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A New Company
for a New Market
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Profarma | Disclaimer
This presentation does not constitute an offering, invitation or solicitation of any kind to subscribe for or purchase shares or any other type of securities, nor
does this presentation or any information contained herein form the basis of any type of contract or commitment.
This material should not be construed as investment advice to potential investors. This information is not intended to be complete and is presented as a
summary. No trust should be built upon the basis of the accuracy of the information herein and no representation or guarantee, whether expressed or
implied, is made as to the accuracy of the information herein.
This presentation contains forward-looking statements that may be based upon forecasts which, as such, are no guarantee of future performance.
Investors are advised that these forecasts are and will be subject to countless risks, uncertainties and factors related to Profarma’s operations and
business environments, such as: competitive pressure, the performance of the Brazilian economy and of the pharmaceutical industry and changing market
conditions among other factors mentioned in the documents released by Profarma. These risks may cause the Company’s results to be materially different
from any future results expressed or implied by such forward-looking statements.
Although Profarma believes the expectations and assumptions contained in the forward-looking statements and information to be reasonable and based
upon data presently available to its management, the Company cannot guarantee future results or events. Profarma does not assume the obligation to
update any forward-looking statements and information.
It is summary information not intended to be complete and should not be deemed investment advice by potential investors. This presentation is strictly
confidential and may not be disclosed to any other persons. We make no statements and no guarantee as to the accuracy, suitability or completeness of
the information posted herein, which should not be relied upon for investment decisions.
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Long-term Growth
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Profarma | Long-Term Growth Strategy
Selected
Acquisitions
New
Segments
Regional
Expansion
Profarma’s long-term growth strategy rests on three main pillars.
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Profarma has been consistently implementing the strategy of
diversifying its pharmaceutical distribution business by
breaking into new market segments such as:
The hospital industry
Special products (vaccines, dermatological products,
higher value-added products, etc.)
Value-added services for manufacturers
Retailing
Profarma’s new business segments complement and
strengthen the Company’s position in the industry:
Higher-margin segments
Synergies with the logistics segment
Synergies with storage services
Synergies with the purchasing department
Business Segment
Hospitals Specialties Retail
Scale
P
rice
Q
uality
D
isti
nct
Pro
du
cts
Go
als
Distribution Services
Initial Focus New Focus Synergy Approach
Selected Portfolio
Strategic Positioning Comments
Profarma | A Strategy Based on A Broad Market Vision and Perfect Execution
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Timeline
CAGR Market (97-00) = 12% CAGR Market (04-10) = 12%
Organic Growth / New Regions New Segments / Products Selected Acquisitions
A proven history of success: a unique ability to enter new regions and segments and make successful acquisitions.
Market (9M11-9M12) = 17%
Profarma | Main Events
CE
PE Paraná
Minas
Gerais Espírito
Santo
Hospitals
in SP
Bahia
DF IPO
Vaccines
K+F
(SP)
Dimper’s DC
(RS)
GO
Prodiet Hospitals
In RJ Arpmed
1998 1999 1996 2001 2003 2004 2005 2006 2007 2009 2011 2012 2013
Casa Saba
Brasil
8
1,102
2003
1,443
2004
1,725
2005
1,968
2006
2,596
2007
2,940
2008
3,042
2009
3,133
2010
3,317
2011
2,832
9M12
In R$ million
8.4% 9.3% 9.6% 9.6% 11.5% 11.7% 10.9%* 10.2%* 9.2%* 9.0%*
Market Share | * Not including similar medications
Rise in Gross Revenues
Profarma | Our Growth in Figures
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68.1
2006
80.1
2007
78.7
2008
110.7
2009
79.9
2010
75.9
2011
73.4
9M12
In R$ MM and as a % of Net Revenues
EBITDA and EBITDA Margin
3.5 3.9
3.1
4.3
3.0 2.7
3.1
As a % of Gross Revenues
Diversification
EBITDA EBITDA Margin (%)
67.7% 69.7% 66.5%
55.4%
5.7% 5.7% 7.0%
8.6%
17.8% 17.8% 18.9%
13.5%
6.7% 4.1% 4.5%
7.1%
2.0% 2.7% 3.1%
12.6%
2.7%
2006 2008 2010 9M12
Branded Generics OTC
Health and Beauty Hospitals + Vaccines Specialties
Profarma | Revenues and EBITDA
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Sector Dynamics
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Global Pharmaceutical Distribution and Retail Industries | Overview
% of the Total Market In € billion
Source: IMS Health 2010. Source: J.P. Morgan
6.6
2.9 2.5 1.8
4.2
1.9 2.5
3.9
10.4
4.3 5.5
19
30 23 21 21
16
24
36
43 42
35
43% 57%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Transaction Amounts # of Transactions
100% 93% 92%
72% 64% 61% 58% 55%
39%
13%
Developed countries: An
establishment process has
taken place over the last 15
years. There are currently
few players.
