trends are driving demand fr cardiac mnitring 13
U.S. Cardiac Arrhythmia Mnitring Market = USD 2 billin U.S. Cardiac Mnitring Market Wireless Mnitring Penetratin Independant diagnstic testing facilties (IDTFs) gain share as hspitals and physician ffices cntinue t utsurce Higher diagnstic yield will drive adptin f wireless systems Surce: Frst and Sullivan; Cardiac Mnitring Outlk, 2008 14
U.S. Cardiac Arrhythmia Mnitring Market = USD 2 billin U.S. Cardiac Mnitring Market Highly Fragmented Market Dminated by a Few Prviders Market leaders will benefit frm cnslidatin Surce: Frst and Sullivan; Cardiac Mnitring Outlk, 2008 15
ASIC Cre Technlgy Embedded sftware and hardware in ne micrchip fr: Cardilgy Diabetes Hypertensin Wellness applicatins Cngestive heart failure (CHF) Chrnic bstructive pulmnary disease (COPD) Indispensable technlgy fr implementing highly functinal, cmpact integrated circuits used in tday s electrnic prducts Faster time t market thrugh shrter design and develpment cycles Strng Technlgy Platfrm Leveraged Int New Markets 16
Cmprehensive Wireless Health Care Platfrm fr Multiple Markets Increasing Disease Prevalence by ppulatin Cardivascular Disease Diabetes COPD/Asthma Obesity Sleep Apnea Chrnic diseases Aging ppulatin Nursing shrtage Explding healthcare csts 17
Grup Financial Review Q2/09 Kbi Ben Efraim, Chief Financial Officer, LifeWatch AG
Strng Revenue Grwth Q2/09 f USD 33.9 millin increased 67% ver Q2/08 LifeWatch subsidiary cntributed 93.8% f ttal revenues 19
20 Primarily Driven by LifeStar ACT in USD Millin 40 35 30 25 20 15 10 5 0 33.9 28.0 23.1 24.8 20.3 13.6 13.6 16.0 14.8 12.9 24.3 17.9 14.0 8.1 10.3 3.4 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 LifeStar ACT Cardiac Event and Other Hlter Pacemaker Technlgies ACT revenue f USD 24.3 millin increased 201% in Q2/09 cmpared t Q2/08
Imprving Prfitability Grss prfit: USD 20.2 millin in Q2/09, increased 69.8% YOY Grss margin: 59.6% in Q2/09 cmpared t 58.5% in Q2/08 EBITDA: USD 8.9 millin in Q2/09 cmpared t USD 4.4 millin in Q2/08 EBITDA margin: 26.1% in Q2/09 cmpared t 21.7% in Q2/08 21
EBIT and Net Incme Perfrmance Net incme: USD 5.0 millin in Q2/09 cmpared t USD 1.0 millin in Q2/08 Net incme margin: 15% in Q2/09 cmpared t 5.1% in Q2/08 EBIT: USD 7.2 millin in Q2/09 cmpared t USD 3.3 millin in Q2/08 EBIT margin: 21.3% in Q2/09 cmpared t 16.1% in Q2/08 Net Incme 8 7 6 5 4 3 2 1 0 1.0 1.6 2.8 5.3 * 5.0 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 * USD 5.33 millin des nt include the ne time tax benefit f USD 5.69 millin 22
Imprving Cash Flw Frm Operatins Cash flw prvided by peratins f USD 8.2 millin, versus USD 3.1 millin in Q2/08 Days sales utstanding in Q2/09 f 46 days cmpared t 54 days in Q2/08 23
Stable Financial Psitin Q2/09 cash, cash equivalents, marketable securities and structures in an amunt f USD 30.2 millin Ttal debt f USD 1.1 millin r 3.1% f revenues in Q2/09 24
Reimbursement Envirnment Craig Fley, VP f Cre Services, LifeWatch
US Healthcare Insurance N universal healthcare cverage Individuals under the age f 65 have: Cmmercial insurance (PPOs*/HMOs**) Self-cverage Individuals ver the age f 65 have: Medicare: federally funded Pricing Medicare reimbursement rates fr telemetry are set by Highmark Medicare Services Cmmercial reimbursement rates are negtiated directly with each payr * PPO Preferred Prvider Organizatin ** HMO Health Maintenance Organizatins 26
27 Natinal Reimbursement Cde Cvers ACT Services in U.S. Established by Centers fr Medicare and Medicaid Services (CMS) largest healthcare payr in the U.S. and funded by the federal gvernment Reimbursement rates apply t standardized billing CPT (Current Prcedural Terminlgy) cdes published by American Medical Assciatin ("AMA ) This natinal CPT cde simplified the claim prcess fr LifeStar ACT services CPT cde 93229 is recgnized natinally and Highmark Medicare Services (administratr fr CMS payments in Pennsylvania) retains respnsibility fr determining reimbursement rates LifeWatch is reimbursed by Highmark Medicare Services fr CPT cde 93229
LifeWatch Reimbursement Prfile Highmark Medicare Services currently reimburses USD 1,123 per patient and has cmmunicated a rate f USD 754 beginning 9/1/09 Cmmercial payrs reimburse at cntracted rates, typically higher than the current Highmark rate 28
Medicare Reimbursement Envirnment January 1, 2009, Categry 1 cde 93229 tk effect fr wireless cardiac mnitring At the time CMS did nt price the cde natinally and allwed reginal Medicare administratrs t set rates Highmark f Pennsylvania set the reimbursement rate at USD 1,123 July 1, 2009, CMS declined t establish a natinal reimbursement rate July 10, 2009, Highmark cmmunicated an intent t reduce the reimbursement rate frm USD 1,123 t USD 754 beginning September 1, 2009 LifeWatch is currently challenging this decisin 29
Cmmercial Reimbursement Envirnment LifeWatch has cntracts with 464 independent cmmercial payrs cvering 296 millin lives Q2/09 added 6 managed care cntracts cvering 5 millin lives Majrity f cmmercial cntract autmatically renew at the same rate every year 30
NiteWatch Intrductin Brent Atwd, Chief Operating Officer, LifeWatch Crp.
