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MAKO Surgical Corporation (MAKO)

The 31st Annual J.P. Morgan Healthcare Conference Call

January 9, 2013 10:30 AM ET

Executives

Maurice Ferre – Chairman, President and CEO

Fritz LaPorte – SVP and CFO

Analysts

Kim Gailun – JP Morgan

Presentation

Kim Gailun

Okay. Good morning and welcome to day three of the JP Morgan Conference. I’m Kim Gailun with the MedTech team and it’s my pleasure to introduce MAKO Surgical and presenting today is Maurice Ferré. After the presentation, we’ll have our breakout in the Georgian Room.

Maurice Ferré

Thank you, Kim, and good morning, everybody. So, first of all, we’re going to start with – MAKO Surgical is a robotic surgery company focused in orthopedics. And we see this market is still larger opportunity and growing, and we see that one of the demands that we’re seeing in the industry is the need for consistent and reproducible precision.

We believe we have a solution using MAKOplasty. MAKOplasty is made up of two elements. It’s made up of a robotic technology and our proprietary implants, which allows us to create a razor/razorblade model.

One of the things that we continue to be focused on is the proposition of adding and creating value to the three constituents; to the patients, the physicians, and the hospitals, and I’ll go through this in our presentation.

We also believe one of the key drivers for success as we started seeing changes in the healthcare system is the continual proving of and developing positive clinical outcomes. And we’ve been working diligently on a lot of work to demonstrate the importance of precision in placements in robotics as it relates to joint replacements both in hips and knees.

We also believe that we had developed a razor/razorblade model with – and a direct sales force in our growing installed base and driving towards higher utilizations, which is a story that over time we still strongly believe is playing out. And we believe also in the strong financial performance and seeing this as a real growth opportunity and continue to be a growth opportunity.

So just to start off with, we’ve just recently announced our Q4 results and we’re happy to say that one of the important things that we’ve been saying consistently has been this one-third, two-thirds element into our business and in the first half in terms of the real placements.

Between Q3 and Q4, we delivered two-thirds of our systems in the second half of the year, which brings us to a total of now 45 systems and more importantly it takes us to what we think is a – it was an important number we’ve always been talking about kind of exceeding and getting to this 150 RIO system threshold. It’s an important piece to our story as we start moving towards profitability.

We continue to put focus on our surgeons and surgeon trainings. We now have about 900 surgeons being trained. We talk about the efforts that we’re putting in on our training programs. We’re training about once a month now where we’re bringing in close to 30 doctors.

On the procedure side, we reported out the first quarter where we actually have seen an increase this year where there’s a 20% increase on 2,904 procedures. One of the key highlights for us is that we saw some real uptick in our hip systems and the release of the system in October was important for us.

Our utilization, we reported out at 6.6. Large part, as you may recall, utilization is driven by the number of systems that we put in on the systems the prior quarter get out into the utilization number. Today we’ve done 23,000 procedures.

And as I’ll talk briefly, we’ve also released and developed our RIO 2.5 Hip application that was released in September. And also our release of our new PST – RESTORIS PST Cup and Tapered Stem implant system, which we’re very encouraged how that’s developing.

Just an overview on the orthopedic market. We know this is a large market. It still continues to be a growing market. The total hip and total knee part of the business represents about a third of this. It’s about a $10 billion business. We know that there’s an aging population. We know that some of the parameters in terms of obesity, things that we’ve always talked about.

I think one of the interesting things that we’re also seeing is also – these orthopedic surgeons across the board are – as the population are getting older and as the increase in demand on orthopedics and procedures become more evident, there’s going to be a real emphasis in our belief of efficiencies in the operating room. And I think this is one of the key pieces that the MAKO story over time will play out. And it’s something that we continue to focus on in terms of bringing automation and efficiency into the operating room.

When it comes to what – what’s going to drive this opportunity, it continues to be the same story. I mean, I think that it’s about patients and real adding value to them. We have patients, live testimonials out there where we have patients talking about partial knees and the success that they’ve had.

We have – it’s all about surgeons in terms of what are you doing for surgeons, what’s the – what is it, is it efficiency piece, is it – where is the data that supports it, what is it that you’re doing for our practice. And we’ve been able to demonstrate to surgeons one of the key pivotal studies that we talked about is we have a two-year data now that shows a 10-fold improvement in survivorship in our partial knees done robotically. And I think that’s very significant and that’s what surgeons are looking for.

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