1. Self-Care/OTC Medicine: a key part of health systems around the world ANDI 10 June 2015
Andy Tisman, Senior Principal Consumer Health
IMS Health

2. Agenda Global OTC Overview LatAm Highlights
Future Trends and Rx/OTC Switch
Summary and Conclusions
IMS Health - ANDI 2015

3. The Basis for Figures in this presentation
Based on IMS OTC Global Analysis
Covers 74 countries across LatAm, EMEA, N America and APAC
Annual sales to end Q1 2015, manufacturer prices
Growths use latest exchange rate across all time periods
Local currency growth aggregated into $ USD
Some qualifications
Coverage excludes Wal-Mart & mass market in some countries
Companies include all OTCs from the corporation
Latest USA and global growth rates are impacted by approx -1.5%/-0.5% respectively due to disparity in data time periods.
IMS Health - ANDI 2015

4. At $107bn, OTC continues to show healthy growth while Pharma growth improves
Global
Source: IMS OTC audits plus estimates
IMS Health - ANDI 2015

5. While Pharma experiences a number of constraints, OTC benefits from a range of growth drivers.
Global
Top Corps contribution to growth falling rapidly
Low number and quality output from R&D
Generics dominating large therapy areas
Demand constrained by payers
PHARMA
OTC
Emerging markets have the critical mass to influence growth
Companies seek to exploit switch opportunities
Increasing access through new channels
Key players building strong brand identities
Payers keen to promote self medication
IMS Health - ANDI 2015

6. There is an “irresistible force” moving through society towards health promotion rather than just treating illness.
Consumer Empowerment
Awareness
Media and advertising campaigns promote interest in maintaining health
Adoption
Consumers around the world are buying into healthy lifestyles – but there is enormous potential for further expansion
Payers
Many stakeholders recognise the long-term cost-benefits to preventative healthcare and health promotion
Future
As a result more companies are entering into this expanding Consumer Healthcare space
IMS Health - ANDI 2015

7. And this shift of focus towards health & wellness has led to new transversal market segments.
Global
Blurring the boundaries (or broadening the scope!) and attracting new competitors
Pharmaceuticals
Nutrition
Personal Care
Cosmeceuticals
Nutraceuticals
Topically applied
Vitamins, herbs, various oils, and botanical extracts typically added
May not claim drug-like or therapeutic effects
Provides medical or health benefits, including
the prevention and/or treatment of a disease
Typically sold in the medicinal form of capsule, tablet, powder, solution
Sometimes associated with functional foods
Nutricosmetics
Ingestible. Containing ingredients such as botanical actives, enzymes, proteins, and vitamins.
Marketed specifically as beauty aids
IMS Health - ANDI 2015

8. As OTC becomes increasingly attractive, industry players become more diverse.
Global
Global
Pharma
Consumer Health
FMCG/CPG
Consumer packaged
goods
Pharma moving into consumer health
CPG moving into consumer health
Pure play consumer health
Payer and generic pressure driving diversification
Rx to OTC asset leverage
Leverage sales and marketing capabilities
Economies of scale in supply chain
Higher consumer health margin and prices
Leverage consumer and trade marketing muscle
A shift in thinking from: “Pharmaceuticals for the Consumer” towards: “Consumer products about Health & Wellness”
IMS Health - ANDI 2015

9. Developing Regions account for the majority of OTC growth; LatAm is a key contributor.
Global
Developing Regions
Total OTC
Share of Sales
51%
Share of Growth
84%
Total OTC
Total OTC
Source: IMS OTC audits plus estimates
IMS Health - ANDI 2015
USA Data: is a 53 week data period, whereas 2014 is 52weeks, therefore growth rates are impacted

10. LatAm remains the fastest growing region while sub-regions in EMEA and APAC also show strong growth
Global
Source: IMS OTC Global Analysis
IMS Health - ANDI 2015

11. 4 of the top 10 OTC markets are in the Pharmerging group - and these are the fastest growing.
Global
Countries with controlled currency rates and high inflation
Source: IMS OTC Global Analysis
IMS Health - ANDI 2015
USA Data: 2013 is a 53 week data period, whereas 2014 is 52weeks, therefore growth rates are impacted

