r
Shaping the future of diabetes care
1
r
Heino von Prondzynski
Head of Roche Diagnostics
2
The idea r
Roche Diagnostics, the worldwide leader in Diabetes
monitoring, and
Disetronics, the worldwide number 2-player in insulin
pumps, want to combine ...
... their know-how, and shape the future of Diabetes
management
3
Roche Diagnostics – focusing on high r
value growth areas
5,367 CHF m
• Leading Diagnostics company +11 % growth*
(YTD Q3 ‘02 vs. Q3 ‘01)
• Broadest portfolio covering all
customer segments
% sales (% growth*)
• Strong growth in high margin 1,858
Diabetes Care 35 % (+15 %)
areas 732 Molecular Dx 14 % (+19 %)
429 Applied Science 8 % (+8 %)
• History of creating new 440
Near Patient Test’g 8 % (+7 %)
markets and shaping
margin
healthcare
1,908
Centralized Dx 35 % (+8 %)
4
* growth in local currencies
r
Strategic rationale
Shaping the future Diabetes Care market
• Expanding Roche Diagnostic’s 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
5
Roche Diabetes Care r
Gaining market share - in blood glucose market
others 7 8 10 11
11 10 10
Abbott 9
16 17 16 14
Bayer
Lifescan 32 30 28 29
34 35 36 37
Roche
1999 2000 2001 2002 est.
Note: Other includes Generics, Private Label including Abbott’s activities, KDK, Therasense, other manufacturers6
Source: Roche analysis - Market Share Tracking 14 Key Countries
Diabetes: a problem of epidemic proportion r
WHO global estimates of people with diabetes
350
300
300 + 3 % CAGR
+ 3 % CAGR
millions of people
250
200
150 240
150
100 120
50 20 % are on
30 60 insulin therapy
0
2002 2025
Sources: WHO Report / Zimmet, P. Et al. Global and societal 7
implications of the diabetes epidemic, Nature 2001
Blood glucose monitoring is 30 % of r
the overall Diabetes market
8.0
CHF 21.5 billion
(2001)
5.0
1.5
7.0
30 %
glucose insulin insulin oral
monitoring delivery antidiabetic
therapy
8
Source: Roche analysis
Glucose monitoring and insulin delivery r
Combining to improve treatment outcome
blood glucose
insulin therapy
monitoring*
CHF 5 billion
CHF 4.5 billion
+5 % p.a.
+10 % p.a.
insulin
delivery
CHF 1.5 billion
+11 % p.a.
value superior stronger
driver: treatment outcome marketing position
9
* for people with diabetes on insulin treatment
Monitoring and therapy delivery are convergingr
Disetronic’s pump technology a key component
Syringe
Insulin Pens
Delivery Pump Pump/ blood Glucose Meter Communication
Open-loop
Automated Pancreas
Closed-loop
Automated Pancreas
Insulin Algorithm
Blood Continuous Monitoring
Glucose
Monitoring Integrated
Meters and Strips Strips Systems
Strips
today future 10
Roche adding marketing and sales r
muscle to penetrate US market
US market 2001
Animas non-US market 2001
1%
Disetronic
17 % Medtronic/
Minimed
Disetronic 30 %
Medtronic/
Minimed 70 %
82 %
total: CHF 160 m
total: CHF 550 m
total market* 2001: CHF 710 million
with approximately 11 % growth p.a. 11
* top 13 countries
Insulin delivery market far from saturation r
• 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
12
Entry into insulin pump market r
Growth opportunities on many levels
• Increase market share in existing markets (e.g. US)
• Expand pump penetration in Europe
• Improved sales of Roche Diagnostics current glucose
monitoring systems with improved access to
endocrinologists and high frequency testers
• Efficiencies in R&D due to coordination and streamlining of
project portfolio
• Generating pump sales in countries other than North
America and Europe
13
r
Willy Michel
Founder and Chairman, Disetronic
14
Disetronic, the world’s 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