This process was driven by the
scalability inherent to the industry,
which leads to an increase in
companies’ earnings thanks to
higher volumes, better negotiation
terms with suppliers and,
consequently, higher margins.
This trend benefited companies
with higher scales and greater
efficiency, able to obtain high
returns and profitability.
Top 3 Distributors’ Market Share M&A Transactions in the Distribution and
Retail Industries
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Global Pharmaceutical Distribution and Retail Industries | Main Trends
Source: IMS Health
World Ranking of Distributors
Distributor Growth 11/10 Sales EBITDA Margin Mixed Ranking
13.0%
2.9%
-3.0%
3.0%
4.0%
3.0%
31.2
30.8
28.8
112.0
102.6
80.2
6.4%
3.0%
2.6%
2.1%
1.8%
1.6%
1
2
3
4
5
6
N.A.
Strong presence through company-owned chains
Focus on services / franchises
Mixed Model: A Reality Worldwide, with Different Focuses
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The Brazilian Pharmaceutical Market | Overview
A unique combination of high growth rates and sound industry fundamentals.
7.0 8.3 9.4 10.3 11.2 11.6 13.1 14.4
16.6 18.3
20.9 23.2
26.1 30.0
36.0
41.8
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sales of the Brazilian Pharmaceutical Industry 1996-2011 (R$ billion)
1997: Asian Crisis
1998: Russian Crisis
1999: Real Depreciation
2000: Internet Bubble Burst
2001: Argentine Default
2002: Pre-Lula
Election Crisis
2003-04: First Years
of Lula’s Administration
2004: Mensalão
(cash-for-votes scheme)
Scandal
2006: Lula’s Re-election 2008: Subprime Crisis
Source: IBGE. Farmácia Popular, Health, OMS, IMS, Brazil Central Bank
Macro Drivers Micro Drivers Timing
Income Growth Aging Population Generic Drugs Regional Brands Fragmented Market Formalization
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Total area (km²)
# of Drugstores
Total Market
8.5 MM
60 thd
R$41.8 Bil
Share: 4.1%
Market: R$1.7 Bil
Area: 3,853,327 km²
# of Drugstores: 4.3 thd
Share: 16.3%
Market: R$6.8 Bil
Area: 1,554,257 km²
# of Drugstores: 4.3 thd
Share: 54.6%
Market: R$22.8 Bil
Area: 924,511 km²
# of Drugstores: 27.2 thd
Share: 17.2%
Market: R$7.2 Bil
Area: 575,410 km²
# of Drugstores: 12.4 thd
Share: 7.8%
Market: R$3.2 Bil
Area: 1,606,372 km²
# of Drugstores: 6.7 thd
Share of the Top 3 Distributors by Geographical Region Distribution Overview
• Highly fragmented: The top 3 account for 42% of
the Brazilian market, vs. 92% in the USA, 72% in
Mexico and 55% in Argentina;
• A slow establishment process: mainly labor and
tax liabilities and contingencies hinder
consolidation in the distribution industry;
• Margins under pressure from the consolidation of
the retail industry;
• A drop in part of the tax incentives.
28%
42%
2006 2011
To
p 3
Source: IMS, IBGE
Distribution in Brazil | A Fragmented, Highly Competitive Market
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Profarma has the scale, efficient operational platform and execution capacity needed to become one of the
major mixed distribution players in Brazil.
Source: IMS Health
• The Brazilian pharmaceutical distribution market is still much more fragmented than in the U.S. and Europe;
• The top Brazilian distributors have not yet felt the need to adopt the European mixed business model or the
American model, with services.
