Jan-2017 Integra LifeSciences Holdings Corp. (IART) Acquisition of Derma Sciences, Inc. by Integra LifeSciences Holdings Corporation Call Total Pages: 15 1-877-FACTSET www.callstreet.com Copyright 2001-2017 FactSet CallS

Integra LifeSciences Holdings Corp.

Acquisition of Derma Sciences, Inc. by Integra LifeSciences Holdings Corporation Call

CORPORATE PARTICIPANTS

MANAGEMENT DISCUSSION SECTION

everyone and welcome to Integra Business and Financial Update Call. As a reminder, today s call is being recorded.

At this time, I d like to

turn the call over to Ms. Angela Steinway, Global Head of Strategic Initiatives and Investor Relations. Please go ahead, ma am.

Global Head of Strategic Initiatives and Investor Relations, Integra LifeSciences Holdings Corp.

Thank you, Roxanne. Good morning and thank you for joining the Integra LifeSciences business and financial update conference call. Joining me today are

Peter Arduini, President and Chief Executive Officer; and Glenn Coleman, Chief Financial Officer.

Yesterday evening, we issued a press release announcing

an agreement to acquire all of the shares of Derma Sciences through a tender offer as well as pre-announcing our preliminary financial results for the fourth quarter and full year 2016 and introducing 2017

guidance. We also posted a presentation on our website, which we will reference during the call today. You can find this presentation at investor.integralife.com under Events and Presentations in the file named Acquisition of Derma Sciences.

Additional information, including the acquisition agreement, can be found in the Form 8-K, accompanying the press release this morning.

If you would now open that file up to slide 2, please reference our Safe Harbor statements covering the forward-looking statements we will make on

And now, I will turn the call over to Pete.

President, Chief Executive

Officer & Director, Integra LifeSciences Holdings Corp.

Thanks, Angela, and good morning, everyone and thanks everyone for joining the call

on this very busy week. Turning to slide 3, we re very excited to announce the acquisition of Derma Sciences, a public company located down the road from our headquarters in Princeton, New Jersey. As some of you may note, Derma is a tissue

regeneration company, offering advanced wound care and amniotic tissue based products, focused on managing chronic wounds and burns.

Derma portfolio expands our regenerative technology, capabilities and increases our advanced wound care strategy with the addition of amniotic based products. It also leverages our existing sales channel with the addition of a complementary line of

advanced wound care products and immediately increases the size of our outpatient focused channel.

Derma s products are concentrated in three key

product categories. One, advanced wound care products, includes Derma s market leading total contact cast and the unique MEDIHONEY products, lined for wound and burn care management. Second is the BioD, family of amniotic membrane and

placental-based products, and third is a suite of market leading traditional wound care products.

So if you turn to slide 4, one of the primary benefits

of acquiring the Derma portfolio, in addition of the amniotic product for wound care is its importance to our 3x3 strategy. Together with Omnigraft and PriMatrix, we ll be the only company with three different technologies with clinical data

and broad indications in three product families. And we re selling that through three sales channels, inpatient, outpatient and our enterprise group who calls on the C-suite. We re now in a stronger

position to contract directly with providers and payers to drive a complete product portfolio and strong value proposition for patients suffering from chronic wounds, especially diabetic foot ulcers.

Additionally, this acquisition offers other strategic benefits. It leverages our existing sales channel with complementary advanced wound care products. It

also accelerates our channel expansion in the outpatient wound care area by adding 40 sales reps and their existing customer base in the United States. We re excited to expand the channel and we ll be managing the integration for revenue

synergies and growth.

Finally, this deal adds amniotic technology and manufacturing, complementing our regenerative technology platform capabilities.

With additional clinical investments, we also have the opportunity to sell the products into a broader set of indications.

So moving onto slide 5. This

slide provides a snapshot of Derma s product portfolio. The total contact compression cast and MEDIHONEY account for the largest portion of revenue, roughly 50%. The TCT (sic) [TCC] (04:17), of the cast is specifically designed caster boot,

which offloads pressure on a wound, taking weight off specific areas of the foot. This is a critical part of wound treatment indicated for use in conjunction with advanced therapies including Omnigraft, PriMatrix and AmnioMatrix as well as

competitive therapies.

MEDIHONEY is a unique medical grade honey with clinical evidence supporting its ability to promote the removal of necrotic tissue,

and advanced a wound towards healing. Together this 50% of revenue carries gross margins in the high 50% range and a mid to high single-digit revenue growth profile.

The advanced wound care amniotic and placental products comprised about 25% of the portfolio. And as many of

you know, amniotic and placental tissue-based products are rich in collagen and other growth factors that support the healing process both improving wound closure and reducing scar formation. And these products carry 80% plus gross margins and a mid

to high single-digit growth profile currently.

In the United States, the Derma Sciences family of amniotic products benefit from the reimbursement

coverage from seven out of eight Medicare administrators, covering over 93% of Medicare patients. With additional investments in clinical evidence, this offers a significant opportunity for longer term and is strategically important to our market

leadership efforts in advanced wound care.

