Company Overview Sidoti Emerging Growth Conference September 2, - - PowerPoint PPT Presentation

CONFIDENTIAL

1

Company Overview Sidoti Emerging Growth Conference September 2, 2015

CONFIDENTIAL

2

Disclosure

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E

• f the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act, as amended (the “Exchange Act”). These

forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management’s current beliefs and assumptions. Any statements contained herein (including, without limitation, statements to the effect that we “believe”, “expect”, “anticipate”, “plan” and similar expressions) that are not statements of historical fact should be considered forward-looking statements. These statements relate to future events or our financial performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward looking statements. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include those set forth in the company’s filings with the Securities and Exchange Commission. We expressly disclaim any obligation to update any forward-looking statements, except as may be required by law. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this presentation and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this presentation.

CONFIDENTIAL

3

Our Company

Founded in 2009 via acquisition of the industrial testing assets of Gen-Probe, a global leader in molecular diagnostics

• Pure Play In Applied Market Diagnostics
• Initial Focus: $2 Billion Food Safety Testing Market
• Atlas Delivers Accurate, Rapid, Fully-Automated

Test Results For Foodborne Pathogens

• Early Adoption By High Priority Strategic Customers
• Scalable Business Model With Significant Operating

Leverage Potential

• Applied Market Growth Opportunities Beyond

Food Safety Testing Market

• IPO completed in July 2014

CONFIDENTIAL

4

Our Food Safety Strategy

• Commercialization of Atlas Detection Assays for foodborne pathogens

– Conversion of high priority strategic accounts in North America – Selective globalization via strategic partnerships

• Drive continued innovation in foodborne pathogen testing

– Next generation of molecular tests – Launch of low volume instrument

• Development of innovative food

safety testing solutions for chemical contaminants and non-pathogenic indicator organisms

CONFIDENTIAL

5

Our Commercial Success to Date

DoD Food Analysis & Diagnostics Laboratory

CONFIDENTIAL

6

Food Safety Is a Public Health Imperative

Overview of Food Safety

• The World Health Organization estimates one in three people in industrialized

countries may be affected by a foodborne disease each year

• The Center for Disease Control estimates 128,000 hospitalizations and 3,000

deaths from foodborne disease in the U.S. each year

• The FDA and USDA reported 916 food recalls in the first nine months of 2013,

including 356 Class I recalls for dangerous or defective products that could cause serious health problems or death – Pathogens and allergens account for the vast majority of food recalls

CONFIDENTIAL

7

The Risk of Foodborne Disease Is Increasing

Overview of Food Safety

• Food imports have increased

dramatically which requires a growing standard of quality and vigilance

• Consumer populations most

susceptible to foodborne illness continue to grow

Risk Factors

• Food production and distribution

is more centralized which increases the magnitude of

• utbreaks

CONFIDENTIAL

8

Food Recalls Are on the Rise

• The number and magnitude of food recalls have increased significantly

– On average, 30 recalls a week in the U.S. (FDA and USDA) – On average, 20 recalls a week in Europe (EU Rapid Alert System)

Overview of Food Safety

Source: Center for Disease Control and Prevention

CONFIDENTIAL

9

Food Recalls Are Expensive

Overview of Food Safety

• Product recalls are frequent and expensive for food processors

– 58% of respondents affected by a recall in prior 5 years – 52% experienced recalls with financial impact > $10 million – 81% deemed financial risk as significant to catastrophic

No balance sheet has a line for Salmonella

Source: 2011 Grocery Manufacturers Association

CONFIDENTIAL

10

Overview of Food Safety

The Cost of Food Safety

Cases

1,027,561

Saw physician

73,984

Hospitalizations

19,336

Fatalities

378

Salmonella

Cases

1591

Hospitalizations

1,173

Severe Illnesses

697

Fatalities

247

Listeria

Cases

180,905

Saw physician

32,692

Hospitalizations

2,077

Fatalities

10

• E. Coli O157:H7 STEC

$3,666,000,000 $2,834,000,000 $299,000,000

Each year, more than

8.9 Million

Americans will suffer from

Foodborne Illness 53,245

• f those will be

Hospitalized 2,377 will LOSE THEIR LIVES

These 3 Pathogens are responsible for

44%

$6.8 Billion

• f all foodborne illness

cost in the US

Source: USDA 2014

CONFIDENTIAL

11

Food Safety Testing: $2 Billion Global Market

Source: Capella Advisors, Company Estimates

Food Safety Testing Market

CONFIDENTIAL

12

North American Pathogen Testing

Source: Capella Advisors, Company Estimates

Food Safety Testing Market

CONFIDENTIAL

13

Heightened Global Regulatory Environment

Pathogen Testing Growth Drivers

• The recent passage of the Food Safety Modernization Act (FSMA) is

expected to drive an increase in pathogen testing by mandating comprehensive, prevention-based controls by food processors

– Environmental monitoring – Finished product – Water testing for produce – Foreign supplier verification

• The European Food Safety Authority and

the People’s Republic of China FDA have also strengthened food safety regulations

CONFIDENTIAL

14

Manufacturer-led Food Safety Initiatives

Pathogen Testing Growth Drivers

• The early and accurate detection of contaminants is a key component of

HACCP food safety plans designed to improve food safety by identifying, analyzing and controlling microbiologic and chemical hazards in food production