(+13.6 % in local currencies, +8.5 % in CHF)
– net profit 29 m CHF (+35.5 %)
– earnings per share 14.97 CHF (+34.6 %)
– around 1,270 employees in EU and USA
Injection
Systems Infusions Systems
24.1 %
75.9 % - sales 115 m CHF
- up by +9.2 % (local)
- global market share ~30 %
15
2001/2002 sales mix
Infusion Systems Division: Insulin pumps r
• Continuous insulin administration
in accordance with individually
programmed requirement profile
• Additional dosage possible at any
time (e.g. 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
16
Business model with two elements r
bringing profitability
• Insulin pumps
• Consumables
- glass and plastic cartridges
- batteries
- carrying systems
- various infusion sets
(catheters changed 3-4 days)
17
r
Dr Erich Hunziker
Chief Financial Officer, Roche
18
Proposed transaction structure r
Effected through two consecutive but concurrent steps
Infusion Systems
Infusion Systems
Sales: 228 m CHF
Sales: 228 m CHF
Disetronic
Disetronic
Sales: 300 m CHF
Sales: 300 m CHF
Injection Systems
Injection Systems
Sales: 72 m CHF
Sales: 72 m CHF
Disetronic = 34 % or 0.66 million shares committed by major shareholder
= 61 % or 1.18 million shares are publicly traded
Step 1: Public tender offer on 100 % of outstanding Disetronic shares
CHF 670 for each Disetronic share = 1.84 million x 670 CHF 1 230 mm
2 GS* per Disetronic Share = 3.7 million GS 350 mm
Total Offer 1 580 mm
Step 2: Sale of Injection business from Disetronic to Mr. Michel 420 mm
Net Cost to Roche after consuming the tender offer 1 160 mm
19
* Assumes Roche Genussscheine (GS) at 95 CHF per share
Valuation r
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 7.02.03
400
200
0
02 January 2002 02 April 2002 02 July 2002 02 October 2002 02 January 2003
20
Transaction multiples based upon the r
tender offer
01/02 2004E
EV/ Sales 4.9 3.3
EV/ EBIT 35 17
EV/ EBITDA 25 14
21
Outlook financials r
• EBIT impact:
– 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
22
Public tender offer on Disetronic shares r
Timing / next steps
• Pre-announcement (Voranmeldung) February 10
• Corporate due diligence February - March
• Disetronic Extraordinary shareholder meeting March
• Publication of tender offer March 24
• End of first offer period (20 bank days) April 22
• Announce interim results of tender offer End April
• Closing May - June
23
Appendix
About Roche Diabetes Care r
• Pioneer in the development of blood
glucose monitoring systems
• Sales and growth Q3 ’02 (vs. Q3 ’01)
• 1.86 m CHF, +15 % (local) Accu-Chek Advantage
• Market Share* 2002E: 37 %
• Main products:
• Accu-Chek Advantage
Accu-Chek Active
• Accu-Chek Active
• Accu-Chek Compact
25
Accu-Chek Compact
* Estimate based on Q1-Q3 2002
Disetronic – who they are r
• A leading global supplier of medical
devices and systems for the
administration of liquid medication for
ambulatory therapies
• The world’s No. 2 in insulin pumps for
the treatment of diabetes…
• … and the largest independent
manufacturer of injection pens for
various therapies
26
Diabetes is not curable, but it is manageabler
• 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
27
Blood glucose monitoring market r
Sustained double digit growth
local CAGR 1995-2000 = 14% CAGR 00-05 CAGR 05-10
= 11 % = 10 %
16'000 15,000
14'000
12'000
9,500
CHF million
10'000
8'000
4,845 5,765 6,465
6'000
4,250
4'000
2'000
0
1998 1999 2000 2001 2005 2010
local growth 14 % 14 % 12 %
Note: includes, lancets, diabetes urine testing, other 28
Source: Roche analysis