Goldman Sachs Goldman Sachs L d Fi H lh C f 2012 L d Fi H lh C f 2012 Leveraged Finance Healthcare Conf erence 2012 Leveraged Finance Healthcare Conf erence 2012 Biomet Inc Biomet, Inc. May 1, 2012 , 2012 Jeffrey R. Binder President & Daniel P. Florin Senior Vice President & Chief Executive Officer Chief Financial Officer Biologics ● Bracing ● Microfixation ● Orthopedics ● Osteobiologics ● Spine ● Sports Medicine ● Trauma ● 3i
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Biomet GS 2012 Leveraged Finan Conf Final.pptx [Read-Only] · 2012. 5. 1. · Global Footprint with 25%Operations in 50+ Locations United States 61% Europe Biologics Bracing Microfixation
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Goldman SachsGoldman SachsL d Fi H l h C f 2012L d Fi H l h C f 2012Leveraged Finance Healthcare Conference 2012Leveraged Finance Healthcare Conference 2012
Forward Looking StatementsForward-Looking StatementsThis presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements are often indicated by the use of words such as “will,” “intend,” “anticipate,” “estimate,” “expect,” “plan” and similar expressions. Forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from those contemplated by the forward looking statements due to, among others, the following factors: the success of the Company’s principal product lines; the results of the ongoing investigation by the United States Department of Justice; the ability to successfully implement new technologies; the Company’s ability to sustain sales and earnings growth; the Company’s success in achieving timely approval or clearance of its products with domestic and foreign regulatory entities; the impact to the business as a result of compliance with federal, state and foreign governmental regulations and with the Deferred Prosecution Agreement and Corporate Integrity Agreement; the impact to the business as a result of the economic downturn in both foreign and domestic markets; theDeferred Prosecution Agreement and Corporate Integrity Agreement; the impact to the business as a result of the economic downturn in both foreign and domestic markets; the impact of federal health care reform; the impact of anticipated changes in the musculoskeletal industry and the ability of the Company to react to and capitalize on those changes; the ability of the Company to successfully implement its desired organizational changes and cost-saving initiatives; the impact to the business as a result of the Company’s significant international operations, including, among others, with respect to foreign currency fluctuations and the success of the Company’s transition of certain manufacturing operations to China; the impact of the Company’s managerial changes; the ability of the Company’s customers to receive adequate levels of reimbursement from third-party payors; the Company’s ability to maintain its existing intellectual property rights and obtain future intellectual property rights; the impact to the business as a result of cost containment efforts of group purchasing organizations; the Company’s ability to retain existing independent sales agents for its products; and other factors set forth in the Company’s filings with the SEC, including the Company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Although the Company believes that theCompany s filings with the SEC, including the Company s most recent annual report on Form 10 K and quarterly reports on Form 10 Q. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or non-occurrence of future events. There can be no assurance as to the accuracy of forward-looking statements contained in this presentation. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company’s objectives will be achieved. The Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements which speak only as of the date on which they were made.
Non-GAAP Financial MeasuresThis presentation uses non-GAAP financial measures, such as net sales excluding the impact of foreign currency (constant currency), operating income as adjusted, free cash flow, unlevered free cash flow, net debt, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as adjusted, net debt, senior secured leverage ratio, and total leverage ratio (net debt), as important financial measures to review and assess financial and operating performance of its principal lines of business. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included on the Biomet website at www.biomet.com
The term “as adjusted,” a non-GAAP financial measure, refers to financial performance measures that exclude certain income statement line items, such as interest, taxes, depreciation or amortization and/or exclude certain expenses, such as restructuring charges, non-cash impairment charges, integration and facilities opening costs or other business optimization expenses, new systems design and implementation costs, certain start-up costs and costs related to consolidation of facilities, certain non-cash charges, advisory fees paid to the private equity owners, certain severance charges, purchase accounting costs, stock-based compensation and payments, payments to distributors that are not in the ordinary course of business, litigation costs, and other related charges.
