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Extending IntegraMed’s Proven Platform into the
Emerging Vein Care Segment
© 2007 IntegraMed America • Proprietary & Confidential
August 8, 2007 Conference Call
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2©2007 IntegraMed™ America • Proprietary & Confidential
+Safe Harbor
Statements contained in this presentation that are not based on historical fact, including statements concerning future results,performance, expectations and expansion of IntegraMed America are forward-looking statements. Actual results may differ materially from the statements made as a result of various factors including, but not limited to, the risks associated with the Company’s ability to finance future growth; the loss of significant business services contract(s); profitability at Reproductive Science Centers® serviced by IntegraMed America; changes in insurance coverage, government laws and regulations regarding health care or managed care contracting; and other risks, including those identified in the Company’s most recent Form 10-K and in other documents filed by the Company with the U.S. Securities and Exchange Commission.
3©2007 IntegraMed™ America • Proprietary & Confidential
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IntegraMed continues to thrive in the Fertility medical sector.
$1.423mm+42%
$66,396mm+7%
• 9 Partners• 22 Affiliates
• Margin improvements at Partners, Corporate
• Value tracking & reporting
2007 (1st Half)
• 8 Partners• 22 Affiliates
• 8 Partners• 18 Affiliates
• 7 Partners• 17 Affiliates
Network Size
$98 (year end)
$2.4 mm 2
+41%
$126.4 mm+10% pro forma
• Increased accountability• Align tactics with customer
requirements• Establish new mgmt team
2006
$68 (year end)$301Market Cap(millions)
• Focus on Shared Risk growth• Establish ARTIC• Increase “Same Store” growth
• Increase in Shared Risk to consumers
• Introduce Marketing Syndicate
Strategic Plan
$1.7 mm+45%
$128.8 mm+20%
+24% pro forma
2005
$1. 2 mm+14%
INMD Net Income
Year over Year %’s
$107.7 mm+15%
INMD RevenuesYear over Year %’s
2004Measure
1. December average 2. Actual net income was $3,224,000 and included a one-time tax adjustment of $821,000.
IntegraMed’s Situation
4©2007 IntegraMed™ America • Proprietary & Confidential
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To put necessary M&A resources in place to act on opportunities
Build an M&A Infrastructure
Select a Sector &
Target
Assess Target
Assess Long-Term Fit
Execute Deal
Objectives
Establish internal M&A team and managementAcquire needed capabilities, e.g.: – Business /
Medical consultants
– Investment Banking
– Valuation– Legal;
Accounting
Activities
To analyze sectors & targets against key criteria
Apply “consumer directed” criteria to sectors to assess fitRank short list of sectorsEvaluate potential target companies within sectorsSelect target company
To assess target attractiveness to IntegraMed
Clarify criteria: – Sound business
model– Performing well– Strong team in
place– Not “broken”– Looking to fuel
growth– Right size for us
to acquireAssess Target vs. criteriaDecide go / no-go and deal terms, as needed
To develop post-acquisition plan for combined entity
Confirm Target’s 3-5 yr StrategyAssess Target functions for Due DiligenceIdentify high-value priorities:– Integration– Build-out Create Post-Acquisition workplan and infrastructure
To finalize acquisition
Finalize due diligence and planningFinalize termsExecute dealBegin Post-Acquisition management
Structured, Analysis-Driven Process
M&A Process Pursued Over the Past 18 Months.
5©2007 IntegraMed™ America • Proprietary & Confidential
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Fertility sector remains strong and our position within it attractive;we are the market leader, with a solid business services infrastructure and good growth potential.
Proven Foundation
The Fertility Sector in the US$3 billion spent annually on diagnostic, medical, surgical and assisted reproductive technology $500 million spent annually on pharmaceutical products 1500 physicians and 425+ fertility centers Continuing market evolution –- Moving from only Early Adopters to a larger
Persuadable target population- Fertility care more widely understood, available- Likelihood of increased consolidation5-year projected industry growth rate: 6%Actual growth rate based on most recent SART data (’04 – ’05) = - 2.3% overall- 12.3% IntegraMed Partners- 1.3% for non-IntegraMed practices
IntegraMed within FertilityExisting Network:- 30 Practices- 22% of all IVF volume in the U.S.- IntegraMed Partners represented 42% of all U.S.
IVF volume growth from ’04 – ‘05Over 20 years in the Fertility sectorNo competitors providing similar practice support services and consumer productsBusiness Services Infrastructure:- Provider Services – full suite of functional services
to support a thriving fertility practice- Consumer Services – we offer products and
services needed to obtain high quality fertility care, more easily and more affordably
- Corporate Platform – with infrastructure in place to support scaled growth and access capital markets as a publicly-traded company
6©2007 IntegraMed™ America • Proprietary & Confidential
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Our research and selection activity led us to the Vein Care Sector and ultimately Vein Clinics of America (VCA).
Complementary Sector & Target
Vein Care Sector in the USElective outpatient treatment, not urgentNiche sector estimated at approx. $2bnUnder penetrated market- Nearly 4.5mm people diagnosed in 2006- 1.8mm sought treatment- only 480k procedures performed- Insurance reimbursement coming onlineProcedures performed expected to grow 12% per year through 2010Narrow, well-defined treatment set; high-volume, replicable – i.e., benefits from economies of scaleWith increased competition – advantages to having experienced business management in place- Industry is very fragmented- Many MD’s do as a “side” business- Blurry line between medical necessity and cosmetic- No competitive networks with scale or services like
VCA
VCA within Vein CareFounded in 1981 – established organizationLeadership position similar to that of IntegraMedFocused exclusively on the treatment of vein disease-related conditionsNetwork of 27 single-MD clinics- Mostly in the Midwest and Southeast- Opening 4-5 new offices per yearHighly replicable clinic model- Focus on single cities, fully penetrate them, then
extend to contiguous areaTarget one clinic per each 1mm population
7©2007 IntegraMed™ America • Proprietary & Confidential
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VCA is very attractive when assessed against our target criteria.
