42
Analysts’ and Media Conference November 5, 2009 Zurich Third Quarter 2009 Results
Analysts’ and Media Conference
November 5, 2009 Zurich
Third Quarter 2009 Results
2
This presentation contains forward looking statements which involve
risks and uncertainties. The actual performance, results and timing of the
business of LifeWatch AG, could differ materially from the performance,
results and timing in this presentation. This presentation does not
constitute an offer to sell or a solicitation to an offer to purchase any
securities of LifeWatch AG, any such decision must not be made on the
basis of the information provided in this presentation. This presentation
must not be distributed in or into the United States of America.
3
LifeWatch – Presentation Team
Dr. Yacov GevaChairman & CEO
LifeWatch AG
Kobi Ben EfraimChief Financial Officer
LifeWatch AG
Brent AtwoodChief Operating Officer
LifeWatch
Agenda
o Business Highlights Q3 2009 – Dr. Yacov Geva
o Financials Review Q3 2009 – Kobi Ben Efraim
o Reimbursement Environment – Brent Atwood
o NiteWatch Launch Update – Brent Atwood
o Summary – Dr. Yacov Geva
4
Dr. Yacov Geva, Chairman & CEO, LifeWatch AG
Business Highlights Q3 2009
• Main subsidiary LifeWatch headquartered in Rosemont, ILHeadquartered in Switzerland, listed on SIX Exchange
• The leading 24/7/365 cardiac event monitoring company in U.S.
• Employs 692
Profitable wireless healthcare monitoring company
• Wireless Ambulatory Cardiac Telemetry – LifeStar ACT
• Comprehensive platform for multiple markets – eHealth, Home Health, Disease Management and Wellness
Delivers Next-Generation health monitoring platform
• Covers >297 million lives at a higher reimbursement rates for ACT
• Over 1.5 million patients monitored by LifeWatchIncreasing market acceptance
• USD 34.1m Q3 2009 revenues reflecting 47% growth over Q3 2008
• 30.6% EBITDA marginStrong financial performance
LifeWatch Overview
6
LifeWatch Continued Success
13.6 13.6 12.914.8
16.0
20.3
23.124.8
28.0
33.9 34.1
0%
5%
10%
15%
20%
25%
30%
10
15
20
25
30
35
Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
EB
IT M
arg
in
Qu
art
erl
y R
eve
nu
e
LifeWatch Quarterly Revenue
REVENUE EBIT Margin
7
in USD
Million
Fiscal Highlights Q3 2009 versus Q3 2008
8
in USD Million
23.1
34.1
Q3/08 Q3/09
REVENUES
3.8
8.8
Q3/08 Q3/09
EBIT
4.8
10.4
Q3/08 Q3/09
EBITDA
3.3
9.2
Q3/08 Q3/09
Cash from Operations
47% growth
year-over-year 118% growth
year-over-year
180% growth
year-over-year
133% growth
year-over-year
LifeStar ACT Growth
9
663 1,252 1,4952,722
5,126
7,1068,545
11,154
15,427
18,697
20,164
0
5,000
10,000
15,000
20,000
25,000
Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Enro
llme
nts
6,132 enrollments in 2007 31,931 enrollments in 2008
Exceed
75,0
00 e
nro
llm
en
ts
in 2
009
54,288 enrollments
in first 3 quarters of 2009
10
Expanding ACT Family of Products
Launched: Q1 2008
Features: 3-channel
Act I Act ExAct III
Launched: Q1 2007
Features: Auto-detect,
auto-send
Launched: Q2 2009
Features: Holter
capabilities
o Patient care programs:o AF Patient Care Program: Launched Q2 2008: Customized
program for post-surgical monitoring of patients undergoing AF catheter and surgical ablation procedures.
o Patient Stroke Care Program: Launched Q3 2009: Monitoring patients who have experienced a Transient Ischemic Attack / Stroke of unknown origin (cryptogenic).
Diverse LifeStar ACT Revenue
11
LifeWatch Continues to Diversify the ACT Platform
LifeStar ACT Enrollments Q3 2009
LifeWatch Clients / Sales Force Expansion
o Customer base: Over 7,000 U.S. customers including 3,900 private cardiology groups (serving 23,000 cardiologists)
o 4 new Federal accounts in Q3 2009, bringing the total to 39 Federal accounts
45
56
71
89
98
107
0
20
40
60
80
100
120
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Sales Reps
12
13
Multiple Growth Opportunities
o Demographic changes drive demand
o Aging population
o Obesity
o Product innovation
o Expansion into additional disease states
leveraging our monitoring platform
o Continued outsourcing of cardiac monitoring
o Consolidation of Independent Diagnostic
Testing Facilities
14
Demographic Changes Driving Demand for
Cardiac Monitoring
As people get older the risk of
cardiac arrhythmias increase
Obesity is a major risk factor for heart attack,
according to the American Heart Association.
Graying of America:
Percent of U.S. Population Over 65Obesity:
Prevalence of Overweight and Obese in U.S.
