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ZELTIQ 2016 JPM

CEO Business Update at JP Morgan Conference
by

Tina Jacobsen

on 13 January 2016

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Transcript of ZELTIQ 2016 JPM

Co - Op
Cool Events
R&D Road Map
Agenda
Market Overview and Opportunity

Financial Results

Growth Drivers

2016 Outlook

Forward Looking Statements
The statements made in this presentation regarding ZELTIQ’s estimate of the worldwide opportunity of $4B with potential to be greater, its growth prospects, opportunities, and financial projections, and its confidence in its recently stated long term financial objectives, are forward-looking statements. The words “believe,” “expect,”, "could", "potential", "opportunity, “estimate”, “plan”, “will”, and “guidance”, and similar words that denote future events or results identify these forward-looking statements. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond ZELTIQ’s control and that could materially affect ZELTIQ’s actual business operations and financial performance and condition. Factors that could materially affect ZELTIQ’s business operations and financial performance and condition include, but are not limited to: less than anticipated growth in the number of physicians electing to purchase CoolSculpting Systems; patient demand for CoolSculpting procedures may be lower than ZELTIQ expects; product or procedure announcements by competitors may decrease demand for CoolSculpting procedures; ZELTIQ may incorrectly estimate or control its future expenditures; ZELTIQ’s sales and marketing plans may fail to increase sales as ZELTIQ expects; as well as those other risks and uncertainties set forth under the caption "Risk Factors" in ZELTIQ’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed with the SEC on October 28, 2015. These forward-looking statements speak only as of the date of this presentation. ZELTIQ expressly disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise.

The ZELTIQ Opportunity -
Market leader in estimated emerging non-invasive fat reduction market

Remain on track to deliver through 2019

Committed to a 25% – 30% Adjusted EBITDA Margin at scale

Robust R&D Pipeline leveraging cooling technology
CoolSculpting
Competing
Technologies
Proven?
Months to prove out
Little / no published data
Selectively targets fat?
No
Comfortable?
Pain typical
Pain vs Gain
Broad range of treatable body areas?
Varies
CoolSculpting
Staff members freed up during procedure?
No, in most cases
New patient generation?
Not without advertising and awareness
CoolSculpting
Training and education
Limited
Physician must figure it out
Practice support
Very little
Very little
Marketing support
Very little
Brand awareness and advertising
Usage data
No
Leveragable platform?
No, in most cases
Competing
Technologies
Competing
Technologies


J.P. Morgan Conference
January 13, 2016

Mark Foley
President & CEO

There are ~10,000
core aesthetic accounts in NA
Through Q4 2015, CoolSculpting technology has been purchased by

in North America
International market
~ same size as NA market*

~ 40,000 potential accounts globally
We have achieved

of the North American account potential and

of the global account potential*
~13% penetration
* ZELTIQ Company Estimates and Easton Associates: Customer Survey of “Real world” Utilization of ZELTIQ’s CoolSculpting Device and Estimation of the Aesthetics Global Market Size.


~2,225 Accounts
And
another ~5,000
non-aesthetic addressable accounts in NA
And ~2,000 aesthetic chains
and ~1,000 potentially dedicated CoolSculpting-focused stores in NA

~10% penetration
US population*
Ages 18-65*
Aesthetically oriented**
Have abdominal back fat**

Funnels computed using cascading base methodology, including data for household income (HHI) and BMI
(~56% have HHI > $75K and ~ 45% have HHI >$100K)

*US population, age, and HHI from US Census 2012

**
Remaining data from Zeltiq
Consumer Quant Study Q313 and Q415


Would consider CoolSculpting
Prepared to make purchasing decision next 12 mos**^
321M
203M
119M
106M
22M
U.S. Patient Opportunity
Botox created the facial aesthetics market

the
non surgical fat reduction market is expanding the entire aesthetic market


we believe
all aesthetic providers
will need to have a non invasive fat reduction offering

Years ago
Today,
In the future,
Body is the New Face
*As of Q4 2015
"A survey last year
found that
of Americans are
considering aesthetic treatments,
up from
30% two years ago
."*
52%
* American Society for Dermatologic Surgery.


