Analyst/Investor Day
1
Analyst/Investor Day
Overview Presentation
Scott Huennekens
President & CEO
August 11, 2014
2
Safe Harbor
Today’s presentation contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding Volcano’s expected revenues, revenue growth, margins, market size and
penetration, its growth and other strategies and ability to execute on these strategies,
competitive position, development of its base business and pipeline, benefits from recent
acquisitions and benefits from new products. These forward-looking statements are based on
the Company’s current expectations and are subject to a number of risks, uncertainties and
assumptions which, if they do not materialize or prove correct, could cause the Company’s
actual results to differ significantly from those expressed or implied by such forward-looking
statements. These risks, uncertainties and assumptions are set forth in the Company’s most
recent form 10-Q, and in its other filings with the Securities Exchange Commission. The
Company disclaims any obligation to update any forward-looking statements, whether as a result
of new information, future events or otherwise.
3
Disclosures
The presentations today will include discussions regarding products that have not
been approved for commercial sale by the FDA, and, in some cases, any of the FDA’s
foreign equivalents. Accordingly, these products are not available for commercial sale
in any jurisdiction where regulatory approval or clearance has not been obtained.
All future approval and product launch dates are based on estimates of regulatory
submissions, reviews and/or approvals or clearances, as well as other business
considerations.
For reconciliation of non-GAAP financial measures used in these presentations to the
most directly comparable GAAP financial measures, please see our most recent
earnings press release in the Investor Relations section of our website,
www.volcanocorp.com.
4
The Volcano Vision
To improve patient outcomes on a
global basis at lower costs by
developing and delivering innovative
minimally invasive coronary and
peripheral diagnostics and therapies
Past
5
Today
Volcano’s Winning Strategy
1
2
Peripheral
Expansion
Coronary Imaging &
Physiology Leadership
3
4
Financial Leverage
& Profitability
6
Business Model
Scale
Volcano’s Winning Strategy
• Continue to innovate, win and maintain
market share leadership in Coronary
Imaging and Physiology
1
• Secure long-term channel access
through system placements in > than
50% of labs/hospitals
• Invest in workflow improvements,
expanded ‘unstable’ indications and
margin expansion
Coronary Imaging &
Physiology Leadership
• Markets > $700M and projected 5 year
growth rate at 4-5% (~9% FFR, 0%
IVI, & Systems 3%)
Volcano Revenue Growth ~1-3% 2014-2018
7
Volcano’s Winning Strategy
• ~18% of Volcano revenue today (without
Axsun)*
2
• Maintain leadership of Intravascular
Imaging through product innovation
• Increase imaging market size through
penetration increases, clinical indication
expansion, & geographic expansion
Peripheral
Expansion
• Commercialize existing pipeline – Crux
VCF, Crux-IVUS combo, Pioneer Plus
(Peripheral CTO), Atheromed Phoenix
atherectomy, Valet microcatheters, SyncVision applications, Venous IVUS.
Addressable markets > $950 million
• Expand peripheral therapeutic portfolio
through tuck-in M&A
Revenue Growth ~25% 2014-2018
8
* Internal estimate only based on allocation of Coronary vs Peripheral Eagle Eye IVUS – see slide “1H 2014
IVUS Global Revenue: Peripheral vs Coronary”. Does not include systems sold into Peripheral labs
Volcano’s Winning Strategy
3
Financial Leverage
& Profitability
• Revenue CAGR 6-8% 2014-2018
• Gross margins 70+% - Costa Rica
transfers, facility rationalization, Axsun
divesture, product cost reductions,
higher margin peripheral therapeutic
products
• Revenue growth > expense growth of
Sales & Marketing, R&D and G&A.
Organizational leverage, expense
management, litigation decreases.
• Operating income and profitability
expansion
• Disciplined capital allocation
Volcano Revenue Growth Accelerating, Expanding Profitability
9
Volcano’s Winning Strategy
• Global sales with > 50% OUS, ~
280 direct global sales reps
4
• Product line focus on scale and
leadership, divest Axsun
• Strong partnerships with Philips,
GE and Siemens
Business Model
Scale
• Tuck-in M&A opportunities to
increase scale globally and in
peripheral and coronary therapies
Augment Revenue and Profitability Growth Above Run Rates
10
Volcano’s Revenue Strategy
Current Markets >$1.6B
Current Market
Current Market Sizes
Business Model Scale
Strategic Expansion in
Coronary and/or Peripheral
Atheromed, BTK, ATK
Peripheral CTOs (Pioneer Plus)
Peripheral Expansion
Crux VCF
Peripheral Imaging & Physiology
Coronary IVI &
Physiology Leadership
Source: Volcano Corporation data on file
11
7+
6
5
4
3
Coronary Imaging & Systems
2
Physiology (FFR, iFR, Sync)
1
Volcano
Growth
>20%
>$950 M
~25%
>$700 M
~1-3%
Projected CAGR Revenue Growth (2014-2018)
PRODUCT AREA
Volcano
Market
1-3%
3%
(1)-0%
1%
Coronary FM Disposables
3-4%
9%
Coronary Overall
1-3%
4-5%
Peripheral IVUS Disposables
10+%
10+%
Pioneer
10+%
10+%
Crux
New product, >25%
3%
Phoenix Atherectomy
New product, >25%
8%
Peripheral Overall
~25%
7-8%
Overall Growth Rate
6-8%
Systems
Coronary IVUS Disposables
12
Volcano Overview
Coronary IVI &
Physiology
Leadership
• Coronary growth – 1-3%
•
Multi-modality system with >15 aps, > 7,400 installed systems
•
Physiology – technology leader and growing business in underpenetrated market
•
IVI – technology leader, broadest product portfolio, global market share leader
• Peripheral growth ~25%, IVUS underpenetrated, new products launching in 2014
and 2015
Peripheral
Expansion
•
Crux IVC filter, bedside applications, Crux-IVUS combo
•
Pioneer CTO device along with Valet micro-catheters for CTO
•
Phoenix atherectomy catheters
• 2014-18 projected revenue growth 6-8% CC
Financial
Leverage &
Profitability
• Gross margin leverage from Costa Rica manufacturing, Axsun divesture, ~ 70%
GM in future
•
Operating margin expansion from SG&A leverage with increasing scale
• Global sales with > 50% OUS, ~ 260 direct global sales reps
Business Model
Scale
13
•
Tuck-in M&A opportunities to increase scale globally and in peripheral and
coronary therapies
•
Product line focus on scale and leadership
•
Strong partnerships with Philips, GE and Siemens
2014 Update
• As reported revenue growth of 1% in 1H, constant currency growth of 3% driven by 21%
peripheral growth and 2% coronary growth (10% physiology and -4% imaging).
• Europe 17% growth, U.S. 0% growth, Japan -5% growth, and APLAC 13% growth in 1H.
• PCI volumes better than expected, 2% in U.S., -1% in Japan, and 4% in EMEAI.
• FX and Japan reimbursement cuts in line with expectations.
• Competition increasing in coronary IVUS and FFR. Terumo and Boston IVUS product launches in
Japan taking share. Acist/Medtronic entering FFR market 2H.
• Continue to lead innovation with the global LMR of Sync-RX® Systems, iFR® adenosine free FFR
global launch, Veratta ® FFR wires global launch, and Crux ® roll out.
• Asset allocation/portfolio prioritization and focus - Atheromed acquisition and Axsun divesture in
2H.
• Focus on capital allocation strategy and financial discipline.
• Legal settlement with St. Jude. Significant legal burn rate reduction.
• Continue to increase operating leverage, manage SG&A, disposable manufacturing in Costa Rica
by year end.