Source: Centers of Disease Control; National Health and
Nutrition Examination Survey (NHANES); 2002
Source: Population Division, U.S. Census Bureau;
August 14, 2008
Aging and obesity trends are driving demand for cardiac monitoring
15
o Embedded software and hardware in one microchip for: o Cardiology
o Diabetes
o Hypertension
o Wellness applications
o Congestive heart failure (CHF)
o Chronic obstructive pulmonary disease (COPD)
o Indispensable technology for implementing highly functional, compact integrated circuits used in today’s electronic products
o Faster time to market through shorter design and development cycles
ASIC Core Technology
Strong Technology Platform Leveraged Into New Markets
16
Comprehensive Wireless Health Care Platform
for Multiple Markets
o Increasing Disease
Prevalence by population
o Cardiovascular Disease
o Diabetes
o COPD/Asthma
o Obesity
o Sleep Apnea
o Chronic diseases
o Aging population
o Nursing shortage
o Exploding healthcare costs
17
U.S. Cardiac Arrhythmia Monitoring Market
= USD 2 billion U.S. Cardiac Monitoring Market Wireless Monitoring Penetration
Higher diagnostic yield
will drive adoption of
wireless systems
Independant diagnostic
testing facilities (IDTFs)
gain share as hospitals
and physician offices
continue to outsource
Source: Frost and Sullivan; Cardiac Monitoring Outlook, 2008
18
U.S. Cardiac Arrhythmia Monitoring Market
= USD 2 billion
U.S. Cardiac Monitoring Market Highly Fragmented Market
Dominated by a Few Providers
Market leaders will benefit from consolidation
Source: Frost and Sullivan; Cardiac Monitoring Outlook, 2008
IDTFs
33%
Hospitals
22%
Physicians
45%
Kobi Ben Efraim, Chief Financial Officer, LifeWatch AG
Group Financial Review Q3 2009
o Q3 2009 of USD 34.1 million increased 47% over Q3 2008
o Monitoring Services contributed 95.4% of total revenues
16.0
20.3
23.124.8
28.0
33.9
Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Strong Revenue Growth
20
34.1
0
5
10
15
20
25
30
35
40
Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
LifeStar™ ACT Cardiac Event and Other Holter Pacemaker Technologies
Primarily Driven by LifeStar ACT
13.6 13.6 12.914.8
16.0
20.3
23.124.8
in USD Million
28.0
14.0
10.3
17.9
8.1
3.4
33.9
24.3
ACT revenue of USD 25.6 million increased 148% in Q3 2009 compared to Q3 2008
34.1
25.6
21
22
Efficiency Initiatives
o LifeWatch implemented cost efficiencies in an effort to
offset a portion of the Highmark/Medicare reimbursement
reductions
o Improved software algorithms lower the average
number of transmissions per patient
o Reduced labor cost
o Renegotiated communication cost and limited phone
activation time
o Despite the flat sequential revenues, LifeWatch still
delivered improved profitability
23
4.4 4.8 5.3
6.9
8.9
10.4
0
2
4
6
8
10
12
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
EBITDA
11.913.9 14.4
17.1
20.222.2
0
5
10
15
20
25
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Gross Profit
Improving Profitability
o Gross profit: USD 22.2 million in Q3 2009 increased 60% YOY from USD 13.9 million in
Q3 2008
o Gross margin: 65.2% in Q3 2009 compared to 60.1% in Q3 2008
o EBITDA: USD 10.4 million in Q3 2009 increased 118% from USD 4.8 million in Q3 2008
o EBITDA margin: 30.6% in Q3 2009 compared to 20.7% in Q3 2008
1.01.6
2.8
5.35.0
7.3
0
1
2
3
4
5
6
7
8
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Net Income
o EBIT: USD 8.8 million in Q3 2009 increased 133% from USD 3.8 million in Q3 2008
o EBIT margin: 25.8% in Q3 2009 compared to 16.3% in Q3 2008
o Net income: USD 7.3 million in Q3 2009 increased 354% from USD 1.6 million in Q3 2008
o Net income margin: 21.5% in Q3 2009 compared to 7.0% in Q3 2008
EBIT and Net Income Performance
24
*
*USD 5.3 million does not include the one time tax
benefit of USD 5.7 million
3.33.8 4.0
5.6
7.2
8.8
0 1 2 3 4 5 6 7 8 9
10
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
EBIT
o Cash flow provided by operations of USD 9.2 million, versus
USD 3.3 million in Q3 2008
o Days sales outstanding in Q3 2009 of 45 days compared to
50 days in Q3 2008
3.1 3.34.5 4.5
8.29.2
0
2
4
6
8
10
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Improving Cash Flow From Operations
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o Q3 2009 cash, cash equivalents, marketable securities and structures in an amount of USD 38.0 million
17.820.8
24.025.6
30.2
38.0
10
15
20
25
30
35
40
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09
Stable Financial Position
26
Reimbursement Environment
Brent Atwood, Chief Operating Officer, LifeWatch Corp.
