Lazard Freres 1 st Annual Life Sciences Conference New York City November 30, 2004 Dan Cohen Vice President, Global Government Affairs INAMED Corporation
Safe Harbor When we estimate revenues, operating margins, capital expenditures, cash and other financial metrics, and discuss expected regulatory, clinical results or other business developments and objectives, such estimates and results are forward-looking statements and no assurance can be given that the estimates will be accurate. Please refer to INAMED s SEC Form 10-K report for additional information on the uncertainties, risk factors related to our business. The following summary points are subject to and qualified in their entirety by the oral presentation of INAMED management that will accompany these summary points today. Accordingly, these summary points should not be relied upon as being complete discussions of the matters to which they pertain today or in the future.
Our Vision To Enhance the Quality of People s Lives through the development and marketing of innovative, high-quality, science-based products. Look Younger Feel Younger Be Healthier
Enhancing Lives Through Obesity Intervention Products Lap-Band System - treats obesity by limiting food intake, reducing appetite and slowing digestion BIB System - induces temporary weight loss by partially filling the stomach Facial Aesthetics Treatments Cosmetic products to treat wrinkles and rejuvenate the face Full array of Dermal Fillers: Collagen and Hyaluronic Acid-based Breast Aesthetics Products (Augmentation and Reconstruction) Saline filled implants Silicone Gel filled implants
Market Leading Franchises INAMED Health Only Gastric Band on US market, and the leading band internationally Safest and least invasive weight loss surgery procedure available INAMED Aesthetics Experienced Aesthetics Sales Force Innovative Products In Breast and Facial Aesthetics Diverse dermal filler offering / Pipeline Strategically Complementary Value-added Breast & Facial Aesthetic practice management solution Strong, diverse pipeline in both franchises with High Probability of Technical Success
Company Growth Drivers Demographics Longer lifetimes Challenge to maintain active youthful lifestyle Demand Aging population seeks to enhance their lives Increasing societal acceptance of physical enhancement Procedures becoming more refined and less invasive Extreme weight gain is an increasing health problem The Company is committed, strategically and tactically, to continue capitalizing on the favorable demographic trends and strong market acceptance in all three of its franchises going forward
INAMED Health
Obesity Market Growth & Potential Morbid Obesity in the US has increased 389% from 1986 to 2000 6 Million people in the US are Morbidly Obese* Obesity is a causal factor in many diseases including diabetes, cancer, cardiovascular disease, arthritis, hypertension, and sleep apnea Department of Health and Human Services removed language denying that obesity is an illness for Medicare/Medicaid Center for Medical Services (CMS) is evaluating various procedures for the treatment of obesity Source: Centers For Disease Control and Prevention *Source: Arch Intern Med. 2003: 163: 2146-2148 (1 in 50, using an approximate US population of 300M)
Obesity Products LAP-BAND System Obesity Intervention Least invasive surgical option No cutting or stapling of the stomach wall or bowel Significantly lower mortality risk than other obesity surgical procedures* Low risk of nutritional deficiencies Adjustable Reversible source: The Australian Safety and Efficacy Register of New Interventional Procedures - Surgical 2002
Obesity Products BIB System Non-surgical temporary weight loss solution Innovative sphere, placed in stomach Filled with saline Induces a feeling of fullness in the patient Marketed internationally Seeking approval in the US