The aesthetics market is experiencing
broad-based growth
And increasing acceptance
~
50%
of CS patients are


~60%
of those are


~20%
of CS patients are
CoolSculpting is bringing new patients into the aesthetic channel
like never before
new to the practice
new to aesthetics*
men*

*ZELTIQ Company consumer research March 2015.


In sum, our
large,

expanding, and underpenetrated
market is capable of supporting
many players

Key advantages will sustain our market leadership
Differentiated Technology
Attractive Economics
Unrivaled support
It is a
win-win for both
patients
and
physicians

Strong Execution in FY15*
Q4 System Placements
Market Overview & Opportunity
Financial
Results

Growth
Drivers

2016
Outlook

Predictable Cadence of New Product Intro's
CoolFit
At least 1 meaningful new product introduction each year

CoolSmooth Pro
CoolSmooth
Thigh Indication
CoolMini

TM
TM
TM
2013
2014
2015
FDA Clearance for Submental Achieved and CoolMini Launched Oct 2015
Arm Indication and Applicator
Cellulite
Next Generation Applicators
Treatment times ~ 30 minutes with colder temps

Successfully launched colder temperature applicator - CoolSmooth Pro

Increased comfort, more consistent draws

Commence roll out 1H 2016; remainder throughout 2017


Pursuing FDA clearance for arm indication

Likely incorporate colder temp technology for reduced procedure times

Targeting FY17 product launch

Upper Arm Applicator Program
Cellulite Opportunity
Introducing Dr. Grant Stevens
Marina Plastic Surgery,
Los Angeles, CA
11 DTC Pilot Markets Across U.S.
Phase 1 Markets:
Atlanta
Dallas
Denver
San Diego

Phase 2 Markets:
Houston
Miami/Ft. Lauderdale
Minneapolis
Philadelphia
Phoenix
Seattle
Washington, D.C.
London first international pilot
2016 DTC Initiative
Thank you!


2016
Next Gen
Applicators
Treatment times reduced ~half



In sum, much about the ZELTIQ opportunity
remains the same
The technology
is unrivaled.
And it works!
The
addressable
market
is BIG!


Significant Utilization Boost for All Tiers of Accounts in Phase 1 Pilot Markets
Top tier
High utilization

Medium utilization
$4B+
20%+ revenue CAGR
beyond non-invasive fat reduction

Sources
Millions

FY15 Revenue ~$255M, up ~46% YoY

Q415 revenue ~$78M
,
up 53% YoY
Int'l contributed ~22%
All Add-On applicator revenue ~$12M
Nearly 1,400 CoolMini applicators shipped WW
Consumables ~45% (~53% ex add-on revenue)
ASPs remain strong for both systems and consumables WW


Solid Intellectual Property
Extended key temperature monitoring IP

Continued work on other method and device claims to enhance and expand IP portfolio


Successfully Extended Patent Protection Through 2029
Proven, safe, and efficacious
60+ published clinical papers and abstracts

5,000+ treatments in clinical studies

Findings conclude:

Consistent, reproducible fat layer reduction
High patient satisfaction
No rise in triglycerides or cholesterol
Skin and surrounding structures safe

Our industry-leading gross margins make us uniquely capable of supporting these growth investments
Other Body Parts & Indications
Next Generation Applicators
Acne
Molly Sims
Account Tier
*Based on CoolConnect data
Lift in Utilization*
Low utilization
Based on strong pilot program results, rolling out national DTC program in 2016

TV/ digital focus to complement Co-Op

Further international DTC pilots

CoolMini-focused campaign


CoolSculpting University
Direct to Consumer Marketing
Submental

And Likely Getting BIGGER!
Cellulite
Acne


Innovation Goals for
ZELTIQ's Cooling Platform
Non-invasive Fat Reduction
New Areas of Opportunity
Cellulite
Acne
Other
Shorter treatment times and improved economics

Increased # of
cycles
per patient


Increased addressable
body parts

Increasing
# of patients that return
for additional treatments
led by non-invasive fat reduction
Large and Growing
Growing Number of
Multi-System Accounts
30%
of N.A. accounts have 2+ systems, up from
13%
in FY12
* Preliminary
Protectable IP?
?
Other
2016 in Focus and On Track
Non-invasive body contouring is the

in the aesthetic market*
fastest-growing category
Website Traffic is Accelerating
Site visits
Joel Stein. "Nip. Tuck. Or Else." Time. June 29, 2015.