LifeWatch Reimbursement Profile
o Highmark Medicare Services implemented a reimbursement
rate of USD 754 per patient on September 1, 2009
o Commercial payor reimbursement rate has remained stable
for the third quarter 2009
28
Medicare Reimbursement Environment
o January 1, 2009, Category 1 code 93229 took effect for wireless cardiac monitoringo At the time CMS did not price the code nationally and allowed regional
Medicare administrators to set rates
o Highmark of Pennsylvania set the reimbursement rate at USD 1,123
o July 1, 2009, CMS declined to establish a national reimbursement rate
o July 10, 2009, Highmark communicated an intent to reduce the reimbursement rate from USD 1,123 to USD 754 beginning September 1, 2009
o September 1, 2009, Highmark implemented the reimbursement rate of USD 754o LifeWatch is in continued discussion with Highmark in an effort to
demonstrate the value of wireless cardiac monitoring and quantify our cost structure
29
Commercial Reimbursement Environment
o LifeWatch has contracts with 469 independent
commercial payors covering 297 million lives
o Q3 2009 added 5 managed care contracts covering
1 million lives
o Majority of commercial contracts automatically
renew at the same rate ever year
30
LifeWatch Reimbursement Strategy
o IDTF Coalition
o Federal and State legislative efforts
o Partnership with U.S. wireless carriers
o (Verizon / AT&T)
o Landmark clinical assessment of about 1,000
ACT patients
o Active dialogue with Highmark and CMS
31
Realizing the Value of Wireless Medicine
32
“The current health care crisis has
some experts saying that
telemedicine's time has finally
come.”
CNET July 2009
“We are already experiencing the
promise and potential of the next
generation of telemedicine systems
that focus on improving the
productivity of clinical staff, and
quality, access, and convenience for
all health consumers.”
Rep. Butterfield (D-N.C.) May 2009
“Intel prescribes telemedicine to
treat health costs”.
San Francisco Business Times
2009
Brent Atwood, Chief Operating Officer, LifeWatch Corp.
NiteWatch Launch Update
The Dawn of a New DayHome Sleep Apnea Testing
o In July, LifeWatch announced its intent to launch a home sleep test (HST) for the diagnosis of obstructive sleep apnea (OSA)
o OSA is a widely undiagnosed medical condition that is highly correlated with other chronic diseases
o LifeWatch will leverage its medical monitoring expertise into a competitive advantage in the OSA market
o LifeWatch is the first Cardiac IDTF to enter the sleep apnea market
o HST is a first step in diversifying LifeWatch’s service offering
34
Sleep Apnea Diagnosis is a
Large Market Opportunity
o 38 million patients affected with OSAo 18 million afflicted with moderate to severe OSA
• 15 million undiagnosed (85%)
o 3 billion (USD) Market Internationally (2008)o U.S. Market approximately USD 1.5B
o Estimated 2 million tests in 2006 (1 million U.S. tests)
o Equipment, Diagnostic Testing, Therapy Products/Services
o 20-30% annual growth over next 5 years
o Diagnostic location: 80% sleep lab / 20% home testing
35June 2007 - CANACCORD ADAMS
NiteWatch: Corporate Website Launched November 2009
36
NiteWatch Service Model
Physicians enroll
patients on NiteWatch
Ave. 2-3 nights of data is
recorded and sent back to
LifeWatch
LifeWatch bills patients’
insurance company
ASP of USD 400-450
Report sent to prescribing
physician after interpretation by
LifeWatch contracted physician
LifeWatch validates insurance
for NiteWatch coverageStep 1LifeWatch establishes patient
hook-up for NiteWatch service
Step 2
Step 3
Step 4
Step 5
Step 6
NiteWatch
Continuum
of Care
37
NiteWatch Payor Coverage Update
o WPS/Medicare approval pending as a Sleep Apnea IDTF o Filed application with Medicare: October 1, 2009
o Completed on-site review: mid-October
o Signed 166 managed care contracts, covering 90 million lives for the NiteWatch service
o We are negotiating with about 200 of remaining carriers
o Anticipated ASP: USD 400-450
38
NiteWatch Market Entry Milestones
Beta Test Update
o About 10 client organizations participating in our beta programo 30-40 patients enrolled in LifeWatch service
o Coordinating a nationwide network of physicians to interpret sleep data in the State that it was recorded. o Necessary for Medicare certification
o On track for January 2010 for national physician coverage
NiteWatch Milestones
o NiteWatch monitoring service rollout:o Q3 2009 beta testing
o Q4 2009 expanded launch
o Q1 2010 general availability
o Managed care objective:o 60%-70% commercial coverage by January 2010
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Dr. Yacov Geva, Chairman & CEO, LifeWatch AG
LifeWatch Summary
41
o Large and growing outpatient cardiac
monitoring market
o Expanding penetration of wireless technology
o Leading provider in a highly fragmented market
o Multiple growth opportunities
o Blue-chip customer base
o Entering an attractive sleep apnea market
Investment Highlights
o Operational objectives
o Focus resources on wireless monitoring penetration and market
share growth
o Exceed 75,000 ACT enrollments in 2009
o Continuous development of next generation ACT platform
o Expansion into new service offering - Sleep Apnea
o Financial objectives for 2009
Corporate Outlook
42
Revenue Growth USD 127 – 130 million (>50% )
EBITDA Margin >20%
EBIT Margin >16%