These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Biomet management believes that these non-GAAP measures provide useful information to investors; however, this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.
N D b L 7 8 *** 5 6 5 6 5 4Net Debt LeverageRatio**
7.8x*** 5.6x ‐ 5.6x ‐ 5.4x ‐
Free Cash Flow* $ 297 $ 135 ‐ $ 239 77% $169 0%
*See Non‐GAAP Financial Measures Disclosure on Slide 2**As defined by our credit agreement
***As of Merger Date: 09/25/07NOTE Free Cash Flow Reflects Cash Flow Provided by Operations Minus Capex FY’11 Includes $33 1M of Time Deposit Investments
Consolidate share gains in global hip and knee business after brief lull New product cadence
Sales execution Sales execution
Strengthen newly created S.E.T. segment for critical mass and growth Continued strong execution in Sports and Extremities
Successful integration of DePuy Trauma business Successful integration of DePuy Trauma business
Restore 3i and BSBH to above market growth 3i: continue US momentum through digital dentistry, address challenges in Europe
BSBH: improve new product flow in spine; develop clinical evidence in stimulation BSBH: improve new product flow in spine; develop clinical evidence in stimulation
Develop sustainable partnerships with hospital customers through Rapid Recovery Aggressively manage costs and cash flow in face of device tax, continued price pressure
Manufacturing: continued plant network optimization and reduced plant costs Manufacturing: continued plant network optimization and reduced plant costs
• Biomet‐Commissioned Study on Total Knee Arthroplasty and General Health1
Total Joint Replacement as Preventive Care 10
• Results:– At 7 years, risk of mortality cut nearly in half for TKA group– Statistically significantly reduced risk of new diagnoses of heart failure
Incremental direct medical costs of TKA patients: $19 843– Incremental direct medical costs of TKA patients: $19,843– Incremental cost per year to reduce risk of death by half: $2,835
• Not included: est. $733 per year reduction in prescription drugs for TKA patients• Not included: productivity gains, other indirect costs, reported as high as $4,603 per year
– Compare to ~$32 000 (U K ) informal cost‐effectiveness threshold per year of healthy life gained2Compare to $32,000 (U.K.) informal cost‐effectiveness threshold per year of healthy life gained
• “TKA confers long term benefit in terms of improved survivorship and reduced cardiovascular conditions for Medicare patients with OA of the knee.”
• Exhibited at 2012 AAOS Annual Meeting
• Press coverage included New York Times, Medscape, Sirius/XM radio
• Submitted to J. Arthroplasty for publication
Reference: 1 Lovald S Ong K Lau E Schmier J Bozic K Parvizi J Kurtz S “ Medical Costs Mortality and Downstream Disease in Osteoarthritis
– 1. Lovald, S, Ong, K, Lau, E, Schmier, J, Bozic, K, Parvizi, J, Kurtz, S, Medical Costs, Mortality, and Downstream Disease in Osteoarthritis Patients with and without Total Knee Arthroplasty,” #1941, American Academy of Orthopaedic Surgeons Annual Meeting, 2012.
– 2. http://www.nice.org.uk/newsroom/features/measuringeffectivenessandcosteffectivenesstheqaly.jsp, converted to 2012 U.S. $.
