THE INNOVATION LEADER IN AIRWAY CLEARANCE TECHNOLOGIES - ELECTROMED, INC. INVESTOR PRESENTATION - SmartVest
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ELECTROMED, INC.
INVESTOR PRESENTATION
November 2016
NYSE MKT: ELMD
THE INNOVATION LEADER IN
AIRWAY CLEARANCE TECHNOLOGIES
FORWARD LOOKING STATEMENTS
Certain statements in this presentation constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform
Act of 1995. Forward-looking statements reflect current views with respect to future events and financial performance and include any
statement that does not directly relate to a current or historical fact. Such statements can generally be identified by the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will” and similar words. Forward-looking statements made in this
presentation include, but are not limited to, our plans and expectations regarding the economic environment in which we operate,
market opportunities, treatment, referral and approval trends, growth strategies and performance goals.
Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known and
unknown, associated with such statements. Examples of risks and uncertainties for Electromed include, but are not limited to, the
impact of emerging and existing competitors, the effect of new legislation on our industry and business, the effectiveness of our sales
and marketing and cost control initiatives, changes to reimbursement programs, as well as other factors described from time to time in
our reports to the Securities and Exchange Commission (including our most recent Annual Report on Form 10-K, as amended from time
to time, and subsequent reports on Form 10-Q and Form 8-K). Investors should not consider any list of such factors to be an exhaustive
statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making
investment decisions. You should not place undue reliance on “forward-looking statements,” as such statements speak only as of the
date of this presentation. We undertake no obligation to update any of these forward-looking statements.
ELECTROMED, INC. INVESTOR PRESENTATION // 2
WHO IS ELECTROMED?
• We are a profitable, growing medical device Revenue ($M)
company focused on developing, $23.0
manufacturing and marketing innovative $19.4
airway clearance products. $15.5
• We are the #3 player in high frequency chest CAGR
wall oscillation (“HFCWO”) devices, which help +22%
clear mucus from the lungs.
FY'14 FY'15 FY'16
• Our SmartVest® HFCWO System improves
quality of life and reduces risk of infection for
patients with compromised pulmonary Net Income ($M)
function due to chronic diseases and $2.2
conditions such as bronchiectasis and other
diseases under the COPD1 umbrella as well as $1.1
cystic fibrosis and neuromuscular disorders.
• We have well-established relationships with
clinicians, regulators and payers, and are
guided by a “patient-centric” culture. $(1.3)
FY'14 FY'15 FY'16
1 Chronic
obstructive pulmonary disease, or the combination of
emphysema and chronic bronchitis. ELECTROMED, INC. INVESTOR PRESENTATION // 3
REVENUE BREAKDOWN – $23.0M (FY 2016)
By Setting By Payer By Referral Volume
4% 8%
23% 27%
50% 49%
11%
27%
88% 13%
Commercial /
Home Care Bronchiectasis
Other
Institutions
Medicare Cystic Fibrosis
(Hospitals)
International Medicaid Neuromuscular
Other
ELECTROMED, INC. INVESTOR PRESENTATION // 4
BENEFITS OF HFCWO THERAPY
Studies show that HFCWO therapy is as effective
as chest physical therapy (“CPT”) for airway Mini coughs loosen, thin
clearance. and propel mucus toward
major airways
Benefits for the Patient
• Lower risk of respiratory infections that can be
serious or life-threatening (e.g., pneumonia)
Garment squeezes and
• Independence from a dedicated caregiver releases upper torso of
body, creating “mini
coughs”
• Consistency, comfort and portability of therapy
• Improved quality of life
Benefits for the Payer Air pulse generator
delivers rapidly repeating
• Eliminates expense of an in-home care provider pulses of air to an
(required in CPT) inflatable garment
connected via hose
• Reduces likelihood of costly hospital admissions How HFCWO Works
due to infections or other complications
ELECTROMED, INC. INVESTOR PRESENTATION // 5
WHY ELECTROMED’S SMARTVEST?
