Company Presentation June 2015 - Jefferies Group · 2015. 6. 11. · Enzymotec At-a-Glance 2...
Transcript of Company Presentation June 2015 - Jefferies Group · 2015. 6. 11. · Enzymotec At-a-Glance 2...
Safe Harbor Statement
This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward-looking statements." Forward-looking statements in this presentation are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “aim”, “forecast”, “project”, “will”, “may”, “might”, “should”, “could” and similar expressions (or their negative) identify certain of these forward-looking statements. The forward-looking statements in this presentation are based upon assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. These assumptions are inherently subject to significant risks, uncertainties and contingencies, including those described under “Risk Factors” in the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission, which are difficult or impossible to predict and many of which are beyond its control and it may not achieve or accomplish these expectations, beliefs or projections. The risks that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, dependence on third parties to obtain raw materials, in particular krill; the sale of a high proportion of the Company’s InFat product to end users by a single company in China; customer concentration and a lack of long-term purchase commitments; possible payment of royalties on sales of our krill products in North America and Australia; the risk of future litigation, including regarding intellectual property rights; possible challenges to the classification of the Company’s products as “medical foods” in the United States; reliance on the Company’s Swedish joint venture with AAK and recently entering into an arbitration proceeding with AAK with respect to certain matters related to the joint venture agreement; dependence on a single facility that houses the majority of the Company’s operations; the Company’s ability to expand its production or processing capabilities; adverse impact on gross profits if the Company is only able to obtain lower quality krill meal; the Company and its customers being subject to significant and increasing government regulations regarding the sale and marketing of the Company’s products and its customers’ products incorporating the Company’s products; and adverse impacts on the Company’s ability to obtain krill due to conservation regulation or initiatives. Please refer to the Form 20-F for a complete list of such risks.
Neither the Company, nor any of its respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation.
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The information and opinions contained in this document are provided as of the date of this presentation and are subject to change without notice. This document has not been approved by any competent regulatory or supervisory authority. This document will not be left behind after this presentation and by accepting this document and attending the presentation you agree to be bound by the foregoing limitations.
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Enzymotec At-a-Glance
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Exchange NASDAQ
Ticker ENZY
Price (as of May 29, 2015) $10.30
Market Cap $232M
Shares Outstanding 22.5M
52 Week Range $5.38 - $15.40
Float 17.3M
Insider Ownership 2.5%
Net Cash $70M*
*As of March 31, 2015
The Enzymotec Edge
Focused on large and growing consumer health and
wellness end markets and spans the health
spectrum from prevention to treatment
Uniquely addresses the entire human life cycle from
infancy to old age
Leader in lipids technologies with clinically-
validated products that address dietary needs,
medical disorders and common diseases, using
molecules familiar to the human body
Fully integrated from research through
manufacturing to marketing and sales
Proprietary, scalable technology platform and
clinical research capabilities integrated across
segments
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Consumer Health and Wellness
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Consumer Drugs
Medical Foods
Clinical Nutrition Branded
Branded Dietary
Supplements
Infant Nutrition
Active Ingredients
Clinical Nutrition
Active Ingredients
BioActive Ingredients
Competitive Edge
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TECHNOLOGY - Proprietary Lipids Technology - Strong Technology Platform - Cover all Clinical Phases
SOURCE OF KNOWLEDGE - Research Activities Span the
Entire Human Life Cycle - Ongoing Market Feedback
FULLY INTEGRATED - Fully Integrated Platform
from Research to Sales
The Biological Importance of Lipids
• Major structural component of all cell membranes
• Key to important biological functions, including cell to cell communication
• ~60,000 different types in the human body and ~60% of the brain's dry mass consists of lipids
• Play an essential role in nerve cells, development and proper function
• Deficiencies or imbalances in lipid levels are associated with a wide array of diseases and disorders
• Limited research despite crucial role in tissue physiology, cell signaling and associated disorders
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Proprietary Lipids Technology
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Natural Resources • Raw Krill • Fish • Vegetable Sources • Bovine Milk
Unique Process
High Value Applications Consumer Health and Wellness Products
Technology Platform and Source of Knowledge
