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ZELTIQ JPM 2015 Final

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Tina Jacobsen

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Transcript of ZELTIQ JPM 2015 Final

ZELTIQ
Company Update
January 14, 2015

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 for the full year 2014, 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 third quarter ended September 30, 2014, filed with the SEC on October 28, 2014. 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.



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

selectively
permanently eliminate
Normal fat cell

Why Own ZELTIQ
?

are Strategic Initiatives Impacting Results?
There are ~10,000
core aesthetic accounts in NA
Through Q4 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 an estimated

of the North American
account potential and

of the international
account potential
2015 Projections
Revenue ~$230M, up 30% yoy
International ~25% of total
Consumables ~50% of mix

Gross margin ~71%

OpEx infrastructure capable of supporting higher demand/ revenue
~$10M in incremental investments YoY: brand awareness, international expansion, East Coast CSU, practice support

Expect Adjusted EBITDA % profile to be similar to 2014

Sufficient cash balance of >$50M to support organic growth needs

FY guidance will be provided in conjunction with Q414 earnings release call



<9% 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
** Zeltiq Consumer Quant Study Q313
^ ~50% have Household Income >$75K
and ~ 30% have Household Income >$100K
Would consider CoolSculpting
Prepared to make purchasing decision next 12 - 18 mos**^
309M
197M
147M
121M
112M
85M
32M
22M
4-8M
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 Q4 2014, we have shippe
d 1.5M revenue 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
~50% of CS patients are new to practice^

~
1 million unique visitors
to coolsculpting.com / year
~40% of website traffic clicks on Practice Locator
of CoolSculpting patients are men*
Over 40%
of patients are new to the aesthetic channel*
Over 60%
CoolSculpting
is bringing new patients into the aesthetic channel
like
no other
solution
* Source: Case Study. 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
Comprehensive assessment

Customized treatments plans

More pleasing,
"Wow" outcomes
driving higher patient satisfaction and referrals

Cycles per patient estimated to have increased to ~4 per treatment
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
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
Market leader in estimated 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
exclusive
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.
1
2
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)
IPO
New mgmt team
CoolSmooth
Strategic initiatives
driving results

Bifurcation of Sales Force
Focused on Outcomes
Optimized Marketing Strategy
Streamlined Product Roadmap
Improved Sales Focus with Bifurcation
CoolEvents
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
Attendees
CSU drives a
Sell-In Revenue Cycles/ Account/ Day
2014
dramatic utilization improvement
Increased 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
How
FY14 Financial Results*
Revenue ~$175M to $176M, up ~57% YoY
Q4 revenue ~$51M to $52M, up ~44% YoY




Gross Margin ~71%
Consumables ~46% of mix
International ~23% of mix

Adjusted EBITDA margin greater than previous guidance



CoolSculpting
Energy Delivering
Technologies
Proven?
cycles
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
New patient generation?
Not without advertising and awareness
CoolSculpting
Training and education
Limited
Physician must figure it out
Field support
Very little
Very little
Marketing support
Very little
Brand awareness and advertising
Usage data
No
Revenue Structure - Applicators designed for versatility
Vacuum Applicators
Debulking applicator
Sculpting applicators
Surface applicator
System ASP ~$109K USD

Each fits multiple body areas


5 Steps to $200,000
Partnering with physicians to drive successful practices
Multi-System Economics
Almost 20%
of U.S. practices have 2+ systems

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

Patient
satisfaction improves
with more
dramatic outcomes

Higher profit potential
per hour

Greater ability to cater to patients wanting immediate treatments
Accounts with 2+ systems
generate
the consumable revenue
3x
* American Society for Aesthetic Plastic Surgery 2011 Report
^ CoolConnect
There are several ways to frame our addressable market
We estimate it is
~ $4 Billion
globally
But in truth, the opportunity could be
MUCH greater than that
Systems Opportunity
Patient Opportunity
Utilization
Opportunity
~1,700 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