The third component of Derma s portfolio is traditional wound care, making up the last 25% of revenue.

Derma offers market leading products used in wound care clinics and clinicians offices, and are sold through a distributor network, through traditional wound care products carry roughly a 30% gross margin profile and revenues are flat to

slightly decreasing.

Derma s product portfolio provides a revenue growth profile of mid single-digits generally in line with our corporate average

and slightly dilutive to corporate gross margins with the average in the mid upper 50%. As we integrate the business, we ll evaluate the strategic fit for all the products and product categories in the portfolio.

So, turning now to slide 6. We re acquiring Derma Sciences through a cash tender offer purchased all outstanding shares for $7 per share, which works out

to a purchase price of just over $200 million. We expect the transaction to close late in the first quarter subject to customary closing requirements including HSR Filings. And we expect to close the transaction using borrowings from our

existing credit facility.

We also pick up 50 reps, about 40 of which are in the U.S. as I previously commented on and about 10 in the UK and Canada.

Also, we ll be adding roughly 300 employees in three manufacturing locations.

During 2017, assuming closing late in the first quarter, we expect the

deal to add approximately $65 million in revenue and be $0.03 dilutive to adjusted earnings per share. During integration, we re focused on achieving revenue synergies and growth. And we also expect to make investments in commercial

channel and R&D related to the amniotic products and systems integration.

We expect some cost synergies outside commercial and R&D areas, and we

plan to get the business closer to in line with our corporate EBITDA margins in 2018. We believe the transaction should reach a breakeven status with adjusted EPS one year after the closing and be accretive in 2018. Finally, we expect our return on

invested capital to exceed the cost of capital by the end of year three.

So to summarize, please turn to slide 7. We re very pleased with the

opportunities to combine our growing outpatient wound care business with Derma s portfolio of market leading solutions and amniotic technology. This acquisition expands our regenerative technology capabilities and accelerates our advanced wound

care strategy, while leveraging our two sales channels with complementary lines of advanced wound care products. Derma is a strong strategic fit and advances us towards relevant scale in a fast growing advanced wound care market. We will drive

leadership in advanced care market with the combined differentiated regenerative technology portfolio.

And in closing, I m looking forward to

welcoming Derma Sciences teams into the Integra organization. Before we open up for Q&A though, I d like to turn the call over to Glenn, who will recap our preliminary fourth quarter results and 2017 guidance. Glenn?

Corporate Vice President, Chief Financial Officer and Principal Accounting Officer, Integra LifeSciences Holdings Corp.

Thanks, Pete. Good morning, everyone. Giving the important news of its acquisition and the presentation will be giving at the conference later today. We

decided to announce preliminary results for revenue and earnings per share for the fourth quarter and full year of 2016 and to introduce 2017 guidance.

Preliminary fourth quarter and full year revenue is expected to come in at the low end of the guidance range we provided in October. We expect organic growth

to be around 7% in the fourth quarter and 9% for the full year. The $5 million delta versus a midpoint of our guidance range, largely resulted from three items. First, we experienced a larger negative impact from currency exchange rates, which

was in excess of $1 million compared to the guidance we provided in October.

Second, our outpatient wound care revenue ramped slower than we had

expected coming in around $11 million versus a $12 million to $15 million that we previously guided to. And finally, while we gain new SurgiMend and PriMatrix customers during the fourth quarter, we do not achieve the expected level

of stocking orders in those accounts, which amounted to the remainder of the revenue shortfall.

Moving to profitability, despite a softer top-line performance in the fourth quarter, we expect to be at or above the midpoint of our previously communicated full year GAAP earnings per share guidance range of $0.91 to $0.94 and at or above the midpoint of

our adjusted earnings per share guidance range of $1.73 to $1.77. These earnings per share amounts reflected two-for-one stock split that went into effect January 3.

Let me wrap up my comments on 2016 with a preliminary view of our cash flow performance. Given our strong expected profitability in the fourth quarter,

we expect to report free cash flow above the high-end of our guidance range, which was $105 million for the full year. We will provide further details including segment level results and the puts and

takes of the rest of the revenue and operating performance when we host our earnings call on February 22.

Let me now move to our outlook for 2017, which

does not include the impact of the Derma Sciences acquisition. For the full year of 2017, we expect organic revenue growth of 7% to 8.5% over our 2016 reported revenue. Fundamentally, our expectations for the business remain unchanged since our

update in October. While the outpatient wound care ramp is somewhat slower than we had expected, our confidence in the value proposition of our advanced wound care solutions and the potential for Omnigraft as a significant differentiator in the

chronic wound treatment market remains strong.

Revenue from outpatient wound care currently is small in contrast to the rest of our portfolio. We remain

confident in other growth opportunities including new product introductions, which will offset the slower ramp in outpatient wound care and enable us to maintain organic growth expectations for 2017.

Foreign currency exchange headwinds increased since we last updated you in October. And we now expected negative impact of roughly 1 percentage point to our