14
2015 Expectations
• iFR & Verrata full year – market share, increased disposable use, and
capital
• New FFR wire – higher performance, 2H
• Next gen IVUS catheter – 2H
• SyncVision 1.0 full year – capital, increased disposable use, IVUS/FFR
share protection
• SyncVision 2.0 – added functionality, 2H
• Crux 2nd year – market share gains, Crux/IVUS combo FIM 2H
• Atheromed – 1.8 & 2.2 fr. Q1 (BTK) and 2.4 fr. 2H (ATK)
• Increased competition IVI and FFR, Boston FFR launch 1H
• Japan price cut annualized
• PCI stabilization continues
• GM expansion – Costa Rica 100% disposables full year, Axsun divesture
15
Volcano’s Winning Growth Strategy
3
2
4
1
Peripheral
Expansion
Financial Leverage
& Profitability
Coronary IVI &
Physiology Leadership
16
Business Model
Scale
Volcano’s Platform Competitive Differentiation is
Pioneer® Plus Catheter
Eagle Eye® Platinum (20 MHz)
PrimeWire® Prestige PLUS
w/ AcuSense™
Verrata™ Pressure Guide Wire
Visions® PV .035 (10 MHz) Catheter
Eagle Eye® Platinum ST Catheter
ComboWire® XT
Visions® PV .018 (20 MHz) Catheter
FloWire®
Precision Guided
Disposables
PRECISION
GUIDED
THERAPY
Information Portability
& Connectivity
17
Advanced Software
& Interfaces
Multiple System
Solutions
Revolution® (45 MHz) Catheter
Multiple Solutions from Volcano Enable
FFR
SyncVision™
+ IVUS
iFR®
SyncVision™
with iFR®
FFR
CFR
CRUX™
VCF +
IVUS
pFFR
CRUX®
VCF
ComboWire®
Digital
IVUS
Pre-Procedure
ChromaFlo®
Rotational
IVUS
VH® IVUS
Peri-Procedure
FACT
Peripheral
IVUS
Post-Procedure
“FACT” is an acronym for Volcano Corporation’s focused acoustic computed tomography (FACT). Technologies are currently under development and are not commercially available for sale.
18
Pioneer®
Plus
Integrated Catheterization Lab
A Multi-Modality Platform Hub
19
(Multi-modality): Volcano 2014
Imaging
Digital
IVUS
Physiology
VH® IVUS
FFR
ChromaFlo®
Peripheral
IVUS
iFR®
Rotational
IVUS
Co-Reg +
IVUS
Combo
(Pressure +
Flow)
Therapy/Imaging
Pioneer™
Plus
pFFR
CFR
(Flow)
4 New
Angio+
13 TOTAL MODALITIES
“FACT” is an acronym for Volcano Corporation’s focused acoustic computed tomography (FACT). Technologies are currently under development and are not commercially available for sale.
20
(Multi-modality): Volcano Pipeline
Imaging
Digital
IVUS
Physiology
Combo
VH® IVUS
FFR
ChromaFlo®
Peripheral
IVUS
iFR®
pFFR
Rotational
IVUS
Co-Reg +
IVUS
CFR
iFR®
Pullback
(Pressure +
Flow)
(Flow)
Therapy/Imaging
Pioneer™
Plus
CRUX™
VCF +
IVUS
4 New
Angio+
FACT
Co-Reg +
i/FFR
17 TOTAL MODALITIES
“FACT” is an acronym for Volcano Corporation’s focused acoustic computed tomography (FACT). Technologies are currently under development and are not commercially available for sale.
21
St. Jude Medical 2014
Imaging
Physiology
OCT
FFR
ICE
CFR
pFFR
5 TOTAL MODALITIES
22
Therapy/Imaging
St. Jude Medical Projected 2015
Imaging
Physiology
OCT
FFR
ICE
CFR
Co-Reg
OCT
pFFR
6 TOTAL MODALITIES
23
Therapy/Imaging
Boston Scientific 2014
Imaging
Physiology
Rotational
IVUS
Peripheral
IVUS
ICE
3 TOTAL MODALITIES
24
Therapy/Imaging
Boston Scientific Projected 2015
Imaging
Physiology
Rotational
IVUS
FFR
Peripheral
IVUS
ICE
4 TOTAL MODALITIES
25
Therapy/Imaging
Broadest Physiology Product Portfolio
Coronary and Peripheral Guide Wires, Hardware and Modalities
Physiology Guide Wires
Modalities
FFR
CFR
pFFR
iFR®
5th
New Wire
in 5 Years
Verrata™ Pressure Wire
Hardware
PrimeWire® Prestige PLUS
w/ AcuSense™
PrimeWire® Prestige
CORE™ Integrated System
FloWire®
SmartMap® Console
OMNI
ComboMap® Console
ComboWire® XT
*iFR is CE Marked and 510(k) Pending. Omni™ and pFFR are development programs at Volcano.
26
FFR Current & Projected Market Shares by Geography
27
Geography
2014
2018
United States
51%
35%
Japan
45%
41%
EMEAI
47%
39%
Total
47%
38%
Broadest Intravascular Imaging Product Portfolio
Coronary IVUS Catheters
Modalities
Digital IVUS
ChromaFlo®
VH® IVUS
Rotational
IVUS
Eagle Eye® Platinum
(20 MHz) Catheter
Eagle Eye® Platinum
ST Catheter
Hardware
Revolution®
(45 MHz) Catheter
Peripheral IVUS Catheters
Visions® PV .018
(20 MHz) Catheter
CORE™ Integrated System
Visions® PV .035
(10 MHz) Catheter
CORE™ Mobile Imaging System
Pioneer® Plus
Catheter
Visions® PV .014P
Catheter
28
IVI Current & Projected Market Shares by Geography
29
Geography
2014
2018
United States
59%
52%
Japan
24%
23%
EMEAI
39%
36%
Total
36%
34%
Volcano’s Winning Growth Strategy
4
1
3
2
Financial Leverage
& Profitability
Business Model
Scale
Peripheral
Expansion
30
Coronary IVI &
Physiology Leadership
Volcano’s Strategy Expansion
PROCEDURES
NON-CORONARY
CORONARY
Diagnostic
Therapeutic
TECHNOLOGIES
31
Integrated
Diagnostic + Therapeutic
Volcano Peripheral Vascular Growth
* Neuro and Carotid are investigational use only. Carotid is commercially available in Japan.