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Lipid Analysis
Data Mining
Enzymatic Technologies
Clinical Trials
Sourcing Intellectual
Property
Process Technologies
Research Centers
Lipid Biochemistry
Lipid Modification
Regulation
Human Life Cycle
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Infants
Teenagers Adults
Seniors
Fully Integrated Platform
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Manufacturing
Process Development Lipid Technology Enzymatic Technology
Research and Development
B2B2C
IP Clinical Support Regulatory Expertise
Global presence in over
30 countries
12 successfully completed
randomized pivotal controlled clinical
trials
23 peer-reviewed
articles
Proven
regulatory track record
Diverse suite of
15 products
Robust IP portfolio of over
160 patents & patent
applications
170 employees
State-of-the-art
GMP-compliant facility in Israel
Key Facts and Figures
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Our Journey So Far…
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1998 1999
2000 2001
2002 2003
2004 2005
2006 2007
2008 2009 2011 2013
2010 2012
January 2001 Moved to new offices in Migdal Ha’Emeq Appointed Dr. Ariel Katz as CEO
Year 2003 First PS revenues
Year 2007 First Krill product revenues
June 2007 Established Advanced Lipids, JV with AAK, Sweden
March 2009 Moved to its current location (Sagi 2000 Industrial Park)
August 2009 Opened new industrial facility in Sagi 2000 Industrial Park
April 2011 Launched VAYA products in US
September 2013 IPO on NASDAQ
March 1998 Established
Year 2004 First InFat revenues
January 2008 Established subsidiary in US: Enzymotec USA Inc.
August 2010 Established second subsidiary in US: VAYA Pharma Inc.
December 2013 Established JV with Polar Omega for Omega PC
Diversified Business Model
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NUTRITION
BioActive Ingredients Infant Nutrition
Omega 3
VAYA PHARMA
Medical Foods
PS Products
Premium infant formula ingredients that seek to resemble more closely the composition and properties of human breast milk
fat
Value-added ingredients for nutritional supplement companies
Lipid-based, branded medical foods for cardiovascular and neurological conditions, sold primarily in the U.S.
under physician supervision
BioActive Business Opportunities
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Cluster of products
Well established marketing infrastructure
Unique value proposition to customers led by strong science
Close relationships with customers
Efficient supply chain
Krill Oil Advantages
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Real Quality The ONLY krill oil produced with MSO® technology Best organoleptic properties Low sodium levels
Customized Solutions Pure krill oil High potency krill oil Custom grades upon customers request
Cost Effective Flexible and competitive prices
Infant Nutrition Opportunities
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Addresses changing trends in the market • Sales channels shift to e-commerce • Segmentation between OEMs and brands • Consumer driven business
Innovative products under development
Tailor custom solutions for each customer
Close relationships with customers
INFAT: Marketed by Advanced Lipids (Joint Venture with AAK)
Oleic Acid O Palmitic Acid P
O
Vegetable Oil
INFAT sn-2 palmitate
Human Breast Milk Fat
P
O
P
P
O
Enzymatic Process
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One Step Closer to Human Breast Milk
Other Oils (>90%)
sn-2 palmitate (<10%)
Infant Formula Oils Market Volume (MT)
INFAT: Marketed by Advanced Lipids (Joint Venture with AAK)
Clinically Proven Benefits
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Clinical Nutrition Market
• 75% of the market controlled by the large players: Nestle, Abbott and Danone
• 25% of the market is spread between >200 small local companies (Revs $1-$40M) that are not fully integrated
• Lack of innovation and most are “Me-Too” with slight formulation changes
• Constant regulatory changes require adjustment
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Clinical Nutrition Market By Formula
Source: Ubic 2014
Enteral nutrition has increasingly been favored over parenteral nutrition due to a higher physiological approach, lower cost and better
maintenance of normal gut function
300,750 165,000 10,000 0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Enteral Formula Parteral Formula Specific Formula
Mar
ket
size
in t
on
s
$5.7 Billion
$5.0 Billion
$0.7 Billion
Global clinical nutrition market was $10.7 Billion in 2013
Global Clinical Nutrition Sales by Disease Group
Source: Ubic 2014
Sarcopenia/Frailty/ Malnutrition
30%
Cancer 20%
Dementia 10%
Surgery/Burn/Wound 8%
Disphagia 8%
COPD & Other Pulmonary Diseases
7%
Dialysis & Urological Diseases
7%
Arthritis & Cardiovascular
Diseases 5%
Other 5%
Growth Strategy
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INFANT NUTRITION
• Develop additional partnerships with branded manufacturers in China • Additional new launches and partnerships outside of Chinese market • Established milk research center to explore and introduce new
ingredients and solutions
BIO-ACTIVE
• Penetrate new territories, particularly in the Far East (China, Korea and Japan)
• Higher quality krill oil and better cost structure to recover market share in US and Australia
• Introduce low sodium krill oil in Europe
CLINICAL NUTRITION
• Identify targets for potential acquisitions
• Launch new and innovative products
What are Medical Foods?
