Filed by RITA Medical Systems, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Company: Horizon Medical Products, Inc.
Subject Company’s Exchange Act
File No. 001-15459
On June 2, 2004, RITA Medical Systems, Inc. held meetings with investors to discuss the its business and the proposed merger of RITA and Horizon. The slides attached hereto were used to accompany the presentation.
Joseph M. DeVivo
President, CEO and Director RITA Medical Systems
Safe Harbor Statement
This presentation includes forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Forward looking statements are based on current expectations as of today. We undertake no obligation to provide updates to these expectations during the year. For those specific factors that can cause actual results to differ from our statements, we refer you to the “Risk Factors” and other disclosures included in the company’s periodic filings with the Securities and Exchange Commission.
New Treatment Options
Norton Healthcare surgeon Dr. Kelly McMasters
treated Charlie Morgan for liver cancer using the RITA
System™ for radiofrequency ablation (RFA)
The RITA RFA Opportunity
• Millions of cancer patients with very few treatment options available
• High margin disposable model
• Emerging clinical data shows RFA plus chemotherapy provides survival benefits
• FDA approved for unresectable liver cancer tumors, and pain associated with bone lesions
• Clinical studies underway for additional indications
Minimally Invasive Liver Tumor Treatment
Radiofrequency probe placed centrally in liver tumor: percutaneous, laparoscopic, or open. Leads deployed and energy applied to achieve 1000 C temperature for total cell death.
Electrode positioned Molecular heating Tumor destroyed
Trends in Ablation Procedural Growth by Organ
Estimated Procedural Trends in Ablation
Ablation Procedure Volume in Thousands
Breast
Lung
Bone
Kidney
Liver
550
499.0
500
450
400
366.7
350
300
254.7
250
200
138.8
150
82.4
100
43.5
27.5
50 16.3
6.3 8.6
4.5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
Source: MedMarket Diligence Report
“Market Opportunities in Ablation Technology” April 2002
RITA: The Leader In RFA
Surgery & Radiology Products
RITA’s Single-Use Disposable Needle Electrode Devices
1500X Radiofrequency Generator
Typical Ablation Using the RITA System
Original Tumor
Ablated Tumor
CT film shows pre and post procedure tumor (circled); dark image at tumor site in post-procedure film confirms destruction of cells with predictable and well-defined margins.
Liver Tumor RFA: Long Term Results
Buscarini et al HCC 5 yr survival
Guglielmi et al HCC 3 yr survival
Nicoli et al HCC 2 yr survival
Siperstein et al HCC & Mets 3 yr survival
Lencioni et al RCT of RFA vs. PEI 2 yr survival
>50 peer-reviewed reports of RITA safety & effectiveness
US & Intl US Liver
Launch Clearance
1997 1998 1999 2000 2001 2002 2003
Long-Term Survival: RITA—RFA vs Surgery
(all patients with liver cancer)
Percent survival
RITA—RFA (n = 187, current study)
Surgery (n = 249, Wayne et al, 2002)
100
80
60 48%
40 42%
20
0
0 12 24 36 48 60
Months
Lencioni R et al, presented at the RSNA 2003 (in press)
Long-Term Survival: RITA—RFA vs Surgery
(patients with a solitary tumor smaller than 5 cm)
Percent survival
RITA—RFA (n = 116, current study)
Surgery (n = 77, Llovet et al, 1999)
100
80 61%
60
51%
40
20
0
0 12 24 36 48 60
Months
Lencioni R et al, presented at the RSNA 2003 (in press)
RAPTURE Trial
(Radiofrequency Ablation of Pulmonary Tumors Response Evaluation)
(Pisa, UCLA, London, Munich, Turin, Sydney, Essen)
Tumor response rate at 1 year
91%
Complete ablation
Partial ablation
Disease-specific survival
in stage I NSCLC
Treatment 6 mo.’s 1 year
RITA-RFA 95% 89%
Radiation * 88% 81%
* Qiao et al, 2003
Lencioni R et al, presented at the RSNA 2003 (in press)
Confirmed Blue Cross Blue Shield & National Top Private Payer Plans Cover RFA Liver* Ablation
Private Payers
*58 Million Lives
* 44 Million Lives Written Policy
14 Million Lives Payment Process Without Policy
14 Million Non-Confirmed Lives
Blue Cross Blue Shield
*84 Million Lives
*64 Million Lives Written Policy Written Confirmation
20 Million Payment Process Without Policy
4 Million Non-Confirmed Lives
*Primary and Colorectal Mets Note: Lives include all managed care and indemnity product memberships
Competition Matrix
Tissue
Temperature Lesion Speed
Control Size
RITA
RTC1
Radionics2
The RITA System is the only available product suite in the industry to offer the combined features of temperature controlled ablation, effective treatment of the largest lesions, and reduced procedure times.