** Indicated for Highly Stenosed Lesions (HSL)
PROCEDURES
Neuro
FFR – pressure /flow in
aneurysm; FACT/IVUS apps*
Carotid
IVUS – plaque characterization,
stent guidance*
EVAR/TEVAR
IVUS- dissections,
avoid contrast
CTO/HSL
IVUS – short tip Eagle Eye**
Balloon
IVUS – stent sizing, avoid
adventitial cuts
Stent
FFR – know where to treat,
when to stop
PAD
NONCORONARY
Sync-Rx for
PAD
Atherectomy
IVCF
IVUS – adjunctive to fluoro
AV Access
IVUS – optimize revascularization
Vein Compression/
DVT/ Reflux
IVUS – dx of vein compression;
thrombus assessment
Diagnostic
Current
state
Product
Development
New Clinical
Data
Partner/L&A opportunity
Valet Microcatheter**
Partner/L&A opportunity
Atheromed - NEW
Atheromed + Sync, FFR, IVUS
Crux
Lumifi - Crux+IVUS combo
Partner/L&A opportunity
Therapeutic
Partner/L&A
opportunity
TECHNOLOGIES
32
Pioneer Plus
IVUS – DEB sizing
DEB
Venous
Endoleak
detection
Integrated
Diagnostic + Therapeutic
Leadership Built on Innovation
2005
• Eagle Eye® Platinum digital
IVUS imaging catheter
• VH® IVUS
software approved
for InVision Gold
imaging system
• Revolution®
45 MHz rotational
IVUS imaging
catheter
2004
2006
• ComboWire® and
ComboMap®
first multi-modality
pressure and flow
guide wire and
system
• s5™ tower
imaging system
with ChromaFlo®
and VH® IVUS
33
• s5i™ Integrated
imaging System
with ChromaFlo®
and VH® IVUS
• Innova® IVUS
• FFR Case Manager ™
for s5 ™ and s5i™ systems
• AcuSense™ pressure
guidewire technology
• One millionth procedure
guided by Volcano
technology
• Visions® PV 035 digital
IVUS catheter
2011
• FFR and
rotational IVUS
functionality
added to s5™
and s5i™
imaging
systems
• Valet® Microcatheter
• IFR® software approval
in Japan
• Volcano is U.S. market
leader in intravascular
imaging
2008
• Eagle Eye® Platinum ST
digital IVUS imaging catheter
• PrimeWire
pressure guide wire
PRESTIGE®
2007
• First patients
enrolled in VH®
IVUS registry and
PROSPECT study
2012
2010
• Eagle Eye® Gold
digital IVUS
imaging catheter
• PrimeWire
Prestige® PLUS
guide wire
• First iFR® data
at EuroPCR
• CORE™ hardware
platform
• Hi-Q™ rotational
imaging software
2013
• Launched Verrata™
Guide Wire and Crux
Vena Cava Filter, and
CORE™ System
• Acquired Pioneer™
Plus
2014 New Product Introductions
1H
2H
US
Crux® VCF
Pioneer® Plus
iFR®
Crux® Retrieval Kit
iFR®
SyncVision™
SyncVision™
VE
Crux® VCF
Pioneer® Plus
VJ
VALET™
34
iFR®
CORE™ Mobile
Verrata™
SyncVision™
PV014™
PV014™
2015 New Product Introductions
1H
2H
US
1.8 & 2.2 Atheromed/
Phoenix
Next Gen
Pressure Wire
2.0 SyncVision™
2.4 Atheromed/
Phoenix
Next Gen. Rotational
Catheter
VE
1.8 & 2.2 Atheromed/
Phoenix
Crux® Retrieval Kit
Next Gen
Pressure Wire
2.0 SyncVision™
2.4 Atheromed/
Phoenix
VJ
Next Gen
Pressure Wire
35
2.0 SyncVision™
Next Gen. Rotational
Catheter
Next Gen. Rotational
Catheter
Volcano’s Winning Growth Strategy
1
2
4
3
Business Model
Scale
Coronary IVI &
Physiology Leadership
Financial Leverage
& Profitability
36
Peripheral
Expansion
Long-Range Plan Objective
LRP 2014-2018
Sales Growth1
~6-8%
Gross Margin
~70%
Operating Expenses
Operating Margin
37
1Excludes
the impact of FX.
~56% – 57%
~13% – 14%%
Volcano’s Winning Growth Strategy
2
3
1
4
Coronary IVI &
Physiology Leadership
Peripheral
Expansion
Business Model
Scale
38
Financial Leverage
& Profitability
Worldwide Sales & Distribution
By Geography
2%
10%
U.S.
27%
50%
23%
United States
• 157 direct sales employees
• CPT physician
reimbursement for IVUS and
FFR
39
By Product
10%
Japan
ROW
31%
Japan
• 64 direct sales
employees
• Full Reimbursement
IVUS Disp
FM Disp
47%
Systems
Other
Medical
Industrial
Rest of World
• 59 direct sales reps in
Western Europe, South
Africa, & Asia Pacific
• Distributors in Asia Pacific,
Latin America, Middle East
and Canada
Capital Allocation Strategy
Best Practice
Capital Allocation Process
1. Calculate the fair value of the
company’s shares based on the longterm growth and returns contemplated
in the company’s business plan
2. Set target for liquidity
3. Fund pre-determined cash
commitments (i.e. Bus Dev, capex)
4. Calculate excess capital
5. Allocate excess capital to the highest
risk adjusted return alternative
a. Organic Growth
b. Acquisitions/Minority Investments
c. Share Repurchases
40
Share Repurchase
1. On December 2, 2013, “Volcano
Corporation Announces $200 Million
Share Repurchase Authorization”
2. As part of the program, Volcano entered
into a $100 million Accelerated Share
Repurchase (ASR)
Precision Guided Therapy Sector
Intra-Body Imaging and Sensing (IBIS)
Medical Device Industry Now
Traditional
Non-Invasive Imaging
Precision Guided Therapy
Delivery Systems &
Therapy Devices
AxiEM EM, Pioneer
AFIB Ablation
3D TEE, Corindus,
Hansen Traxtal EM, OSS
IGT - SeeHawk
IVUS, ICE, AFIB Ablation
CARTO EM, ICE
IVUS, OCT
LightLab OCT, Radi FFR
MediGuide EM, NavX, ICE
Image Co-reg, AcuNav ICE,
Stereotaxis, Mediguide, Hansen
Sync RX – Angio+, IVI co-reg,
FFR co-reg, Structural Heart aps,
Peripheral aps
Robotics
41
Atheromed Atherctomy,
Microcatheters, Crux IVCF,
Thrombectomy Catheters,
PioneerTM
Why Volcano Now? The Markets 2014-2018
• PCI volume stabilization and modest increases
• FFR market growth ~9%
• IVI imaging market flat and Systems growth ~ 2%
• Peripheral imaging market growth > 15%
• Peripheral therapy market growth ~8%
• Expansion of Volcano market opportunities from ~ $700m to > $1.6B
• Increased competition in IVI and FFR markets in the short term, longer
term scale and innovation challenges for new entrants and market
dynamics improve long term
• Growth and strategic attractiveness of these markets is increasing to
non-invasive diagnostic companies and therapy companies
42
Why Volcano Now? The Company
• Strong current and projected technical and market leadership in
coronary imaging and FFR.
• Market leadership and market expansion in peripheral imaging
supplemented by peripheral therapy expansion driving ~25% growth.
• Projected revenue growth acceleration with 5 year CAGR of 6-8%
• Expansion of market opportunities from $700m to > $1.6B, with a
decreased dependence on slower growth coronary PCI and Japan
markets.
• Expanding gross margins with Costa Rica transfer and Axsun divesture
• Expanding profitability with operating expense leverage.
• Increasing attractiveness to many potential acquirers in a consolidating
med tech industry
43
1
Coronary Imaging and Physiology
Joe Burnett, EVP and General Manager
Coronary & Systems Business
Coronary Imaging &
Physiology Leadership
44
State of the Union (Coronary Disposables & Systems)
• Current Market which includes Systems, Coronary IVUS, OCT and FFR
Wires is > $700M (est.) and will grow ≈ 7% in 2014
• Volcano has market leadership today with ≈ 44% of total Market
• The established IVUS and FFR disposables have > 75% standard
gross margin
• Our large installed base > 7,400 Systems is beginning a replacement
cycle with CORE® and SyncVision™ Platform launches underway
• Our global sales team enjoys access to more than 3,000 coronary PCI
hospitals around the world
45
FFR, IVUS & OCT Penetration
Market Growth (global penetration of PCI)
2014 (global penetration of PCI est.)
100
80
FFR
IVUS
OCT
Combined
60
40
20
0
FFR
IVUS
OCT
Combined
• Penetration still low as % of PCI, especially in emerging markets
• Access to new markets and alignment of incentives key drivers for growth
• Estimate combined WW penetration grows from 21% to 24% by 2018
46
Market Growth (stronger recommendations)
47
Market Growth (the believers are out there)
Combined FM-IVI Utilization as a % of PCI
(penetration at 1,500 U.S. Hospitals)
Priority on Peer to Peer education
of routine usage and workflows
48
Source: Internal estimates derived from 2012 Aileron data, actual 2013 sales and field interviews. Data on file at Volcano Corporation.
Strategic Summary (Coronary Disposables & Systems)
• The Coronary market will continue to grow 4-5% to ≈ $850 M by 2018
driven by improved technology and broader access to training
• Volcano will invest in our pipeline to remain the share leader although
share will decline from 44% to 39% (from 4 to 7 competitors in the space)
• New entrants will drive pricing down 2-3% per year and Volcano will
reduce costs to maintain current standard margins
• Volcano coronary business will grow 1-3% from 2014-18
• New clinical indications and guidelines for technology will emerge by
2018 to reinvigorate coronary growth
49
Total Coronary & Systems Market Model
Coronary & Systems Revenue
2014
CAGR
(2014-18)
Market
$717
4-5%
Volcano
$312
1-3%
Share
44%
(2-3%)
• Key Assumptions
– PCI Volume is flat in established geographies, growth comes from emerging
markets
– No broad changes to guidelines or reimbursement, Japan pricing declines 7%
every two years
– Outcome data supporting new indications not available until 2018
– Volcano launches FACT globally in 2016-17
– Smaller players (<10% share) stay in the market despite lack of scale
50
Systems Market Model
Volcano Systems (Revenue by Geography as % of Total)
100%
80%
Other
Europe
Japan
U.S.
