Avanos Medical : 2020 J.P. Morgan Presentation

J.P. MORGAN

HEALTHCARE

CONFERENCE

JANUARY 2020	JOE WOODY
	CHIEF EXECUTIVE
	OFFICER

1

FORWARD-LOOKING INFORMATION

Certain matters in this presentation and webcast, including our expectations and planning assumptions, and any estimates, projections, and statements relating to our business plans, objectives, acquisitions and transformation initiatives, constitute forward-looking statements and are based upon management's expectations and beliefs concerning future events impacting the Company.

These statements are subject to risks and uncertainties, including currency exchange risks, cost savings and reductions, raw material, energy and other input costs, competition, market demand, economic conditions, S&IP separation execution and IT implementation, availability of drugs used in our Acute Pain products, other supply chain disruptions, and legislative and regulatory actions. There can be no assurance that these future events will occur as anticipated or that the Company's results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them. For a more complete listing and description of other factors that could cause the Company's future results to differ materially from those expressed in any forward-looking statements, see the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

NON-GAAP FINANCIAL MEASURES

Management believes that non-GAAP financial measures enhance investors' understanding and analysis of the Company's performance. As such,

results and outlook have been adjusted to exclude certain items for relevant time periods as indicated in the non-GAAP reconciliations to the comparable GAAP financial measures included in this presentation and posted on our website (www.avanos.com/investors).

2

WHO WE ARE

$650M+

Global Revenue*

Pain

Management

Chronic

Care

*2018 figure

~$10B

Addressable

Market

Business operations in

90+ countries

International

U.S.

Diversified portfolio with

8 market-leading products in the U.S.

Creating

Shareholder Value

Organic growth

acceleration

Optimized cost

structure

M&A execution and integration

Our Vision: To be the best at getting patients back to what matters

3

CHRONIC CARE

Leading market positions enhanced by recent bolt-on acquisitions

Addressable Market

~$400M

Respiratory

Health

~$1B

Digestive

Health

Product Portfolio

Digestive Health		Respiratory Health

Long-term Feeding	Nasogastric Feeding	Neonatal Feeding	Closed Suction
Continued market		Avanos enters into the	Enhances Respiratory
Demonstrated capability	Health portfolio and
leadership with launch	neonatal market, a
with leading position in	leverages existing sales
of MIC-KEY* SF	leading organic growth
nasogastric feeding	and marketing
in 2020	opportunity
	infrastructure
Mic-Key (legacy)	Corpak (2016)	NeoMed (2019)	endOclear (2019)

4

PAIN MANAGEMENT

Opportunity to deliver much-needednon-opioid pain relief therapies

Addressable Market

>$4B

Interventional Pain

	>$4B
	Acute Pain
100M	>20M
Americans in	Target U.S. surgical
chronic pain	procedures

Product Portfolio

ON-Q (Legacy)	GameReady (2018)	Summit Medical (2019)
Clinically proven non-opioid	Market-leading provider of cold
therapy to reduce	and compression therapy	Electronic ambulatory pumps
post-surgical pain	systems

COOLIEF* (Legacy)	COOLIEF* Technology Innovation
Only FDA-cleared RF treatment	Cooled and standard	Next generation COOLIEF* probe
for OA knee pain	radiofrequency generator

5

REMOVING OBSTACLES FOR VALUE CREATION

2019 CHALLENGES

Top line impacted by

industry-wide drug shortage

and pump filler shutdown

IT implementation caused

3Q 2019 disruption

Increased cash cost for

transformation

2020 PRIORITIES

Build momentum in Acute Pain

into 2021 to return Avanos to MSD growth

IT stabilization

M&A integration

Positive free cash flow

6

CATALYSTS FOR

LONG-TERM VALUE

CREATION

7

INVESTING FOR THE FUTURE

▪Expanded direct-to-patient advertising

2019

2020

• Significantly grew sales force
• CMS reimbursement decision finalized
• Published 6 studies that demonstrate the efficacy of COOLIEF*
• • Continue educating private payors on clinical evidence and economic advantages of COOLIEF*
  • Roll out new COOLIEF* products, including a next generation RF generator and probes
  • Publish study on COOLIEF* vs. hyaluronic acid

2021

& Beyond

CLINICAL

AWARENESS

COVERAGE

EXPERTISE

• Publish study on COOLIEF* vs. standard RF
• Work with CMS to improve reimbursement levels for procedures performed in ASC settings

Investments that generate breakthrough growth

8

SURGICAL PAIN: SETTING THE STAGE FOR RETURN TO GROWTH

Legacy Portfolio	Leiters	Summit		Internal
Partnership	Medical	BioQ	Project

ON-Q	ON-Q	Electronic	Drug + Pump	Electronic
Fixed Flow Rate	Select-a-Flow	Pump	Combination Device	Nerve Block
Pump

Taking action to bolster portfolio, win back sales and simplify the process for customers and patients

9

DRIVING INTERNATIONAL GROWTH

Enhanced leadership and focus on commercial excellence

	Geographic		Go-to-Market			Market
	Expansion		Execution			Development
▪	Developed markets	▪Improve distributor		▪	Disease state awareness
▪	Emerging markets		management capability			& referral pathway
			▪	Physician education
		▪Targeted go-direct
▪	Incorporate recently
	sales model		▪	Reimbursement and
	acquired acquisitions
					healthcare economics

▪Define Standard of Care

10

DELIVERING POSITIVE CASH FLOW IN 2020

Bolsters already strong balance sheet

Fewer unusual or

non-recurring

expenses

Return to normal capital spending

Recapture prior

year working

capital

inefficiencies

Repeatable free

cash flow

acceleration

11

FRAMEWORK FOR VALUE CREATION

Invested in priority

areas to enhance

growth

2019

Gain earnings

leverage to accelerate margins

Continue to	2021
right-size cost	& Beyond
structure and M&A
integration

2020

Accelerate sales

internationally and

stabilize ON-Q

Disciplined pursuit of complementary M&A

Bring innovation to

market via M&A

and organic

pipeline

12

The best at getting patients back to the things that matter

13