Obesity Initiatives Outreach to Doctors Target/grow key bariatric surgeon accounts! Increase trained and proctored surgeons Target State/Federal Government Arenas Center for Medical Services coverage evaluation Positive Outcome! Direct to Consumer Media Pilot Triage Plan to Drive Patients to Key Surgeons Testing In Four Markets Increase Reimbursement Coverage Demonstrate long term cost savings to providers (employers and insurance companies) Targeting 100M lives - currently 75M+ Recent Blues wins: Texas, Illinois, New Mexico and Minnesota
Medicare Coverage Advisory Committee Summary from November 4, 2004 Meeting Clarified July, 2004 decision removing language from the CMS coverage manual stating obesity is not a disease for treatment purposes - Determined that Adjustable Gastric Banding (LAP-BAND), Gastric By-Pass and Biliopancreatic Diversion are safe and effective treatments for the morbidly obese Encouraged interested parties to file a National Coverage Decision request with CMS to expand federal coverage guidelines Confirmed that bariatric surgery is the only medical treatment that provides sustained weight loss and offers a significant, long-term health benefit for the morbidly obese CMS Response to the MCAC expected in 90 days
Obesity Procedure Cost Studies Mercy Hospital Davenport, Iowa 1 Year of Discharge Data (Avg. Cost/Procedure) $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Gastric Bypass 1.6 to 1.8 times the avg. cost of LAPBAND Procedure $0 Open Gastric Bypass Laparscopic Gastric Bypass LAP-BAND Average Cost Per Procedure $26,917 n = 23 $31,044 n = 114 $16,892 n = 85 N = Number of Procedures Tracked
Obesity Market Expansion Strategy Product Upgrades LAP-BAND VG System introduced in Q1 2004 Additional upgrades planned going forward BIB pilot clinical study has started Expand Market Through Clinical Development Programs Adolescent Obesity - Market size of 6-7M Discussing with FDA Diabetes - Market size of 8-10M Running Advertising Lower Body Mass Index - Market size of 33-35M In Clinical development
LAP-BAND System Product Development Continuous Process of Product Innovation 2001 Product Line 2004 Product Line * Significant product enhancements from 2001-2004 include introduction of the LAP-BAND VG, contoured belts for easier placement, and advanced port technology.
Diabetes Resolution Ad Oct. placement in the ADA supplement Guide to Women s Health, published just prior to Diabetes Awareness Month (November) LAP-BAND System also featured in an article Circulation: 320,000 MD s/nurses
INAMED Health Sales Summary ($ in Millions) Period-over-Period Sales & Growth $11.3 $17.7 $14.0 $19.2 $15.2 $21.1 $16.2 $22.2 Q4 '03 Q1 '04 Q2 '04 Q3 '04 + 57% + 37% + 39% + 37%
INAMED Aesthetics - Facial
Facial Aesthetics Growth Drivers Minimally-Invasive procedures increasing faster than Surgical procedures in plastic surgery 22% growth in Minimally-Invasive procedures vs. 12% growth of Surgical procedures for 2003 compared to 2002* Collagen, Hyaluronic-Acid and botulinum toxin Type A treatments are all key components of this growth GROWING CONSUMER ACCEPTANCE * Source: American Society for Aesthetic Plastic Surgery (ASAPS)
Facial Aesthetics Products & Pipeline Product Zyderm /Zyplast CosmoDerm /CosmoPlast Description Collagen treatment/on market in 77 countries Gold standard 20+ years on the market Collagen treatment - No skin test On market in US and Canada Cosmoderm/Cosmoplast launched in Spain and Italy Q4 in France Hylaform Hylaform Plus NEW Hyaluronic Acid - No skin test Approved in 28 countries, including US Approved 10/13 first large particle size HA approved in U.S. Juvederm --completing enrollment in U.S. pivotal study-3 formulations in trials Juvederm 2 nd generation (high viscosity products) 24HV and 30HV soon to be launched in Canada and Europe Reloxin Hyaluronic Acid - No skin test Marketed under the name Hydrafill in Europe Approved in 37 countries; licensed for US, Canada and Australia (exclusive) and Europe G5 (non-exclusive) Juvederm 2 nd generation products 24HV and 30HV just approved and soon to be launched in Canada & Europe in 4 th Quarter Botulinum Toxin Type A Cosmetic Wrinkle Treatment In Phase 3 trials for cosmetic indication in US & Canada Worldwide 2004 estimated Market $450M*/ growth rate 20+%/year * Source: Morgan Stanley Equity Research, Marc Goodman, "Allergan, Inc.", Page 9, July 28, 2004.