60%
40%
20%
0%
2014
2018
• Grow Systems revenue by 1-3% CAGR by 2018
• Key Assumptions
–
–
–
–
51
System replacement / obsolescence cycle every seven years
SyncVision™ Full Market Release in 2015
New SyncVision™ Modality Upgrade launched each year (2016-18)
Service capture rate increase to > 50%
Systems Strategy
In a more competitive environment you must win two points of sale
1. Get your systems placed to win access to the lab
–
–
–
Features and Capabilities
Pricing
Service and Support
2. Get your disposables used once you have access to the lab
–
–
–
Ease of Use
Quality
Per Procedure Value
Different from the past, not every vendor will participate
You must be in the ‘top two’ to get access and compete
52
System Strategy
FFR
Co-Reg +
IVUS
iFR®
Angio+
CFR
CRUX™
VCF +
IVUS
pFFR
CRUX™
VCF
Combo
(Pressure +
Flow)
Digital
IVUS
Pre-Procedure
53
Enable
ChromaFlo®
Rotational
IVUS
VH® IVUS
Peri-Procedure
“FACT” is an acronym for Volcano Corporation’s focused acoustic computed tomography (FACT).
Technologies with gray outlines are currently under development and are not commercially available for sale.
FACT
Peripheral
IVUS
Pioneer™
Plus
Post-Procedure
System Strategy (Win on Differentiation)
Digital
IVUS
iFR®
Unique,
Differentiated
& Must Have
Pioneer™
Plus
CFR
Peripheral
IVUS
Meet or Exceed
Buying
Threshold
FFR
Rotational
IVUS
ChromaFlo®
Angio+
IVUS
Co-Reg
CRUX™
VCF +
IVUS
PV IVUS
Co-Reg
FM
Co-Reg
CRUX™
VCF
Omni+
Integrated
FACT
Phoenix
Mobile
The only vendor who can offer all these
solutions on a common platform
54
“FACT” is an acronym for Volcano Corporation’s focused acoustic computed tomography (FACT).
Technologies with gray outlines are currently under development and are not commercially available for sale.
System Strategy (Enable Multi-Modality)
Key Benefits
• Launched 2H 2013
• Advanced computing technology/
processing capabilities
• Bedside controller and
Touchscreen enabled
• Compatible with co-registration
• Big Iron partnerships in place
• “Backbone” for future modalities
55
System Strategy (Drive Integration)
Integrated
56
System Strategy (Drive Integration)
SyncVision™ offers Image
Enhancement, Auto-QCA,
Vessel Stabilization all in
addition to Co-Registration
Reason for a hospital to
use VOLCANO in every
case and be the choice for
integration
SyncVision™ is currently
in limited market release at
20 global centers
57
System Strategy Summary
• Grow System revenue by 1-3% CAGR by 2018
• Highlight differentiated features to win access to labs and ability to
compete
• Launch the SyncVision™ suite of angiography enhancement
features to win integration
• Replace 7,400+ unit installed base with now available CORE systems
• Upgrade installed base with future modalities, leveraging our
established sales channel and service organization
58
Coronary Imaging Market Model
Volcano Coronary Imaging (Revenue by Geography as % of Total)
100%
80%
Other
Europe
Japan
U.S.
60%
40%
20%
Grow Coronary
Imaging Revenue
(1%) – 0% by 2018
0%
2014
59
2018
U.S. (2014 / 2018)
Japan (2014 / 2018)
Europe (2014 / 2018)
PCI Volume
↔/↔
↔/↔
↔/↔
Penetration
↓/↑
↔/↔
↑/↔
Pricing
↔/↓
↓/↓
↔/↓
Market Share
↓/↔
↓/↑
↔/↓
VOLC Revenue
↓/↑
↓/↑
↔/↔
Coronary Imaging Strategy (broadest portfolio)
Coronary IVUS Catheters
Modalities
Digital IVUS
ChromaFlo®
VH® IVUS
Rotational
IVUS
Eagle Eye® Platinum
(20 MHz) Catheter
Eagle Eye® Platinum
ST Catheter
Hardware
Revolution®
(45 MHz) Catheter
Peripheral IVUS Catheters
Visions® PV .018
(20 MHz) Catheter
CORE™ Integrated System
Visions® PV .035
(10 MHz) Catheter
CORE™ Mobile Imaging System
Pioneer™ Plus Catheter
60
Coronary Imaging Strategy (protect digital phased array market)
• Imaging Market #1
Intravascular Imaging Units
• Digital Phased Array Imaging
•
Fast, Simple, Easy to Use
•
No flushing or pullback device
•
Large field of view, Penetration
•
ChromaFlo
VOLC Phased Array
•
VH IVUS
VOLC Peripheral
VOLC Rotational IVUS
Other Peripheral
OCT
Other Rotational IVUS
VOLC has 100% of Coronary Phased Array
61
Coronary Imaging Strategy (grow emerging peripheral franchise)
Intravascular Imaging Units
• Imaging Market #2
• Peripheral Imaging
•
Field of View for Larger Vessels
•
Long, manual pullbacks
•
Fast, Simple, Easy to Use
•
Deep Tissue Penetration
VOLC Phased Array
•
ChromaFlo
VOLC Peripheral
•
VH IVUS
Other Peripheral
VOLC Rotational IVUS
OCT
Other Rotational IVUS
VOLC has 80%+ of Peripheral
62
Coronary Imaging Strategy (compete in crowded hi-resolution market)
• Imaging Market #3
Intravascular Imaging Units
• High Resolution Imaging
•
High Precision
•
Smaller Vessels
•
In-Stent Restenosis
•
Plaque Ruptures
VOLC Phased Array
•
Requires Flushing
VOLC Peripheral
•
Automatic, Sheathed Pullback
Other Peripheral
VOLC Rotational IVUS
OCT
Other Rotational IVUS
6 Players are Competing in High-Definition
Rotational (57%)
63
Coronary Imaging Strategy (invest to maintain leadership)
Intravascular Imaging Units
VOLC Rotational IVUS
6 Competitors
in 57%
segment
VOLC Phased Array
VOLC Peripheral
Other Peripheral
OCT
Other Rotational IVUS
Having Phased Array, Peripheral and High Resolution Imaging
are requirements for imaging market leadership
64
Coronary Imaging Strategy (protect digital phased array market)
3-Way
Association
65
Coronary Imaging Strategy (launch FACT into hi-resolution segment)
FACT Technology
• A new intravascular imaging transducer technology
• < 50 µm high resolution imaging, 30%+ improvement (est.)
• Allows visualization of entire plaque and vessel wall without
needing to flush to clear blood
Activities for Commercialization
• Finalize designs in 2014
• Complete regulatory and first-in-human cases 205
• Launch commercially in 2016 in U.S. and Europe,
and 2017 in Japan
Source: Volcano Corporation data on file
66
Current Rotational
Imaging Market
> $250M
Coronary Imaging Summary
• Grow Coronary Imaging Revenue (1%) – 0% by 2018
• Expand penetration of SyncVision™ IVUS Co-Registration to protect
current digital phased array IVUS market
• Launch FACT to compete in high-resolution imaging segment and
win back rotational imaging share
• Train physicians on new workflows to drive awareness and routine
usage
67
Coronary Physiology Market Model
Volcano Coronary Physiology (Revenue by Geography as % of Total)
100%
80%
Other
Europe
Japan
U.S.
