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FINAL 2014 ZELTIQ Investor Day

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Transcript of FINAL 2014 ZELTIQ Investor Day

Investor Day
September 18, 2014


Today's Agenda
ZELTIQ Management

Mark Foley, President and CEO

Patrick Williams, Senior VP and CFO
Physician Panelists

Video Clips:
Grant Stevens, MD, FACS
Marina Plastic Surgery, Los Angeles, CA

Live Panel:
Elizabeth Tanzi, MD, FAAD
Washington Institute of Dermatologic Laser Surgery, Washington, DC

David P. Rapaport, MD, FACS
Manhattan Plastic Surgery and founder of CoolSpa, New York, NY

The statements made in this presentation regarding ZELTIQ’s belief that continued building on key strategic initiatives will drive its long term success, its expectation of an increase in demand for system sales over the course of 2014, its belief regarding the potential for 2014 and its financial guidance for 2014 are forward-looking statements. The words “believe,” “expect,” “potential”, “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 in ZELTIQ’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014, filed with the SEC on July 29, 2014. 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.

Forward-Looking Statements
The Science
Non-invasively, transcutaneously delivers cold to and
fat cells

permanently eliminate
Normal fat cell


& Proven Technology

Large & Growing


Management Team
& Organizational Changes

Executive Team:
CEO, CFO, CTO, SVP S&M, VP of Op’s

Restructured marketing dept and personnel
Consolidated global sales organization

~65% of organization; ~80% of sales force
Focus on culture
are Strategic Changes Impacting Results?
There are ~10,000
core aesthetic accounts in NA
Through Q2 2014, 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
2014 Full Year Guidance
Revenue ~$160-165M, up 43-48% yoy
Up from $137-140M prior
Consumables ~50% of total

Gross margin ~70%

Adjusted EBITDA margin ~2%
Up from prior guidance for EBITDA loss ~(3%)

~8% 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; 30,000 estimated worldwide aesthetic practices

US population*
Ages 18-65*
Household income >$35K*
BMI 18.5-34.9**
Aesthetically oriented**
Have abdominal back fat**
Have an aesthetic physician
Sources: *US Census 2012 Update; **Zeltiq Consumer Quant Study Q313
Prepared to make purchasing decision next 12 - 18 mos
1. Source: 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.

2. Zeltiq Estimate
Through Q2 2014, we have shipped > 1M cycles, implying
< 1% worldwide penetration
375,000 U.S. patients
receive liposuction / year*
CoolSculpting is a less invasive option with 10x the market appeal

4M U.S. Botox patients
; 14M considerers
Majority are good CS candidates
~47% of CS patients are new to practice^

1 million unique visitors
to coolsculpting.com / year
of CoolSculpting patients are men*
Over 40%
of patients are new to the aesthetic channel*
Over 60%
is bringing new patients into aesthetic channel
no other
* Source: Stevens et. al. Overview of a Clinical and Commercial Experience with CoolSculpting. Aesthetic Surgery Journal. August 2013;33(6)

* Source: Stevens et. al. Overview of a Clinical and Commercial Experience with CoolSculpting. Aesthetic Surgery Journal. August 2013;33(6)

Treatment to Transformation (T2T)
Upgraded Approach from "One and Done" to
Total Body Assessment
Addresses ALL potential treatment areas

Customized treatments plans

More pleasing,
"Wow" outcomes
driving higher patient satisfaction and referrals
CoolConnect real-time business intelligence for practices implemented Q3 2013
Point-of-Sale tool launched across NA installed base with plans to launch internationally

Actionable analytics for practice

Increased visibility and measurement of practice utilization

Improved marketing ROI analysis

The Systems Opportunity
The U.S. Patient Opportunity
The Utilization Opportunity
Company Overview

Physician Panel


Strategic Changes
Delivering Results

Platform for Sustainable

Developed by world-renowned, Harvard scientists
Our technology
Based on
fat cell hypersensitivity to cold
– more than skin, nerves, muscles

1970 - Popsicle panniculitis

1980 - Equestrian cold panniculitis

Science and its broad applications attracted our founding investors

Cleared by FDA 2010
Proven, safe, and efficacious
40+ published clinical papers and abstracts

4,000+ patients treated in clinical studies

Findings conclude:

