growing, profitable market for Diabetes. management WHO global estimates of people with diabetes Diabetes is not curable, but it is manageable …
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Shaping the future of diabetes care
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Heino von Prondzynski
Head of Roche Diagnostics
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The idea
Roche Diagnostics, the worldwide leader in Diabetes
monitoring, and
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Disetronics, the worldwide number 2-player in insulin
pumps, want to combine their know-how, and shape the future of Diabetes
management
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Roche Diagnostics focusing on high value growth areas
Leading Diagnostics company Broadest portfolio covering all customer segments
5,367 CHF m 11 growth YTD Q3 02 vs Q3 01
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sales growth
Strong growth in high margin areas
margin
1,858
Diabetes Care Molecular Dx Applied Science
35 15 14 19 8 8
732 429 440
History of creating new markets and shaping healthcare
Near Patient Testg 8 7
1,908
Centralized Dx
35 8
4
growth in local currencies
Strategic rationale Shaping the future Diabetes Care market
Expanding Roche Diagnostics role in the rapidly growing, profitable market for Diabetes management Creating a platform for additional growth through entry into the attractive insulin pump market Leveraging the Accu-Chek brand and proven business models to a related Diabetes business Leading the vision of creating an automated pancreas by
combining blood glucose monitoring with insulin delivery technologies, and the know how of two leading companies
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Roche Diabetes Care Gaining market share - in blood glucose market
others Abbott Bayer Lifescan
7 11 16 8 10 17 30 10 10 16 28 11 9 14 29
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32
Roche
34
35
36
37
1999
2000
2001
2002 est
Note: Other includes Generics, Private Label including Abbotts activities, KDK, Therasense, other manufacturers6 Source: Roche analysis - Market Share Tracking 14 Key Countries
r Diabetes: a problem of epidemic proportion
WHO global estimates of people with diabetes
350 300 millions of people 250 200 150 100 50 0
3 CAGR 3 CAGR
300
150
120 30
2002
240
60
2025
20 are on insulin therapy
Sources: WHO Report / Zimmet, P Et al Global and societal implications of the diabetes epidemic, Nature 2001
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Blood glucose monitoring is 30 of the overall Diabetes market
80
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CHF 215 billion 2001
50 15 70
30
glucose monitoring insulin delivery insulin oral antidiabetic
8 Source: Roche analysis
therapy
Glucose monitoring and insulin delivery
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Combining to improve treatment outcome
blood glucose monitoring CHF 45 billion 10 pa insulin therapy CHF 5 billion 5
pa
insulin delivery
CHF 15 billion 11 pa value driver: superior treatment outcome stronger marketing position
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for people with diabetes on insulin treatment
Monitoring and therapy delivery are convergingr
Disetronics pump technology a key component
Syringe Insulin Delivery Pens Pump Pump/ blood Glucose Meter Communication Open-loop Automated Pancreas Closed-loop Automated Pancreas Insulin Algorithm Continuous Monitoring Meters and Strips Strips Integrated Strips Systems
Blood Glucose Monitoring
today
future
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Roche adding marketing and sales muscle to penetrate US market
US market 2001
Animas 1
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non-US market 2001
Disetronic 17 Medtronic/ Minimed 82 Disetronic 70 Medtronic/ Minimed 30
total: CHF 160 m
total: CHF 550 m
top 13 countries
total market 2001: CHF 710 million with approximately 11 growth pa
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Insulin delivery market far from saturation
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Intensive insulin therapy gaining in acceptance World-wide 200,000 pump users
North America 130,000 Europe 60,000 Rest of world max 10,000
Pump therapy known and accepted in more and more countries Reimbursement environment improving Continuous glucose monitoring will increase market potential
for pumps significantly
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Entry into insulin pump market Growth opportunities on many levels
Increase market share in existing markets eg US Expand pump penetration in Europe Improved sales of Roche Diagnostics current glucose monitoring systems with improved access to endocrinologists and high frequency testers
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Efficiencies in RD due to coordination and streamlining of project portfolio Generating pump sales in countries other than North America and Europe
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Willy Michel Founder and Chairman, Disetronic
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Disetronic, the worlds No 2 in insulin pumps r Double digit sales and profitability growth
Disetronic Business HY 2002/ 03 vs HY 2001/ 02