60%
40%
20%
Grow VOLC Coronary
Physiology revenue by
3-4% by 2018
0%
2014
68
2018
U.S. (2014 / 2018)
Japan (2014 / 2018)
Europe (2014 / 2018)
PCI Volume
↔/↔
↔/↔
↔/↔
Penetration
↑/↔
↑/↔
↑/↑
Pricing
↔/↓
↓/↓
↔/↓
Market Share
↓/↓
↔/↓
↔/↓
VOLC Revenue
↔/↓
↑/↔
↑/↑
Coronary Physiology Strategy (broadest portfolio)
Physiology Guide Wires
Modalities
FFR
CFR
pFFR
iFR®
5th
New Wire
in 5 Years
Verrata™ Pressure Wire
Hardware
PrimeWire® Prestige PLUS
w/ AcuSense™
PrimeWire® Prestige
CORE™ Integrated System
FloWire®
SmartMap® Console
OMNI
ComboMap® Console
ComboWire® XT
*iFR is CE Marked and 510(k) Pending. Omni is a development program at Volcano.
69
Coronary Physiology Strategy (broadest portfolio)
Dx Angiogram
No Visible
Disease,
Diabetics,
Women
Non-Culprit ACS
MVD / Tandem
PCI Guidance
Post-PCI
Confirmation
Proof or Absence
of Ischemia
Deliver proper
diagnosis
Cost-Effective
Patient Staging
Practical Frontline
Workflow
Confirm Functional
Improvement
FFR
CFR
iFR
iFR
iFR
Hybrid iFR/FFR
90%+ FFR
Agreement
50%+ Drug Savings
New workflow makes
physiology guidance practical
*iFR is CE Marked and 510(k) Pending.
70
Market Leadership Strategy
• Physiology market still has
significant growth opportunity
• There are more than 5,000,000
guidewires used in interventional
procedures each year
– less than 400k are ‘smart’ wires
– No additional devices added to workflow
• Value of the information must
outweigh ‘costs’ of a pressure wire
workflow
71
Internal Use Only
Data on File at Volcano
Market Leadership Strategy (reduce costs)
10 min lab time
Reduce the effective
cost of FFR without
giving up Volcano
wire pricing
($500)
Hyperemic Agent
($5 – $750)
Pressure Wire
($650 – $750)
Economic Barrier to
Use of FFR
Workhorse Pressure Wire &
No Hyperemic Agent
($650 – $750)
72
Workhorse Wire
Workhorse Wire
($80 – $250)
($80 – $250)
Market Leadership Strategy (increase value)
73
Market Leadership Strategy (increase value)
•
•
•
•
•
•
•
74
Indication
Stable no Stress Test
Stable MVD w/ Stress Test
Post-PCI Confirmation
CABG Mapping
Unstable Angina
Non-Culprit ACS ‘Ad-Hoc’
Clinical Trial Program
(FAME / FAME II)
(DEFINE-Dx)
(DEFINE iFR Swedeheart)
(SYNTAX2, FAME III)
(DEFINE FLAIR)
(DEFINE FLAIR)
Outcome data supporting
new indications will drive
increased penetration by
2018
Coronary Physiology Summary
• Grow VOLC Coronary Physiology revenue by 3-4% by 2018
• Remove the barrier of adenosine administration to improve ease of
use and reduce time
• Develop and launch workhorse wires at lower costs to narrow the
performance gap and offer pricing flexibility
• Combine imaging and physiology through co-registration to allow
these tools to be used for ‘guidance’ and not only ‘justification’
• Invest in new clinical indications including unstable patients and ACS,
multi-vessel CABG mapping, and post-PCI confirmation
75
Strategy Summary (Coronary Disposables & Systems)
• Coronary & Systems Market will grow 4-5% CAGR in the coming years
• Volcano is the #1 player in this market and has the pipeline of systems
and new tools to continue to grow our installed base and remain #1
• New entrants and competitive pricing pressure will lower ASPs, share
and revenue growth, erasing some benefit of increased usage
• Established IVUS and FFR disposables can maintain 75% standard
margin through internal cost reduction programs
• Products and Studies supporting new indications are being introduced
to the market today (iFR® Modality and SyncVision™) and are actively
enrolling (DEFINE Family of studies)
76
Q&A
Break
2
Peripheral Vascular
Neil Hattangadi MD
Executive VP, General Manager
Peripheral Vascular & Global Clinical/Scientific Affairs
Peripheral
Expansion
State of the Union (Peripheral Vascular)
• The strategy is working. Peripheral is a major growth driver for Volcano
– 2014 global revenues of ~$65-68M*, continuing strong growth
through 2018 (~25% CAGR)
• Peripheral Intravascular Imaging (Diagnostic) market is ~$75M WW,
growing mid teens
– Imaging in Peripheral procedures remains under-penetrated (1-13%,
depending on indication)
– Volcano has market leadership today with ~80% share
• Volcano’s three primary Peripheral Therapeutic markets (Chronic Total
Occlusions, IVC Filters, and Atherectomy) have aggregate size of
~$875M WW, growing mid to high single digits
– Volcano has differentiated products and synergy with imaging to
drive meaningful market share
80
* Internal estimate only based on allocation of Coronary vs Peripheral Eagle Eye IVUS – see slide “1H 2014
IVUS Global Revenue: Peripheral vs Coronary”. Does not include systems sold into Peripheral labs
Volcano’s Peripheral Expansion
PROCEDURES
NON-CORONARY
CORONARY
Diagnostic
Therapeutic
TECHNOLOGIES
81
Integrated
Diagnostic + Therapeutic
Targeted Peripheral Vascular Applications
Neurovascular*
Target markets are:
• Large
• Growing
• Clinical & Economic evidence for IVUS
Carotid Artery
AAA
Structural Heart
Thoracic EndoVascular aortic Aneurysm Repair (TEVAR)
EndoVascular Abdominal aortic aneurysm Repair (EVAR)
VENOUS
Inferior Vena Cava (IVC)
Filter Placement
AV Access for Dialysis
Vein compression
Renal Artery (Stenting, Denervation)
Iliac Artery
PAD
Superficial Femoral Artery (SFA)
Below the Knee (BTK)
Deep Vein Thrombosis (DVT)
Venous Reflux
82
1.8M Target Peripheral procedures globally
Global Procedure Growth (CAGR)
Global Procedures (000’s)
1,200
7%
1,000
2014
2018
800
3%
600
3%
400
200
8%
9%
0
Additional ~1M Procedures in secondary indications (Carotid, Iliac/Renal, Neuro, DVT)
83
Data from Millennium Research Group and Volcano internal research. Vein Compression numbers include upper extremity
venous stenting
IVUS massively underpenetrated in target Peripheral
markets, creating large upside opportunity
Global IVUS Penetration % (2014)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
13%
4%
1%
7%
1%
0%
Additional Penetration in secondary indications (esp. Carotid, Iliac, Renal in Japan)
84
* Use of IVUS in conjunction with fluoroscopy. Additional usage for bedside placement of VCFs
(investigational use only)
Volcano Peripheral Vascular Growth
* Neuro and Carotid are investigational use only. Carotid is commercially available in Japan.
** Indicated for Highly Stenosed Lesions (HSL)
PROCEDURES
Neuro
FFR – pressure /flow in
aneurysm; FACT/IVUS apps*
Carotid
IVUS – plaque characterization,
stent guidance*
EVAR/TEVAR
IVUS- dissections,
avoid contrast
CTO/HSL
IVUS – short tip Eagle Eye**
Balloon
IVUS – stent sizing, avoid
adventitial cuts
Stent
FFR – know where to treat,
when to stop
PAD
NONCORONARY
Sync-Rx for
PAD
Atherectomy
IVCF
IVUS – adjunctive to fluoro
AV Access
IVUS – optimize revascularization
Vein Compression/
DVT/ Reflux
IVUS – dx of vein compression;
thrombus assessment
Diagnostic
Current
state
Product
Development
New Clinical
Data
Partner/L&A opportunity
Valet Microcatheter**
Partner/L&A opportunity
Atheromed - NEW
Atheromed + Sync, FFR, IVUS
Crux
Lumifi - Crux+IVUS combo
Partner/L&A opportunity
Therapeutic
Partner/L&A
opportunity
TECHNOLOGIES
85
Pioneer Plus
IVUS – DEB sizing
DEB
Venous
Endoleak
detection
Integrated
Diagnostic + Therapeutic
Volcano Peripheral Vascular Growth: Diagnostics
* Neuro and Carotid are investigational use only. Carotid is commercially available in Japan.
