EndoChoice Corporate Presentation January 2016
EndoChoice Corporate Presentation
January 2016
Safe Harbor This presentation contains forward‐looking statements. You should not rely upon forward‐looking statements as predictions of future events. All statements other than statements of historical facts contained in this presentation, including information concerning our possible or assumed future results of operations and expenses, business strategies and plans, competitive position, business environment and potential growth opportunities, are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties are described in our filings with the SEC, including the Registration Statement on Form S-1, as amended, for our initial public offering and our Form 10-Q for the period ended September 30, 2015. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this presentation. Except as required by law, we disclaim any obligation to update any forward‐looking statements for any reason after the date of this presentation.
This presentation shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Platform GI Company Differentiated Tech $6B Addressable Market Growth Drivers
+ +
2015 Revenue of
$72.3M,
18% growth YoY
Shipped 82 Fuse
end-user systems,
year over year
growth of 116%
$6B Global
GI market,
growing annually
at 7%
New Products,
Expanding Sales
Team, 2,500+ US
customers
EndoChoice at a Glance
3
+
Single Use Products
Pathology
Imaging
GI Market Opportunity
4
Pathology
5
Source:
Markets & Markets, Endoscopy Equipment, Global Forecasts to 2018;
The U.S. Anatomic Pathology Market, Forecast & Trends 2014-15;
Annual Reports and EndoChoice Internal Estimates
Note: Devices do not include ERCP and EUS opportunity
EndoChoice Platform for GI Endoscopy ~$6 Billion Global GI Market
7% GI Market Growth Rate
Imaging Single-Use Products
2008 2010
2013
6
Source: iData & EndoChoice Internal Data
EndoChoice is Targeting 95% of GI Procedures
Dilation
Visualization
Airway
Personal Protection
Inventory Mgt
Diagnostic Tests
Luminal Access
Tissue Acquisition
Patient Monitoring
Luminal Patency
Data Management
EndoKits
Preparation
Suction
Patient Service Hemostasis
Cleaning
Retrieval Transport
Mobility
Quality Measures
Infection Risk
A World of Opportunity…
7
Disinfection
Fragmented GI Community
8
GI Procedure
Cycle
EndoChoice Platform
9
Proven Track Record in GI Innovation
10
ASP Range of $2 to $225,000
Pathology
2015 Revenue $13.9M
Total 2015 Revenue: $72.3M – 2 Year CAGR: 18%
Three Growth Engines
Total revenue last
year
Growth rate
Leveraging a
common sales team
Serving the GI Caregiver with Differentiated Products and Services
Imaging
2015 Revenue $22.4M
Leveraging a Unified Sales Team
Single-Use Products
2015 Revenue $36.1M
The EndoChoice Platform
12
Single-Use Products
~$1.7B Market Size Globally
XX%
Single-Use Products
2015 Revenue
$36.1 Million 2-Year CAGR 8%
2016 SUP Growth Drivers More than 2,500 customers in the US New Products to increase wallet share New 20 Dedicated Account Managers
14
28,638 31,861 33,878
2,062
1,984 2,198
30,700
33,845 36,076
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
2013 2014 2015
Domestic Single-Use Products International Single-Use Products
Stable SUP Revenue Underpins Model
(000’s)
Presence in >2,500 GI departments (1/3 of U.S. market)
65% of our SUP customers buy multiple products
Fuse customers buy 2.5x vs non-Fuse customers
GI Pathology
XX%
GI Pathology
2015 Revenue
$13.8 Million 7% CAGR
2016 SUP Growth Drivers Automated ADR Reporting Stickiness via EMR integration New 20 Dedicated Account Managers
~$1B Market Size in US
16
Pathology Growth (2 Year CAGR of 9% in Specimens Processed)
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
$5,000
$7,000
$9,000
$11,000
$13,000
$15,000
2013 2014 2015
Pathology Revenue Specimens Processed
Specimen 2 Yr.