• Smaller, quieter, lighter and designed to maximize comfort
• Tailored-fit design and user-friendly controls
• Truly portable
SmartVest’s Innovative Features Designed to Drive Greater
Patient Compliance with Prescribed Treatment Schedules
ELECTROMED, INC. INVESTOR PRESENTATION // 6
BUSINESS MODEL
We generate revenue via sales to: patients for home use; institutions for
inpatient use; patients when discharged from a hospital; and international
distributors.
Home Care Institutions International
% of Revenue: ~88% ~8% ~4%
Sales Points: Direct to physicians Individual hospitals; Distributors
Adult pulmonology clinics member hospitals of
Cystic fibrosis centers group purchasing
Neuromuscular clinics organizations (GPOs)
Hospitals
Revenue Model: Third-party Payments made directly Contracted price with
reimbursement from the institution for payments made directly
(Medicare, Medicaid, generator sales – capital from the distributor
Commercial) purchase
Single patient use
garments – recurring sales
ELECTROMED, INC. INVESTOR PRESENTATION // 7
VALUE ADDED SERVICES
TO OUR HOME CARE CUSTOMERS
Clinician /
Reimbursement Physician Respiratory
Team Therapists
• Counsel to
physicians
• Physician
paperwork Patient / • In-home patient
Caregiver training by
• Patient advocate Value Add Value Add respiratory therapist
• Insurance • Respiratory
authorization therapists on call
• Claims processing service-line
Payer
• Ensure therapy
compliance,
improving
outcomes for payers
ELECTROMED, INC. INVESTOR PRESENTATION // 8
INVESTMENT HIGHLIGHTS
Innovation and History of innovation, leading the way in new product features for HFCWO devices
Service Track Record Unparalleled patient care, reimbursement support and clinician/prescriber services
#3 player in total served domestic HFCWO market
Large, Growing
Underserved patient population: a significant market opportunity (e.g., bronchiectasis)
Addressable Market
Favorable industry growth drivers (e.g., Affordable Care Act, aging population, etc.)
Leadership Experienced, talented and proven management team
Execution Successfully executing a turnaround-to-growth story
High Gross Margins FY’16 gross margin of 78% and cash flow from operations of $2.2M
and Strong Cash Flow Operating leverage upside as revenue increases
Drive core organic growth through product innovation and world-class services
Compelling Organic
Expand the market opportunity, focusing on adult pulmonology and bronchiectasis
Growth Strategy
Add payer contracts, grow institutional market share and enhance sales productivity
ELECTROMED, INC. INVESTOR PRESENTATION // 9
HISTORY OF INNOVATION
Introduced
Expanded
SmartVest®
Introduced Introduced Introduced Garment and
Introduced Portable Programmable Reversible Wrap SmartVest® Introduced SmartVest SQL®
HFCWO Device HFCWO Device Garment Colors SmartVest® SQL® Generator Colors
2000 2002 2004 2006 2008 2010 2011 2013 2014 2016
Introduced Introduced Expanded Introduced Introduced Commenced
Machine Multi-Positional R&D Seriously Pink Gingko Green Development
Washable Vest HFCWO Device Projects SmartVest® SmartVest® of Wireless
Garment Connectivity
Reporting
Solution
ELECTROMED, INC. INVESTOR PRESENTATION // 10HISTORY OF INNOVATION
• “Internet of Medical Things” (IoMT) – better collaboration in making
patient-centric decisions
• Commenced development of a wireless connectivity solution
‒ data connection between physicians and patients with
impaired airway clearance
‒ real-time visibility to HFCWO treatment information
• Integration with interactive dashboard application to encourage:
‒ Patient engagement with HFCWO therapy
‒ Promote adherence to prescribed treatment
Wireless
Late 2016 January 2017 Summer 2017
Connectivity
Commenced Pilot Testing Commercial
Project Development To Begin (est.) Launch (est.)