Hylaform Plus Approval Inamed gained approval for Hylaform Plus on October 13 th 2004 - orders and product shipments began shortly thereafter Hylaform Plus is the only large-particle hyaluronic acid-based dermal filler approved and available in the United States The product should strengthen the competitive position of INAMED s facial product portfolio, as the Juvederm (next generation HA dermal filler) pivotal study advances Hylaform Plus is being introduced with pricing economics to support combinational therapy with collagen replacement therapies (Zyderm/Zyplast/CosmoDerm/CosmoPlast)
Treating The Whole Face
Facial Aesthetics Initiatives Solid Competitive Position Broadest Portfolio of Facial Products on the Market Medicis Restylane, the company s only dermal filler (bacteria based hyaluronic acid) Allergan Botox, the company s only line and wrinkle treatment (Botulinum Toxin Type A)
Reloxin (Dysport)) Phase 2 Study U.S. Methodology: Results: Allistair Carruthers, MD, Gary Monheit, MD, et al. Study: A randomized, double-blind, placebo-controlled study to determine the optimal dose of Dysport for the treatment of glabellar lines. Objectives: Evaluate the efficacy and safety of 3 doses of Dysport in the treatment of glabellar lines. Patients were injected with a total of 20, 50 or 75 units of Dypsort or placebo at 5 sites across the forehead at day. Follow-up assessments were carried out on Days 7, 30, 60, 90 and 120 after treatment. Adverse events were also elicited by telephone on Day 3. The 50-unit dose was as effective as the 75-unit dose, and their duration of action was similar. The most common adverse events were mild headache and nasopharyngitis, which occurred in a very low frequency in all treatment groups. Conclusion: All doses of Dysport resulted in a significant improvement in the glabellar frown lines and were well tolerated. From these data, the 50-unit dose was selected as the optimal dose for treatment.
Reloxin (Dysport)) Phase 3 Study - France Methodology: Results: Benjamin Ascher, MD, et al. (J Am Acad Dermatol 2004; 51:223-33) Study: A randomized, double-blind, placebo-controlled study to determine the efficacy and safety of three doses of Dysport in the treatment of glabellar lines. Objectives: Evaluate the efficacy and safety of 3 doses of Dysport in the treatment of glabellar lines. 119 patients with moderate to severe glabellar lines at rest were treated with 25, 50, or 75 units Dysport or placebo at 5 intramuscular glabellar sites. Outcome measures included evaluations by independent experts from blinded standardized photos at rest 1 month after treatment, physician and patient evaluations during a 6-month period. Significant efficacy was reported for all 3 doses for at least 3 months after injection. Investigator and patient evaluations suggested that 50 units was the optimal dose. Dysport was well tolerated; no blepharoptosis was reported. Conclusion: Dysport is an effective and safe treatment for glabellar lines
Facial Aesthetics Strategic Intent and Tactics Strategic Intent: expand current facial aesthetics product line in the top US and International markets through the in-licensing, acquisition, development and innovative commercialization of a comprehensive line of high quality/science products that the address health and the beauty of the skin. Aggressively pursue the development and approval timelines for the product pipeline in key global markets Acquire cutting edge technologies and/or partner with leading global providers of facial aesthetics products Build strong global brands for Inamed offerings * Source: American Society for Aesthetic Plastic Surgery (ASAPS)
Facial Aesthetics Sales Summary ($ in Millions) Period-over-Period Sales & Growth $25.6 $19.9 $17.8 $17.5 $22.2 $20.5 $21.6 $17.1 Q4 '03 Q1 '04 Q2 '04 Q3 '04 + 29% - 2% - 8% - 21%
INAMED Aesthetics - Breast
Breast Implant Products Saline US Silicone Gel Outside of U.S. International sales mix is 90 +% Silicone and < 10% Saline BioDimensional Cohesive Gel Matrix International Markets Only Customizzed TM implant in Int l/euro markets PMA expected to be filed with FDA October November 2004 #1 Silicone breast implant sold internationally