12. And the OTC market share is larger and growing faster in Pharmerging than in the mature countries
Global
Pharmerging market pharma
Sales, $Bn
Top 8 mature market pharma
Sales, $Bn (EU5, Japan, US, Canada)
300
700
600
500
200
68%
29%
29%
400
68%
300
100
34%
200
16%
20%
100 7% 9%
10% 7%
MAT Q1 10MAT Q1 10
MAT Q1 11MAT Q1 11
MAT Q1 12MAT Q1 12
MAT Q1 13MAT Q1 13
MAT Q1 14MAT Q1 14
MAT Q1 10MAT Q1 10
MAT Q1 11MAT Q1 11
MAT Q1 12MAT Q1 12
MAT Q1 13MAT Q1 13
MAT Q1 14MAT Q1 14
2-year CAGR (MAT Q )
Segment
Pharmerging
Mature
10.2%
-0.2%
13.1%
9.7%
14.9%
1.8%
28.7%
6.7%
15.3%
3.1%
Note that ‘Consumer Health’ is defined by ATC class for products most often dispensed without prescription in addition to the OTC flag in IMS MIDAS and the total differs from the CH value in IMS OTC Global Analysis
Original Rx brands
Rx Generics
Consumer health
TCM*
Other*
Source: IMS MIDAS, Q1 2014, constant exchange rates. ‘TCM’ = Traditional Chinese Medicine. ‘Other’ includes products that are unclassified due to country data limitations and products that pre-date protection. Excludes Ukraine, Nigeria, Vietnam, Romania and Algeria as no market segmentation available for these countries. Both retail & hospital panels are included. Non retail panel included for Brazil and Mexico.
IMS Health - ANDI 2015

13. Many major MNCs do not match market growth due to weighting towards developed markets
Global
Source: IMS OTC Global Analysis
IMS Health - ANDI 2015
Estimated sales of combined businesses, dependent on detail of acquisition
GSK-Novartis CH excluding Hexal/Lek/Sandoz/Alcon & pharma divisions

14. Global OTC – Key Categories
The big 5 categories account for 75-80%, with CCR fastest growing due to a strong winter
Global
Global OTC – Key Categories
Value Share (%)
Value Growth (%)
Source: IMS OTC Global Analysis
IMS Health - ANDI 2015

15. Agenda Global OTC Overview LatAm Highlights
Future Trends and Rx/OTC Switch
Summary and Conclusions
IMS Health - ANDI 2015

16. Colombia and Brazil show good but slowing growth; Argentina and Venezuela driven by inflation.
Latin America
Countries with controlled currency rates and high inflation, adjusted market size
Source: IMS OTC Global Analysis:
IMS Health - ANDI 2015

17. LATAM OTC – Key Categories
Growth is strong across all categories, especially ‘Others’, driven primarily by Circulatory.
Latin America
LATAM OTC – Key Categories
Value Share (%)
Value Growth (%)
Source: IMS OTC Global Analysis
IMS Health - ANDI 2015

18. Sanofi, Pfizer and EMS grow ahead of the market, as local players perform strongly.
Latin America
Source: IMS OTC Global Analysis
IMS Health - ANDI 2015

19. While LatAm shows strong increased spend per capita, comparisons show room for continued growth.
Latin America
Comparative spends
Europe $85
CEE $40
N America $56
Source: IMS OTC Global Analysis: NB: Venezuela overstated
IMS Health - ANDI 2015

20. In Pharmerging Markets there is also a blurred line between Rx and OTC; OTC has a broader reach
Cold & flu example
OTC products
Competitors
Traditional /herbal remedies
Rx products
Rx antibiotics
Traditional remedy: Herbal, Phyto, TCM, etc
OTC cold & flu remedy
OTC products may reach a larger market given the blurred line between OTC and Rx drugs and traditional medicines
Given this environment, multinational OTC players must understand how to access the market, position and promote consumer health drugs, who are the market stakeholders and how to engage with them
Considerations for multinational OTC players
IMS Health - ANDI 2015