CAGR – 9%
Specimen growth outpacing impact of reimbursement cuts in 2014
(000’s)
~$3B Market Size Globally
Imaging
XX%
Imaging
2015 Revenue
$22.4M 67% CAGR
2016 SUP Growth Drivers New Sales Hires/Increased Productivity Expanding Clinical Data
18
A New Standard in GI Imaging
Fuse Gaining Traction
19
4,700
10,114
16,953
3,372
4,865
5,429
8,072
14,979
22,382
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
2013 2014 2015
Domestic Imaging International Imaging(000’s)
33 51
66 78
91 8
10
20
26
32
41
61
86
104
123
0
25
50
75
100
125
150
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
End-User Installed Base by Quarter
Domestic - End Customer Int - End Customer Linear (Total)
Fuse® Installed Base Now Over 100 Systems
20
81% of Fuse customers buy our Single Use Products
21
Limited View with 170° Colonoscopy
22
Panoramic 330° Field of View with Fuse®
23
Field of View 170°
24
330° Field of View
LEDs
25
Fuse® Enabling Technologies Integrating LEDs and Multiple Imagers
3 Imagers
Light Guides
1 Imager
Traditional Colonoscope Fuse Colonoscope
26
Compelling Clinical and
Cost-Effectiveness Data
Sources:
Gralnek IM, Siersema PD, Rex DK, et al. Standard forward-viewing colonoscopy versus full-spectrum
endoscopy: an international, multicentre, randomised, tandem colonoscopy trial. The Lancet Oncology
2014; 15: 353-60.
Hassan, et al, Cost-effectiveness of “full spectrum endoscopy” colonoscopy for colorectal cancer
screening , Digestive and Liver Disease, 2015
Fuse® detected 69% more pre-cancerous polyps, improving quality of care
Fuse® provides confidence with a negative exam. Fuse® found pre-cancerous polyps in 6% of patients which had normal findings by standard colonoscopy
9% of patients were recalled on an earlier interval. GI physician can retain and attract more patients
Potential $300M annual cost savings in U.S. alone
27
Expanding Set of Clinical Data
“…Improve(s) the efficacy
of colorectal cancer screenings…” Gralnek et al., The Lancet Oncology
“…An advancement in colonoscopy…” Papanikolaou et al., UEGW 2014 Abstract
“…More effective in identifying
multiple polyps…” Hassan et al., UEGW 2014 Abstract
“Advancement time to the cecum
was faster with Fuse…” Neumann et al., UEGW 2014 Abstract
“…Greatly expanded view
of the upper GI tract…” Stein et al., NYSGE Abstract 2013
28
Direct to Patient: Insist on Fuse®!
Fuse® Adds Value For All Stakeholders
29
Physician Significant GI advance
Differentiated practice, more procedures
Payor Cost saving technology
Addressing problem of interval cancer
Hospital/ASC Differentiated technology
Marketing advantage
Patient Reduced fear of missed polyps
Increased confidence in negative exam
Pathology
2015 Revenue $13.9M
Total 2015 Revenue: $72.3M – Total 2-Year CAGR: 18%
The EndoChoice Platform
Total revenue last
year
Growth rate
Leveraging a
common sales team
Serving the GI Caregiver with Differentiated Products and Services
Single-Use Products
2015 Revenue $36.1M
Imaging
2015 Revenue $22.4M
Leveraging a Unified Sales Team.
Driving Commercial Success
31
Multi-Pronged Growth Strategy
32
Expand
US Sales Force
Enter New
International Markets
Launch New
Products GPO Contracts/
Creative Bundling
33
US Sales Force Expansion & Optimization
Imaging
SUP
Pathology
70
Territory
Managers
Territory Managers (TMs)
sell entire portfolio.
Account Managers (AMs)
focused exclusively on Single-Use Products and Pathology.