LifeWatch Enters Hme Sleep Apnea Testing LifeWatch is annuncing its intent t launch a hme sleep test (HST) fr the diagnsis f bstructive sleep apnea (OSA) OSA is a widely undiagnsed medical cnditin that is highly crrelated with ther chrnic diseases LifeWatch will leverage its medical mnitring expertise int a cmpetitive advantage in the OSA market HST is a first step in diversifying LifeWatch s service ffering 32
Sleep Apnea Apnea is a blckage f airway during sleep - relaxed thrat muscles allw sft tissue t cllapse causing temprary suspensin f breathing fr 10+ secnds Airflw interruptin ccurs as ften as 100 times/night Organs deprived f xygen s heart verwrks t cmpensate 33
Sleep Apnea is a Majr Medical Cncern Prevalence f OSA in America = 18 millin, equivalent t diabetes 1 ut f 2 adults ver the age f 65 are at risk fr OSA Healthcare utilizatin csts duble Five times the risk f fatal cardivascular events Six times the risk f serius vehicular accidents Tw times the risk f strke 85% f OSA patients are undiagnsed Undiagnsed OSA increases csts and risks Majr unmet need impacts patients in every practice Diminished prductivity at wrk and reduced quality f life 34
Sleep Apnea Diagnsis is a Large Market Opprtunity 38 millin patients affected with OSA 18 millin afflicted with mderate t severe OSA 15 millin undiagnsed (85%) 3 billin (USD) Market Internatinally (2008) U.S. Market apprximately 1.5 billin Estimated 2 millin tests in 2006 (1 millin U.S. Tests) Equipment, Diagnstic Testing, Therapy Prducts/Services 20-30% annual grwth ver next 5 years Diagnstic lcatin: 80% sleep lab / 20% hme testing June 2007 - CANACCORD ADAMS 35
Limitatins f Current Sleep Lab Diagnstic Testing fr OSA Expensive: USD 2,000-3,000 per test Unstandardized results: Data unnecessary fr diagnsis cllected Incnvenient fr patients: Multiple nights in sleep labs Cumbersme equipment High nn-cmpliance and lw-cmpletin rates: Many walk-uts and 1 st night effect (false negatives) 36
NiteWatch: A Better OSA Diagnstic Slutin Hme Sleep Testing captures nly what is necessary fr OSA Diagnsis Inexpensive: A fractin f the cst f a sleep lab Standardized results: NiteWatch cllects nly data critical t OSA diagnsis Patient cnvenience: At-hme diagnsis Minimally intrusive equipment Expect higher cmpliance and cmpletin rates 37
Hme Sleep Testing Cmpetitive Envirnment Hme sleep testing is gaining market acceptance and gaining share frm sleep labs fr diagnsing OSA HST is a less expensive alternative fr OSA diagnsis HST market is highly fragmented, with nly a few meaningful prviders NiteWatch Key Success Factrs: Existing cmmercial payr relatinships IDTF mdel ffers ecnmies f scale Experienced sales frce in place with physician netwrk 38
NiteWatch Market Entry CMS issued a cverage decisin n hme sleep testing in March 2008, updated in March 2009 Validates the use f hme sleep testing t diagnse OSA NiteWatch mnitring service rllut: Q3/09 beta testing Q4/09 selective launch Q1/10 general availability Managed care bjective: 60%-70% cmmercial cverage by January 2010 39
LifeWatch Summary Dr. Yacv Geva, Chairman & CEO, LifeWatch AG
Investment Highlights Large and grwing utpatient cardiac mnitring market Expanding penetratin f wireless technlgy Leading prvider in a highly fragmented market Multiple grwth pprtunities Blue-chip custmer base Entering an attractive sleep apnea market 41
Operatinal bjectives Crprate Outlk Fcus resurces n wireless mnitring penetratin and market share grwth Exceed 75,000 ACT enrllments in 2009 Cntinuus develpment f next generatin ACT platfrm Expansin int new service ffering - Sleep Apnea Financial bjectives fr 2009 Revenue Grwth USD 127 130 millin (>50% ) EBITDA Margin >20% EBIT Margin >16% 42