Distributor Medications Vaccines Hospital Health and Beauty Specialties Retail Services
Retail / Distribution European Mkt U.S. Mkt
Business Segments of the Main Pharmaceutical Distributors in Brazil
Distribution in Brazil | A Fragmented Market with Opportunities
Government
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Groups # of Stores Names
The retail market is still very fragmented, with about 60,000 drugstores in Brazil. Independent stores continue to play
an important role in the retail industry – The top chains in Brazil are establishing themselves through geographical
expansion whereas medium-sized chains are establishing themselves regionally.
The Retail Industry in Brazil | A Fragmented Market
Top Established Players – 2011
Source: Media publications. IMS Distribution Study.
Presence of Chains by Brazilian Region
Chains S SW MW NE N
Raia Drogasil
DSP Pacheco
Pague menos
Brazil Pharma
Araújo
Panvel
Nissei
Onofre
Extrafarma
Drogasmil
Venâncio
Drogal
Angélica
Drogãosuper
Indiana
A Nossa Drog
Permanente
São Bento
Moderna
Santa Lúcia
Minas Brasil
Relevant Market
Aug 2011
Aug 2011
Brazil Pharma
Estrela Galdino
Guararapes
Farmais
Droga Raia 389
Drogasil 363
São Paulo 374
Pacheco 348
Pague Menos 466
Araújo 99
Catarinense 197
Nissei 209
Panvel 274
Ultrafarma 6
Bigfarma 86
Bom Preço 180
Big Bem (PA) 128
Rosário (DF) 85
Venâncio 17
Extrafarma 177
Mais Econômica (RS) 187
Santana (BA) 103
Onofre 39
São João (RS) 240
Other Chains
Independent
Outras 3.713 12,8%
Independentes 57.825 48,3%
Top 5 Chains 23,3%
Top 6-10 Chains 7,2%
8,5% Top 11-20 Chains
Bifarma
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The Retail Industry in Brazil | Opportunities for Establishment in the Retail Industry
2011
776 828
2012 2009
582
688
2010 2011
737
1,050
2012 2009
423 503
2010 2011
489
2012
555
2009
333 400
2010
The Growth of 3 of the Top 5 Players – Number of Stores
Sales EBITDA Net Income
R$4.7 Bil R$151.4 MM R$271.5 MM
Sales EBITDA Net Income
R$2.6 Bil R$95.7 MM R$155.4 MM
Sales EBITDA Net Income
R$2.9 Bil R$109.1 MM R$232.2 MM
2011 2011 2011
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Vertical Integration: The Mixed
Model in Brazil and Worldwide
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The Mixed Model | Recent Moves in Latin America in Line with a Global Trend
Chile Mexico
Peru
• Socofar is one of the top three pharmaceutical
distributors in Chile;
• It owns the largest retail chain in that country (Farmacias
Cruz Verde), which has over 500 stores and established
itself after the acquisition of Farmacias Conosur in 2001
(ranking 4th in the industry).
• Founded in 1892, Grupo Casa Saba is the top
pharmaceutical distributor in Mexico, with US$2.8 billion
net revenues in 2010;
• Grupo Casa Saba is also present in the retail market. It
had over 160 stores under the brands Farmacias ABC and
Farmacias Provee de Especialidades (in Mexico) and
Drogasmil (in Brazil) at the close of 2009;
• In October 2010, Grupo Casa Saba acquired Farmacias
Ahumada AS and became the largest mixed distributor in
Latin America, with a retail platform of over 1,500 stores
in Mexico, Brazil, Chile and Peru.
• Quimica Suiza, the top pharmaceutical distributor in Peru,
acquired Boticas BTL, one of the top drugstore chains in
that country in 2011 and now has a retail platform of over
300 stores.
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The Mixed Model | The Changing Reality in Brazil
Examples of Brazilian Pharmaceutical Distributors Migrating to the Mixed Model
• Grupo Jorge Batista, one of the top distributors in Northeastern Brazil, owns the retail chain
Globo Guararapes (with 30 stores in Rio Grande do Norte State), has recently acquired
Lusitana chain (with 25 stores in Piauí State) and is engaged in negotiations with Drogaria
Ceará, which has 20 stores in Fortaleza, Ceará State.
• Founded in 1972, Distribuidora Brasil distributes pharmaceuticals in the states of Mato
Grosso and Mato Grosso do Sul and has recently expanded its presence to the states of São
Paulo and Paraná, and the Federal District. It operates in the retail industry through Drogaria
São Bento, a chain with about 75 drugstores in Mato Grosso and Mato Grosso do Sul.