December 2013 December 2014
Q4 Expansion 2015
SUP
Pathology
35 SUP
Pathology
Imaging
45 SUP
Pathology
Imaging
55 SUP
Pathology
20
TM TM TM AM
Engagement With Major GPOs
34
Current GPO contracts drive revenue growth
More products on contract drive revenue growth
No contract position hampers effort to expand business
Currently $17M is up for renewal in 2015 (Premier, Novation and HealthTrust-HPG)
Fuse Contract
Scope Services Contract
SUP Contract
Strategic International Expansion
35
Phase 1
Europe
Phase 4
LATAM
Phase 2
Asia
Phase 3
MEA
Direct Sales in Germany and Israel
Distribution partners in 30 countries
2,062 1,984 2,198
3,372 4,865
5,341
5,434
6,849 7,539
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2013 2014 2015
Single-Use Products Imaging
International Revenue Growing Marginally Faster than Domestic on Constant Currency Basis
36
2 Yr. CAGR of 33% on constant currency basis
(000’s)
Life Cycle Revenue Potential Per New ASC Customer
37
2 Room Center
Revenue Value
One Time Sale
Fuse Video System, 2 Rooms $440,000
Recurring Revenue
Devices $160,000
EndoKits $160,000
Endoscope Reprocessing $80,000
Endoscope Service $120,000
Pathology Billing $2,000,000
Total Recurring Revenue Over 5 Years $2,520,000
5 Yr. Revenue Potential For Each
New Customer $2,960,000
85% Recurring
15% Capital
Use icons for each division
38 38
This ASC successfully leverages EndoChoice’s product platform
Note: Cost of products and services refers to cost per use / procedure
Single-Use Products Imaging/Fuse® Pathology
$8
$30
$100 Leveraging The EndoChoice Platform
Growth Drivers for 2016
39
New Product Launches
Automated ADR Reporting
39
Imaging/Fuse® Pathology Single-Use Products
Expanding International Footprint
Expanding International Footprint
Integration into EMR systems
20 New Account Managers in US
20 New Account Managers in US
Expanding to 55 Territory Managers
2500+ US Customers and GPO Contracts
Expanding Set of Clinical Data
Strong Financial Profile
40
Consistent Revenue Growth Across All Product Lines
41
First sales of Fuse® Generation 1 in late 2013 to gain experience;
Started deliveries of Gen 2 in Q2 2015
12,119 12,595 13,844
30,700 33,845 36,076
8,072
14,979
22,382 50,891
61,419
72,302
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
2013 2014 2015
Pathology Single-Use Products Imaging(000’s)
Path To Gross Margin Improvement Gain Scale in Fuse Manufacturing
42
Target
Current State
Fixed Manufacturing Overhead
Units Produced
Fixed OH per system
Direct Materials per system
Direct Labor per system
Total Costs/System
US ASP/System
Gross Margin%
$11.5M
100
$115
$75
$15
$205
$205
0%
$15.0M
500
$30
$53
$12
$95
$205
54%
Evolution of Fuse System Margin
Business Unit Percent of
Revenue
Current
Margin%
Target
Margin%
GI Equipment and Supplies 80% 26% 54%
Pathology 20% 61% 60%
Total/Blended - 33% 55%
Evolution of Corporate Gross Margin
Path To Profitability Longer Term Operating Goals
Gross margin expansion will be driven by:
Spreading fixed manufacturing costs over higher unit volumes
Design programs to reduce parts and improve manufacturability
Greater purchasing leverage with vendors on higher volumes
43
Long Term Goals
Gross Margin ~ 55%
Sales & Marketing ~ 21%
General & Administrative ~ 10%
Research & Development ~ 7%
Operating income ~17%
These objectives are forward-looking, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond
the control of the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results will vary and
those variations may be material. For discussion of some of the important factors that could cause these variations, please see the risks and uncertainties in our Form S-1, as
amended, and our Form 10-Q for the period ended September 30, 2015. Nothing in this presentation should be regarded as a representation that these goals will be
achieved, and we undertake no duty to update our goals.
Platform GI Company Differentiated Tech $6B Addressable Market Growth Drivers
+ +
2015 Revenue of
$72.3M,
19% growth YoY
Shipped 82 Fuse
end-user systems,
year over year
growth of 116%
$6B Global
GI market,
growing annually
at 7%
New Products,
Expanding Sales
Team, 2,500+ US
customers
EndoChoice at a Glance
44
+
Single Use Products
Pathology
Imaging