Nowhere is that more evident than in our results
Large addressable market

85% of women have some form of cellulite

Limited treatments that deliver effective and durable results and address all aspects of cellulite
In 2013, physicians earned


$3.5 billion globally
The global market is forecasted to
reach in the U.S.
and worldwide by 2017.*
from body shaping treatments*
$700M
$2B
*GlobalData 2015
ZELTIQ System Placements Are Testament To That
System Revenue
Steady NA systems (ex Ideal Image)
Growing International systems
ASP dynamics
CoolMini in new system bundle
CoolMini Standalone
Multi-system
Geographic mix

Consumable Revenue
Steady NA and Int'l Account utilization
ASP dynamics
CoolMini cycle price
Next Generation Applicators cycle TBD
Geographic mix

New applicator Revenue
CoolMini - ongoing launch
Colder temp / shorter time (~45 min CoolMini, ~30 min next generation applicators)


New System Placements
Thermal image of tissue following treatment with Next Generation suction applicator


"People are looking at themselves
every single day
and are
much more critical

of themselves
and
want to look better
.”
What is behind all of this self-improvement
?


Social Media!
Source: NY Daily News
Systems
Estimated
global market opportunity of

Cycles
at least

$4 Billion

309M
112M
197M
85M
29M
2013
2015
2015 Consumer Study Findings
Market size measured at 29M,
up ~6M or ~28%
from 2013

CS brand awareness est 16%,
up ~200bps from 2013


Interest in non-invasive fat treatment is
2x
that for toxin or filler

2x preference
for CoolMini vs other minimally invasive options
Through Q4 2015,
we have shipped
1.7M cycles, implying

of the
U.S.
cycle opportunity
~1% penetration
U.S. Opportunity by Treatment
And we believe the
international
cycle opportunity is

as that of the U.S.
We achieved the strongest
North American and International system placements
ever
in
Q4 2015*
2016
2017+
2018
CoolMini Standalone
at least as large
?
How realistic is continued penetration of that vast opportunity
Gross Profit
Gross profit
100
x
4
Gross Profit
$ 200K
400
= / week

2 patients
Effort Implied in 2 Patients/ Week
Total cycles


Number of patients

x
Average cycles/ patient
Economics implied by 400 cycles*
$ 200K
$ 250K
-
$ 50K
5 Steps to
$200,000

Implied Economics
Practice Revenue
-
Card Purchases


= @ $625/ cycle
= @ $125/ card
400 cycles
400 cycles
Perform ~1.5 Cycles per Day
Partnering with
physicians to drive
successful practices
Size, shape, and curvature of applicator uniquely designed to treat fat bulges under chin and small volume areas of fat

Launched Oct 1, 2015

Outstanding interest; sold nearly 1,400 since launch

Introducing shorter time of 45 minutes

Introducing CoolMini!
Transformational
Results
Photos courtesy of Dr. Kilmer (row 1 and 2) and Dr. Burns (row 3).
Framing the Opportunity
of people concerned with submental fat

Increasing interest as awareness grows
2011 ~3M interested (US)
2015 ~7M interested (US)

estimated submental market opportunity
$750M
68%
Differentiated, Compelling Treatment Alternative for Submental Fat
Completely
non-invasive
procedure

Comfortable
with no numbing required
How is CoolMini Differentiated?
No downtime
procedure

Only 1 to 2 office visits

Cost effective
for both the patient and the doctor

CoolSculpting is a
proven
clinical and commercial solution
1. 2014 study conducted by American Society for Dermatologic Surgery (ASDS)
2. Rabin Research 2011. 1076 interviews conduction of men and women, aged 18-65. 25% would like to have a CS treatment and listed all areas they would like
to treat. Rabin results are applied to the US adult population with treatment areas additionally weighted by gender.
3. ZELTIQ Company Market Research 2015.
4. Wall Street Analyst estimates

1
2
3
4
Marketing and Awareness Initiatives
3x
15%
New Products & Indications
Marketing &
Awareness
Initiatives
Galderma
Partnership
Increased International Investment
Coolmini Standalone

Initial 2016 Expectations
FY revenue ~$315M

FY Adjusted EBITDA of ~11%

Global tax structure initiatives underway
Legal structure in place
Cycle manufacturing in Ireland beginning 2H 2016

