Ceuta International Alliance Conference 2018

Ceuta International Alliance Conference 2018 media coverage OTC industry publication HBW Insight covers stories on HRA, Baird and Pfizer from 2018’s event.

HRA Pharma reveals big growth ambitions in quest to become top-10 OTC player A combination of prescription-to-OTC switches, acquisitions and maximising the potential of its existing portfolio will take France’s HRA to the next level. Tom Gallen reports.

France’s HRA Pharma is focused on more than doubling its sales over the next four years by maximising the potential of its leading OTC brands, revealed the firm’s chief global commercial officer Martyn Hilton. Its long-term ambition, with the help of acquisitions, it to become a top-10 consumer healthcare player globally.

Speaking at the 13th Annual Ceuta International Alliance conference in London, Hilton said HRA wanted to grow the business from expected revenues of around €211 million in 2018 to €500 million by 2022 based on its current portfolio, which is led by the EllaOne emergency contraceptive and the Compeed foot-care line.

“But we’re not stopping there,” Hilton insisted. “we’re actively looking at further acquisitions.”

The way that we will win, and the way that we will grow these brands, is through really driving consumer understanding and marketing and getting it right in store.

HRA hoped to snap up “another Compeed”, but such established brands, didn’t “come along every day” and insisted that the firm needed to “be careful and make the right choices”.

“I would hope, if everything goes to plan in the next 12 months, we’ll have at least one, if not two, other brands we’ve acquired,” he added.

With the help of acquisitions, and its “growth model” for EllaOne and Compeed, Hilton said HRA believed it could become a top-10 OTC company. It was an “audacious goal”, he admitted, “but this is the mindset we’ve got. We really believe that with the products we have, and with the acquisitions we’ll make, we can get there.”

Today, HRA has a physical presence in seven European markets, including its base in France, as well as a recently-opened subsidiary in the US. The company serves an additional 80 markets through its network of distribution partners. Hilton said HRA was “completed committed” to this outsourcing model.

“We’re not going to be opening new subsidiaries or bringing big sales teams in house, that’s not what we’re about. We’re about forming strong, lasting partnerships with partners that share our ambition, share our appetite and hunger for growth, and demonstrate strong executional capability.”

Drilling down into HRA’s plans for its existing portfolio, Hilton said the company wanted to triple Compeed’s sales – from its current base of around €100 million – by 2022, and in the same time period quadruple sales of EllaOne. While the two brands on the surface appeared to be very different – especially as they sat in different OTC categories – Hilton insisted that “in a lot of ways” they were similar.

“They’re both market leaders, have unparalleled efficacy and massive headroom for growth,” he argued.

As a result of this commonality, HRA would apply the same growth model to both brands, he explained.

“The way that we will win, and the way that we will grow these brands, is through really driving consumer understanding and marketing and getting it right in store. And this is what we’ve been doing for past 18 months.”

Commenting on the progress of this strategy to date, Hilton said HRA was “seeing growth across the board” for EllaOne in Europe, with notable success in the Netherlands, Czech Republic, Switzerland and the UK. “This success proves that the model we’ve taken, namely really focusing on the consumer and how we market directly to them, is working,” Hilton explained.

“We’re growing fastest in markets like UK where we’re able to focus on our direct-to-consumer message.”

International Alliance Conference 2018 media coverage

2

For Compeed – a brand which HRA took full management of in February, following its acquisition from Johnson & Johnson last year – Hilton said HRA was “excited about what we’ve been able to achieve in a short space of time”.

In four of Compeed’s top-five markets across Europe – which accounted for two thirds of total sales – HRA was growing market share, Hilton revealed, with “significant growth” achieved in the UK and in Spain, where it had realised its “highest market share ever” for the brand.

To enable the firm to hit its ambitious growth targets for both brands, Hilton said HRA would continue to employ a multi-dimensional strategy based upon channel expansion, white space opportunities, innovation, executional excellence and marketing.

Filling in white space was central to HRA’s EllaOne growth plans, he revealed. “EllaOne is the European market leader but there are still huge white space opportunities,” Hilton noted.

HRA was “actively looking” at how it could secure a prescription-to-OTC switch for EllaOne with a “particular focus” on achieving switches in the US, China and Japan, he said.

Tied into this ambition was, Hilton explained, making it easier for consumers to purchase the product. “This is a highly distressed category,” Hilton noted, with women reluctant to go to the pharmacy and ask for the product for fear of being judged, meaning they often “don’t want to go through with the purchase”.

“So we’re looking at how we can create this frictionless path to purchase,” Hilton explained, “how can we make it easier, and how can we also normalise the category.”

The marketing strategy for EllaOne supported this goal, Hilton pointed out, with the recent my morning after promotional campaign delivering an “empowering, uplifting message” for both men and women to make responsible choices when it came to emergency contraception. The campaign had a digital focus, he explained, to ensure it found its intended audience. “We put together 60 second advertisements to a six second sting to use in every possible format that is relevant to the millennial consumer,” he noted.

sure that pharmacists are aware this is the best product [for emergency contraception] and ensuring they feel confident to recommend it to consumers.”

Within the pharmacy, HRA was also pushing the boundaries in terms of the product’s visibility. “In Spain we performed a test which involved taking EllaOne out of the draw and displaying it on the back wall. Sales grew by 20% as a result. So there’s a big opportunity here for us to test the boundaries on how this category operates.”

