12-Sydney Clark-OTC Market in Latin America

8/13/2019 12-Sydney Clark-OTC Market in Latin America

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Sydney Clark | IMS HealthOctober 2013

OTC Market in Latin AmericaOverview and trends


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Source: IMS OTC Global Analysis, IMS MIDAS; *N.B. Trend break due to change in estimation methodology

7.5

9.7

7.57.1 6.9

5.5 5.3

6.5

4.34.6

2.02.2

4.84.4

5.9

5.1

6.6

7.7 7.7

5.4

6.6

5.8

11.6%11.1%

10.8% 10.7% 10.5% 10.6%10.8% 11.0% 11.1%

11.3%11.7%

0%

2%

4%

6%

8%

10%

12%

14%

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

V a l u e

G r o w

t h ( % )

Year on Year Value Growth & OTC Share of Total Pharma

MAT Q1 2013

Total Pharma Total OTC OTC Share of Total Pharma

Total Pharma = $913bn TotalOTC = $107bn

On a global perspective, OTC has been outgrowing Pharmasince 2008

Global


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OTC and consumer health products play an important role inprevention and reducing overall health care costs

Trend in society towards focus onpreventative health and nutrition

OTC as a means of reducing overallhealth care costs 1

Media campaigns heighten awareness ofunhealthy lifestyles

Growing number of advertisements,magazines and blogs for self-medication with vitamins, minerals and other dietarysupplements

Emerging markets following mature markettrends of adopting supplements as part of ahealthy diet

Payers are recognizing the long-term cost-benefits to preventative treatments

Many health insurance providersencourage active lifestyles and healthyeating as part of their membership schemes

As a result more companies are enteringinto the space which has now become aseparate market to just nutrition

The market is expected to continue withstrong growth

It is estimated that OTC medicines providea value of US$102 billion to the UShealthcare system

Each dollar spent on OTC medicines saves$6-7 for the U.S. healthcare system

240 million people in the U.S. currently useOTC medicines 60 million of themwould not seek alternative (e.g., Rx)treatment if OTC medicines were notavailable

If OTC medicines did not exist, an additional56k medical practitioners would needto work full-time to accommodate theincrease in office visits by consumersseeking prescriptions for self-treatableconditions

If OTC medicines were not available,additional Emergency Departmentvisits , primarily by patients on Medicaidand uninsured individuals, would drive upnearly $4 billion in healthcare system costs

Source: (1) Booz & Co. CHPA Study The Value of OTCMedicine to the United States, 2012

Global


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This shift of focus towards health & wellness has led tothe development of transversal market segments

Pharmaceuticals

NutritionPersonalCare

NutraceuticalsCosmeceuticals

Nutricosmetics

Topically applied, but contain

ingredients that influence thebiological function of the skin

Vitamins, herbs, various oils,and botanical extractstypically added

Manufacturer may not claimthat these products penetrate

beyond the skin's surfacelayers or that they havedrug-like or therapeuticeffects

E.g.: Stiefel (GSK),Galderma(Nestle/Lreal), ROC(J&J)

Often derived from food

products, provide medical orhealth benefits, includingthe prevention and/ortreatment of a disease

Typically s old in the medicinalform of capsule, tablet, powder,solution

High growth rates andattractive margins have fueledinterest from BigPharma /Food companies

E.g.: RB buys SchiffNutrition, Valeant buysSwiss Herbal and Probiotica,Nestle buys Pfizer Nutrition

Ingestible products containing ingredients such as botanical actives,enzymes, proteins, and vitamins that offer antioxidant benefits and that are

formulated and marketed specifically as beauty aidsE.g.: Inneov (LOreal), Imedeen (Pfizer), Oenobiol (Sanofi)

Global


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Source: IMS OTC Global Analysis, MAT March 2013

NorthAmerica

95%

5%

Japan

90%

10%

WesternEurope

88%

12%

APAC

85%

15%

LatAm

77%

23%

CEEMEA

75%

25%RXOTC

Share of OTC and Prescription market by region(retail channel, US$ basis)

In emerging markets, including LatAm, OTC represents agreater share of retail channel drug expenditures...

Reduced access tophysicians drivespopulation to seekOTC as 1 st line oftreatment

Largely non-reimbursed (out ofpocket) marketsfavor lower cost OTCalternatives (vis avis RX)

Long standingculture of self-medication in manyLatAm countries

Latam


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Source: IMS OTC Global Analysis

21 21

18 18

1422

13178

1126

12

0

10

20

30

40

50

6070

80

90

100

Global LatAm 2

Value Contribution (%) of Category to OTC Sales

All Others

Skin

Digestive

Pain Relief

VMS &Tonics

CCR

...despite lower availability of molecules with OTCalternatives

Examples of RX to OTCSwitches since 2000

Prilosec (omeprazole) $175myearly sales

Zyrtec (cetirizine) $150m yearlysales

Allegra (fexofenadine) $130myearly sales

Zocor Heart Pro (simvastatin) UK only, behind the counter

Latam


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LatAm region is a key contributor to growth in OTC