Timeline:
ELECTROMED, INC. INVESTOR PRESENTATION // 11ELECTROMED’S FORMULA FOR SUCCESS
Making life’s
important moments Reimbursement
possible – one breath Support
at a time.®
Technology Patient Care
Clinician and Innovation and
Support
Device Effectiveness, Training
Comfort and Ease-of-Use
Service for
Prescriber
ELECTROMED, INC. INVESTOR PRESENTATION // 12TOTAL SERVED MARKET
Total Served Domestic Market Total Served International Market
(est. in millions) (est. in millions)
$20 $5
$130 $25
$110 $20
Home Care Home Care
Institutional (Hospitals) Institutional (Hospitals)
Electromed is the #3 player
in the US market. ELECTROMED, INC. INVESTOR PRESENTATION // 13UNDERSERVED PATIENT POPULATION:
A SIGNIFICANT MARKET OPPORTUNITY
• Over 24 million people in the United States have diseases and
conditions for which HFCWO therapy is routinely prescribed:
COPD 24 Million
Bronchiectasis 370,000
Largest
underdiagnosed
Affected and reimbursable
Neuromuscular 250,000 market (est.)
Cystic Fibrosis 30,000
ELECTROMED, INC. INVESTOR PRESENTATION // 14THE BRONCHIECTASIS OPPORTUNITY
• Bronchiectasis: an irreversible lung
condition characterized by abnormal 370,000 people with
widening of one or more of the
bronchi (airways) Bronchiectasis in US (est.)
• End result of repeated episodes of
pulmonary inflammation and infection Disease
Disease Mis-
• Damaged airways allow excess mucus Under- diagnosed
to accumulate, increasing risk of diagnosed
infection HFCWO
Under-
prescribedGROWING, UNDERPENETRATED MARKET
• The bronchiectasis market is growing an estimated 9% per year, driven
by an aging U.S. population developing higher incidences of chronic lung
diseases.
• 2015 estimated bronchiectasis and cystic fibrosis patients treated with
HFCWO therapy:
370,000
Untreated
Treated
314,500
untreated
30,000 1,000 untreated
Bronchiectasis CF
Cases Cases
The bronchiectasis market opportunity
is significantly greater than cystic fibrosis.
ELECTROMED, INC. INVESTOR PRESENTATION // 16INDUSTRY DRIVERS FOR AN EXPANDING
HFCWO MARKET
• Aging population
• Higher incidences of chronic lung diseases
• Growing physician awareness of diseases and conditions
(e.g., bronchiectasis)
• The Affordable Care Act penalties for readmission of patients within
certain timeframes after discharge
• Healthcare reform driving greater accountability through moving
from fee-for-service to fee-for-outcomes
• Treatment moving to lower cost settings (i.e., in-home care)
ELECTROMED, INC. INVESTOR PRESENTATION // 17HEALTH CARE REFORM IS FOCUSED ON THE
COMPREHENSIVE COST OF CARE
Upfront Future Costs
Cost vs. and Outcomes
SmartVest Lowers the Comprehensive Cost of
Health Care and Improves Outcomes
ELECTROMED, INC. INVESTOR PRESENTATION // 18FROM TURNAROUND TO GROWTH STORY
• Changes in Leadership
• Implemented process and system enhancements in key areas, including reimbursement
• Improved product design and features; advanced new model to market (SmartVest SQL)
1 • Reduced manufacturing costs and streamlined operations
• Managed through external challenges, including Blue Cross Blue Shield billing transition
and downward pressure in reimbursement
2
In • Investing in growth: device and service innovation, hiring key resources and expanding
progress sales and marketing initiatives
3
ELECTROMED, INC. INVESTOR PRESENTATION // 19THE RESULTS DEMONSTRATE OUR PROGRESS
Revenue (in millions)
$23.0
$19.4
$15.1 $15.5
FY 2013 FY 2014 FY 2015 FY 2016
Operating Income (in millions)
$3.1
$1.3
$(0.7)
$(1.8)
FY 2013 FY 2014 FY 2015 FY 2016