• Headquartered in Ribeirão Preto (São Paulo State), Drogacenter is a pharmaceutical
distributor operating in the states of São Paulo, Minas Gerais, Goiás and Rio de Janeiro. The
company owns the largest drugstore chain in the country of São Paulo State (Drogão Super),
with over 50 stores inland, in the Santos area and Southern Minas Gerais State.
• Imifarma is a pharmaceutical distributor based in Belém (Pará State). The company owns
Extrafarma drugstore chain, with over 70 stores located in the states of Pará, Maranhão and
Ceará.
• Dimed was one of the first distributors to adopt the mixed model in Brazil. It operates in the
industry under the Panvel brand, which is currently the largest drugstore chain in Southern
Brazil, with 290 stores.
Northeast
Mid-West
Southeast
North
South
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Complementarity
Strategic access to information
and market needs will be able to
leverage new business (e.g. provision
of additional services to industry and
Growth
Entry into the retail industry, a
fragmented market with multiple
opportunities for establishment
Efficiency Gains
A management structure combining
optimized logistics, an integration
between systems and processes, a
dispersal of expenses and the
elimination of redundancies.
Higher Gross Margin
Adoption of the best purchasing
terms and conditions and gross
margin and leveraging of the
combined scale of purchases in
new business negotiations.
The Mixed Model | The Main Advantages for Profarma
Vertical integration offers Profarma several opportunities to create value.
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Acquisition of Casa Saba Brasil
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Geographical Coverage Highlights Transaction
Profarma | Overview of Casa Saba Brasil
Geographical Coverage
• Aquisition of 100% of CSB Drogarias S.A.(Drogasmil
/ Farmalife) total equity, for R$ 87.0 million, to be paid
net of debt and cash balances;
• 100% paid upon CADE´s approval of the operation.
• Two strong brands in the market: “Drogasmil” and
“Farmalife” with complementary positioning.
• Platform of 85 stores;
• Gross Revenue of R$ 332.8 million in 2011;
• Leading position in Rio de Janeiro (2nd largest
market in Brazil);
• Strong presence in shopping malls (less
competitive environment);
• Relevant participation in the hygiene and beauty
segment, and also dermocosmetics. RJ
Rio de Janeiro State
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Casa Saba Brasil | Transaction Rationale
Diversification
and Scale
Robust entry on the retail sector through an 85 store platform, being one of the largest
drugstore chains in Brazil, second largest in Rio de Janeiro.
Creation of one of the largest mixed distribution and pharmaceutical retail platforms in Latin
America, and the largest in Brazil
Company with a differentiated position to become an important player of the industry
consolidation process;
Improved flexibility and capillarity for the entry into new markets where Profarma already has
operations (support from the local Profarma team).
Growth
Support from regional industry managers, generating possible synergies in purchases,
marketing funds, logistics and back-office;
Tax optimization in Rio de Janeiro;
Easier integration and management of retail operations.
Sinergy
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Distribution
3rd largest distributor in Brazil, with 12
distribution centers and nationwide
coverage.
The Company also has two platforms
(Prodiet and Arpmed) focused on the
hospitals, government and specialties
segments.
Mixed operation model (distribution +
retail) already established in the
European market;
Greater consolidation opportunity:
more than 80% of the points of sale are
still independent shops.
Profarma | A New Company
Mixed Model
A Fragmented Retail Market A Solid Regional Expansion and
Diversification of Channels and
Products
Retail
+
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Analyst Coverage
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Company Analyst Phone number Email address
Credit Suisse Marcel Moraes (55 11) 3841-6302 [email protected]
Banco Fator Gabriel Gaetano (55 11) 3049-9480 [email protected]
BTG Pactual João Carlos dos Santos (55 11) 3383-2384 [email protected]
Juliana Rozenbaum (55 11) 3073-3040 [email protected] Itaú BBA
Fernando Amaral (55 11) 3048-6088 [email protected] Morgan Stanley
Andre Parize (55 11) 5171-5870 [email protected] Votorantim
Merrill Lynch Mauricio Fernandes (55 11) 2188-4236 [email protected]
Profarma | Analyst Coverage
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IR contacts
Max Fischer | Chief Financial and IR Officer
Beatriz Diez | IR Manager
Phone number.: 55 (21) 4009-0276 | E-mail: [email protected] | www.profarma.com.br/ir