consolidated total sales 157 million CHF 136 in 
local currencies, 85 in CHF net profit 29 m CHF 355 earnings per share 1497 CHF 346 around 1,270 employees in EU and USA
Injection Systems
241
759
Infusions Systems
- sales 115 m CHF - up by 92 local - global market share 30
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2001/2002 sales mix
Infusion Systems Division: Insulin pumps
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Continuous insulin administration in accordance with individually programmed requirement profile Additional dosage possible at any time eg mealtimes Administration of
insulin to the body via an infusion set 3 models:
- H-TRONplus: The proven one - D-TRONplus: The innovative one - Dahedi: The discreet one
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Business model with two elements bringing profitability
Insulin pumps Consumables
glass and plastic cartridges batteries carrying systems various infusion sets catheters changed 3-4 days
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17
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Dr Erich Hunziker Chief Financial Officer, Roche
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Proposed transaction structure Effected through two consecutive but concurrent steps
Infusion Systems Infusion Systems Disetronic Disetronic
Sales: 300 m CHF Sales: 300 m CHF Sales: 228 m CHF Sales: 228 m CHF
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Injection Systems Injection Systems
Sales: 72 m CHF Sales: 72 m CHF
Disetronic
34 or 066 million shares committed by major shareholder 61 or 118 million shares are publicly traded Public tender offer on 100 of outstanding Disetronic shares CHF 670 for each Disetronic share 184 million x 670 CHF 1 230 mm 2 GS per Disetronic Share 37 million GS 350 mm Total Offer 1 580 mm Sale of Injection business from Disetronic to Mr Michel 420 mm
Step 1:
Step 2:
Net Cost to Roche after consuming the tender offer
1 160 mm
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Assumes Roche Genussscheine GS at 95 CHF per
share
Valuation
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Share development of Disetronic
Average: 10 days CHF 536, 1 month CHF 557, 3 months CHF 563, 1 year CHF 670
1600
CHF / Share
1400 1200 1000
Offer
800
543 CHF
600 400 200 0 02 January 2002
70203
02 April 2002
02 July 2002
02 October 2002
02 January 2003
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Transaction multiples based upon the tender offer
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01/02 2004E EV/ Sales EV/ EBIT 49 35 33 17 14
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EV/ EBITDA 25
Outlook financials
EBIT impact:
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slightly dilutive for the Roche group in 2003 and slightly accretive in 2004 dilutive for Roche Diagnostics in 2003 and slightly accretive in 2004
Overall, guidance for the Roche Group and Diagnostics unchanged
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Public tender offer on Disetronic shares
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Timing / next steps
Pre-announcement Voranmeldung Corporate due diligence Publication of tender offer End of first offer period 20 bank days Announce interim results of tender offer Closing February 10 February - March March 24 April 22 End April May - June
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Disetronic Extraordinary shareholder meeting March
Appendix
About Roche Diabetes Care
Pioneer in the development of blood glucose monitoring systems Sales and growth Q3 02 vs Q3 01 186 m CHF, 15 local Market Share
2002E: 37 Main products: Accu-Chek Advantage Accu-Chek Active Accu-Chek Compact
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Accu-Chek Advantage
Accu-Chek Active
Accu-Chek Compact Estimate based on Q1-Q3 2002
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Disetronic who they are
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A leading global supplier of medical devices and systems for the administration of liquid medication for ambulatory therapies The worlds No 2 in insulin pumps for the treatment of diabetes and the largest independent manufacturer of injection pens for various therapies
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r Diabetes is not curable, but it is manageable
Detect diabetes at an early stage and treat it correctly
Type I 10 insulin therapy Type II 90 insulin, oral, exercise, diet etc
Blood glucose levels for people with diabetes are generally too high and subject to extreme fluctuations Insulin is lacking or completely unavailable or it is available but not sufficiently effective Insulin therapy:
measure blood glucose levels regularly determine insulin requirement administer insulin
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Blood glucose monitoring market
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Sustained double digit growth
local CAGR 1995-2000 14
16000 14000 12000
CHF million
CAGR 00-05 CAGR 05-10 11 10
15,000
10000 8000 6000 4000 2000 0 1998 1999 2000
2001
4,845 4,250 5,765 6,465
9,500
2005
2010
local growth
Note: Source:
14
14
12
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includes, lancets, diabetes urine testing, other Roche analysis
Source:childrensdiabetesfdn.org