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

Unique Value Proposition

Targets fat without harm to surrounding tissue

First aesthetic procedure to achieve measurable results without patient discomfort

Once deployed, CoolSculpting does not require staff time

It's About FAT
It's About COMFORT
It's About TIME
Bottom Line
Consistent, clinically proven efficacy and high satisfaction
Market leader in emerging market
Body gradually and naturally processes fat and eliminates dead cells via immune system
over 60 to 90 days
Applied cooling causes onset of apoptosis

Fat cells die in first 2-3 days and begin to collapse

Macrophages digest and consume dead fat cells and lipids

We are the global licensee of Crypolipolysis technology, CoolSculpting
Our technology
1. Epstein EH, Jr., Oren ME. Popsicle panniculitis. N Engl J Med 1970;282(17):966–967.
2. Beacham BE, Cooper PH, Buchanan CS, Weary PE. Equestrian cold panniculitis in women. Arch Dermatol 1980;116(9):1025–1027.
The Science
Patients can to unwanted areas of fat
Before CoolSculpting procedure
After CoolSculpting procedure on abdomen
Fat is evenly distributed
Less ability to store fat in treated area

Fat still evenly distributed among remaining fat cells
say goodbye
The Evolution
Revenue (M)
New mgmt team
Strategic changes
delivering results

Leadership & Sales Structure
Focused on Outcomes
Optimized Marketing Strategy
Streamlined Product Roadmap
Improved Sales Focus with Bifurcation
Introducing patients to CoolSculpting and practices
Focused Practice Development Managers
Adding value to practices and increasing utilization
PDM attention positively correlated with consumable revenue per account

Avg. North America consumable revenue
# of PDM activities*
Utilization at practices that hold 5+ annual CoolEvents is
nearly 3x
that of practices that don't host any

CoolSculpting University

Hands-on learning

Live demonstrations

Treatment techniques

Consultation strategies

90-day business plan

Comprehensive 2-Day Training Program at HQ
Non Attendees
CSU drives a
Sell-In Revenue Cycles/ Account/ Day
1st Half 2014
dramatic utilization improvement
Increasing CSU's reach in 2014 to
accelerate future utilization
A wealth of insightful data now at our fingertips
CoolSculpting.com Visitors Trending Positively
3 month moving average trend
unique visitors on annualized basis
Utilization is
~2x higher
at accounts with microsites
Search engine marketing
Social media
CoolSculpting.com Physician Locator
Phone call
Free Consultation
Microsites Driving Volume
Q2 Financial Results
Revenue $47M, up 80% yoy

71% Gross Margins

Adjusted EBITDA margin 12%;
up 2000 bps YoY

Revenue Performance
Revenue Performance
P&L Performance
Months to prove out
Little / no published data
Selectively targets fat?
Pain typical
Pain vs Gain
Broad range of treatable body areas?
Staff members freed up during procedure?
New patient generation?
Not without advertising and awareness
Training and education
Physician must figure it out
Field support
Very little
Very little
Marketing support
Very little
Brand awareness and advertising
Usage data
Revenue Structure - Applicators designed for versatility
Vacuum Applicators
Debulking applicator
Sculpting applicators
Surface applicator
System ASP ~$109K USD

Each fits multiple body areas

Purple Series
Gold Series
Blue Series
$125 / cycle
$125 / cycle
$275 / cycle
24-cycle card
(60 min)
24-cycle card
(120 min)
16-cycle card
(60 min)
24 Gelpads
16 Gelpads
24 Gelpads
24 Liners
16 Liners
24 Liners
5 Steps to $200,000
Partnering with physicians to drive successful practices
Applicators and consumables to customize treatment
National avg
~8 cycles/ week
40% of our practices treat toxin patients
each week
If they treat ½ of those
patients with CoolSculpting,
they can generate
in add'l annual revenue
Planning Template
Multi-System Economics
Almost 20%
of U.S. practices have 2+ systems

Patients purchase
larger packages
(8-10+ cycles) thanks to reduced treatment times

satisfaction improves
with more
dramatic outcomes

Higher profit potential
per hour

Greater ability to cater to patients wanting immediate treatments
Accounts with 2+ systems
the consumable revenue