Full financial guidance in conjunction with Q4 2015 earnings release in February
Go-forward tax rate guidance
Cash generation and cash EPS metrics
~10M^
Excellent initial results!
over 3x
~3M visits to
CoolSculpting.com
in 2015, up
vs 2014
2.4x
Leveraging Physician Relationships
And Sales Teams
Rolled out to both sales teams at global sales meeting

Physician-focused, nationwide program designed to enhance systems placements and utilization


ZELTIQ Benefits

Galderma Benefits
Access to ~180 Galderma reps

Accounts that purchase a CS machine receive Aspire account credit
Access to ~100 ZELTIQ reps

CS accounts that increase Galderma utilization receive increased co-op benefits

Access to new patients generated by CS
2016 Investments to Globalize CoolSculpting
Int'l currently only ~25% of revenue

New Executive Leadership addition
Todd Zavodnick - President, Int'l

Increasing investments in sales force, infrastructure, and brand awareness

Plans for International CSU as well as increasing satellite CSU classes globally

UK DTC and other markets may follow
* Preliminary and unaudited
Annual Revenue Cycles
* Q4'15 preliminary and unaudited
^ Q4'14 excludes 60 Ideal Image system placements

* Preliminary and unaudited
CoolMini Standalone
Single
Multi
CoolMini Standalone
Add - On Applicators
Patient Opportunity
More Body Parts
Treatment to Transformation
*North America excludes 60 Ideal Image system placements in Q414
2015
2014
2013
Since 12/28/15 launch of nationwide DTC campaign,
week one traffic is up
vs 2015
weekly average
Selfies
prepared to
make purchasing decision
within the next 12 months,
with 2013 consumer study

Add'l within 12-24 months
1. Sources: Rabin Research Report 2011. 1,076 interviews conducted of men and women, aged 18-65. 25% would like to have a CoolSculpting treatment and listed all areas they would like to treat. The Rabin results are applied to the US adult population with treatment areas additionally weighted by gender; ZELTIQ Company Market Research 2015.
2. Zeltiq Estimate

Systems: 385 placements
NA 240 systems, up 20%^
Int'l 145 systems
Multisystems nearly 40% of placements at 90 systems

Total global installed base ~4,600 systems
150 new NA accounts, up ~6%^

Cycles:
Over 270K shipped, up 57% YoY

Utilization:
NA up ~10% YoY; Int'l up ~15% YoY

Q415 Details*
* Preliminary and unaudited
^ Excludes impact of 60 systems and 30 accounts related to Ideal Image in Q4 2014.
Q4 Accounts Added
* Q4'15 preliminary and unaudited
^ Q4'14 excludes 30 Ideal Image accounts

Q4 Revenue Cycles
*
* Preliminary and unaudited
40% YoY
64%
57%
57%
59%
60% YoY
Differentiated, Compelling Treatment Alternative for Submental Fat
Completely
non-invasive
procedure

Comfortable
with no numbing required
How is CoolMini Differentiated?
No downtime
procedure

Only 1 to 2 office visits

Cost effective
for both the patient and the doctor

CoolSculpting is a
proven
clinical and commercial solution
Introducing the CoolMini Stand Alone System!
Opens door to target facial plastic physicians

Lower cost-of-capital option to expand the addressable market for CoolSculpting

~$69K ASP vs ~$118K for current system with full suite of applicators

Configured with CoolMini; expandable functionality with additional applicator and software purchases

Incorporates faster CoolMini 45 min treatment capabilities
CoolMini announcement
Molly Sims campaign
up from ~4-8M
~10M
~6M
Before
Where We Were
Where We Are
Excellent T2T Outcomes
Drive Utilization
Global Utilization
* Preliminary and unaudited
*
North American Utilization
* Preliminary and unaudited
*
Revenue Cycles per Account per Day
Revenue Cycles per Account per Day

of accounts have participated in CSU, Cool Events, and Co-Op

Those accounts have experienced
greater sales results
than non-participant accounts
2016 in Focus and On Track

Continued progress on Adj EBITDA despite growth investments


Nationwide DTC initiative
CSU International
Global sales force expansion
Ireland manufacturing
Galderma partnership
Full transcript