CONFIDENTIAL

15

Challenges of Pathogen Testing

Pathogen Testing Methods

• Food safety testing poses unique diagnostic challenges:

– the complexity and wide variety of food sample types – the heterogeneous distribution of low levels of pathogens – the stressed or injured state of pathogenic cells in a sample – the complexity of sample preparation/enrichment and pathogen testing workflows

• Hence food safety labs perform extensive method

comparison and validation studies on their specific food matrices prior to adoption of any new method

CONFIDENTIAL

16

Current Pathogen Testing Methods

• Food safety labs are forced to make tradeoffs between accuracy, time to

results and the complexity/labor intensity of pathogen testing workflows Pathogen Testing Methods

CONFIDENTIAL

17

Typical PCR-based Testing Methods are Complex

Pathogen Testing Methods

CONFIDENTIAL

18

Performance Gaps of Current Pathogen Testing

• Accuracy: Require more accurate test results, regardless of sample

type, to reduce operational costs of false positive or negative results

• Time to Results: Require faster test results in order to reduce the

delay in operational response to pathogen control, to potentially reduce working capital needs and support a longer shelf life for perishable products

• Automation: Require higher test volume throughput with reduced

labor costs and improved accuracy through reduction of operator error

Pathogen Testing Methods

CONFIDENTIAL

19

The ROKA Solution

CONFIDENTIAL

20

Roka Pathogen Testing Solution

• Listeria
• Salmonella
• E. coli 0157:H7
• Listeria Monocytogenes
• Shiga toxin-producing
• E. coli (STEC)

Atlas Detection Assays Atlas Instrument Full Commercial Menu Current AOAC Certified Menu covers >98% of Pathogen testing volume

Roka Value Proposition

Accurate, Rapid, Fully-Automated Test Results

CONFIDENTIAL

21

Roka Automates Pathogen Testing

• The Atlas System delivers fully-automated molecular pathogen detection

CONFIDENTIAL

22

Atlas Delivers Accurate, Rapid Test Results

• 1. This table includes the time to results for samples from the environmental sponge matrix.
• 2. This table includes the time to results for 25 gram samples from the macaroni/dried oats food matrix.
• 3. This table includes the time to results for 375 gram samples from the beef food matrix.

Representative sample types for each target organism based on AOAC PTM certifications. The study involved 580 samples and was performed

• n 15 different sample types. Our Atlas Detection

Assays for Salmonella and Listeria were compared to commonly used PCR-based methods.

CONFIDENTIAL

23

Atlas Delivers Fully Automated Test Results

• “Sample – in – result – out” instrument

– Reduces direct labor cost – Minimizes potential for operator error – Automated process controls – Reduces training requirements – Electronic data traceability

CONFIDENTIAL

24

Atlas Delivers Workflow Efficiencies

• 1. Workflow efficiency studies conducted by a third-party consultant for our Atlas Detection Assays for Listeria and Salmonella compared to

commonly used PCR-based methods

• 2. Workflow efficiency studies conducted by a third-party consultant for our Atlas Detection Assays for Salmonella compared to commonly used

PCR-based methods. The process steps per sample and manual touches per sample do not vary from laboratory to laboratory or based on the pathogen tested.

CONFIDENTIAL

25

Commercial Strategy Driving Growth

CONFIDENTIAL

26

North America Commercialization Strategy

• Target high-volume molecular testing customers with dedicated sales & service organizations

– Strategic food processor and contract testing lab accounts are our initial focus – Leverage strategic accounts to drive broader market adoption

• Demonstrate accuracy, time to results and automation advantages of Atlas Detection Assays
• Validation of Atlas Detection Assays across a wide variety of sample types, sample sizes,

enrichment media and dilution factors

• Minimize barriers to customer adoption of Atlas instrument with reagent rental model

– 41 Atlas commercial instrument placements by end of June 2015

CONFIDENTIAL

Significant Growth Opportunities in the Future

27

• Non-amplified molecular pathogen assays

– Alternative to immunochemical assays – Consolidation of test methods with different performance metrics and price points

• Low volume instrument

– Lower-volume testing labs – Expansion in non-food markets

• Contaminants and non-pathogenic

indicator organisms

– Leverages technical and commercial competencies

• Personal care products
• Water
• Environmental
• Veterinary
• Pharmaceutical process
• Biothreat
• Infection control in healthcare facilities

including testing for HAIs

CONFIDENTIAL

28

Financial Overview

CONFIDENTIAL

The Business Model

29

• Revenue driven by instrument

placements and utilization

• Significant consumable pull

through opportunity with each Atlas placement

• Time and resource intensive

sale process results in committed customer base

• Leveraging of existing sales

force to convert new accounts and increase utilization at existing customers

• Capacity for significant growth

with low capital requirements

• Volume growth and royalty

buydown expected to drive margin expansion

CONFIDENTIAL

30

Significant Consumable Revenue Opportunity with Each Atlas Instrument Placement

*Average Annual Revenue Projected Based on Q2 2015 Actual

*

CONFIDENTIAL

31

Operating Results

*unaudited

*

*

CONFIDENTIAL

32

Balance Sheet Highlights

*unaudited

* *