Contains ingredients that are GRAS (Generally Recognized As Safe)
Specially formulated
Based on recognized scientific principles
Produced under current Good Manufacturing Practices (cGMP)
Unavailable via regular diet
Intended for use under a physician's supervision
Nutritional deficiency correlated with diseases
Category of treatment defined by the FDA
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Current VAYA Product Line
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Offers physicians a safe, cost-effective first line therapy alternative as compared to pharmaceutical intervention
Indication
Prescribing Physicians
Other Available Treatments
Clinical Dietary Management of ADHD
Psychiatrist Pediatrician Neurologist
Non-stimulants Stimulants
Clinical Dietary Management of Early Memory Impairment
General Practitioner Neurologist
CerefolinNAC Alzheimer's Disease
Treatments
Clinical Dietary Management of Hypertriglyceridemia
General Practitioner Cardiologist
Lovaza (GSK) Vascepa (Amarin)
Epanova (Omthera) Fibrate/Niacin/Niaspan(Abbott)
Growth Strategy
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• Launch online pharmacy and call center in 2015
• Double number of sales representatives
• Increase market reach in US beyond Southeast into Northeast
• Develop strategic partnerships outside the US
• Expand clinical indications with additional clinical trials
• Increase conference attendance, initiate targeted advertising and expand relationships with key opinion leaders
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Financial Summary
Net Revenues 2011 - 2014
27 (1) Represents Enzymotec’s consolidated financials (InFat revenues represent Enzymotec’s share (50%) of the net results of the joint venture (Advanced Lipids) for US-GAAP accounting purposes). (2) InFat operational figures are based on the proportionate consolidation method and therefore, includes 50% of the InFat revenues from the JV with AAK - Advanced Lipids.
Revenues ($ in millions)
$23
$38
$65
$47
$28
$46
$81
$61
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2011 2012 2013 2014
Equity Method
Proportionate Consolidation Method
(1)
(2)
Profitable Company
28 (1) Margins are calculated based on Enzymotec U.S.-GAAP revenues. InFat revenues represent Enzymotec’s share (50%) of the net results of the joint venture (Advanced Lipids) for U.S.-GAAP accounting purposes. (2) Excludes IPO related bonus of $1 million. (3) Excludes Secondary Offering related expenses of $0.4 million.
Adjusted EBITDA ($ in millions)
Net Income ($ in millions)
Margins (1) 6% 12% 25% 31%
Margins (1) NM 13% 19%
$2.7
$10.5
$18.8
$14.0
$1.3
$7.3
$16.1
$11.4
$0
$5
$10
$15
$20
2011 2012 2013 2014
Nutrition Consolidated
19% 29%
($0.9)
$4.8
$12.4
$8.2
($5)
$0
$5
$10
$15
2011 2012 2013 2014
(2)
34% 24%
17%
(3)
Quarterly Performance
29 (1) Represents Enzymotec’s consolidated financials. InFat revenues represent Enzymotec’s share (50%) of the net results of the joint venture (Advanced Lipids) for US-GAAP accounting purposes. (2) Margins are calculated based on Enzymotec U.S.-GAAP revenues. InFat revenues represent Enzymotec share (50%) of the net results of the joint venture (Advanced Lipids) for U.S.-GAAP accounting purposes.