21. Several factors drive this strong interplay between Consumer Health and Pharma in EM.
Pharmerging
Key factors driving interplay between Consumer Health and Pharma
High level of OOP expenditure
No legal Rx/OTC differentiation
Many market factors drive this interplay
Limited reimbursement for many Rx products
Price conscious patients seek cheapest option
Pharmacies may substitute/ OTC for Rx and vice versa
In many markets all medicines are classified together, without a clearly defined OTC class
Although a de facto OTC market usually develops
Limited access to healthcare
Limited control of Rx dispensing
Access to hospitals, clinics etc. likely to be limited in rural areas
Pharmacists may have more of a front line role
Increases likelihood of traditional remedies being used
It is often possible to buy Rx medicines without a prescription
Combined with limited reimbursement, can encourage sufferers to visit pharmacy first
IMS Health - ANDI 2015

22. Agenda Global OTC Overview LatAm Highlights
Future Trends and Rx/OTC Switch
Summary and Conclusions
IMS Health - ANDI 2015

23. MCM (channels & messages)
Consumer centricity and empowerment will be a key driver for growth in the future...
OTC Trends
Traditional Mindset
Intermediate
Influencer
Brand & Service
Intermediate are relevant external stakeholders with access to consumers (i.e. Pharmacists, physicians, etc …)
Future Mindset
B2C
B2B
MCM (channels & messages)
Value prop.
Consumer
Patients
Influencers
Customers
Channels
Messages
Brand
IMS Health - ANDI 2015

24. Extension of OTC distribution channels addresses consumer lifestyle and meets demand for convenience.
OTC Trends
Pharmacy chains
Modern pharmacy, Drugstores
“Virtual” chains, symbol groups
Traditional apothecary independent pharmacy
Super/Hyper-markets
e-pharmacy
Mom & Pop stores, Convenience outlets
...and brings important implications for manufacturers.
IMS Health - ANDI 2015

25. Product-based NPD is still key; use of social media and technology in innovation is now commonplace.
OTC Trends
The most common, but a proven way to extend a brands life.
Innovation
Line Extensions
Social Media
Apps
Devices
R&D
Sensors
Sensors provide the consumer with a direct feedback on their current state of health.
An ever-present in consumers’ daily life, but care must be taken in Pharma/Consumer Health.
Synchro-TechTM has helped two actives with opposing dissolution profiles to come together
Healthcare apps are growing rapidly with Cardio Diet and Women's health accounting for half the volume.
Devices can improve efficacy and control
IMS Health - ANDI 2015
For discussion purposes only.  Not approved by management.  IMS Confidential.

26. 7 of top 20 brands are switches, accounting for 5% of OTC sales
Rx/OTC Switch is a key element in OTC development, making more products available for self-care
Rx/OTC Switch
9 of top 20 brands are recent switches, accounting for 12% of OTC sales
W Europe
7 of top 20 brands are switches, accounting for 5% of OTC sales
The path to switch is well established
EU Central Switch route has yet to be fully leveraged
The challenge in “switch-developed” countries remains to create new categories via “innovative” switch
What is the future potential in LatAm for a more clearly established OTC classification and Rx/OTC Switch as a driver of OTC growth?
IMS Health - ANDI 2015

27. Switch has been an important drive element for a number of leading OTC categories in the last 15 years.
Rx/OTC Switch
Switched since 2000
IMS Health - ANDI 2015

28. And Rx/OTC Switch provides a number of benefits across the main healthcare stakeholders.
To the Consumer
To the Pharmacist and Physician
To the Payer
I’m in control!
Greater control of their healthcare management
Use of various tools to self-manage at anytime
Empowers the patient to treat or prevent chronic illness
Greater satisfaction with the results of self-medicating
Growing demand on governments to reduce costs and increase accessibility
Increased access has the ability to offer a wide range of healthcare system benefits
Increased availability of preventative medicines increasing productivity
Reduced cost of medicines to the healthcare system
Expanding the role of the pharmacist becomes an integral trustworthy source of information at the heart of the self-care healthcare system.
Physicians are freed from treating minor illness to focus on conditions and situations where their skills are critical
Increased access to self-medicate has the potential to offer a wide range of healthcare system efficiencies, outcomes and savings
IMS Health - ANDI 2015

