MicroPort Scientific Corporation Investment and Strategic ...€¦ · MicroPort Scientific...
Transcript of MicroPort Scientific Corporation Investment and Strategic ...€¦ · MicroPort Scientific...
MicroPort Scientific Corporation
Investment and Strategic Partnership Agreement with
Lombard Medical, Inc.
December 21, 2016
Contents
Transaction Overview
Endovascular Market Overview
Overview of Lombard Medical
Key Products Overview: Altura & Aorfix
MicroPort Transaction Strategic Rationale
Q&A
Appendix
Conference Call Agenda
Executive Summary
2
MicroPort Management team is pleased to announce an investment and strategic
partnership transaction to expand MicroPort’s Endovascular business.
Lombard Medical is a UK headquartered, Nasdaq publicly traded company (ticker: EVAR)
that manufactures two innovative endovascular devices, Altura and Aorfix, to treat patients
with Abdominal Aortic Aneurysms (AAA).
The proposed transaction will have the following elements:
$5 million equity investment in Lombard common stock (represents 28.85%
ownership)
$10 million convertible bonds issued by Lombard
MicroPort Fully Diluted Ownership in Lombard of approximately 49.1%, assuming
conversion of convertible bonds
2 Board Seats for MicroPort on Lombard’s Board
China manufacturing and distribution rights for Altura and Aorfix
Brazil distribution rights
The Board of Directors for MicroPort and Lombard have approved this transaction
Announcement regarding the transaction was released on 19 December.
MicroPort Management believes this transaction has significant strategic benefits for
its endovascular business and MPSC shareholders
Contents Transaction Overview
Key Transaction Terms Summary
4
Indicative Terms
Equity Investment • $5 million in Lombard common stock • Issued at Lombard common stock price of $0.62 per share,
representing a discount of 22.59% to Lombard closing stock price (12/16/16)
• MicroPort ownership percentage of approximately 28.85%
Convertible Bond
• Principal Amount: $10 million • Issuer: Lombard • Interest Rate: LIBOR + 4.0%, with a 6-month LIBOR • Term: 5 years, unless earlier repaid by Lombard • Conversion Price: $0.90 per share, representing a premium of
12.37% to Lombard closing stock price (12/16/16) • Shares underlying: approximately 11.1 million Lombard shares • Ranking: Unsecured and subordinated to Lombard’s existing
secured debt
MicroPort Investment Holding Structure
• $4 million of $15 million total investment to be funded by Certain Investors which include: Lead Power, Maxwell, and New Alliance
• MicroPort to have voting control of Equity Investment and Convertible Bond issuance to be held by two MicroPort controlled legal entities : MicroPort NeuroTech (BVI) and MicroPort NeuroTech CHINA (HK)
Key Transaction Terms Summary (Cont’d)
5
Indicative Terms
Board of Directors
Post transaction, Lombard’s Board shall consist of 5 members and shall include 2 Board representatives as designated by MicroPort
Strategic Partnership
China Distribution and Manufacturing Rights to Altura and Aorfix • MicroPort shall be granted exclusive commercial and manufacturing
rights for Altura and Aorfix for the Territory which shall include Mainland China, Hong Kong and Macau.
Component Manufacturing Agreement • MicroPort to manufacture certain components of Lombard’s Aorfix
and Altura devices at its endovascular manufacturing facility in Shanghai.
Brazil Registration and Distribution Rights • MicroPort to register Altura and Aorfix with Brazil regulatory body
and exclusive distribute products upon receiving regulatory approval
Parties to finalize agreements for the above within 90 days of Closing
Contents Endovascular Market Overview
Endovascular Aortic Repair (EVAR) Market Overview – Large Growing Market with Room for Expansion
7
Medtronic, 34%
Gore, 33%
Endologix, 16%
Cook, 15%
Other, 2%
U.S. Market Share(1)
Medtronic, 42%
Gore, 21%
Endologix, 9%
Cook, 25%
Other, 3%
E.U. Market Share(1)
• Aging and “westernization” of global population
• Conversion from Open Surgical Repair to EVAR – facilitated by technology
• Expanding indications with newer technologies
• Strong reimbursement and screening – SAAAVE Act serving as catalyst for EVAR
• AAA still considerably under-diagnosed: ~10% of all AAAs are diagnosed(1)
____________________
(1) Wall Street Research and “EVAR Update: Companies Target Complex Anatomies With Innovative
Solutions”, MedTech Insight, April 2016.