Notes: Based on internal estimates; Represents fiscal quarter ending one month prior to calendar quarter for Biomet, calendar quarter for all others
*See Non‐GAAP Financial Measures Disclosure on Slide 2
14Key Growth Drivers for Hips and Knees
Products Currently Launched Arcos® Modular Femoral Revision Hip System Active Articulation™ E1® Dual Mobility Hip System Active Articulation™ E1® Dual Mobility Hip System Taperloc® Complete Hip Stem Oxford® Partial Knee Line Extensions Signature™ System for Oxford® Partial Knee
Products Expected to be Launched Over Next 6 – 12 Months: Taperloc® Complete Microplasty® Stem (commercial intro: Q1 FY13) Signature™ Acetabular System (clinical eval: Q1 FY13, pending 510k clearance) Multi‐Bearing Acetabular System (clinical eval: Q2 FY13) Multi Bearing Acetabular System (clinical eval: Q2 FY13) Vanguard® SSK 360 Revision Knee System (commercial launch: Q4 FY12) Vanguard® XP (clinical eval: Q2 FY13)
S.E.T. Key New Products for FY’13 SRS Shoulder Salvage System ACL in a Box ACL in a Box
Strategic Rationale for DePuy Transaction: Bolsters our S.E.T. franchise to ~ $500 million run rate Provides a valuable opportunity to quickly gain much broader worldwide Provides a valuable opportunity to quickly gain much broader worldwide
market penetration No significant overlap between Biomet and DePuy trauma products;
significant complementarity between internal and external fixation portfolios
significant complementarity between internal and external fixation portfolios
U S S i M k t C ti t b Ch ll d
16Biomet Spine and Bone Healing
U.S. Spine Market Continues to be Challenged: Payor push‐back affecting volumes Aggressive competition from both physician‐owned distributorships and conventional
N P d t Fl (diff ti t d d t ith f ) d l New Product Flow (differentiated products with proof sources) and sales execution are key to our improved sales results Solitaire™‐C Spacer (commercial intro: Q4 FY12, pending 510k clearance) Cellentra™ VCBM [Viable Cell Bone Matrix] (available: Q1 FY13) Cellentra VCBM [Viable Cell Bone Matrix] (available: Q1 FY13) Lineum™ Posterior OCT System (Q4 FY12 intro)
International Markets Provide Strong Growth Potential for Biomet Spine International Markets Provide Strong Growth Potential for Biomet Spine
Expect to Commence a Prospective Clinical Trial on Trauma Non‐Invasive Bone Healing in Early Fiscal 2013
Partnered with top 3 IOS providers: Align, 3M and Sirona– Q1 FY13 commercial intro
19Creating Customer Value through Rapid Recovery
Biomet’s Rapid Recovery Management Consulting Program is an advanced clinical pathway optimizing the processes of orthopedic patient care resulting in:
• Reduced cost per patient (up to ‐30% per patient)• Increased throughput of patients at reduced hospital cost• Improved patient satisfactionp p• Increased hospital profitability
Pre Surgery•Patient education
During Surgery•Surgical procedures
Post Surgery•Physiotherapy/mobilizationPatient education
•Process optimization•Patient care pathways
Surgical procedures•Anesthesia/pain protocols• Krauss efficiency program
NOTE: Unlevered Free Cash Flow reflects cash flows before taking into account the interest payments required on outstanding debt;Unlevered FCF for fiscal Q3’11 reflects the purchase of $44.3M of investments
21Productivity Initiatives
Value Creation Program initiated post LBO in mid‐2007 has delivered significant cash g p gsavings (+$100M) and EBITDA contribution (+$65M) while maintaining the highest levels of quality and customer service Plant network optimization: reduced plant facilities from 17 to 11 (including 2 new China plants)
to lower cost of production and optimize capacity utilizationto lower cost of production and optimize capacity utilization Lean manufacturing Strategic Sourcing SIOP and Inventory managementy g Program now embedded in day to day operations
We continue to pursue additional opportunities to lower COGS Advanced manufacturing; new materials; manufacturing overhead; lower global
distribution/warehousing costs
Improving both Efficiency & Effectiveness in SG&A and R&D Improving both Efficiency & Effectiveness in SG&A and R&D Global Orthopaedics Product Engine structure Shared service and out‐sourcing models Sales force productivity initiatives
Goldman SachsGoldman SachsL d Fi H l h C f 2012L d Fi H l h C f 2012Leveraged Finance Healthcare Conference 2012Leveraged Finance Healthcare Conference 2012