Life Science VC investor slides

1. Executive Summary: Alphaeon is uniquely positioned to meet the
needs of the cash-pay segment & engage specialty physicians
Cash-Pay Segment
Alphaeon Overview
• Healthcare market is composed of two segments:
• Alphaeon will transform the market by establishing a deregulated cash-pay only business that directly engages
customers as shareholders
– Reimbursed segment, defined by medical need
– Cash-pay segment, offering lifestyle enhancement
• Global cash-pay segment offers a $18bn opportunity and
is poised to grow at 10% CAGR
– Medical Aesthetics and Ophthalmic are the most attractive
sectors within the segment
Market Landscape
• Cash-pay segment dominated by Big Strategics (Pharma
& Medical Device)
– Entered the market to hedge against decline in
reimbursement
• Big Strategics have low expertise in office-based sales &
DTC marketing
• These players “disintegrate” targets following
acquisition, stunting innovator culture
• Big Strategics also extend regulations around physician
interaction and promotions to cash-pay businesses
following acquisition, resulting in negative synergy
– Big Strategics today cannot outbid smaller companies
during acquisitions due to negative impact of regulations
– Physician input will drive Alphaeon strategy
• Alphaeon will be exempt from regulations limiting
marketing & sales and physician financial participation in
healthcare companies
• Alphaeon will acquire platforms within Medical
Aesthetics and Ophthalmic & expand via “bolt-on”
acquisitions
• Acquisition targets will operate independently while
leveraging a combined practice management force
• Alphaeon will adopt a customer-centric model delivering
practice management to customers
– Generalist practice partners will compose the majority of
Alphaeon sales force
• Alphaeon is well-positioned to enter the market today
due to historic lows in valuation of cash-pay businesses
and low deal flow
• Alphaeon will provide >30% IRR Returns to investors and
plans to IPO within two to three years of first platform
acquisition
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2. Current State of Healthcare Market
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3. Current market is composed of healthcare reimbursed based on
medical need & cash-pay lifestyle enhancement healthcare
The global healthcare market size valued at $1.2 trillion in 2011
(Pharma: $880Bn & Medical Device: $312Bn)
1. Reimbursed
Healthcare
• Government
reimbursed healthcare
sectors address
“medical need” of
patients
• Includes “covered
services”
• Currently, products are
automatically entered
into review for
reimbursement
Medical Need
2. Cash-pay Healthcare
1
3
2
3. Cross-over
• Some products & services fall
into both categories
• Medical need assessed on a
case-by-case basis
• Government nonreimbursed healthcare
includes products that
offer life enhancements
to the patient rather
than addressing
“medical need”
• Patients pay out-ofpocket (i.e. cash-pay)
• Includes “non-covered”
products and services
Lifestyle Enhancement
Medical Need with Lifestyle Benefit
Sources: “Medical Device Revenue to Top $300Bn This Year,” Kalorama Information, Jan 2011; Global Pharma Market Forecasts, IMS Health, Dec 2010
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4. Current State of Cash-Pay Market Segment
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5. The cash-pay healthcare sector is composed of segments focused
on improving the quality of life of the consumer
Cash-Pay Sector Definition
• Cash-pay segments offer consumers quality of life enhancements and are differentiated by lack of
reimbursement (i.e. patients pay out-of-pocket) and medical need
• While segments below are typically cash-pay, certain procedures/products may be reimbursed when
medical need is established (for instance, breast reconstruction under Medical Aesthetics)
• Similarly, some lifestyle enhancement procedures outside of the listed segments fall into cash-pay bucket
Medical
Aesthetics
Weight Loss
Ophthalmic
Cash-Pay
Sector
Dentistry
Illustrative examples
throughout this presentation