Low end: 4M candidates
x avg of 4 cycles / patient
x $125 in revenue / cycle
= $2 Billion U.S. Opportunity
And we
believe 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
Surface
Vacuum based application with 2 cooling panels
Non-vacuum based application with a large cooling panel
Is there opportunity
for upside?
Higher system revenue
More patients
More cycles per patient
New products
Area Sales Managers
(ASM's)
Drive systems sales with existing and new customers
32 Capital Reps*
Product Development
Managers (PDM's)
Support practices and drive utlization
70 Consumable Reps*

Differentiated
& Proven Technology


Compelling
Business
Model


Strategic Initiatives
Driving Results


Large & Growing
Addressable
Market


Platform for Sustainable
Growth

Driving to deliver revenue CAGR over next 5 years
Scaling toward Adjusted EBITDA Margin
FY revenue
$25M
$68M
$76M
$112M
~$177M E
Cash burn
($20M)
($25M)
~($2.5M)
~$0 E^
2010
2011
2012
2013
2014
Source: Vance and Associates Q2’14 Market Research Study, 256 respondents
Treatment to Transformation
CoolSculpting University
~500 accounts had completed CSU by year end 2014
Patient Conversion
Brand Awareness
* Company data. Average quarterly revenue in North America through Q4 2014
CoolSculpting Patient
4 cycles @ $675
= ~$2700
Physician's Practice
4 cycles @ $550
= ~$2200
ZELTIQ
4 cycles @ $125
= ~$500
$
Procedure
Economics
Recurring Revenue (Consumables) has a
More Attractive Gross Margin


Systems

55% GM
Consumables are increasing as a % of revenue mix

2014 GM ~71% with ~46% Consumables
And that
assumes only
1 system / acct
~20% of NA accounts have 2+
These advantages will
help us capture the
market opportunity that we
framed earlier
HUGE
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
T2T results speak for themselves
First Treatment
Second Treatment
Procedure by Grant Stevens, MD
(No weight change)
First Front Treatment
2nd Front Treatment
2nd Back Treatment
First Back Treatment
Treat
Treatment to Transformation
Treatment to Transformation
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)
CoolFit
60% increase in avg utilization
Insight into how often our technology is being used
R&D Pipeline
$4B
20%+
25% -30%
Robust
A market leader in an estimated emerging market
Scaling toward a Adjusted EBITDA Margin
Investing to support a R&D Pipeline
$4B
25 - 30%
robust
ZELTIQ is:
of website
traffic* clicks on a practice locator
~40%
* unique and previous visitors
~5% penetration

Increased # of
cycles/
per patient
Increased # of
patients
that return for additional treatments
Increased addressable
body parts
Leveragable platform?
No, in most cases
R&D and G&A combined ~15% of revenue

S&M 35% to 40% of revenue with increased investments in brand awareness

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


Consumables

85% GM
Driving to deliver a highly visible revenue CAGR over the next 5 years
20%+
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.
* Unaudited; per
1/13/15
pre-announcement
^ Excludes Cash Tax Liability related to Restricted Stock Units
Investing in Sales Force to Support Growth
North America
The ZELTIQ Evolution
Revenue (M)
IPO
New mgmt team
CoolSmooth
YOY % Growth
172%
12%
47%
~ 57%
CoolFit
* Per pre-announcem
ent on 1/13/15.
Preliminary and unaudited.
ASM's
PDM's

# of systems
# of accounts
International
Direct Sales

# of systems
2013
2014
2015E
East Coast CSU Opening Q215
to Accommodate Demand
Patient Conversion
Existing Patients
New Patients
Average practice has 10-12K patient charts
Average account treated 1-2 patients/ week
~50% of CoolSculpting patients are new to the practice*
New gateway procedure
High % of men
*As measured by CoolConnect
nearly 3x
Traffic to all brand websites
up 30% YOY
in 2014 to
>1.1MM annual visits

Dec 2014 traffic
up

52% YOY

Normal seasonality over summer months, winter holidays
2012
2013
2014
2015
Direct to Consumer (DTC)
Broad-based Co-op

