Transcript Slide 1

(AMEX Symbol: XCR)
Roth 20th Annual OC Growth Stock Conference
February 19, 2008
Forward-Looking Statements
Except for statements of historical fact, the matters discussed in this
presentation are forward looking and pursuant to the safe harbor
provisions of the private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect numerous assumptions and
involve a variety of risk and uncertainties, many of which are beyond
the company’s control that may cause actual results to differ materially
from stated expectations. These risk factors include, among others,
limited operating history, difficulty in developing, exploiting, and
protecting proprietary technologies, the risk that our technology may
not be effective, uncertainty as to the outcome of legal proceedings,
intense competition, and substantial regulation in the medical device
and healthcare industries, as discussed in the Company’s periodic
reports filed with the Securities and Exchange Commission, available
on its website at http:/www.sec.gov.
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Management Team
• Dan Goldberger, MSME
Chief Executive Officer
• Winson Tang, MD, FACP
Chief Operating Officer
• Victor Gura, MD
Chief Medical Officer
• Sound Surgical, Glucon,
OSI Systems, Optiscan
• Amgen, Vertex, Tularik,
Isis, Pacific Capital Grp
• Cedars-Sinai Med. Cntr,
Assoc. Clin. Prof., UCLA
• Robert Weinstein, CPA, MBA • Able Labs, Healthcare
Chief Financial Officer
Private Equity, GE Cap.
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Selected Board Members
• Hans Polaschegg, Ph.D
• Fresenius
• Extracorporeal
Technological
Committee Chairman
• Kelly McCrann, MBA
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•
•
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DaVita
PacificCare
KPMG
McKinsey & Co.
Xcorporeal Highlights
• Extra-corporeal medical devices that could replace the
function of failing or failed organs
• Multiple initial products
– Portable Hospital Hemodialysis device
– Portable Home Hemodialysis device
– Wearable Artificial Kidney
• First U.S. 510(k) filing anticipated Q4, 2008
• Minimal to low risk strategy
– Prototype device tested successfully
– Well defined and straightforward regulatory strategy
– Well delineated reimbursement codes
• Multi-billion dollar and clearly defined markets
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Xcorporeal Hemodialysis Devices
• Portable Hemodialysis Device
- Hospital CRRT/Acute Hemodialysis
• Portable Hemodialysis Device
- Home Hemodialysis – ESRD
• Wearable Artificial Kidney
- Home Hemodialysis – ESRD
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Xcorporeal Hospital
Hemodialysis Device
• Truly portable device
– Smaller (< two cubic feet) and lighter than competitor
devices (30-40 lbs)
– Reduced fluid (dialysate) requirement
– Easier to operate, reduced training requirement
• Fully functional
– Continuous Renal Replacement Therapy (CRRT)
– Intermittent Hemodialysis
• Product status
– Functional prototype undergoing bench testing
– FDA 510(k) filing expected in Q4, 2008
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Xcorporeal
Proprietary Disposable Manifold
• The complexity of setting up a dialysis
machine has been reduced to insertion of a
proprietary manifold into the machine
• This reduces machine size, disposable
cost, and simplifies operation
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Benefits of Xcorporeal
Hospital Hemodialysis Device
• Decrease workload for hospital ICU staff
– No plumbing requirements
• Use simple tap water versus bagged dialysate
– Simple to use operator interface
– Snap-in disposable unit
– Simple set-up, tear down and clean-up
• Cost effective
– Decrease in medical staff time (nurse, pharmacist)
– Decrease in staff training downtime
– No need for bagged dialysate ($180/treatment)
• Flexibility
– Truly portable, no utility hookup limitations
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Hospital Hemodialysis Device
Development Timeline
Q1
Q2
Q3
2008
10
Q4
Q1
Q2
2009
Hospital Hemodialysis Device Market
• US Market Opportunity = $1.1 billion
– Growing at 10% per year
• Aging Population
• Increasing severity of hospitalized patients
• Disposable Market
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242,000 patient hospitalizations per year estimated 2008
Average 8 days per hospitalization
$500 revenue per day for fluids and disposables
Disposable Market = 242,000 x 8 x $500 = $968 million
• Device Market
– 2008 Market = $150 million
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Xcorporeal Home Hemodialysis Device
• Truly portable device
– Smaller (< two cubic feet) and lighter than competitor
devices (30-40 lbs)
– Reduced fluid requirement
– Easier to operate, reduced training requirement
– No special plumbing nor electrical requirements
• Fully functional
– Wide range of flow rates – treat larger patients
• Product status
– Working prototype
– FDA 510(k) expected filing in Q3, 2009
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Benefits of Xcorporeal
Home Hemodialysis Device
• Truly portable
– Substantially smaller and lighter than any existing device
– No utility requirements, tap water and wall power only
• Ease of Use
– 6 liters of regenerated dialysate; no need to handle large
volumes of dialysate
– Fully disposable fluid circuit, no cleaning or sterilization
– 50 – 600 ml / minute range of flow rates
• Ease of Treatment
– One step, one-handed set up
– Graphical user interface
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Home Device Development Timeline
Q1
Q2
Q3
2008
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Q4
Q1
Q2
2009
Chronic Hemodialysis Market
• U.S. Market Opportunity = $6.7 billion
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–
–
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357,000 chronic dialysis patients
3 treatments per week
$120 Medicare reimbursement / treatment
Market = 357,000 x 3 x $120 x 52 weeks = $6.7 billion
• Home hemodialysis penetration is less than 1%
today but will grow because
– Appropriate equipment becomes available (Xcorporeal,
NxStage, Fresenius off label)
– Longer, more frequent therapy is better medicine (4+
treatments per week versus 3)
– Home hemodialysis reduces capital and skilled labor
requirements
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Home Hemodialysis is a significant
Growth Opportunity in ESRD
• Patient Benefits
– Increased time on hemodialysis with improved
outcomes
– Potential for daily dialysis
– Improved quality of life: diet, sleep, time
• Provider Benefits
– Decreased need for nurses/techs
– Increase in revenues without need for
additional infrastructure
– More frequent treatments decreases need for
expensive medications
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Home Hemodialysis Device Comparison
Renal
Solutions (*)
NxStage
Fresenius
2008K
150 - 400
50 - 600
20 - 600
50 – 500
6
Yes
< 40
200 - 400
50 - 200
100 - 800
6
20 - 30
120
Yes
No
No
195
80
160
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5
16
No
Partial
No
Drainage Required
< 2.0
Yes
No
No
Yes
Yes
Installation Cost
Low
Medium
Medium
High
Blood Flow Rates
Dialysate Flow Rates
Dialysate/4-hr (liters)
Dialysate Regeneration
Dry Weight (pounds)
Size (cubic feet)
Portable
* Not marketed.