Source: IMS OTC Global Analysis

LatAm represents roughly 10%of the global OTC market

Latam


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The OTC market in LatAm totals USD11.4 billion andhas been growing at 15%

Source: IMS MIDAS, MAT Aug 2013Note: Ex-manufacturer MIDAS price level USD at constant exchange rates from Aug 2013

0,5(4,7%)

9,8

1,7(17,2%)

1,8(15,5%)

4,3(49,8%)

4,9(50,3%)

5,8

(51,1%)

1,4(16,5%)

2011

8,6

Others +8,2%

0,4(4,5%)1,2

(12,3%)0,9

(9,9%)

1,6(14,1%)

1,7(19,6%)

+14,9%

Venezuela +37,0%

2012

0,4(4,2%)

1,5(15,7%)

2013

Argentina +21,6%

Brazil +16,5%

11,4

Mexico +2,0%

1,7(14,6%)

LatAm OTC marketUS$ (billion)

CAGR13x11

LatAm


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Company performance per country is inconsistent, withlocals typically gaining share

Source: IMS MIDAS, MAT Aug 2013Note: Ex-manufacturer MIDAS price level USD at constant exchange rates from Aug 2013

LARank Corporation Sales(US$ MM) CAGR13x11 Bra Rank Mex Rank VenzRank Arg Rank

1 SANOFI 807 11% 2 4 6 9

2 HYPERMARCAS 725 13% 1 - - -

3 BAYER 544 11% 15 2 5 2

4 EMS 511 20% 3 - - -

5 GSK 478 7% 5 14 16 3

6 GENOMMA 478 21% 11 1 - 1

7 NESTLE 439 22% 10 8 2 27

8 J&J 420 7% 6 6 10 28

9 B.I. 411 10% 8 3 9 5

10 TAKEDA 320 15% 4 17 41 21

Other local players amongst Top 10 in countryAche Pisa Gr Farma Elea

Leti Andromaco

Roemmers

Bago

Leading OTC Corporations in LatAm

LatAm


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9

2011 2012

Generics

2013

+11,4%

Brands

93,1%

6,9%43,9

93,0%

7,0%48,9

93,3%

6,7%

54,4

2011 2012 2013

+13,3%

94,2%

5,8%4,1

95,5%

4,5%4,5

95,7%

4,3%5,2

Brazil OTC marketStandard Units (billion)

Brazil OTC marketUS$ (billion)

Source: IMS PMB MAT Sept 2013.Retail channel only. Prices at PPP price level. Constant exchange rate of 1 US$ = R$2,18

The OTC market in Brazil has grown double digits over thepast two years brands drive market growth


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Mix in OTC shifts towards higher value added categories andaway from commoditized segments

10Source: IMS PMB MAT Sept 2013.Retail channel only. Prices at PPP price level. Constant exchange rate of 1 US$ = R$2,18

0

5

10

15

20

25

30

35

40

-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Dermo-cosmetics (763)

Ophthal. (237)

Nutrients (276)

A-A/F/U/Laxatives (392)

Muscle Relax (293)Cough & Cold (693)

Others (603) Analgesics (606)

Other Derm (292)

Other GI (405)

Vitamins & Sup. (684)

% Generics penetration

2 0 1 3 x 2

0 1 1 C A G R ( % )

Brazil OTC market growth by therapy areaUS$ (million)

Size of bubble represents size oftherapy area (US$ million)


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Despite lack of generics, competition in higher value addedsegments intensifies


0

5

10

15

20

25

30

35

40

-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Dermo-cosmetics (763)

Nutrients (276)

Cough & Cold (693)

Analgesics (606)

Other Derm (292)

Vitamins & Sup. (684)


2 0 1 3 x 2

0 1 1 C A G R ( % )

These 3 segments represent roughly 50% oftotal absolute growth since 2011

Derma-cosmetics Local players gaining space Genomma

(Cicatricure, Pointts), Hypermarcas, Biolab, Ache,others

Line extensions of sun protection and hidrationproducts

Nutricosmetics

Bepanthol

Nutrients mainly uptake of pediatric formulationsfrom MNC (e.g. Nestle, Danone, Abbott)

Vitamins & supplements Vitamin D (Depura, Addera D3, others) Multivitamins and Vit C few global brands

growing (e.g. Centrum, Redoxon); many localbrands gaining share (e.g. EMS, Marjan, Cifarma,Biolab, Cimed, Eurofarma)


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Lower growth segments partially driven by underlying shift inconsumer behavior towards niches


0

5

10

15

20

25

30

35

40

-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

A-A/F/U/Laxatives (392)

Cough & Cold (693)

Analgesics (606)

Other Derm (292)


2 0 1 3 x 2

0 1 1 C A G R ( % )