(2) Lombard Medical 2015 20-F, “Expanding the EVAR Toolbox: A Glimpse into the Future”, MedTech
Insight, March 2012.
$1.4 $1.5 $1.6 $1.7 $1.8 $1.9
2013 2014 2015 2016 2017 2018
USD: billion
55% 30% 25%
45% 70% 75%
0%
100%
2007 2011 2015
Open Surgery EVAR
Market Drivers and Industry Dynamics
Worldwide EVAR Market Size & Growth (1)
EVAR Vs Surgical Repair (2)
EVAR Evolution of Therapeutic Options
8
Open Surgical Repair EVAR Percutaneous EVAR
(PEVAR)
Percutaneous EVAR (PEVAR) is the least invasive of therapeutic options, only
enabled for by select devices including Lombard’s Altura stent graft
Open Surgical Repair EVAR PEVAR(1)
30-Day Mortality 4.3% 1.8% 0.6%
30-Day Major Adverse Event (MAE) Rate
56% 11% 2.5%
Length of Hospital Stay (Days)
10.4 3.6 2.3
Applicable Devices Aorfix Aorfix Altura
Global EVAR Landscape
9
United States, ~$714M(1)
•13th leading cause of death in US and the 10th leading cause of death in US men aged 65 years and older
•Each year, 200,000 patients are diagnosed with AAA
•High EVAR volumes and higher selling price
Europe~$477M(2)
• Market was estimated to be $477M in 2014; growing at an average growth rate of 6%
• Germany and the United Kingdom are two of the three largest and the most receptive EVAR markets
Japan, ~$158M(2)
• 2nd largest standalone EVAR market in the world growing at an average rate of 18%
• Highly developed and lucrative market with high barriers to entry
• ~400 physicians at 200 clinics performing EVAR and it is estimated that approximately 55% of Japanese AAA patients are treated using this method
The U.S., Europe and Japan comprise ~90% of the global EVAR marketplace China EVAR market is rapidly growing at 13%
____________________
(1) iData Research Inc.: US Market for Peripheral Vascular Devices and Accessories (2013).
(2) Medtech Ventures: Aortic Intervention Market (2014).
(3) MicroPort internal estimates
.
China, ~$145M(3)
•Rapidly growing market at CAGR of greater than 13%
•Approximately 12,000 annual procedures
•End user pricing consistent with Western markets
Contents Overview of Lombard Medical
Lombard Medical An Innovative Vascular Device Company
11
• A global, commercial stage medical technology company with 116 employees
• Corporate headquarters in Oxfordshire, UK
• Focused on the $1.7B(1) abdominal aortic aneurysm (“AAA”) repair market
• Objective – To offer a patient focused, innovative portfolio approach to AAA treatment to treat the broadest range of patients
• Altura™: New CE marked ultra low profile stent graft offering a simple, predictable and accurate solution for standard AAA anatomy
• Aorfix™: The only globally approved AAA stent-graft for aortic neck angles up to 90 degrees
Aorfix Altura
____________________
(1) Medtech Ventures: Aortic Intervention Market (2014).