Pilot Programs
Digital
Training/ education (CSU)

Market Research
3% brand awareness (Q3)
Refined Co-op

Company-led initiatives
Digital strategy (microsites with DTC)
Practice support (Roadmap to $200K)
CRM
PR and social media


Expanded co-op with best practice options

Enhanced in-office programs and promotions

DTC pilots

Enhanced understanding of target customer and positioning

Expanded digital, PR, and social media

Evaluate branded partnership opportunities

Increased investment in international
Evolution of Marketing and Awareness Efforts
Predictable Cadence of New Product Intro's
At least 1 meaningful new product introduction/ year

Evaluating expansion of labeled indications
2013
2014
2015
CoolFit
CoolSmooth
Thigh Indication
CoolMini
(Q4)

CoolSmooth Pro
(Q2)
Significantly shorter treatment time
Improved strapping mechanism
Innovating
to drive:
Investigating
platform expansion of new opportunities
Cellulite treatment
Skin tightening
Acne
Treatment of skin conditions
* Preliminary and unaudited
leadership position?
Energy Delivering
Technologies
Energy Delivering
Technologies
Awareness is Beginning to Grow
Research has indicated only
23%
brand awareness
3%*
Add
28
28

32
47
32
70

535
397
648
489

650
475
8
10
14
157
295
518
Bottom Line
Consistent, clinically proven efficacy
and high satisfaction
Chart is Okay as is
93% Customer Satisfaction
with CoolSculpting
It Works...
Source: Vance and Associates Q2’14 Market Research Study, 256 respondents
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

*Source: ZELTIQ Consumer Quant Study Q3'13
And Our Efforts are Driving Recognition
Ranked
#1 Fastest Growing Medical Device Company
in North America (#24 overall) in 2014

2013 and 2014 winner of
Best Fat-Reducing Treatment

Top performing MedTech stock in 2013

North American Systems vs. Accounts
~20% of accounts have 2+ systems
Increases capacity for add'l patients
Reduces patient treatment times (DualSculpting)
~2,100 systems across ~1,700 accounts
West
44%
Central
21%
Midwest
24%
Northeast
20%
Southeast
24%
% of Accounts that Have Attended CSU
cycles
patients
body parts
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
Applicators and consumables to customize treatment
Applicator
Planning Template
CoolCard
Gelpad
Liner
ASP
Today,
CoolSculpting
is creating the
non-surgical fat reduction market

Years ago
, Botox created the facial aesthetics market

In the future,
we expect all accounts to have a non-invasive fat reduction solution
*ZELTIQ Company estimate
Body is the New Face
We are the global licensee of Crypolipolysis technology, CoolSculpting
exclusive
Our technology
Uses
controlled cooling
to eliminate stubborn fat that is resistant to diet and exercise

Market leader in
non-surgical
fat reduction

FDA-cleared
for flank (love handle), abdomen and thigh
CoolSculpting Technology
Results are proven, noticeable and
lasting
~$175M to $176M*
With Differentiated Technology...
Unrivaled Support...
And Attractive Economics
Small volume and submental applicator
new applicators
(R)
(R)
2
Expectations as we build for
GROWTH!
International

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

At least 1
new product intro each year
CoolSmooth Pro launching Q2'15
CoolMini launching Q4'15
North America

Steady system placements
with minimal growth in capital sales team
~20% of to
tal systems placed
2nd system sales
Steady utilization with PDM growth to ~25 accounts / PDM at beginning of year
Evaluation of new business opportunities
Increased investment in
brand awareness
Investment in east coast training center and other training initiatives
North America
International
R&D
GAAP and Cash Effective Tax Rate expected to be significantly reduced due to benefit from recently formed global IP tax structure
Over 350 systems shipped; total global installed base ~3,200 systems
Over 170K revenue cycles shipped, up ~55% YoY
* Quantity of reps only representative of North American force
1
2
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