BVX investorpresentation 11-27-17 - Bovie Medical...2017/11/27  · -Vipul R. Patel, MD, FACS...

November2017

SafeHarborStatement

CertainmattersdiscussedinthispresentationandoralstatementsmadefromtimetotimebyrepresentativesoftheCompanymayconstituteforward-lookingstatementswithinthemeaningofthePrivateSecuritiesLitigationReformActof1995andtheFederalsecuritieslaws. AlthoughtheCompanybelievesthattheexpectationsreflectedinsuchforward-lookingstatementsarebaseduponreasonableassumptions,itcangivenoassurancethatitsexpectationswillbeachieved.

Forward-lookinginformationissubjecttocertainrisks,trendsanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromthoseprojected. ManyofthesefactorsarebeyondtheCompany’sabilitytocontrolorpredict. ImportantfactorsthatmaycauseactualresultstodiffermateriallyandthatcouldimpacttheCompanyandthestatementscontainedinthispresentationcanbefoundintheCompany’sfilingswiththeSecuritiesandExchangeCommissionincludingourmostrecentreportsonForm10-KandForm10-Q.CopiesofthesefilingsareavailableonlinefromtheSEC. Forforward-lookingstatementsinthispresentation,theCompanyclaimstheprotectionofthesafeharborforforward-lookingstatementscontainedinthePrivateSecuritiesLitigationReformActof1995. TheCompanyassumesnoobligationtoupdateorsupplementanyforward-lookingstatementsasaresultofnewinformation,futureevents,orotherwise.

InvestmentHighlights

3

Establishedcommercialbusinesssegmentsin“Core”and“OEM”withstrongprofitabilityandcashflowprofiles

AdvancedEnergysegmentis‘engineofgrowth’forBovieMedical

AdvancedEnergysegmentgrowthfueledbycommercializationofJ-Plasma®

J-Plasma®:transformationaltechnology;growthprofileenhancedbyfocusedsellingefforts,growingclinicalsupportandpendingnewproductlaunchesinQ4’17

ExperiencedManagementTeam

Improvinggrowthandprofitabilityprofilesupportedbysolidbalancesheetcondition

AdvancedEnergysegmentsupportedbystrong,andgrowing,IPportfolio

ExperiencedManagementTeam

Executive JoinedBovie RepresentativePreviousExperience

RobGershonChiefExecutiveOfficer December2013

JayEwersChiefFinancialOfficer June2014

ToddHornsbyVicePresident&General

ManagerofAdvancedEnergyAugust2014

ShawnRomanVicePresidentof

R&D,RegulatoryandQualityOctober2014

4

RobSaronPresidentandDirector January1978

MosheCitronowiczSeniorVicePresident October1993

YearsofRelevantExperience

28

34

15

15

35

30 KCRTechnologies SequentialInformationSystems

5

CompanySnapshot

Core

Advanced energy-based medical device company specializing in developing,manufacturing and marketing a range of electrosurgical products andtechnologies, as well as related medical products used in doctor’s offices, surgerycenters and hospitals worldwide.

Founded: 1978

Locations:• Purchase,NY• Clearwater,FL• Sofia,Bulgaria

Full-Time Employees: ~217**

CommercialProfile: >300 products soldin>150countries

LTMSales(9/30/17): $37.0M

OperatingSegments:• Core• OEM• AdvancedEnergy

Yearof IPO: 1982NYSEMKT: BVXMarketCap: ~$127M*

Avg.DailyVol(LTM): ~114,000*

*Shareprice:$3.88asofmarketcloseon10/30/2017;Sharesoutstanding:32.8Masof10/30/2017**Asof12/31/2016LTM=“LastTwelveMonths”

OperatingSegment:“Core”

• Legacybusinessfocusedonthedesignandmanufactureofproductsusedindoctor’sofficesandambulatorysurgerycenters

• Productsprimarilyconsistofelectrosurgicalgenerators&accessories(43%FY’16“core”sales)andbattery-operatedcauteries(26%ofFY’16“core”sales)

• MarketedandsoldbydistributorsworldwideunderprivatelabelandBovie’swell-respectedbrands(Bovie®,IDS™,ICON™&DERM™)

• CoresegmentFY’16EBITmargin:~27%

6

Long-standingrelationshipswith“Big7”distributors: SampleProducts:

“Core”segmentprofile:mid-singledigitrevenuegrowthwithattractiveprofitability

Core:76%ofFY’16Revenue

$24.3M$26.1M

$27.8M~$28.8M

FY'14 FY'15 FY'16 FY'17GuidanceMidPt.