Top 1% generate 10x avg utilization

Top 5% generate 5x avg utilization

Top 25% generate 2x-3x avg utilization

25% of accounts purchase ~$0 consumable revenue in any given quarter

Chart is Okay as is
* American Society for Aesthetic Plastic Surgery 2011 Report
^ CoolConnect
There are several ways to frame our addressable market
We estimate the Global market is
~ $4 Billion
But in truth, the opportunity could be
MUCH greater than that
Systems Opportunity
Patient Opportunity
~1,350 Accounts
And another ~5,000
non-aesthetic addressable accounts in NA
And ~2,000 aesthetic chains and ~1,000 potentially dedicated CoolSculpting stores in NA
(not counting 20,000 medispas)
Low end: 4M candidates
x avg of 4 cycles / patient
x $125 in revenue / cycle
= $2 Billion U.S. Opportunity
And our international patient opportunity is equal in size to the U.S.
Alternative ways to triangulate patient opportunity
Our market opportunity estimate assumes avg of 4 cycles / patient
Patient utilization is growing
with increased indications, optimized marketing, and focus on outcomes (T2T)
Applicators designed for versatility
Vacuum based application with 2 cooling panels
Non-vacuum based application with a large cooling panel
CoolSmooth Revolutionary Applicator
FDA clearance for thigh indication April 2014

$6.1M in Add-on Applicator Revenue in Q2

Rapid adoption by ~60% existing NA accounts by Q2

Increasing multi-system placements

Driving growth in North America utilization

CoolSmooth results speak for themselves
Inner thigh
Outer thigh
How does brand awareness impact utilization and patient demand?
Is there opportunity
for upside?
Higher system revenue
More patients
More cycles per patient
New products
Account Stratification Speaks to
Utilization Opportunity*
*Company data for North America through 1st half 2014
93% Customer Satisfaction
with CoolSculpting
It Works...
Sales Managers
Driving systems sales with existing and new customers
Practice/Marketing support, clinical training
Visibility to deliver sustainable, high growth of revenue CAGR
Scaling toward adjusted EBITDA margin
ESPN Radio Ad in December 2013 -
Utilization Impact in 6 mos
+ 110%
Much of increase driven by
male patients

Drove $140k of incremental revenue in H1 2014
+ 110%
Men accounted for 11% of cycles in Q413

Men now account for
1/3 of cycles

ESPN Radio Ad in December 2013 -
Utilization Impact
by Gender
DFW accounts on average demonstrated faster growth than national avg
ESPN Radio Ad in December 2013 -

Impact on Surrounding Accounts
Stevens WG, Pietrzak LK, Spring MA.
Broad Overview of a Clinical and Commercial Experience With CoolSculpting. Aesthet Surg J. 2013 Aug 1; 33(6): 835-846.
“With careful treatment planning, proper applicator placement, and multiple treatment cycles, Cryolipolysis can produce
results comparable to those of liposuction
“Cryolipolysis is a
well-tolerated, safe, and effective
noninvasive fat removal technique.”

Garibyan L, Sipprell WH 3rd, Jalian HR, Sakamoto FH, Avram M, Anderson RR.
Three-dimensional volumetric quantification of fat loss following cryolipolysis.
Lasers Surg Med. 2014 Feb;46(2):75-80.
FY revenue
$160-165M E
Cash burn
~$0 E*
Source: Vance and Associates Q2’14 Market Research Study, 256 respondents
Treatment to Transformation
CoolSculpting University
Over 550 accounts will have completed CSU by YE 2014
* Company projection for 2014
Practice Support
Brand Awareness
* Company data of average quarterly revenue in North America through Q2 2014
CoolSculpting Patient
4 cycles @ $675
= ~$2700
Physician's Practice
4 cycles @ $550
= ~$2200
4 cycles @ $125
= ~$500
Attractive Corporate Economics
50% of Rev


55% GM
Consumables are increasing as a % of revenue mix
And that
assumes only
1 system / acct
~20% of NA accounts have 2+
Expectations as we build for

PDM support
Increase training efforts with 1-3 training centers next few years
Brand awareness, key opinion leaders, trade shows
New market approvals

At least 1
new product intro each year
Submental applicator US
launch Q3 2015
North America