** Indicated for Highly Stenosed Lesions (HSL)
PROCEDURES
Neuro
FFR – pressure /flow in
aneurysm; FACT/IVUS apps*
Carotid
IVUS – plaque characterization,
stent guidance*
EVAR/TEVAR
IVUS- dissections,
avoid contrast
CTO/HSL
IVUS – short tip Eagle Eye**
Balloon
IVUS – stent sizing, avoid
adventitial cuts
Stent
FFR – know where to treat,
when to stop
PAD
NONCORONARY
IVUS – DEB sizing
DEB
Sync-Rx for
PAD
Atherectomy
Venous
Endoleak
detection
IVCF
IVUS – adjunctive to fluoro
AV Access
IVUS – optimize revascularization
Vein Compression/
DVT/ Reflux
IVUS – dx of vein compression;
thrombus assessment
Diagnostic
Current
state
Product
Development
New Clinical
Data
Therapeutic
Partner/L&A
opportunity
TECHNOLOGIES
86
Integrated
Diagnostic + Therapeutic
1H 2014 IVUS Global Revenue: Peripheral vs Coronary
Revolution
12%
~58% [estimated]
Eagle Eye
Coronary
Eagle Eye
Peripheral
PV 014/018
PV 8.2/035
87
~13% [estimated]
8%
9%
~30% of WW
IVUS
Disposables in
Peripherals
IVUS in Endovascular AAA Repair
Clinical Value of IVUS
1. Reduce contrast (~50%) and radiation1,2
2014
2. Resolve true vs false lumen in dissections
3. Improve graft sizing and placement (assess
landing zones for calcium, thrombus) 2
4. Assess completeness of treatment
(graft infolding, wall apposition) 2
5. Detect endoleak (in development)
2018
170k
WW
EVAR/TEVAR
Procedure
Volume
127k
6. Improve outcomes, save cost
~18%
IVUS
Penetration
~13%
Renal vein
Renal
artery
1. von Segesser, et al. Routine Use of Intravascular Ultrasound for Endovascular Aneurysm Repair: Angiography is not Necessary. Eur J Vasc Endovasc Surg.
2002;23:537-542.). Up to 50 cc reduction
2. Hoshina, et al. A Retrospective Study of Intravascular Ultrasound use in Patients Undergoing Endovascular Aneurysm Repair: Its Usefulness and a
Description of the Procedure. Eur J Vasc Endovasc Surg. 2010;40:559-563.
Images: Data on file.
88
IVUS in Peripheral Arterial Disease
Clinical Value of IVUS & Pressure/Flow
1. Guide treatment strategy
(calcified vs. soft thrombus vs. fibrous)
2. Optimize stent sizing – length and
diameter (covered stents1,
self-expanding BMS2  20-30%
improvement in patency), new SFA DES
3. Optimize DEB sizing – length and
diameter
2014
WW PAD
Procedure
Volume
2018
1.02M
763k
4. Avoid atherectomy adventitial cuts3
IVUS
Penetration
~6%
~4%
1. VIPER study with Gore Viabahn. “Heparin Bonded Stent–grafts in the SFA: Viper Trial One-Year Results.” Richard Saxon, M.D. Presented at ISET 2012. When
IFU followed and device not oversized by more than 20%, the primary patency is 91% at 1 yr; when oversized by more than 20%, the primary patency is 70%
2. Buckley et al. “Intravascular Ultrasound is Critical to Insuring Long-Term Stent Performance”. Vascular Disease Management Apr 2011; 87-92. 71 limbs treated
with PTA/stent, at mean f/u of 40m, 25% restenosis in angio alone, vs 0% in IVUS
3. UTOPIA study, P Krishnan, presented at ACC 2012. Adventitial cuts result in 60% restenosis at 6m, vs 15% when adventitial cuts avoided.
Images: Data on file.
89
IVUS in Vein Compression/Thrombosis
Clinical Value of IVUS
1. Identify lesions not seen on
venography – 30% greater sensitivity1
2014
2018
2. Guide sizing and placement of venous
stents – avoid migration
3. Guide thrombus removal strategy –
lysis vs. thrombectomy
4. By diagnosing and effectively treating
compressive lesions, IVUS-guided
stenting can improve ulcer healing and
Post-Thrombotic Syndrome (improve
outcomes)2
WW Vein
Stenting
Procedure
Volume
182k
127k
~15%
Iliac Vein
IVUS
Penetration
~7%
1. Neglén P, Raju S. Intravascular ultrasound scan evaluation of the obstructed vein. J Vasc Surg. 2002; 35:694-700.
2. Mussa et al., Iliac Vein Stenting for Chronic Venous Insufficiency. Tex Heart Inst J. 2007; 34:60-6. Neglen et al., Stenting of the venous outflow in chronic
venous disease: Long-term stent-related outcome, clinical, and hemodynamic result. J Vasc Surg. 2007; 46:979-90. Additional data in development
Images: Data on file.
90
Pathology of Vein Compression & Chronic Venous
Insufficiency
Unilateral Edema
Non-Healing Venous Ulcer
Before Treatment
Righ
t
Iliac Vein
91
Lef
t
After Stenting
Venous IVUS in SVS/AVF Guidelines
2011, SVS and AVF Clinical Practice Guidelines J Vasc Surg 2011;53:2S-48S.
Guideline 4, Imaging Studies, GRADE 1B recommendation;
GRADE of recommendation 1 (strong), level of evidence B (moderate quality)
Regarding IVUS: “Intravascular ultrasonography (IVUS) has been used successfully
to evaluate iliac vein compression or obstruction and to monitor patients after venous
stenting. For patients with varicose veins, IVUS should be used selectively in those
with suspected or confirmed iliac vein obstruction. IVUS is important in assessing the
morphology of the vessel wall, identifying lesions such as trabeculations, frozen
valves, mural thickness, and external compression that are not seen with
conventional contrast venography, and it provides measurements in assessing the
degree of stenosis. In addition, IVUS confirms the position of the stent in the venous
segment and the resolution of the stenosis.”
92
Venous IVUS – AV Graft RCT
N=100, AV Graft requiring
revascularization
1:1
Venography-Guided
Revascularization
Venography +
IVUS-Guided
Revascularization
IVUS Check
(no new treatment
allowed)
Follow-up for 3,6,12m
(Re-intervention)
93
•
Primary Endpoint: Time to
first re-intervention in IVUS
vs Venography arms
•
Health economic analysis to
be included
•
Enrollment completed as of
Mar 2014
•
Data embargoed, pending
presentation at
Controversies in Dialysis
Access (CiDA) conference
Oct 2014
Executing Peripheral Imaging Growth
1. Physician awareness and training – Peer to peer education, 30+ training
programs per year globally – KOLs explain why they use, how to use;
online/interactive training materials
2. Greater presence at Peripheral tradeshows – more live cases featuring
IVUS
3. Focus on reducing radiation – Workflows and physician testimonials showing
IVUS able to reduce radiation exposure to physician, patient and staff
4. Account targeting – high procedure volume, with low IVUS penetration
5. Greater rep experience and coverage
6. New clinical data – 6+ studies to show Volcano technologies improve clinical
decision making, workflow/cost, and clinical outcomes
7. Product development – Continued improvements in Phased Array IVUS
technology; Sync Vision peripheral applications (AAA, PAD)
94
Volcano Peripheral Vascular Growth: Therapeutics
* Neuro and Carotid are investigational use only. Carotid is commercially available in Japan.