70.0%
30.0%
Mainstream On-label Challenging Anatomy
• Low Neck Angulation
• Moderate Neck
Diameters
• Longer Necks
• High Neck Angulation
• Large Neck Diameters
• Short Necks
Lombard’s portfolio now allows patient driven
treatment choice with “on-label” coverage of 85% of
cases
Lombard Medical Timeline
12
2009 2013 2014 2015 2016
2009: Aorfix
approved
for neck
angulations
up to 90°
April 2012:
Aorfix:
AorFlex™
Delivery
System
Feb. 2013:
Aorfix:
FDA
Approval
2014:
Aorfix:
Japanese
Approval
July 2015:
Altura™
Medical
Acquisition
April 2014:
Lombard
Medical
Nasdaq
Listing
June
2016:
Aorfix:
IntelliFlex
™ Low
Profile
Delivery
System
June
2016:
Aorfix:
Australian
Approval
US IDE – PYTHAGORAS Study 0°-
90°
Feb 2016:
Altura: First
Commercial
Case
Pre-2007:
2003: Aorfix
approved
for neck
angulations
0°- 60°
2012
Altura: Revolutionizing AAA Treatment
13
• Design Concept – Bilateral D-shaped (kissing stents) aortic grafts with overlapping
iliac legs
• Features/Benefits – Simple
• Ultra-low profile (14F) – percutaneous use
• Ability to deliver ‘out-patient’ and proctor free EVAR for many patients
• No cannulation
• No polymer injection
• Market leading inventory requirement
– Altura – 6 product codes cover all patients
– Market leaders – 20-80
– Predictable
• Consistently shorter procedure time
• Less exposure to radiation for physician and patient
– Accurate
• Proximal end can be recaptured and redeployed
• Reverse Iliac deployment for exact placement
• Offsetting bilateral stents allows use of total Aortic neck length
Altura: Key Design Features
14
• Fully supported, flexible nitinol braided frames
• Exceptional Flexibility while maintaining radial strength
• Ultra low porosity, woven polyester graft material
• Graft material outside of frame improves seal
• Two sets of suprarenal anchors on each aortic endograft
• Radiopaque markers for precise positioning and easy septum alignment
Altura: Comparative Analysis
15
Technology Comparisons
System Altura - Lombard Competitor I Competitor II Competitor III
French Size 14Fr (OD) 18-20Fr (OD) 14Fr (OD) 14Fr (OD)
Complexity - Cannulation No cannulation required
for contralateral deployment
Cannulation required for contralateral deployment
Cannulation required for perpendicular deployment
Cannulation required for contralateral deployment
Iliac Deployment Accurate reverse
deployment Standard deployment Standard deployment Standard deployment
Recapture Ability
Yes
Reposition during
placement of proximal
endograft
No No No
Inventory 6 product codes 75 product codes 23 product codes 40+ product codes
Polymer No No No Yes
Waiting time 20 mins before retraction.
Renal off-set positioning Yes No No No
Aorfix Product Summary
16
• Unique design
• Only device with FDA & Global Approvals to treat severe infra-renal neck angulation
• Pythagoras US Pivotal Trial has shown excellent results at 5 years: Presented at SVS 2016, publication under review at JVS
• ARCHYTAS Registry – 500 patient global registry collecting “real world” clinical data on Aorfix
• Competitors' “Z” type metallic ring designs are more rigid, may kink in tortuous anatomy increasing re-interventions and poor clinical outcomes
Competitors Aorfix
Aorfix: Delivery System vs. IntelliFlex LP Delivery System
17
• 22F OD Profile
• Support tubes limit proximal control of implant
• SS nose cone with long tip severely limits vascular maneuverability
• Twist / bayonet design requires multiple non-intuitive movements
• No integrated sheath, requires additional sheath device to use additional devices
• Dated Industrial design
AorFix Delivery System
• 18F ID / 20F OD Profile
• Actively expanding “Y” mechanism provides high grade proximal control of implant
• 50% smaller nose cone with shorter and stiffer tip provides much better vessel maneuverability
• Single variable, rotational design uses single intuitive movement
• Integrated exchange sheath eliminates need for additional sheath for other steps
• Modern, elegant quality design
• CE Mark Approval Q2 2016
• FDA approval expected Q4 2017
IntelliFlex LP Delivery System
Contents MicroPort Transaction Strategic Rationale
MicroPort Transaction Rationale
19
Expand the technology portfolio of MicroPort’s Endovascular business by securing the
distribution and manufacturing rights in China to the Target Company’s two innovative
products for Abdominal Aortic Aneurysm (“AAA”) repair market, Aorfix and Altura. The
combined product portfolio of the Group’s endovascular business with Target Company’s
Altura and Aorfix products would create the broadest product portfolio for the endovascular
AAA market in China to address multiple market segments.