Consolidated Revenue ($ in Millions) (1)
Adjusted EBITDA ($ in Millions)
Margins (2) 21% 22% 34% 20%
$13.8 $14.9
$17.8 $18.5 $17.9
$9.0 $9.5 $10.8 $11.3
$0.0
$4.0
$8.0
$12.0
$16.0
$20.0
Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
$3.0 $2.9 $3.9
$6.3 $6.5
$1.2 $1.8 $2.0
$2.7
$0.0
$2.0
$4.0
$6.0
$8.0
Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
36% 13%
47% 48% 58% 47% 62% 62% Gross Margins (2)
19%
63% 59%
19%
62%
24%
Significant Conversion of EBITDA into Net Income
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($ in Millions) Net Income Adjusted EBITDA % Conversion
2012 $4.8 $7.3 66%
2013 $12.4 $16.1 77%
2014 $8.2 $11.4 72%
(1) Excludes IPO related bonus of $1 million (2) Excludes secondary offering related expenses of $ 0.4 million (3) As of March 31, 2015
Minimal Interest Expense
Net Cash Position $70M
Low Taxes
Tax exempt in Israel until 2023 due to “approved enterprise”
status
Reduced CapEx and D&A
Capital expenditures and depreciation and amortization
related to manufacturing of InFat borne by JV partner
(1)
(2)
(3)
Outlook for 2015
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2015E YoY % Change
Net Revenues (Equity Method) $52M - $60M +10% to +27%
Net Revenues (Proportionate Consolidation Method) $65M - $75M +6% to +22%
Non-GAAP Net Income* $5M - $8M -45% to -12%
Non-GAAP Diluted EPS* $0.21 - $0.34 -46% to -13%
*The 2015 projected Non-GAAP Net Income and Non-GAAP Diluted EPS include an operating loss of approximately $4.5 million (or $0.20 earnings per share) in VAYA Pharma for operations, infrastructure and clinical trials to reinforce the science and develop additional indication. It also reflects an investment in the development of innovative ingredients for infant nutrition.
Investment Highlights
Unique exposure to health and wellness categories
VAYA Pharma is a growth engine
Stable customer base as the business is B2B
Opportunity to innovate in clinical nutrition
Stabilization in infant formula and krill oil markets
Experienced leadership team and advisory boards
Significant conversion of EBITDA into net income
Strong balance sheet with $3/share in net cash
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Company Management
Dr. Ariel Katz, President and Chief Executive Officer
Joined Enzymotec as President and Chief Executive Officer in 2000
Held senior positions with the Dead Sea Bromine Group of Israel Chemicals Ltd., including roles in R&D, Plant Management, Marketing and Business Development
Bachelor’s degree in Chemistry and an M.Sc. in economic management from Ben-Gurion of the Negev, Beer Sheva, Israel, as well as a PhD in engineering in the field of artificial intelligence
Oren Bryan, Vice President and Chief Financial Officer
Joined Enzymotec as Vice President and Chief Financial Officer in 2008
Served as Chief Financial Officer of MIND C.T.I. Ltd., a global leader in telecom billing and call accounting software
Bachelor’s degree in Economics and Accounting from Hafia University, Israel, and hold the Certified Public Accountant designation
Rob Crim, President and Chief Executive Officer of VAYA Pharma USA
Over fifteen years experience in clinical nutrition and medical foods industries
Held various positions at Danone/Numico, including General Manager of the SHS Business and Regional Vice President – North America
Bachelor’s degree from Harvard University and an M.B.A. from the University of Michigan
Steve Dubin, Chairman of the Board
Joined Enzymotec as Chairman of the Board in January 2014
Principal of SDA Ventues LLC, a firm focused on assisting emerging growth health and nutritional products companies with corporate development, business acquisition and corporate finance
Former Chief Executive Officer and member of the Board of Directors of Martek Biosciences Corporation, leading producers of nutritional supplements with business segments focused on medical foods and infant formula
Holger Liepmann, Director
Joined Enzymotec as a member of the Board of Directors in February 2015
Served in various positions with Abbot Laboratories between 1986 and 2011, finishing with a five-years as Executive Vice President of Nutritional Products
While at Abbot Laboratories, oversaw all aspects of global nutrition business, including R&D, manufacturing, and supply chain and commercial operations
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Thank You
www.enzymotec.com