** Indicated for Highly Stenosed Lesions (HSL)
PROCEDURES
Neuro
Carotid
Partner/L&A opportunity
EVAR/TEVAR
Valet Microcatheter**
CTO/HSL
Pioneer Plus
Balloon
PAD
Partner/L&A opportunity
Stent
NONCORONARY
DEB
Venous
Atherectomy
Atheromed - NEW
Atheromed + FFR, Sync, ?IVUS
IVCF
Crux
Lumifi - Crux+IVUS combo
AV Access
Partner/L&A opportunity
Vein Compression/
DVT/ Reflux
Diagnostic
Current
state
Product
Development
New Clinical
Data
Therapeutic
Partner/L&A
opportunity
TECHNOLOGIES
95
Integrated
Diagnostic + Therapeutic
Volcano Pioneer® Plus
Technology
• IVUS guided True Lumen Re-Entry device
for Chronic Total Occlusions
• Shorter procedure time, greater safety, and
higher crossing success with IVUS-guided
Re-Entry
Status Update
• Sales have grown 20%+ from preacquisition, due to Volcano sales focus
and synergy with IVUS
96
Source: Volcano Corporation data on file
Current WW Market
(Specialty CTO Devices)
~$200M
Volcano Pioneer® Plus
1. 6 F sheath compatibility
2. IVUS transducer offers enhanced imaging for
diagnosis and targeting
3. Curved-needle housing to enable targeting;
adjustable needle depth: (3 mm, 5 mm and 7
mm)
4. Triple-braided shaft for enhanced trackability,
torque control and needle movement
5. Easy-to-use handle allows for single-handed
deployment of needle
6. Thumb-activated safety lock for ease of use
97
Executing Pioneer Growth
1. Gain share in “re-entry” market – Pioneer has ~30% unit share today. #1
competitor (> 50% share) has limited interest in the space
2. Educate the IVUS advantage with Pioneer vs “un-guided re-entry”. Data
showing:
1) Shorter procedure time
2) Greater safety (bleeding, hematoma)
3) Higher crossing success
4) Reduced radiation
3. Account targeting – many CTO interventionalists with a Volcano system have
not yet evaluated Pioneer
4. Product development – Next gen Pioneer in progress, including focus on
COGS reduction
98
Crux IVC Filter
Roadmap to Success
• Large market with significant underserved
needs and pressures to improve
• Launching two of the greatest innovations in
VCFs in decades (the filter and delivery
system)
• We will lead in two segments of the market –
bedside and cath lab based delivery
Status update
• LMR 4Q13, FMR in late Mar 2014
• Slower than expected ramp because of Value
Analysis Committee (VAC) approval times, rep
coverage
• Much interest in the filter due to FDA-driven
pressures on retrieval and general concerns on
penetration of conical filters
• Development of Lumifi™ (Crux+IVUS) device
driving significant interest
99
Current WW Market
(IVC Filters)
~$300M
Source: Volcano Corporation data on file
Crux Differentiation
BARD Eclipse
Cook Celect
ALN
Conventional Conical
Design Drawbacks
Crux Features
Filter Tilt
Self-Centering
Limited Retrieval
Bi-directional Retrieval
Migration
0% Migration in Pivotal Trial
Fracture
0% Fracture in Pivotal Trial
Perforation risk
0% Perforation in Pivotal Trial
RETRIEVE 2, 3 and 4 Pivotal Clinical Trial Results*
*JVIR 2013. Smouse et al.
100
Deployment Success
Retrieval Success
Migration
Fracture
Embolization
123/125 (98%)
53/54 (98%)
0%
0%
0%
Crux Launch to date
Issue
Solution
• Rep hiring and training: ~3 months to
identify and hire top talent, plus ~2 months
for class + field training
• All reps fully proficient by 3Q14
• VAC Approval Timelines: up to 120 day
approval times
• Top 200 new account prospects have VAC
processes already started, with MD
advocate
• Hospital contract cycles: annual
commitments at some facilities
• Driving evaluations ahead of bulk order
contract cycle
• Case coverage: timing of filter cases is
unpredictable, hard for reps to do 5+ initial
cases with MD in short period of time
• Product enhancements to decrease MD
learning curve (fewer cases with reps to
become self-sufficient)
• Reps have been hired with strong
implantable experience
• National “SWAT team” to supplement case
coverage
• Greatest benefits of filter not seen until
retrieval
101
• Programs to track and improve filter retrieval
• Many filters implanted in 1H14 are now
being retrieved – experiences have been
very positive
Crux addresses unmet need with Conical Filters
•
•
Current VCF market experiences ~5-10% rate of clinical events
Tom Fogarty used this as his driving reason to develop Crux
Illustrative Case
At deployment
At retrieval attempt
Tilt,
tip embedded
in IVC wall
•
•
•
•
71 y/o woman
Severe SOB, 86 days after
Conical VCF insertion
Tilted, deformed filter lost
efficacy  led to PE
Filter could not be removed
b/c of tip embedded in IVC
wall
Overall study: 86% perforation rate on cavagram, 27% tilt > 10°
102
Limb Penetration
& Filter
Deformity
Lumifi ™ Crux-IVUS for Bedside Placement
Economic Value
Clinical Value
• Saves Costs
• Improves Outcomes
- $850 catheter + $500 15min
MD/staff time = $1350
- Remove transportation risk – severe
trauma, ventilated patients (ventassociated pneumonia) (~20%)
- IVCF in the OR: 30 min cath lab
time = $5000
- Remove radiation risk – pregnant women
(~5%)
- IVCF at bedside:
• Increases Efficiency
- Reimbursement to hospital is the
same, so all cost/time savings are
hospital profit
This is the greatest value proposition for
IVUS guidance for any entire body
procedure by changing site of care
103
- Reduce contrast load – ESRD (~5%)
~30% of patients have clinical justification
for bedside placement w/ IVUS
All 100% have economic justification, if
procedure is safe
• Expands Patient Population
- Additional 15-30% market expansion
from ICU patients not currently receiving
IVC filters due to transport risk
IDE Submission expected 4Q 2014
Executing Crux Growth
1.
Drive retrievals – FDA Safety Alert (2010, 2014), litigation risk creating much greater
awareness. Providing tools to track implants and schedule retrievals (including Crux smart
phone app)
2.
Greater rep experience and coverage – ~75 reps now with Crux quota, plus National
“SWAT” team
3.
Account targeting – each rep has ~10 target accounts for 2H14, with 200+ VAC
approvals already in process with on-site MD advocates
4.
New clinical data – registries focused on retrieval success & long term (2 year+)
outcomes; PRESERVE study (FDA/SIR/SVS initiative to improve retrieval and collect long
term outcomes)
5.
Leverage strong interest in Lumifi ™ (Crux+IVUS)
6.
Product development – continued workflow enhancements, Next gen Crux in progress
104
Phoenix Atherectomy system
Technology
• Front cutting, highly trackable design
• Cuts, captures, and clears plaque and debris
• No capital equipment
• Simple easy to use design
• Efficacy in variety of plaque types and vessel sizes
Status Update
• LMR by YE2014 (US and EU); FMR in 1Q 2015
• Initial focus on Below-the-Knee (BTK) disease &
Critical Limb Ischemia (CLI). ATK version to
launch in 2H 2015
• LMR sites in US and EU already identified, based
on previous Phoenix usage and high volume
atherectomy
• Dedicated ~5 atherectomy reps being hired to
drive focused launch
105
Current WW Market
(Peripheral Atherectomy)
~$375M
Source: Volcano Corporation data on file
Phoenix Atherectomy acquisition rationale
• Clinical synergy and differentiation with peripheral FFR, IVUS,
and SyncVision technologies
• Peripheral sales force scale
• Win share in a growing $375M market with differentiated product
• Gross Margins above corporate target, with transfer to Costa
Rica facility
• High Operating Margin contribution with sales rep leverage in
Peripheral Arterial cases
106
Phoenix Family of Catheters for ATK and BTK Disease
107
Phoenix Competitive Differentiation
Phoenix
108
TurboHawk
Stealth OAS
Leader ATK
Leader BTK
Jetstream
Laser
Mechanism of Action
Rotational, frontcutting, directional
Directional
Circumferential,
rotating burr
Rotational, active
aspiration
Laser pulses
Cut
✔
✔
✔
✔
✔
Capture
✔
✔
Continuous Clear
✔
Single Insertion
✔
No Capital or Tableside
Equipment
✔
5F Profile
✔
Ability to Cut Calcium
✔
✔
Treats Broad Range of
Disease
✔
✔
Ease of Setup
✔
✔
Below the Ankle
Capability
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
EASE (Endovascular Atherectomy Safety and
Effectiveness) Study Overview
• Pivotal trial to support 510(k) clearance, received Jan 2014
• 105 patients enrolled across sites in US and Europe, 123 lesions evaluated
• Well exceeded Target Performance Goals set with FDA
109
Executing Phoenix Commercialization
1.