29. Switch can offers significant benefits to the overall economics of healthcare systems
Rx/OTC Switch
Several studies have reviewed burden of minor illness
Government/payers often caught between:
Political Imperative: universal healthcare
Economic Imperative: manage costs; pay for what is necessary
IMS studies in UK have shown
20% of all GP attendances and 19% of all Emergency Room attendance are for self-treatable conditions
Potential savings to UK system >$3.5bn annually
By encouraging appropriate Rx/OTC Switch and responsible self- care, payers can meet consumer needs for greater involvement and synergise healthcare system performance
IMS Health - ANDI 2015

30. and or government cost/reimbursement perspective
Yet the global Switch environment is diverse...and is evolving in a number of geographies outside LatAm
Rx/OTC Switch
Region
Current scenario
Developing scenario
North America
Large market with direct consumer access but US is restricted by lack of pharmacy supervision class
US future dialogue on the potential of future ‘below the counter’ class
Europe
European Local levels of switch vary from UK leading edge to Italy conservatism
Now developing 28 country faster central switch route e.g. pantoprazole & alli
Asia and Australasia
Japan catching up with EU with 2007 introduction of MHLW switch scheme
Australia leading edge switches to schedule 2&3
In Japan further switch expansion expected from the MHLW & Korosho plans to promote switches to consumers
Australia continue to achieve similar switches to EU
In other countries OTC is less well defined from a regulatory viewpoint,
and or government cost/reimbursement perspective
IMS Health - ANDI 2015

31. Información no disponible
And in LatAm many of the products available OTC in Europe still remain Rx
Rx/OTC Switch
Argentina
Chile
México
Venezuela
Colombia
Total moléculas
258
Información no disponible 28 41 26 4
No comercializado 70 38 68
111 55
OTC 64 33
100 58 RX 96
146 75
145
Partcipación del número de Moléculas OTC y RX por país
Colombia
71%
29%
203
Chile
82%
18%
179
México
39%
61%
164
Argentina
60%
40%
160
Venezuela
52%
48%
143 RX
OTC
IMS Health - ANDI 2015

32. Many factors impact the size of the OTC switch and levels of success; there are no common benchmarks
Rx/OTC Switch
IMS Health - ANDI 2015

33. However a number of key implementation criteria have been identified that can impact market success
Rx/OTC Switch
Low level
High level
Level of consumer insight & or interest
Low consumer understanding
Consumer insight driven
Satisfied market
Unsatisfied market
Level of existing market satisfaction
Level of pharmacist /physician engagement
Professional disengagement
Professionals engagement
Launch country only
Multi regional and/or country launch
Level of roll out into countries
Level of brand extension deployed/possible
No extension beyond original switch product
Cross category and brand extensions
Although conventional wisdom says new categories offer larger potential
‘watch out’ e.g. Prilosec USA vs. Zocor UK
New category created or entry into existing market
Follower into existing OTC market
New OTC category leader
IMS Health - ANDI 2015

34. Rx/OTC Switch
In the US, Prilosec switch created a strong brand position through consumer insight into heartburn
Prilosec OTC % MS evolution
OTC heartburn & acid market
Prilosec OTC vs. Rx volume evolution
OTC Prilosec launched by P&G as part of Astra Zeneca PPI LCM
Despite strong existing GI brands Prilosec achieved a peak MS of 37%
Prilosec benefited from market exclusivity in the USA at launch
Private label entered in 2008, now takes 42% MS of the PPI segment,
IMS Health - ANDI 2015

35. How did P&G drive such a strong success with Prilosec in heartburn?
Rx/OTC Switch
How did P&G drive such a strong success with Prilosec in heartburn?
Strong Key Message...
Strong marketing support
TV Campaign...
Website, sponsorship
IMS Health - ANDI 2015

36. Rx/OTC Switch
But if HCP and consumer engagement are not executed correctly, success may not follow
A model switch in terms of pharmacy protocol and training
Business model was unrealistic
Pharmacist engagement was below expectation
Getting it right with consumers is key
IMS Health - ANDI 2015