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Xcorporeal
50 – 600
Xcorporeal
Wearable Artificial Kidney
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•
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•
•
“Disruptive” technology
Wearable, battery operated light-weight device
Fully automated, simple to use
Prototype tested successfully
Successful human trials published in The
Lancet & Kidney International December 2007
• 24 hrs/7 days therapy with potential to
revolutionize care of ESRD patients
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Wearable Artificial Kidney
Feasibility Prototype
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Wearable Artificial Kidney
Bi Phase Pump
Metering
Pump
Metering
Pump
Sorbent 3
Heparin
Infusate
Bubble
Sensor
Blood Loop
Sterile
Change weekly
in clinic
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Dialyzer
Patient
Metering
Pump
Blood
Sensor
BiCarbonate
Sorbent 2
Sorbent 1
Metering
Pump
Waste
Drain Valve
Dialysate Loop
Change daily at
home
Clinical Trial Results
• Initial clinical study conducted with a prototype
device at The Royal Free Hospital, London
– 8 ESRD subjects dialyzed for mean of 6.4 hrs
– Clearances of creatinine, urea, and beta-2microglobulin achieved (chart follows)
– No adverse events reported
– Subjects were able to walk unhindered during dialysis
treatment
– Presented at ASN November 5, 2007
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Clinical Trial Results
Time (hrs)
0%
-5%0:00
2:00
4:00
6:00
8:00
-10%
% Change
-15%
-20%
-25%
Urea
-30%
Creatinine
-35%
Beta2 Microglobulin
-40%
-45%
-50%
• Sustained reductions in key blood chemistries
• Clearance of both small and middle molecules
• Clearance meets or exceeds daily toxin production
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WAK Development Timeline
Q1
23
Q2
Q3
2008
Q4
Q1
Q2
Q3
2009
Q4
Q1
Q2
2010
Q3
Q4
Intellectual Property
• Portable Artificial Kidney
– 22 patents pending or in process
• Wearable Artificial Kidney
– Exclusive in-licensed patents
• Wearable ultra-filtration device
– Wearable, self-contained, device for continuous excess fluid
management
• Wearable continuous renal replacement therapy device
– Expands on patent above to include renal replacement patients
and battery-operated power source
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Selected Financial Information
September 30, 2007
• Cash and Marketable Securities - $20.3 million
• Shares Outstanding - 14.4 million
• Market Capitalization - $41 million at 2/13/08
• $1.2 million monthly cash burn rate
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Company Near-Term Milestones
• Hospital Portable Hemodialysis Device
– Functional Prototype (completed)
Q4, 2007
– Pre-Production Prototype
Q3, 2008
– FDA 510(k) submission
Q4, 2008
– Commercialization target
Q2, 2009
• Home Portable Hemodialysis Device
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– Functional Prototype (completed)
Q4, 2007
– Pre-Production Prototype
Q3, 2008
– Clinical trial
Q2, 2009
– FDA 510(k) submission
Q3, 2009
– Commercialization target
Q4, 2009
Comparable – NxStage Medical (NXTM)
• Emerging growth hemodialysis company
• “System One” device
– Home hemodialysis: > 2,200 patients; <1.0% of market
– Hospital CRRT for acute renal failure
• Financial Metrics
– $288M market capitalization @ 2/13/08
• 6.7x trailing twelve months revenues
• 2.4x annualized Q4, 2007 revenues
– Quarter ended December 31, 2007 financial highlights
• $34.3M in cash (includes $25M debt drawdown)
• $17.8M operating expenses
• $17.2M operating loss
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Comparable Acquisition
Fresenius purchase of Renal Solutions
• $190 million purchase price
– $100 million at closing
– $60 million in one year, $30 million contingency
• Sorbent technology
• Allient device
– Cleared by FDA over two years ago
– Not brought to market
• Why significant for Xcorporeal
– Suggests sorbent technology valuable
– High acquisition price for “scarce” assets
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Xcorporeal Highlights
• Extra-corporeal medical devices that could replace the
function of failing or failed organs
• Multiple initial products
– Portable Hospital Hemodialysis device
– Portable Home Hemodialysis device
– Wearable Artificial Kidney
• First U.S. 510(k) filing anticipated Q4, 2008
• Minimal to low risk strategy
– Prototype device tested successfully
– Well defined and straightforward regulatory strategy
– Well delineated reimbursement codes
• Multi-billion dollar and clearly defined markets
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