1 Division of Boston Scientific
2 Division of Tyco
Market Share – Estimated 2002 Sales by Company
Estimated Market Share of the U.S. Suppliers of Directed Energy-Based Tumor Ablation Products 2002
Source: Medtech Insight, “Pharmacological and Device-Based Therapeutic Approaches To Cancer Management,” #A415, December 2003
RITA Medical Systems
Business Case
Historical Operations Summary
March 31,
FY 2003 2004 2003
Sales $ 16,607 $ 4,644 $ 4,497 1
Gross Profit 10,441 3,029 2,923
Gross Profit Margin 63% 65% 65%
Total Operating Expenses 21,712 5,209 5,922
Net loss $ (11,236) $ (2,170) $ (2,933)
Net loss per share, basic and diluted $ (0.63) $ (0.12) $ (0.17)
Shares used in computing net loss per share,
basic and diluted 17,971 17,998 17,223
1 In Q1 2003, one-time sales to Japan totaled $522,000
Growth Strategies
• Utilization Focus
• Drive New Regulatory Clearances
• Kidney Ablation
• Lung Ablation
• Generation “Three” Product Development
• Broaden Market Opportunity
• Set New Ablation Standards
• Reduce Cost – Improve Ease of Use
• Japan Reimbursement
• Lean Operational Focus
Q3 2003 Through Q1 2004 Performance
US Sales Int. Sales
Q3 2003 Through Q1 2004 Performance
New Business Utilization
RITA Medical Strategic Options
• Raise capital, drive to profitability as a single product company
• Competition/Resources/Opportunity
• Grow through adding more products to RITA
• Build around team/preserve upside/invest
• Market business for sale
• Timing/Proof of business
Merger Overview
Medical Oncology Devices
Horizon Medical Products
Horizon Medical Products, Inc., headquartered in Atlanta, primarily markets oncology product lines including implantable ports, tunneled central venous catheters, and safety needles used primarily in cancer treatment protocols. In addition, Horizon has exclusive U.S. rights to distribute Medtronic Inc.’s Hepatic Arterial Infusion (HAI) product line, including sales and case support of Medtronic’s IsoMed® Infusion System and related products.
Merger Strategic Benefits
• Opportunity to develop an independent, broad-based Medical Oncology Device business
• Increasing trends in devices playing important roles in Cancer Treatment. Merged entity can capitalize on this trend.
• Develops platform company for the acquisition and/or licensing of additional oncology products.
Medical Oncology Device Company
MEDICAL ONCOLOGY
• Interventional Radiologists
• Surgical Oncologists
• Medical Oncologists
Horizon Products
Vortex® MP Port System
LifeValve™ Technology
LifeGuard™ Safety Infusion Set
IsoMed Pump
RITA Products
StarBurst™ Xli enhanced
StarBurst™ SEMI-FLEX
StarBurst™ MRI
StarBurst™ SDE
RITA 1500X Generator with RITA Base Software
Merger Strategic Benefits
Medical Oncology
Surgical Oncology
Interventional Radiology
Hospital Administration
The merged company will have more products and more reasons to call on the key constituencies in the hospital, increasing strategic value, customer touches, and increased productivity for each sales rep.