• Manufacturingelectrosurgerytechnologiestomeetdesign-specificneedsoflarge,well-knownmedicaldevicecompanies

• LeveragingBovie’s establishedR&D/innovationcapabilities

• Compellingoperatingprofitability

- OEMsegmentFY’16EBITmargin:~57%

• Segmentrevenuegrowthfluctuatesbasedontimingoforders/demandfrommedicaldevicecustomers

OperatingSegment:“OEM”

7

“OEM”segmentprofile:leveragesR&D/innovationcapabilities;generatesstrongprofitability/cashflows

OEM:15%ofFY’16Revenue

$3.2M$2.1M

$5.3M

FY'14 FY'15 FY'16 FY'17GuidanceMidPt.

$2.5M

• Advancedelectrosurgicalandplasmatechnologysurgicalproducts(generatorsandhandpieces)

• PrimarydriverofBovie’slong-termrevenuegrowth

• Commercializedproductsmarketedthroughdirectselling()andsaleschannelpartnerships()

• Targetedmedicalspecialties:

- PlasticSurgery- SurgicalOncology

- Orthopedicarthroscopy/sportsmedicine

OperatingSegment:“AdvancedEnergy”

8

“AdvancedEnergy”segmentisthegrowthengineofBovieMedical

AdvancedEnergy:10%ofFY’16

Revenue

$0.2M$1.3M

$3.5M

FY'14 FY'15 FY'16 FY'17GuidanceMidPt.

J-Plasm

aPlazXa

ct

~$6.8M

AdvancedEnergy:J-Plasma®

• Revolutionarytechnologyionizesheliumtocreatestreamofplasmaforcutting,coagulatingandablatingsofttissue

• Superiorprecision,withlimitedthermalspread

- Stable,thin,focusedstreamofionizedheliumgas

- Widerangeofcontrol

- Noconductivecurrentsthroughthepatientduringsurgery

• Allowssurgeonstosafelyperformproceduresonorarounddelicatestructures

• Commercialfocusonplasticsurgeryandsurgicaloncologyprocedurecategories;~2.7millionU.S.proceduresannually

9

Transformationaltechnology;potentialtoreplace‘standardofcare’inavarietyofsurgicalprocedures

UniqueRetractableBlade

J-Plasma®:LimitedThermalDamagevs.Energy-basedSurgicalTools*

• Prospectivestudycomparedlevelsofunintendedthermaldamagetoperitonealtissue(membraneliningtheabdominalcavity)amongotherenergy-basedsurgicaltoolsvs.J-Plasma®

• Redareasrepresentthedepthofthermalorenergydamageeachtoolleftbelowthetissuesurface;blueareasrepresentunaffectedtissue

• J-Plasma®demonstratedfarlowestamountofcollateralthermalinjurytohealthytissuesurroundingtheoperativesite

*Reference:PedrosoJ,GutierrezM,VolkerW.J-Plasma,monopolarpencil,argonbeamandCO2laserelectrosurgery:comparativeevaluationofthermalspreadinaporcinetissuemodel(whitepaper).BovieMedicalCorporation.June2014 10

J-Plasma®:DemonstrationVideo

11VideoURL:http://www.boviemedical.com/downloads/J-Plasma_Demonstration_Video.mp4

J-Plasma®:SampleClinicianFeedback

12

“J-Plasmaisoneofthemostsignificantinnovationsinenergyinmorethanadecade,andithasthepotentialtobeoftremendousbenefittopatientsundergoingsurgeryforprostatecancer.”

-VipulR.Patel,MD,FACSUrologistandRoboticSurgeon

“J-PlasmadeliversthemostprecisionIhaveeverseeninanenergy-baseddevice.Thisallowsthephysiciantotreatsmallandlargeareaswithease.TheamountofenergycanbetailoredtogetoutcomesIhavenotyetseenwithanycompetitivelaserdevice.”