Steady system placements
with minimal growth in field sales team
~15% of total systems placed
2nd system sales
Steady utilization with PDM growth to ~25 accounts / PDM
Evaluation of new business opportunities
Increased investment in
brand awareness
Investment in east coast training center and other training initiatives
These advantages will
help us capture the
market opportunity that we
framed earlier today
As the market evolves and more competitors enter our space, how will we maintain our leadership position?
What does our business look like at $500M in revenue?
~70% of revenue mix consumables

~30% of revenue international

~75% gross margin

~25% - 30% Adjusted EBITDA
% Men
Annual Practice Revenue from CoolSculpting
Function of patient volume & cycles / patient
Upside to both volumes &
cycles / patient
T2T results speak for themselves
First Treatment
Second Treatment
Procedure by Flor A. Mayoral, MD

First Treatment
Second Treatment
Procedure by Grant Stevens, MD
(No weight change)
First Front Treatment
2nd Front Treatment
2nd Back Treatment
First Back Treatment
Treatment to Transformation
Treatment to Transformation
Treatment to Transformation
Front Treatment
Back Treatment
Treatment to Transformation
Procedure by Scott Gerrish, DO
(+1 pound, -3 inches circumferentially)
Procedure by Suzanne Kilmer, MD

Front Treatment
Treatment to Transformation
Procedure by John B. Fasano, MD
(No weight change)
Back Treatment
Treatment to Transformation
Procedure by John B. Fasano, MD
(No weight change)
Procedure by Edward Becker, MD
(No weight change)
Front Treatment
Back Treatment
Treatment to Transformation
40% increase in avg utilization
Insight into how often our technology is being used
~1 million
Source: data from Dr. Jay Burns, Dallas, TX
Source: data from Dr. Jay Burns, Dallas, TX
Source: data from Dr. Jay Burns, Dallas, TX
Submental Clinical Study Underway
Early results
R&D Pipeline
at least a 20%
25% -30%
National average
Grant Stevens, M.D., on that dynamic
A market leader in emerging market
Scaling toward a adjusted EBITDA margin
Investing to support a R&D Pipeline
25 - 30%
Grant Stevens, M.D., on R&D efforts
Grant Stevens, M.D., on the impact of CoolSculpting on his practice
Submental Clinical Study Underway
Early MRI results
of website
traffic* clicks on a practice locator
* unique and previous visitors
Current R&D
Clinical research and trials toward FDA clearance
~1% penetration
* Hired by new mgmt team; joined on or after 1/1/13
Submental Applicator Prototype
Marking with template
20 degree angle with umbilical
10 weeks post 1 Tx
Submental applicator launching late Q3 2015
Increased efficacy
Shorter cycle times
At least 1 meaningful new product intro each year
Leveragable platform?
No, in most cases
Key Drivers of Sustainable Growth
More patients
More cycles / patient

Installed system base
2+ systems in existing accounts
New practices
New business opportunities (aesthetic chains, Cool Sculpting-focused stores

R&D Efforts
New products and indications
Enhanced outcomes and procedure efficiency
New markets: cellulite, acne, skin tightening

International presence
Increased PDM support in target markets
Brand awareness
Emerging markets
R&D and G&A combined to be ~15% of revenue

S&M between 35% - 40% of revenue
Increased investments in brand awareness

Depr, Amort, & SBC ~5% of total revenue
* Data is for representative purposes only
50% of Rev


85% GM
Visibility to deliver sustainable, high growth of revenue CAGR
at least a 20%
First quarter of GAAP earnings in company history
GAAP EPS $0.07

Generated ~$2M in cash
The CoolSculpting procedure for non-invasive fat reduction is FDA-cleared for the flank (love handle), abdomen, and thigh. The CoolSculpting procedure for non-invasive fat reduction is available worldwide. ZELTIQ, CoolSculpting, the CoolSculpting logo and the Snowflake design are registered trademarks and Fear No Mirror is a trademark of ZELTIQ Aesthetics, Inc. © 2014. All rights reserved.
*Excludes Cash Tax Liability related to Restricted Stock Units
Clinical research and trials toward FDA clearance
Pre-clinical research & advanced concept development
1 & 2 hour cycles
Skin Tightening
Early stage clinical research
Faster and Better
New Market Opportunities
Full transcript