Initial focus on 15 high volume global sites with previous Phoenix experience – drive
sales, serve as podium speakers to influence broader usage. VAC and contracting
processes started immediately upon acquisition.
2.
Initial atherectomy-only reps dedicated to LMR accounts – Attracting reps with deep
10yr+ product experience, with key customer relationships. Initial focus allows greater case
coverage; over time, integrate into broader sales force for product leverage (esp. arterial –
Valet microcatheter, IVUS in PAD, Pioneer).
3.
Top Atherectomy leadership – CEO of Atheromed, VP Commercial Operations executing
global launches (together built Access Closure commercial from inception to $70M in 18
months, subsequently sold to CAH for $320M). Head of US Commercial, Head of Clinical
Affairs, Peripheral GM all with deep Atherectomy experience.
4.
Penetration into MD offices – enabled by low COGS, absence of capital, short procedure
time
5.
New clinical data – multiple studies planned based on KOL feedback; include
demonstrating value of minimizing distal embolization (improved distal runoff, end-organ
perfusion), ISR (strong feasibility data to date)
6.
Product launch cadence – longer lengths in 2Q15, ATK version in 2H15
110
Peripheral Clinical Trial Activities
Diagnostics
• AV Access Revascularization, IVUS vs venography RCT - pilot completed, multicenter
enrollment in progress
• Venous compression in ulcers, IVUS vs venography [VIDIO] – enrollment in progress
• Venous stenting, IVUS vs venography vs duplex ultrasound [VIRTUS] – enrollment in
progress
• Peripheral FFR, correlation to outcomes – pilot completed, multicenter enrollment in
progress
• IVUS for AAA, Carotid, PAD single arm studies (Japan, Europe) – enrollment in
progress
Therapeutics
• Crux post market registry [PRESERVE] – enrollment expected to start 4Q14
• Lumifi (Crux + IVUS) IDE – enrollment expected to start 2Q15
• Phoenix Atherectomy studies – multiple, in planning stages
6 Trials Enrolling, 3 Trials pending
111
Peripheral Commercial Structure
• ~40 dedicated Peripheral reps, being supplemented with
dedicated Phoenix reps for LMR in 2H 2014. Additional Peripheral
coverage with coronary and capital sales force.
• Expect strong continued field expansion through Phoenix FMR in
2015
• Increasingly leverage synergies in product portfolio, selling
multiple products at single point of contact: venous (Crux VCF,
Venous IVUS), arterial (Phoenix, Pioneer, Valet, Arterial IVUS)
• Full ~64 rep base trained and actively covering peripheral cases
• IVUS reimbursement has driven high penetration in peripheral
procedures (>40%)
• Initial focus on countries with highest volume of Peripheral cases
(e.g., Germany, Italy, UK)
112
Why we will win in Peripheral
• The strategy is working. Peripheral is a major growth driver for Volcano – 2014
global revenues of ~$65-68M*, continuing strong growth through 2018 (~25%
CAGR)
• The only Peripheral company with a leading portfolio of inter-related
diagnostic and therapeutic products
• All products benefiting as we gain scale – e.g., Peripheral tradeshows and
training programs incorporate entire portfolio
• Commercial distribution channel gaining traction and improving
productivity. Hiring the best reps, providing the best training. Sales rep can now
offer multiple products in a case, and participate in more cases per lab day.
Revenue opportunity per rep per day increasing >3-5x
• Internal organization aligned to drive Peripheral success (R&D, Clinical,
Commercial)
113
Financial Overview
John Dahldorf
Chief Financial Officer
114
2014 Guidance
May Guidance
August Guidance
Revenue
$413 – $421M
$397M – $401M
Gross Margin %
64% – 64.5%
63% – 63.5%
68% – 69%
65.5% – 66.5%
EPS
($0.57) – ($0.60)
($0.52) – ($0.55)
Non-GAAP EPS1
$(0.16 – ($0.19)
($0.16) – ($0.19)
51,440
51,400
Operating Expense %
Basic Shares
115
1Non-GAAP
EPS excludes acquisition-related items, amortization of intangibles and non-cash interest expense.
2014 Guidance Changes
($18.0M)
By Geography
US
($10.M)
FM; Cor IVI;Crux;SyncV
Japan
($5.0M)
Cor&Peri IVI; Dist. Prod.
EMEAI
($1.0M)
Russian Dist. Change
Other
($1.0M)
Axsun; APLAC
FX
($1.0M)
GM
(100 bp)
CR mfg. var; Royalty Exp
Op Exp
250 bp
Acq. Related; Litigation;
Headcount Reductions; R&D
Prioritization; Expense Control
EPS
$0.05
Acq Related; Amort of
Intangibles
Revenue
Non-GAAP EPS1
116
1Non-GAAP
NO Change
EPS excludes acquisition-related items, amortization of intangibles and non-cash interest expense.
Euro 1.38
1.34
Long-Range Plan Objective
LRP 2014-2018
Sales Growth1
~6-8%
Gross Margin
~70%
Operating Expenses
Operating Margin
117
1Excludes
the impact of FX.
~56% – 57%
~13% – 14%%
Long Range Plan Objective: Create Operating Leverage
with Gross Margin Expansion and Expense Management
Gross Margin
•
•
•
•
•
118
2014
2018 LRP
63%
70%
Divest Axsun
Complete transfer of disposables to CR
Design next generation lost cost wires and catheters
High margin acquisitions
Yield improvements and cost leverage
Long Range Plan Objective: Create Operating Leverage
with Gross Margin Expansion and Expense Management
Sales & Marketing
2014
2018 LRP
28%
25%
• Coronary sales force leverage
• Peripheral sales force expansion
• Invest in select marketing programs
G&A
•
•
•
•
2014
2018 LRP
21%
17%
Leverage existing infrastructure
Facility consolidation
Shared Services
Reduced litigation
R&D
2014
2018 LRP
15%
11%
• Advance existing pipeline through commercialization
• Invest in clinical differentiation
• Reduce time to market
119
Wrap-Up
Scott Huennekens
President & CEO
120
Why Volcano Now? The Markets 2014-2018
• PCI volume stabilization and modest increases
• FFR market growth ~9%
• IVI imaging market flat and Systems growth ~ 2%
• Peripheral imaging market growth > 15%
• Peripheral therapy market growth ~8%
• Expansion of Volcano market opportunities from ~ $700m to > $1.6B
• Increased competition in IVI and FFR markets in the short term, longer
term scale and innovation challenges for new entrants and market
dynamics improve long term
• Growth and strategic attractiveness of these markets is increasing to
non-invasive diagnostic companies and therapy companies
121
Why Volcano Now? The Company
• Strong current and projected technical and market leadership in
coronary imaging and FFR.
• Market leadership and market expansion in peripheral imaging
supplemented by peripheral therapy expansion driving ~25% growth.
• Projected revenue growth acceleration with 5 year CAGR of 6-8%
• Expansion of market opportunities from $700m to > $1.6B, with a
decreased dependence on slower growth coronary PCI and Japan
markets.
• Expanding gross margins with Costa Rica transfer and Axsun divesture
• Expanding profitability with operating expense leverage.
• Increasing attractiveness to many potential acquirers in a consolidating
med tech industry
122
Q&A