Complementary Business –Meeting all our Criteria
• Pursuing INMD acquisition to achieve growth to next-level• INMD provides scale to effectively fund growthLooking to fuel growth
• Material in size and consideration• Not too large from a risk management standpoint • Attractive EBITDA valuation • Management expertise and infrastructure in place
Right size for us to acquire
• CEO Kush Agarwal remains as division President and joins INMD Board; Dr. Brian McDonagh staying as medical adviser;
• CFO, SVP of Marketing and VP of Operations in place• Regional structure reporting up through VP of Operations being
built out
Strong team in place
• No performance or infrastructure issues requiring re-trenching or significant one-time investment to repairNot “broken”
• Revenues have grown 40% from 2004 through 2006• IBIT has grown 26% during the same periodPerforming Well
• Recruit and train MD’s to follow VCA protocols; sets them up in new market
• Focus on Operational Excellence; replicability of business and clinical operations
Sound business model
Data; ObservationsCriteria
8©2007 IntegraMed™ America • Proprietary & Confidential
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VCA clinics are primarily located in the Midwest and Southeast.
VCA Locations
• West Palm Beach
• Lawrenceville
• Raleigh
• Rockville
• Merrillville
• Milwaukee
• North Kansas City
• Northbrook• Oak Brook• Orland Park• Schaumberg
• Owings MillsMaryland
• ViennaVirginia
• KnoxvilleTennessee
• Charlotte• GreensboroNorth Carolina
• Alpharetta• AtlantaGeorgia
• Ft LauderdaleFlorida
• IndianapolisIndiana
• Overland ParkKansas
• MadisonWisconsin
• St. LouisMissouri
• Bourbonnais• Chicago• Gurnee• Naperville
Illinois
CitiesState
9©2007 IntegraMed™ America • Proprietary & Confidential
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Key Personnel Are Remaining and have/are entering into employment agreements.
Key VCA Personnel
CEO – Kush AgarwalHas served as President and CEO of Vein Clinics of America for 20 years and was a driving force behind the company's growth from a few clinics to a $28.0 million organization. Mr. Agarwal was instrumental in developing the operating model and corporate structure that is VCA.
CFO – Dan DomanHas served as Chief Financial Officer for VCA since early 2006. Mr. Doman has over 20 years financial management experience within the healthcare industry. Prior to joining VCA, Mr. Doman was a Partner at one of the Nation's largest accounting firms.
SVP, Strategic Planning & Business Development – Jim WilliamsHas helped lead the growth and expansion of VCA since joining in 2001. Mr. Williams has over 20 years of experience within healthcare marketing, operations, and finance.
VP Operations – Katherine VanDenHeuvelJoined VCA in May 2000 bringing with her expertise in all areas of medical practice management. In her tenure at VCA she has developed the information support system that has enabled VCA to maximize patient revenue within the entire sales cycle.
Medical Director – Brian McDonagh, MDFounder and National Medical Director of Vein Clinics of America. He pioneered and developed the clinical protocols used by VCA's physicians. Dr. McDonagh is a member of the AMA, the Chicago Medical Society, and the American College of Phlebology and a former diplomat of the American Academy of Family Practice and author of numerous articles.
10©2007 IntegraMed™ America • Proprietary & Confidential
+IntegraMed Organizational Chart
Jay Higham, CEOIntegraMed
John Hlywak,EVP & CFO
Kush Agarwal,President Vein Care
(to be appointed)President
Fertility Care
IntegraMed will organize into Divisions to focus on individual medical sectors while providing Corporate support and oversight.
11©2007 IntegraMed™ America • Proprietary & Confidential
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$35 Million Initial Purchase Consideration$24 million in cash– $13 million from available cash; approx.– $11 million from new $25 million, five-year term loan from
Bank of America, replacing previous loan agreement with INMD
$4 million in stock– 336,700 shares priced at $11.88 per share
Assumption of approx. $7 million of VCA debt
Earn-out based on 2007 and 2008 VCA EBITDA results exceeding targets– 50% cash / 50% stock
Transaction Terms
12©2007 IntegraMed™ America • Proprietary & Confidential
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(1) adjusted for 25% stock dividend paid May 4, 2007.
8.5
$0.42
3.6
4.1
$156.4
Pro Forma Summary
0.3--8.2Diluted Shares Outstanding(1)
----$0.39Diluted EPS(1)
(2.0)2.43.7IBIT
(1.1)1.53.2Net Income
--$ 28.5$ 127.9Revenues
Pro Forma AdjustmentsVCA 2006
IntegraMed2006($Millions, except EPS)
13©2007 IntegraMed™ America • Proprietary & Confidential
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Accretive transaction:Infrastructure investment for combined companies should temper any EPS benefit in 2007 and 2008Accretion anticipated in 2009 and beyondProvides VCA with access to growth capital at lower rates
Attractive Valuation:Purchase price at attractive multiple of EBITDABelow INMD’s current EBITDA valuation
Accretive Transaction: 2008 and Beyond