These 4 segments represent roughly 25% of total absolute growth since 2011

Analgesics Ample generic penetration Ibuprofen gains participation within treatment Combinations grow faster (e.g. Neosaldina, Lisador)

Cough & Cold Generics highly penetrated in select molecules (acetylcysteine, loratadine, ambroxol) Local multisymptom products outperform (e.g. Multigrip, Cimegrip, Decongex Plus) Increased usage of sodium based drugs (e.g. Rinosoro, Sorine, Maresis, Salsep , etc)

Other Derm Generics highly penetrated in select molecules (nystatin, ketoconazole, anti-bacterials/fungals) Genomma outperforms with Aspexia

A-A/F/U/Laxatives Generics highly penetrated

in select molecules(simeticone, dimeticone)

Increased use of herbalproducts


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13

0

0,2

0,4

0,6

0,8

1

0 1 2 3 4 5

LOWER

HIGHER

LOWER HIGHERLikelihood of occurrence on next 3-5 years

O T C M a r k e

t I m p a c

tPopulation

Aging

Farmcia Popular

program coverage

Association betweenIndependent pharmacies

Consolidation/Expansion of Chains

Income

Increasing

Private payerscoverage increasing Tax reduction

OTC return to back ofcounter

New Competitors

Switch RX

to OTC

Higher prescriptionscontrols

Higher price controls

Physicians inpharmacies

Private LabelExpansion

Source: IMS AnalysisNote: HEOR = Health Economics and Outcomes Research; DTC = Direct to Consumer Advertising

Several events could impact the future market dynamics

Pharmacistprescribing


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175

75

0

150

25

125

50

100

PMBForecasted

RDC44/2010

0

j a n /

1 3

j u l / 1 2

j a n /

1 2

j u l / 1 1

j a n /

1 1

j u l / 1 0

j a n /

1 0

j u l / 0 9

j a n /

0 9

j u l / 0 8

j a n /

0 8

250200

150

10050

S t d

U n i t s

( M i l l i o n s

)

L i s t

P r i c e

( B R L M i l l i o n s

)

25-30%

Antibiotics volume impact of 25-30%,with a higher list price mix

7-11%

Other Classes a higher impact couldbe expected, with winners and losers 1

0.2

Topical Anti-acnePreparations 0.3

Antitussives andExpectorants 0.6

Centrally ActingMuscle Relaxant 0.8

Non Steroidal

Anti Rheumatics1.0

Rx

Vitamins

OTC

Antacids andantiulcerants 1.1

1.1

Nasal Decongestant 0.1

Topical Antifungice

Pantozol, omeprazol

Several

Diclofenac, nimesulide

Torsilax, Tandrilax,Mioflex-A

Adapalene,Tretinoin

Ciclopirox,Isoconazole

Neosoro, Sorinan

Hedera Helix, Acebrophylline

Dorflex, Nevralgex,Sedalex

Eno,Estomazil

Several

ketoprofen, etodolac

Acetylcysteine, Ambroxol

Glycolic Acid + Salycilic Acid, Benzoyl Peroxide

Miconazole, Nystatin +Zinc

Sorine,Narix

Source: PMBNote: Molecules and/or Brands from medicines on the right chart are (non-exhaustive) examples. Preference forgrouping by molecules instead of brands excluding those cases where combinations would be unlikely to be shown inthe chart. (1) Figures from April 2013 MAT Sales list priced

14

Prescription retention enforcement is on the agenda and couldchange the drug consumption profile


16/18

15

Continued consolidation in a relatively fragmented market Larger chains are planning to open new pharmacies (it is expected 320 new stores for

2013 considering just the top 3 chains), but they are going to face great challenges: To find suitable places in main cities Set up new business models in small cities (eg. Farmasil)

Entrance of Grupo Ultra through the aquisition of Extrafarma Independent pharmacies and small chains are looking for different business

models in order to achieve more benefits in negotiations and logistic efficiency Partnerships/Associations Participation in established franchises (eg . 26 out of 52 new Farmais stores were

independent pharmacies) Using specialization business models to deal with niches

Popular Business model that focused in the new Class C (part of the population that is risingits consumption range) in association or not with partners

Diabetes Compounding Personal & Beauty Care Nutrition

Regulation has been debated with possible significant impacts Limitation of marketed categories, traceability, destination of drugs residues, others

It is expected that distribution & retail will remain dynamic bythe next years


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Conclusion

OTC drugs play an important role in prevention and reduction of health

costs

OTC drugs represent a larger and increasing share of the pharmaceutical

market in emerging markets

There is still ample room for expansion

Therapy areas / molecule availability

Companies expanding their presence across the region

Brazil plays a predominant role within Latin America

All therapy segments grow, but consumption patterns are favoring

market segments of higher value

The outlook for the market is positive, with most potential future

events favoring increased usage of OTC medications


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Sydney Clark | IMS HealthOctober 2013

OTC Market in Latin AmericaOverview and trends

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12-Sydney Clark-OTC Market in Latin America