37. Rx/OTC Switch
And if the consumer proposition is not strongly motivating it can lead to commercial ‘heartbreak’
Take Levonelle once and I won’t get pregnant.
Consumer proposition
“New, improved” version just launched through EU central switch process
A tale of 2 brands
Consumer proposition
Take Zocor Heart Pro every day for the rest of my life to reduce the chances of me having the cardiovascular event that I might never have had anyway.
IMS Health - ANDI 2015

38. Canesten line extensions in the UK
Bayer have driven success for Canesten by adding line extensions to grow the the original switch product
Rx/OTC Switch
A key criteria of brand value has been the ability to line extend the Canesten range to build an umbrella brand
Canesten line extensions in the UK
No of prods 5 6 7 8 8 8
IMS Health - ANDI 2015

39. Nurofen line extensions in the UK
Rx/OTC Switch
Nurofen is a further example of leveraging switch through line extensions and channel development
Nurofen line extensions in the UK
No of prods 4 6 8 9 10 9
Euro ms
Line extensions in core pain category and consumer channel access have driven Nurofen
IMS Health - ANDI 2015

40. The benefits Rx/OTC switch offers stakeholders is officially recognised in much of the world
European Commission
“Non-prescription medicines play an important role since they offer economic as well as social benefits
Self-medication empowers patients to treat or prevent short term or chronic illnesses which they consider not requiring the consultation of a physician, or which may be treated by the people after an initial medical diagnosis.
Consequently, access and availability of these medicinal products require particular attention.”
Source: Communication from the European Commission of 10 December 2008 “Safe, Innovative and Accessible Medicines: a Renewed Vision for the Pharmaceutical Sector”
IMS Health - ANDI 2015

41. New molecules in existing categories “Accepted” new switch categories
And the potential for further Rx/OTC Switch molecules and categories is still significant
Rx/OTC Switch
New molecules in existing categories
“Accepted” new switch categories
Switch potential but issues to be addressed around molecules and/or conditions for self-care
IMS Health - ANDI 2015

42. Agenda Global OTC Overview LatAm Highlights
Future Trends and Rx/OTC Switch
Summary and Conclusions
IMS Health - ANDI 2015

43. A range of key factors is involved in driving superior performance in Pharmerging markets.
OTC Trends
Recruit & keep local talent
Local government support
Affordable products
Launch many products & new lines
Fast responsiveness
Local adaptation
Integrated distribution
Local players may have advantages, but many of these factors can also be adopted by multinational OTC players to drive success.
IMS Health - ANDI 2015

44. Degree of localisation
OTC Trends
Market concentration & localisation determine the portfolio and operation required to succeed.
Where to play and how to win?
Country segmentation
Market concentration
Driven by urbanisation level and pharmacy consolidation
Impact largely the business operation (commercial model to adopt)
Relevant to establish where to play?
Localisation:
Driven by local roots due to culture, linguistic and medicinal habits
Impact largely the portfolio (product type, positioning & pricing)
Relevant to establish how to win? *
Illustrative
High
LatAm
East EU
Market concentration
Medium
Asia Pac
MENA
Low
Low
Medium
High
The segmentation can vary within each country depending on the CH category
Degree of localisation
IMS Health - ANDI 2015

45. Highlights and Implications for LatAm and Colombia.
Latin America
OTC growth in LatAm remains strong, and Consumer Health is an attractive business.
OTC/CHC continues to play an important role in healthcare, increasing in the future
Consumer Centricity will become key to driving the right innovation for future growth.
Empowering consumers to manage their health rather than just to treat their illness.
Innovation is a MUST for continued growth, meeting market demands.
Innovation in NPD and Rx/OTC Switch is key to meeting market demands.
LatAm Markets offer excellent growth but bring a range of specific challenges.
Gaining alignment among all stakeholders will be key: industry plays a major role
IMS Health - ANDI 2015

46. Andy Tisman Senior Principal Consumer Health IMS Health
For contact:
Andy Tisman Senior Principal Consumer Health IMS Health
+44 (0)
IMS Health - ANDI 2015