Leverage the MicroPort’s Endo expertise in manufacturing endovascular devices to
significantly reduce the manufacturing costs of Aorfix and Altura which can improve the
gross margin and thereby increase the financial profitability of Lombard
Expanding MPSC’s endovascular business in international markets by securing the
commercial rights of Aorfix and Altura for Brazil.
MicroPort Endovascular Business Summary
20
8.2 8.9
10.3
12.2 13.2
15.4
7.4
10.5
2010 2011 2012 2013 2014 2015 20151H 20161H
Revenue
Highlights
Soli
Sales growth by products
HT HBL HBB AB surgical
20151H 20161H
Achieved Y/Y sales growth of 40% in RMB and 32% in USD,
exceeding market average level
Hercules Thoracic Stent-Graft System maintains strong
growth momentum with 74% and 60% growth rate in volume
and revenue, respectively .
Significant growth of AAA related products
Castor TM Thoracic Branch Stent-Graft System granted
Green Path with 70 follow-up clinical trial completed
Reewarm TM PTX Drug balloon dilatation granted Green
Path
USD:million Excl. FX USD:million Excl. FX
Extensive product pipeline ~ 17 products by 2019 across all sectors
Product Name
Castor
Next Generation TAA
多分支
Ultra-LP
ReeWarm PTX(0.018)
ReeWarm PTX(0.014)
ReeWarm(0.018) Drug PTX
Next Generation Surgical Stent
2016 Q4 2018 Q1
*
*
2018 Q4
*
*
*
2019 Q2
*
*
*
TAA
A
AA
Pe
riph
eral Su
rgical
Broad and Deep Endovascular Product Portfolio for China Endovascular Market
21
The combined MP Endo and Lombard product portfolio will be the best in class TAA and AAA devices to address all patient segments for endovascular repair market
Hercules™分叉型
覆膜支架及输送系统
Aegis™ 分叉型
大动脉覆膜支架及输送系统
Hercules-LP直管型
覆膜支架及输送系统 CRONUS™术中支架系统
CROWNUS™外周血管支架系统
Hercules™球囊
扩张导管
Endovascular
Aorfix™AAA
stent graft to
treat neck
angles >60
degrees
Altura™- 14F
low profile
AAA stent
system for
PEVAR
Leverage MicroPort Endovascular Shanghai Operations
22
• MicroPort Endovascular has expertise in manufacturing endovascular devices in its facility in Shanghai China.
• In the near term, MicroPort will leverage this endovascular manufacturing expertise to provide low cost components to Lombard’s Altura and Aorfix – which will significantly reduce the manufacturing cost for Lombard’s devices
• In the long term, MicroPort Endo will have the China manufacturing rights to support the commercialization of Altura and Aorfix for China market
• Both of these activities will significantly leverage the existing MicroPort Endovascular operations
Expanding MicroPort Endovascular Portfolio into the International Market
23
United States
UK
Germany
Japan
Australia
China
Philippines Thailand
Brazil
Colombia
Chile
Argentina
Spain
Netherlands
While MP Endo can commercialize Lombard’s products in our home China market, Lombar will focus on commercializing on Europe, Japan and US markets…
…and MPSC can offer local access for the important Brazil market.
Contents Q&A
Contents Appendix
Lombard Medical Management Team
26
Simon Hubbert Chief Executive Officer
• Joined Lombard Medical in 2010; Appointed CEO in 2011 • Previous roles include sales & marketing positions at Johnson
& Johnson and Medtronic
William J. Kullback Chief Financial Officer
• Over 30 years of corporate finance and accounting experience
• Over 20 years in CFO roles at companies such as ActivStyle, Inc., IntriCon Corporation, MedSource Technologies, Inc., and Pemstar, Inc.