will focus on the Medical
Aesthetics and Ophthalmic
segments
ENT & Sleep
Enhancement
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6. The global cash-pay market presents an ~$18Bn opportunity and
is slated to grow to ~$29Bn in 2016 (10% CAGR)
Global Cash-Pay Market Revenue & Growth
$19
$18
$17
$16
$15
$14
$13
$12
$11
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
CAGR to 2016
18%
17%
$17.5
16%
13%
14%
12%
10%
9%
10%
9%
7%
$5.0
$4.6
8%
CAGR %
$Bn
2011 Revenue
6%
$4.1
$3.4
4%
2%
$0.5
0%
Total
Medical
Aesthetics
Dentistry
Ophthalmic
ENT & Sleep
Enhancement
Weight Loss
Sources: Global Cash-Pay Market, Medical Insights, April 2012
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7. The cash-pay segments are currently composed of the following
products & therapy sub-segments:
Neuromodulators
Fillers
Breast Implants
Phototherapy
Liposuction
Body Shaping
Cosmeceuticals
Chemical Peels
Eyelash Products
Refractive Surgery
(incl. femtosecond lasers)
Premium IOLs
Medical Aesthetics
Surgical Equipment
(incl. LASIK)
Diagnostic Equipment
Ophthalmic
$5.0Bn
Incentives
Weight Loss
Devices
Weight Loss
Pharmaceuticals
$4.1Bn
Weight Loss
Dentistry
$0.5Bn
$4.6Bn
ENT & Sleep
Enhancement
$3.4Bn
Injection Snoreplasty
Radiosurgery
Implants
Gum Lift
Dental Bridges
Bonding
Diagnostics
Braces
4D Imaging
Veneers
Teeth Whitening
Pillar Procedure
Laser Surgery
(Snoring & Septoplasty)
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8. The Baby boomers demand and are more willing to pay for quality
of life enhancements than previous generations
Drive for Quality of Life
•
Desire for improved quality of life from aging baby
boomers drives growth in cash-pay market
Premium Lens (PC-IOL) Cash-Pay Market
– As baby boomers reach 65+ age bracket, approval of
cosmetic surgery in the age group has skyrocketed
•
Baby boomer generation is wealthier than previous
generations and more willing to pay out-of-pocket for
better care and results
– Baby boomers control ~50% of US discretionary income
•
$612M
Baby boomers accounted for over a third of cosmetic
procedures in 2011
% of 65+ Population Indicating Approval of Cosmetic
Surgery (ASAPS Survey)
77%
$416M
$241M
$305M
$118M
2008
2009
2010
2011
2012
2013
Cosmetic Procedures by Age Group (2011)
% Cosmetic
Procedures
8% 1%
28%
40%
$490M
% of US
Population
14%
20%
27%
19-34
35-50
19%
20%
18 and under
21%
51-64
65+
2000
2010
43%
Sources: Presbyopia Devices Report, Market Scope, 2009; Attitudes on Cosmetic Surgery Survey, American
Society of Aesthetic Plastic Surgery; 2011 Statistics on Cosmetic Surgery American Society for Aesthetic Plastic Surgery
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9. Decline in physician reimbursement and regulatory pressure are
driving physicians to perform more cash-pay procedures
Impact on Physicians
• Diminishing reimbursement in surgical procedures challenges traditional practice economics and physicians’ commitment to
prescribing the best products for their patients irrespective of cost
Decline in Cataract Reimbursement
– Medicare reimbursement has fallen dramatically over the last decade
– 27% cut in reimbursements scheduled for March 1 delayed until 2013 but continues to threaten physicians
• Heightened regulations bar physicians from directly engaging with pharma manufacturers in the drug discovery and development
process
• Physicians face an all or nothing choice to opt-in/opt-out of Medicare and must accept all Medicare patients if opted-in
• Due to regulatory restrictions and poor practice economics, physicians are increasingly marginalized within the healthcare field
and less satisfied within their profession
US Reimbursement Rate for Cataract Procedures
(CPT Code 66984)
$958 $929
$795 $773 $748 $743
$669 $671 $684 $684 $684
$610 $626
$549 $550 $550 $550
$435
Proposed
Medicare cut
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1
54.6% Decrease
1 Projection based
on expected cut in reimbursement rates of 27% in 2013
Source: Reimbursement schedule, Centers for Medicare & Medicaid Services
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