Merger Strategic Benefits
• Benefits For RF ablation product line
• Doubles our domestic field selling effort
• Improves competitiveness and market development
• Increases our reach to more hospitals
• Allows for greater concentration on new RF procedures
• Increases productivity at each hospital
• Benefits for HMP Product Lines
• Coupling High growth product with stable core product offering
• Leveraging relationships and call points to increase overall productivity and reach
• Building a combination therapy using systemic/regional
chemotherapy delivery and local mechanical control of cancerous tumors
• Medtronic Distribution Agreement
• Capitalize on existing synergy between IsoMed Hepatic Artery Pumps and Radio Frequency Ablation which are normally used in the same procedure
Transaction Overview
• Each Horizon shareholder will receive 0.4212 of a RITA share
• RITA and Horizon shareholders will own 47.5% and 52.5%, respectively, of the combined company (1)
• RITA expects to issue 18,644,039 shares and assume options and warrants for an additional 3,935,110 shares
• The combined company will assume $17.1 MM of Horizon debt
• The holders of $8.262 MM of Horizon Senior Subordinated Notes have agreed to extend the maturity from July 2005 to July 2008
• The remaining $6.501 MM of Senior subordinated Notes will continue to be due in July 2000
• The merger is expected to close in August 2004 and is subject to the approval of the shareholders of each company
• It is expected that HSR approval will not be required
• Shareholders representing 53% of Horizon’s shares outstanding and 9% of RITA’s shares
outstanding have signed voting agreements in favor of the transaction
(1) Reflects diluted ownership using the treasury stock method to account for shares
Transaction Overview
• Board of Directors of the combined company will be comprised of 6 members from RITA and 3 members from Horizon
• Joseph DeVivo will be named President, CEO and Director
• Robert Wenzel will be named COO
• Don Stewart will be named CFO
• The combined company headquarters will be in Mountain View, CA with operations in Mountain View, CA and Manchester, GA
• Company shares will continue trading on the NASDAQ National Mkt.® under the RITA symbol
Key Financial Statistics FY 2003
RITA HMP
Revenue $16.6MM $28.0MM
Gross Profit $10.4MM $16.7MM
EBITDA ($9.6MM) $ 3.1MM
Cash $9.5MM $ 1.8MM
Debt $0 $18.4MM
S&M Employees 28 56
Employees 80 138
Merger Financial Impact
• The transaction is expected to significantly increase RITA’s revenue base
• On a pro forma basis, the combined company would have reported approximately $45 MM of revenue in 2003
• The combined company is expected to derive significant operating leverage from combining this larger base of revenue with a reduced operating cost structure
• Preliminary estimates have identified $5—$7 MM of potential annual cost savings associated with the combination
• Horizon reported EBITDA of $3.6 MM for the 12-month period ending March 31, 2004 (1)
• As a result of a growing base of revenue and the assumed cost savings, management believes the transaction will be accretive to earnings and the combined company will be profitable following a successful integration
(1) Excludes approximately $1.0 MM of one-time charges incurred in 1Q/2004 related to separation payments payable to Marshall Hunt and William Peterson, Jr.
Valuation
• How do the implied multiples for the transaction compare to market trading multiples?
• What are RITA shareholders receiving in return for giving Horizon shareholders 52.5% of the combined company?
Valuation
Comparable Companies Analysis as of May 12, 2004
($ in millions)
Enterprise Value as a
Multiple of Revenue
Company CY 2003A LTM as of 3/31/04
Possis Medical Inc. (1) 7.36x 7.01x
Arthrocare Corp. 4.15x 3.88x
Merit Medical Systems Inc. 3.03x 2.90x
Kensey Nash Corp. 7.11x 6.58x
Aspect Medical Systems Inc. 7.42x 7.00x
Palomar Medical Technologies Inc. 8.35x 7.49x
LifeCell Corp. 7.43x 6.65x
Candela Corp. 2.08x 1.95x
Exactech Inc. 3.24x 3.11x
Endocardial Solutions Inc. 5.21x 4.78x
STAAR Surgical Co. 2.86x 2.82x
Micro Therapeutics Inc. 5.60x 5.10x
Mean 5.32x 4.94x
Median 5.41x 4.94x
Acquisition Multiple
Horizon Medical 4.60x 4.44x
(1) LTM is as of 1/31/2004.