Peter Phillips Chief Technology Officer
• Ph.D. from Guy’s Hospital London • Co-developer of the Aorfix stent-graft and led the
development and commercialization of Aorfix in 1995 • Previously a Director of Surgicraft Ltd.
Paul Hardwick Vice President of International Sales & Marketing
• Joined Lombard Medical in 2006 as Business Manager • Previously Regional Business Manager, of Endoscopy at
Boston Scientific
Lombard Ownership Summary
27
Current Pro Forma Pro Forma
Shares % Equity % Equity + Convert %
MicroPort Scientific - 0.0% 8,064,516 28.9% 19,175,627 49.1%
Invesco Asset Management 6,317,851 31.8% 6,317,851 22.6% 6,317,851 16.2%
Abingworth Management Ltd 3,473,452 17.5% 3,473,452 12.4% 3,473,452 8.9%
SV Life Sciences Advisers, Inc. 1,270,305 6.4% 1,270,305 4.5% 1,270,305 3.3%
New Leaf Ventures II LP 1,072,634 5.4% 1,072,634 3.8% 1,072,634 2.7%
All Other 7,751,723 39.0% 7,751,723 27.7% 7,751,723 19.8%
Total 19,885,965 100.0% 27,950,481 100.0% 39,061,592 100.0%
Lombard Public Financials Income Statement
28
Year Ended Nine months ended Three months ended
($ in thousands) December 31, September 30, September 30,
2014 2015 2015 2016 2015 2016
Revenue 13,277 15,115 12,171 9,769 4,227 3,044
Cost of sales 7,541 8,296 6,183 8,020 2,164 2,694
Gross profit 5,736 6,818 5,988 1,749 2,063 350
Selling, marketing and distribution expenses 21,363 23,125 17,331 11,197 5,384 3,600
Research and development expenses 9,213 11,279 7,961 6,336 2,915 1,739
Administrative expenses 11,303 11,707 8,069 5,594 3,144 1,776
Total operating expenses 41,879 46,111 33,361 23,127 11,443 7,115
Operating loss (36,143) (39,293) (27,373) (21,378) (9,380) (6,765)
Finance income 247 134 114 89 32 18
Finance costs (83) (860) (591) (1,633) (335) (547)
Change in fair value of contingent liabilities - - - (997) - (289)
Loss before taxation (35,979) (40,019) (27,850) (23,919) (9,683) (7,583)
Taxation 1,227 2,215 1,651 576 1,223 161
Loss for the period (34,752) (37,804) (26,199) (23,343) (8,460) (7,422)
Other comprehensive income/(loss):
Items that may subsequently be reclassified to profit or loss
Currency translation differences (1,947) (975) (688) (3,052) (938) (700)
Total comprehensive loss for the period (36,699) (38,779) (26,887) (26,395) (9,398) (8,122)
Source: Lombard Medical 20-F filing and Q3 2016 financial earnings press release.
Lombard Public Financials Balance Sheet
29
September 30, December 31,
($ in thousands) 2016 2015
Assets
Goodwill 15,671 16,052
Intangible assets 20,951 21,889
Property, plant and equipment 2,001 3,043
Trade and other receivables 171 176
Non-current assets 38,794 41,160
Inventories 8,942 6,462
Trade and other receivables 4,576 4,168
Taxation recoverable 1,974 1,618
Cash and cash equivalents 9,857 32,332
Current assets 25,349 44,580
Total assets 64,143 85,740
Liabilities
Trade and other payables 8,143 8,236
Current portion of borrowings 2,642 -
Curreny liabilities 10,785 8,236
Borrowings 23,423 23,115
Deferred tax liabilities 674 674
Contigent consideration 11,597 10,600
Non-current liabilities 35,694 34,389
Total Liabilities 46,479 42,625
Net assets 17,664 43,115
Equity
Called up share capital 199 199
Share premium account 63,853 63,853
Capital reorganization reserve 205,686 205,686
Translation reserve (1,782) 1,270
Accumulated loss (250,292) (227,893)
Total equity 17,664 43,115
Source: Lombard Medical 20-F filing and Q3 2016 financial earnings press release.