Breast Implant Market -- SOLID INAMED the Worldwide Leader in Breast Aesthetics Sales Steady growth gives the company a strong business to leverage from Duopoly market in the US with steady growth INAMED continues to gain market share Significant progress of differentiation efforts in Europe with Style 410 BioDIMENSIONAL silicone gel matrix products Growing consumer acceptance for augmentation procedures Societal acceptance keeps increasing, especially with higher visibility in prime time TV programming * Source: American Society of Plastic Surgeons (ASPS)
Breast Aesthetics Clinical Data Product Differentiation Saline Implant Deflation Rates and Patient Follow-up Comparison at 5 and 7 Years* DEFLATION RATE PATIENTS FOLLOW UP RATE AUGMENTATION 5-YEAR 7-YEAR INAMED MENTOR INAMED MENTOR 6.8% 9.7% 9.8% 16.4% 901 1,264 876 1,264 81.0% 5.0% 85.0% 50.0% RECONSTRUCTION 5-YEAR 7-YEAR INAMED MENTOR INAMED MENTOR 7.5% 18.0% 12.4% 26.9% 237 416 194 416 80.0% 52.0% 83.0% 71.0% Product Development Initiatives Continue to differentiate BioDIMENSIONAL cohesive gel matrix product line Launch new 510 cohesive gel matrix product line internationally * INAMED Corporation data at 5-years is taken from Table 2 of INAMED's Directions for use of BIOCELL(TM) Textured and Smooth Saline-Filled Breast Implants (M712-C 11/02). INAMED Corporation 7- year data has been submitted to the FDA in INAMED's 2004 Annual Report for BIOCELL(TM) Textured and Smooth Saline-Filled Implants. Mentor Corporation data is taken from Tables 7a and 7b of Mentor's Product Insert Data Sheet for Saline-Filled & Spectrum(TM) Mammary Prostheses (102865-001 Rev. A Effective January 2004)
Breast Aesthetics Tactical & Strategic Initiatives Drive Lookingyourbest.com reference source and doctor referral -- --> 30 Millions hits to date Expand Inamed Academy premier educational services Execute practice building collaboration with Nextech, the leader in plastic surgery practice management software platforms. Rigorously pursue Silicone 1 approval FDA discussions ongoing File the Bio-DIMENSIONAL 3 rd generation cohesive gel in the US (expected filing by end Q4, 2004) Leverage leadership position/ evaluate and pursue the next generation of breast implants
Breast Aesthetics Sales Summary Period-over-Period Sales & Growth ($ in Millions) $57.3 $46.8 $52.8 $47.5 $49.3 $41.0 $42.4 $41.1 Q4 '03 Q1 '04 Q2 '04 Q3 '04 + 12% + 25% + 21% + 20%
Revenue Balance Diversifying Business Mix % Sales (F-Y 1999) % Sales (@ 9/30/04) 9% 16% 1% 74% 54% 25% 19% 2% Breast Obesity Facial Other Breast Obesity Facial Other
Worldwide Sales Period-over-Period Sales & Growth ($ in Millions) $91 $91 $74 $76 $86 $100 * $80 $90 Q4 '03 Q1 '04 Q2 '04 Q3 '04 + 23% + 20% + 16% + 12%
Diluted Earnings Per Share Period-over-Period Sales & Growth $0.26 $0.44 $0.35 $0.49 $0.37 $0.56 * $0.35 $0.47 Q4 '03 Q1 '04 Q2 '04 Q3 '04 + 69% + 40% + 51% + 34% * Non-GAAP diluted EPS, excluding Ethicon settlement and related second quarter litigation Expenses. GAAP EPS was $0.27.
Gross Margins Increased Gross Margins from 72% for the year in 2003 to 75% in the third quarter Comprehensive manufacturing consolidation and changing business mix has led the way to increased margins Shifted capacity to lower cost manufacturing sites Exploring other areas of cost improvement
Capital Structure Debt Reduction - $83.5M (Q4 2002-present) Total Remaining Debt of $25.0M* Total Shareholder s Equity of $412M* Market Capitalization: ~$1.9B Strong Cash and Cash Equivalents Position of $108M** * All Balance Sheet information is as of September 30, 2004 ** Includes marketable securities
2004 Guidance GAAP EPS - $1.96 - $2.01* Franchise Revenue: Health - Increase in excess of 30% Facial - Decrease in the mid to high teens Breast Increase in the mid to high teens * This excludes a $17.2M charge for the Ethicon Endo Surgery settlement and related second quarter litigation expenses; GAAP EPS guidance for 2004 is now $1.67-$1.72.
Additional 2004 Guidance Revenue - Low double-digit growth Gross Margin - 72-74% SG&A - 40-42% R&D - $28-30M Tax Rate - 24-26%
INAMED Well-Positioned Solid Current Product Portfolio/Three Diverse Franchises Favorable Demographics Growing Consumer Acceptance Strong Product Pipeline/High PTS Excellent Gross Margins and Core Profitability Balance Sheet (growing cash/low debt) Affords Strategic Flexibility Global Presence