-JasonEmer,M.D.,FAAD,FAACSDermatologicSurgeon

“J-PlasmaisatrulyinnovativetechnologythatwillbeinvaluabletoFacialandPlasticSurgeonsandDermatologists.Thethermalcharacteristicsofthisenergy-baseddeviceareunlikeanydevicescurrentlyavailable.”

-RichardGentile,M.D.,MBAPlasticSurgeon

“Thereisanincredibleamountofcontrolintermsofdepth-of-penetrationbecauseitissosafe;becauseit’snotdeliveringaburningenergy”“It’sachancetobeartistic,becauseyouareusingadevicemorelikeapaintbrushthananatombomb.”

-JosephB.DeLozier III,MD,FACSPlasticSurgeon

J-Plasma®:ExpandingProductPortfolio

13

ContinuedinnovationinJ-Plasmatechnologieswithrecenthandpiece andgeneratorclearances

Precise360®HandpiecePrecise®Handpiece

Ultimate®Generator(Gen.2)

FDA510(k):May2017CEMark:March2017

CommercialLaunch:June2017

ExistingProductPortfolio:

PreciseFlexRoboticHandpieceFDA510(k):May2017CEMark:May2017

ExpectedCommercialLaunch:Q4’17

OpenHandpieceRedesignFDA510(k):March2017CEMark:March2017

ExpectedCommercialLaunch:Q4’17

2017NewProductClearances:

Ultimate®Generator(Gen.1)OpenHandpiece

J-Plasma®:ClinicalValidation

14

• PeerReviewedLiterature:- Publications:2- Presentations:3

• WhitePapers:- Published:10

• PreclinicalandClinicalStudies:

Procedure Area Design IRB/IACUCSubmission

EnrollmentInitiated Completed Published

Preclinical BowelStudy P P P 2H’17

LymphoceleReduction P P P 2H’17

GynecologicOncology P P P P 2H’18

DermalResurfacing(IDE) P P

• Sterile,single-usedeviceforcutting,coagulatingandablatingsofttissue

• Efficienttipdesigntranslatesintothefollowingadvantages:

- Lowpowerrequirementtoinitiateablation- Lowerpower=lowerheat:saferforthepatient- Compatiblewithanygenerator

• Distributionpartner:

- GlobalsaleschannelpartnershipagreementforPlazXact™tobemarketedastheUltrAblatorBipolar®series

• Compellingaddressablemarket:- >1.2Mestimatedknee,shoulder,elbow&ankle

arthroscopyproceduresinU.S.alone

AdvancedEnergy:Ablator

15

PlazXact™

InitialFDA510(k): January2016

CEMark: January 2016

CommercialLaunch: March 2017

• EstablishedIPportfolio;pendingapprovalsfocusedonAdvancedEnergysegment:

IP&NewProductDevelopment

16

GrowingIPportfolioandcontinuedprogressinnewproductdevelopment

PatentsIssued PatentsPending

UnitedStates 41 12

International 23 9

Total 64 21

AdvancedEnergyproductscomprise:42%ofissuedpatentsand100%ofpendingpatents

Progress(2010– 2013):

- 4510(k)clearances- 2CEMarkclearances- 4Productscommercialized

ProgresssinceJanuary,2014:

- 9510(k)clearances- 9CEMarkclearances- 8Productscommercialized

• Productdevelopmentpipelinereinvigoratedin2014:

MedicalAdvisoryBoard• Sixsurgeonthought-leadersrepresentingavarietyofmedical

specialties

• Focusedonidentifying,andmaximizing,theclinicalapplicationsofourinnovativesurgicaltechnology,J-Plasma®

17

Dr.HusamBalkhy,Director,MinimallyInvasive&RobotCardiacSurgery,DuhossoisCenterforAdvancedMedicine

Dr.RobertJ.Cerfolio,ChiefofClinicalThoracicSurgery,NYULangone

DirectoroftheLungCancerCenter,NYULangonePerlmutter CancerCenter

Foundingmember:Dr.VipulPatel,worldrenownedroboticsurgeon,MedicalDirectorofGlobalRoboticsInstitute,Florida

