Merrill Lynch Global Pharmaceutical, Biotechnology and Medical Device Conference Peter R. Nicholson Vice President, Corporate Development February 9, 2006
Safe Harbor Statement This presentation contains, in addition to historical information, forward-looking statements. Such statements are based on management s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the Company s Annual Report on Form 10-K/A and other SEC filings. 2
Mentor Corporation NYSE: MNT A $2.1 billion specialty medical device company FY 05 improved leverage FY 2005 Revenues Revenues = $482 million, +15% Gross Profit = $310 million, +19% Aesthetics $252 M Urology $231 M Op. Income = $100 million, +21%* 3 * Non GAAP, excludes restructuring and asset impairment charges
Mentor s Strategy Increase focus on aesthetic medicine Leverage leadership position to take advantage of surgical and non-surgical cosmetic procedure growth Explore strategic options for urology business Enhance shareholder value and enable the company to focus more fully on aesthetic medicine 4
Aesthetics Franchise History Acquired Heyer-Schulte division of American Hospital Supply in 1984 Now dominant provider of breast implants and related products worldwide Acquired Byron Medical began in 1997, completed in 2001 Now dominant provider of capital equipment and disposables for liposuction market worldwide Acquired A-Life in 2003 Proprietary next generation HA-based dermal filler products Acquired all rights to WARF botulinum toxin in 2003 Proprietary next generation botulinum toxin products 5
Aesthetics Revenues Sales and Growth Rates Breast Reconstruction Breast Augmentation Body Contouring 250 200 CAGR = 12% $ millions 150 100 50 6 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Aesthetics Market Top 5 Cosmetic Surgery Procedures in 2004* 1. Lipoplasty 478,251 2. Breast Augmentation 334,052 3. Eyelid Surgery 290,343 4. Rhinoplasty 166,187 5. Facelift 157,061 7 * Source: American Society for Aesthetic Plastic Surgery (ASAPS), 2005
Breast Aesthetics Franchise Complete range of products used in cosmetic and reconstructive surgery, premium price position Market leading customer support and service focused on helping customers grow and improve their business Highly experienced direct sales force with significant position tenure Memory Gel PMA under review with FDA 8
Mentor Practice Development Helping Customers Reach Their Revenue Goals Demand Creating Programs Practice Enhancing Programs Increased Number of Surgeries Industry-leading customer service and support Mentor brand promise customer partnership 9
Body Contouring U.S. Demographics (1000s of Procedures) 150 100 50 Augmentation Lipoplasty 0 <18 19-34 35-50 51-64 >65 Significant overlap with breast aesthetics demographics 10 * Source: American Society for Aesthetic Plastic Surgery, 2004
Body Contouring Market Characteristics Most popular surgical cosmetic procedure in U.S. with 478,251 performed in 2004* Mentor with strong intellectual property position Mentor is the U.S. market leader 50% share of equipment market 30% share of disposables market 11 * Source: American Society for Aesthetic Plastic Surgery (ASAPS), 2005
Global Distribution Network 10,000 Plastic Surgery Accounts Worldwide 12
U.S. Cosmetic Procedure Growth (millions of procedures*) 1997 2004 2.1 0.9 1.1 9.7 Surgical (118% growth) Non-Surgical (764% growth) 13 * Source: American Society for Aesthetic Plastic Surgery (ASAPS), 2005
Corporate Vision To be the world leading single-source supplier of highquality products for the aesthetics market Marketed products Strong pipeline Sales force Manufacturing Surgical Non-Surgical 14
Aesthetics Market Top 5 Non-Surgical Cosmetic Procedures in 2004* 1. Botox injection 2,837,346 2. Dermal Fillers** 1,845,455 3. Laser hair removal 1,411,899 4. Chemical peel 1,110,401 5. Micro-dermabrasion 1,098,316 15 * Source: American Society for Aesthetic Plastic Surgery (ASAPS), 2005 ** Hyaluronic acid, collagen, polyactate, calcium hydroxylapatite and autologous fat
Dermal Filler Opportunity U.S. Dermal Filler Market: 2002A - 2008E ($ millions) $400 $350 $300 CY04-CY08 CAGR = 22.1% $292 $340 $250 $244 $200 $194 $150 $153 $100 $50 $72 $97 $0 2002A 2003A 2004E 2005E 2006E 2007E 2008E 16 Source: Wall Street Research
HA Dermal Filler Program Competitive Advantages Able to add topical anesthetic for improved patient comfort Not derived from human or animal tissue DXL patented and unique double cross-linked technology Regulatory Status Europe introduced in June 2005 at EAPS Canada approved in December 2005 U.S. pivotal study began in Q3 05 17
Botulinum Toxin Opportunity Total Allergan Botox Sales: 2000A - 2008E ($ in millions) $1,400 $1,200 $1,000 $800 $600 Botox Cosmetic Sales Total Botox Sales Total CAGR: 23.3% Cosmetic CAGR: 29.4% $400 $200 $0 2000A 2001A 2002A 2003A 2004E 2005E 2006E 2007E 2008E 18 Source: Wall Street Research
Botulinum Toxin Program Exclusive agreement with Wisconsin Alumni Research Foundation All indications, all countries Large market opportunity High barriers to entry U.S. cosmetic indication Phase 1 study began Q3 05 Phase 2 study began in Q2 06 19
Surgical Urology Revenues Sales and Growth Rates Women s Health Erectile Dysfunction Brachytherapy Urinary Care 150 $ millions 100 50 CAGR = 25% 24% 0 1998 1999 2000 2001 2002 2003 2004 2005 20
Women s Health Stress Urinary Incontinence and Pelvic Organ Prolapse Approximately 7.7 million American women suffer from SUI* Approximately 36 million women suffer from Pelvic Organ Prolapse in the U.S. and Europe* 40% of women with SUI also have prolapse* 21 *Millennium Research Group
ObTape Synthetic Product Portfolio First Trans-obturator tape Over 45,000 cases performed worldwide Aris TM Newest technical achievement for knitted tape Light, thin mesh with soft edges and low elasticity 22
Erectile Dysfunction Market Characteristics 30 million men affected by erectile dysfunction in the U.S. 10 million elect to try PDE-5 inhibitors (Viagra, Cialis, ) PDE-5 non-responders 3 million 100% Consider penile implant 80,000 3% 100% Elect to have penile implant 16,000 0.5% 20% 23
Erectile Dysfunction Product Portfolio Mentor with high-margin, innovative product line Titan coated three-piece implant Genesis coated malleable implant Very high degree of patient satisfaction Using current customer base as key marketing resource for new patient acquisitions Duopoly market, high barriers to entry La Bombita DTC program 24
Healthcare Revenues Sales and Growth Rates 150 Male external catheters and intermittent self-catheters 100 CAGR = 15% $ millions 50 0 1998 1999 2000 2001 2002 2003 2004 2005 25
Clinical & Consumer Healthcare Management of urinary retention and bladder control Patient population Young and old Men and women Healthy and handicapped Lifetime customers 26
Revenues & EPS Growth Revenue Earnings per Share ($ millions) 500 400 300 200 100 CAGR = 15% $321.1 $268.9 $249.3 $204.6 $382.4 $422.2 $483.4 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.40 CAGR = 23% $0.57 $0.66 $0.85 $1.15 $1.13 1 $1.40 2 2 0 1999 2000 2001 2002 2003 2004 2005 $0.00 1999 2000 2001 2002 2003 2004 2005 27 1 Restated per EITF 04-8 2 Non-GAAP diluted EPS which excludes $0.23 of special charges
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