ELECTROMED, INC. INVESTOR PRESENTATION // 20STRONG GROSS MARGINS AND CASH FLOW
Gross Profit Operating Cash Flow
(in millions) (in millions)
$17.9
$2.8
$13.6
$2.2
78%
70%
FY'15 FY'16 FY'15 FY'16
Gross Profit Gross Margin
We believe long-term gross margins can be sustained in the mid-70s
ELECTROMED, INC. INVESTOR PRESENTATION // 21COMPELLING ORGANIC GROWTH STRATEGY
• Continue to develop innovative device features that appeal to patients
• Maintain leadership in reimbursement support and customer care
• Focus on increasing referrals in largest, fastest growing segments
‒ Adult pulmonology / Bronchiectasis
‒ Market development
• Sales force expansion
• Maximize therapy adherence
• Expand third-party payer coverage
• Grow institutional market share to support home care growth
ELECTROMED, INC. INVESTOR PRESENTATION // 22INVESTMENT CONCLUSIONS
Growing market,
driven by aging
Electromed Turnaround
population and
provides superior complete, growth
increasing
HFCWO devices story well
bronchiectasis
and services underway
and COPD
prescriptions
Strong gross
Compelling
margins and
organic growth
operating cash
strategy
flow
ELECTROMED, INC. INVESTOR PRESENTATION // 23Kathleen Skarvan, President and CEO Kalle Ahl
(952) 758-9299 (212) 836-9614
kskarvan@Electromed.com kahl@equityny.com
Jeremy Brock, CFO Devin Sullivan
(952) 758-0852 (212) 836-9608
jbrock@Electromed.com dsullivan@equityny.com
ELECTROMED, INC. INVESTOR PRESENTATION // 24APPENDIX
FINANCIAL HIGHLIGHTS AND
BALANCE SHEET SNAPSHOT
Financial Summary Fiscal Year Ended 3 Months Ended
(in $ millions, except shares amounts) June 30, 2014 June 30, 2015 June 30, 2016 Sept. 30, 2015 Sept. 30, 2016
Net revenues 15.5 19.4 23.0 5.0 5.5
Gross Profit 10.6 13.6 17.9 3.9 4.3
Gross margin 69% 70% 78% 77% 78%
Operating (loss) income (0.7) 1.3 3.1 0.6 0.3
Operating margin -5% 7% 14% 12% 5%
Net (loss) income (1.3) 1.1 2.2 0.3 0.2
Diluted EPS $(0.16) $0.13 $0.27 $0.04 $0.02
Diluted shares 8,114,252 8,153,703 8,248,391 8,173,684 8,452,780
Cash provided by operations 2.1 2.8 2.2 0.3 (1.2)
Balance Sheet (in $ millions) Sept. 30, 2016
Operating Cash Flow
Cash 3.8
(in millions)
Current assets 15.1 $2.8
$2.1 $2.2
Total assets 19.7
Current liabilities 1.9
Long-term debt 1.1
Total stockholders' equity 16.7 FY'14 FY'15 FY'16
ELECTROMED, INC. INVESTOR PRESENTATION // 26COMPETITIVE LANDSCAPE
• Hill-Rom the Vest® Estimated Domestic Market Share
‒ Well established
‒ Deep pockets
‒ Hospital bundle option 2%
16%
‒ Large domestic sales force 29%
• RespirTech inCourage® $130M
‒ Strong focus on pediatric
market
‒ Triangle-wave theory 53%
• I.B.C. – AffloVest®
Electromed Hill-Rom
‒ Patient truly mobile during
therapy RespirTech I.B.C.
‒ Selling through DME
ELECTROMED, INC. INVESTOR PRESENTATION // 27ADDITIONAL BARRIERS TO ENTRY
Established Relationships Regulatory & Reimbursement
• With Physicians • FDA device approval
• With Clinicians • Clearance to use the Conformité
Européenne mark, or CE mark, in Europe
• With Institutions
• Deep understanding of health care
• With Payers reimbursement and reform
• State licensing
Intellectual Property / R&D Manufacturing
• 19 U.S. and 12 foreign-issued patents • 10,000 square foot owned facility in New
Prague, Minnesota
• 30 pending U.S. and foreign patent
applications • Fully meets FDA’s manufacturing
standards and Quality System Regulation
• R&D spend of approximately 2% to 4% of
sales per year • Compliant with ISO 13485 and ISO 9001
quality system standards
ELECTROMED, INC. INVESTOR PRESENTATION // 28You can also read