Dr.CraigMcCoy,Women’sWellnessCenter,ColumbiaMO.Obstetrics&GynecologySpecialistAdjunctAssistantProfessorofObstetricsandGynecologyattheUniversityofMissouri-Columbia

Dr.DennisChi,DeputyChiefandHeadofOvarianCancerSurgery,GynecologyServiceatMemorialSloanKetteringCancerCenter

Dr.JackZamora,Oculo-facialplasticsurgeonspecializinginminimallyinvasivecosmeticprocedures.

18

State-of-the-ArtManufacturingFootprint

Clearwater, FL Sofia, Bulgaria China

Size: 60,000sq.ft. 16,000sq. ft. • 70,000sq.ft.

Owned/Contracted:

Owned Owned Contracted

Capabilities:

• Assembly• Integration• FinalTesting• Packaging• SterilizationManagement

• Manufacturing• ComplexComponent

Assembly• InitialTesting

• ComponentManufacturing• Sub-Assemblies• Finished MedicalDevices

(Electrodes)

Thecompanyalsorentsofficespaceof3,650sq.ft.inPurchase,NY

Capacitytoincreaseoutputfromexistingfacilities

19

HistoricalFinancialSummary

($in000's)2016 2017 2015 2016

Revenue $10,063 $9,347 $29,520 $36,627RevenueGrowth(Y/Y) 28.6% -7.1% 6.6% 24.1%

CostofGoodsSold 5,002 4,753 16,963 18,712

GrossProfit $5,061 $4,594 $12,557 $17,915GrossMargin 50.3% 49.1% 42.5% 48.9%

OperatingExpenses 5,306 5,728 19,543 21,707

LossfromOperations ($245) ($1,134) ($6,986) ($3,792)

CashonhandasofSeptember30,2017 $9,411

Q3 FY

20

FY’17GuidanceSummary

• FormalFinancialGuidance:

• TotalGAAPrevenueintherangeof$37.9millionto$38.4million,comparedto$36.6millioninfiscalyear2016.

• AdjustedEBITDAlossinarangeof$3.3millionto$3.5million,comparedtoalossof$2.2millioninfiscalyear2016.

• FY’17totalCompanyrevenueguidanceassumes:• LargestdriveroftotalCompanyrevenuegrowthistheAdvanced

Energysegment,whichisexpectedtogrowsales93%- 98%y/yin2017• SecondlargestdriveroftotalCompanyrevenuegrowthistheCore

segmentwhichisexpectedtogrowsales3%- 4%y/yin2017

Together,salesinourAdvancedEnergyandCoresegmentsrepresentapproximately93%oftotalCompanysalesinFY’17;

guidanceimpliesthesesegmentsgrow~14%y/yin2017

FinancialAppendix

BalanceSheet

22

(Unaudited)(Inthousands)September30,

2017December31,

2016

ASSETSCurrentassets:Cashandcashequivalents 9,411$ 14,456$Restrictedcash 779 779Tradeaccountsreceivable,netofallowanceof$154and$118 4,077 4,733Inventories,net 7,335 6,158Prepaidexpensesandothercurrentassets 634 413Totalcurrentassets 22,236 26,539

Propertyandequipment,net 6,376 6,449Brandnameandtrademark 1,510 1,510Purchasedtechnologyandlicenserights,net 189 215Goodwill 185 185Deposits 84 109Otherassets 119 103

Totalassets 30,699$ 35,110$

LIABILITIESANDSTOCKHOLDERS'EQUITYCurrentliabilities:Accountspayable 1,387$ 1,606$Accruedpayroll 193 419Accruedvacation 330 404Currentportionofmortgagenotepayable 239 239Accruedandotherl iabil ities 2,657 2,604Totalcurrentliabilities 4,806 5,272

Mortgagenotepayable,netofcurrentportion 2,515 2,694Notepayable 140 140Deferredrents 11 14Deferredtaxl iabil ity 564 564Derivativel iabil ities 146 203Totalliabilities 8,182 8,887