• The multiple paid for Horizon is less than the mean and median for the comparables despite including a control premium
Valuation
Contribution Analysis
($ in millions)
RITA Medical Horizon Medical
$ % of $ %of
Amount NEWCO Amount NEWCO
Revenues
CY 2003A $16.6 37.3% $28.0 62.7%
Q1 2004A 4.6 39.6% 7.1 60.4%
Gross Profit
CY 2003A $10.4 38.5% $16.7 61.5%
Q1 2004A 3.0 41.8% 4.2 58.2%
EBITDA
CY 2003A ($9.6) - $3.1 -
Q1 2004A (1.8) - 0.9 (1) -
Diluted Ownership in NEWCO: 47.5% 52.5%
(1) Excludes $1.03 million of separation payments paid to Marshall B. Hunt and William E. Peterson, Jr.
Debt
Payment Strategies
• Negotiated $8.262mm Comvest/Medtronic Senior Notes to be due 2008
•$ 6.501 million of Comvest LP Senior Subordinated Notes due July 2005
• Broad range of alternatives depending on market conditions and speed and success of integration
• Internally generated funds from combined operations
• We currently project Cash available from Operations after working capital requirements and capital expenditures to be in the range of $8-$10 million for 2005
• Bank lines or credit facilities to replace debt
• Currently in discussions with a number of banks
Summary
Why Invest in RITA
• The largest pure play medical oncology device company, second only to Boston Scientific oncology division in terms of revenue and sales force size
• Critical mass to operate as profitable organization
• Positive earnings and cash flow following successful integration of companies
• Ability to continue investment in R&D
• Platform deal – RITA will be positioned to potentially acquire or license additional technology
Questions
Additional Information About the Merger and Where to Find It
In connection with RITA Medical Systems’ proposed merger with Horizon Medical Products, RITA intends to file with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 that will include a joint proxy statement/prospectus and other relevant materials in connection with the proposed merger.
INVESTORS AND SECURITY HOLDERS OF RITA MEDICAL SYSTEMS AND HORIZON MEDICAL PRODUCTS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT RITA MEDICAL SYSTEMS, HORIZON MEDICAL PRODUCTS, AND THE MERGER.
The joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by RITA or Horizon with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov. In addition, investor and security holders may obtain free copies of the documents (when they become available) filed with the SEC by RITA Medical Systems by directing a request to: RITA Medical Systems, Inc., 967 North Shoreline Blvd., Mountain View, California, 94043, Attn: Don Stewart. Investors may obtain free copies of the documents (when they become available) filed with the SEC by Horizon Medical Products by directing a request to: Horizon Medical Products, Inc., One Horizon Way, Manchester, Georgia 31816, Attn: Robert Wenzel.
RITA Medical Systems, Horizon Medical Products and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of RITA Medical Systems and Horizon Medical Products in favor of the merger. Information about the executive officers and directors of RITA Medical Systems and their ownership of RITA Medical Systems common stock is set forth in the RITA Medical Systems’ Form 10-K/A for the fiscal year ended December 31, 2003, which was filed with the SEC on April 29, 2004. Information about the executive officers and directors of Horizon Medical Products and their ownership of Horizon Medical Products common stock is set forth in the Horizon Medical Products’ Form 10-K/A for the fiscal year ended December 31, 2003, which was filed with the SEC on April 29, 2004. Investors and security holders may obtain more detailed information regarding the direct and indirect interests of RITA Medical Systems, Horizon Medical Products and their respective executive officers and directors in the merger by reading the joint proxy statement/prospectus regarding the merger when it becomes available.