STOCKHOLDERS'EQUITY

SeriesBconvertiblepreferredstock,$0.001parvalue;3,588,139authorizedandzeroissuedandoutstandingasofSeptember30,2017and3,588,139authorizedand975,639issuedandoutstandingasofDecember31,2016,respectively — 1

Commonstock,$0.001parvalue;75,000,000sharesauthorized;32,975,174issuedand32,832,095outstandingasofSeptember30,2017and40,000,000sharesauthorized;31,002,832issuedand30,859,753outstandingasofDecember31,2016,respectively 33 31Additionalpaid-incapital 50,156 49,625Accumulateddeficit (27,672) (23,434)Totalstockholders'equity 22,517 26,223Totalliabilitiesandstockholders'equity 30,699$ 35,110$

IncomeStatement

23

(Unaudited)(Inthousands,exceptpersharedata)

2017 2016 2017 2016Sales 9,347$ 10,063$ 27,535$ 27,133$Costofsales 4,753 5,002 13,673 14,049Grossprofit 4,594 5,061 13,862 13,084Othercostsandexpenses:Researchanddevelopment 610 681 2,015 1,941Professionalservices 421 292 1,291 1,045Salariesandrelatedcosts 2,080 2,192 6,783 6,492Selling,generalandadministrative 2,617 2,141 7,950 6,354Totalothercostsandexpenses 5,728 5,306 18,039 15,832Lossfromoperations (1,134) (245) (4,177) (2,748)Interestexpense,net (36) (37) (103) (125)Changeinfairvalueofderivativel iabil ities (69) (683) 57 (555)Totalotherloss,net (105) (720) (46) (680)Lossbeforeincometaxes (1,239) (965) (4,223) (3,428)Incometaxexpense 6 — 15 —Netloss (1,245)$ (965)$ (4,238)$ (3,428)$

LosspershareBasic (0.04)$ (0.04)$ (0.14)$ (0.13)$Diluted (0.04)$ (0.04)$ (0.14)$ (0.13)$

Weightedaveragenumberofsharesoutstanding-basic 31,078 27,075 30,932 27,059Weightedaveragenumberofsharesoutstanding-dilutive 31,078 27,075 30,932 27,059

ThreeMonthsEndedSeptember30,

NineMonthsEndedSeptember30,

ReconciliationBetweenGAAPandNon-GAAP

24

(Unaudited)(Inthousands)

2017 2016 2017 2016NetlossGAAPBasis (1,245)$ (965)$ (4,238)$ (3,428)$Interestexpense,net 36 37 103 125Incometaxexpense 6 — 15 —Depreciationandamortization 171 201 527 556Stockbasedcompensation 191 173 532 533Changeinfairvalueofderivativeliabilities 69 683 (57) 555AdjustedEBITDA (772) 129 (2,748) (1,659)

ThreeMonthsEndedSeptember30,

NineMonthsEndedSeptember30,

25

FY’17GuidanceDetail

• TheCompanynowexpectstotalrevenueintherangeof$37.9millionto$38.4million,representinggrowthof4%to5%year-over-year,comparedtopriorguidancewhichassumedgrowthintherangeofapproximately5%to11%year-over-year.

• TheCompanyexpectstotalrevenuegrowthtobedrivenby:

• AdvancedEnergysalesgrowthintherangeofapproximately93%to98%year-over-yearascomparedtogrowthintherangeofapproximately90%to95%year-over-yearpreviously,

• OEMsalesdeclineintherangeofapproximately50%to55%year-over-year,unchangedfrompriorguidanceexpectations.

• Coresalesgrowthintherangeofapproximately3%to4%year-over-year,ascomparedtogrowthintherangeofapproximately5%to11%year-over-yearpreviously.

• TheCompanynowexpectsadjustedEBITDAlossinarangeof$3.3millionto$3.5million,comparedtoadjustedEBITDAlossinarangeof$2.8to$3.0millioninourpriorguidancerange.

• TheCompanywillrecognizeapproximately$525,000ofseparationrelatedexpenseinthefourthquarterof2017relatedtothedepartureofamemberofitsmanagementteam.TheupdatedadjustedEBITDArangereflectstheimpactofthisexpense.