Turning to HRA’s growth strategy for Compeed, Hilton said channel expansion was a key focus– namely widening distribution outside the pharmacy.

Compeed was in 80% of cases a “distress purchase” when a consumer had a blister, Hilton noted, which meant the product had to be conveniently available at the point of need. As consumers often purchased a plaster to try and treat a blister it was imperative that Compeed was stocked nearby to offer a more tailored solution. However, the brand’s distribution channels were currently quite narrow, with 75% of sales going through pharmacy.

The firm had already enjoyed some success with this strategy, Hilton revealed, with 15% of sales in the Nordics now going through the sports channel, while the firm was also seeing growth in the online channel thanks to its e-commerce efforts.

Linked to increased distribution was filling in white space for Compeed, Hilton noted. With the brand currently only available in eight of the top-20 global OTC markets, HRA was “actively looking” at opportunities to launch the brand in new countries.

“We’ve got four launches planned for 2019 and many more beyond that,” he revealed.

A plan to “widen the target group and broaden the occasion” for Compeed – as J&J had somewhat overlooked men to focus on “sophisticated, stylish women” – would attract a new raft of consumers to the brand, he said.

“In first year of owning Compeed, we’ve been on a steep learning curve,” Hilton admitted. “But we’re confident it’s a great asset and we’re well placed to build into 2019.”

But HRA wasn’t focusing its attention solely on raising awareness of EllaOne among Consumers, Hilton said, with the firm also training pharmacists as part of its executional excellence strategy. “It’s about making International Alliance Conference 2018 media coverage

3

Unlock M&A growth potential through outsourcing Baird’s Vincenzo di Nicola says the time is now for consumer healthcare players to get the most out of their acquisitions by adopting an outsourcing approach. Tom Gallen reports.

Frenetic merger and acquisition (M&A) activity in the global consumer healthcare market is creating a host of new challenges for both established OTC players and new market entrants, according to Vincenzo di Nicola, managing director of European investment banking at financial services group Baird.

“What is driving this activity? The answer is easy,” he observed. “The sector fundamentals are very strong, the growth is robust, there is a proliferation of new regional brands that want to become international, and there is a growing adoption of OTC medicine in emerging markets, such as the Middle East.”

Addressing delegates at the 13th Annual Ceuta International Alliance conference in London, Nicola said all companies engaged in this activity – whether multinational or regional OTC players, private-equity firms or entrants from adjacent industries – shared a common goal: maximising return on investment and expanding the reach of their brands. But this was not easy, he admitted.

Looking at the share of recent M&A activity by investor class, the top-20 OTC firms were some of the most “aggressive buyers”, Nicola noted, accounting for 26% of deal volume over the past three years.

These larger players were looking for scale gains to “protect market share and offset competitive threats”, he claimed. “They are also buying to get into new attractive segments, with new target consumer groups, where they see increasing growth,” he added, “such as sports and nutrition, and vitamins, minerals and supplements.”

For the large players, Nicola said M&A was creating increasingly complex portfolios, leading to so-called ‘tail-end’ brands being overlooked. Regional players that snapped up new products faced the challenge of growing them in unfamiliar markets, he noted, while private-equity acquirers lacked a sizeable infrastructure to quickly expand the business.

Furthermore, new entrants to the market – often from the fast-moving consumer goods (FMCG) industry – did not have the “domain expertise” to make a success of their acquisitions in the unfamiliar consumer healthcare space, he explained.

The key to resolving all of these issues, Nicola maintained, was brand outsourcing. “The solution that all these different groups of buyers are looking for is brand management, brand fostering,” he argued, “[an outsourcing provider] that brings optimisation, rationalisation, augmentation of sales, as well as management of the supply chain.”

Now was the time for firms to explore how outsourcing could help them drive growth, Nicola insisted, with the frenetic pace of acquisitions and divestments in the consumer healthcare sector set to continue.

“M&A activity in consumer healthcare remains very strong,” Nicola pointed out. “Year-to-date, deal volume is up 5%, and over the past three years there have been over 420 deals, with an average size of US$0.5 billion.”

After the top-20 players, the second most active investor class were financial buyers – private equity, investment funds and merchant banks – Nicola explained, accounting for around 24% of M&A activity.

Private-equity firms were attracted by the “strong, robust growth” of the consumer healthcare sector, but also its fragmentation “If the top-20 incumbents only account for 30% of total consumer healthcare revenue, there is 70% of the market that theoretically could be consolidated,” Nicola pointed out. “For private equity, there are horizontal and vertical consolidation opportunities to build global platforms,” he said. “So they can buy brands, services around brands, and they can expand internationally.”

Consumer healthcare investments also gave private equity an opportunity to reduce their exposure to government funded risk, Nicola explained.

“Historically, private equity has invested in a lot of government funded services in healthcare, but now they want to diversify their portfolios and consumer healthcare gives access to out of pocket money.”

Furthermore, the demand for assets in the OTC market offered private-equity firms a clear exit pathway, Nicola noted. “When a private-equity player builds an international platform, they know that there will be buyers waiting that are looking to maintain market share or get hold of specific brands.”

International Alliance Conference 2018 media coverage

4

The remaining M&A activity not accounted for by private equity or the top-20 firms – around 50% – was attributed by Baird to ‘others’, the most significant of which included FMCG players looking to tap into consumer healthcare and regional firms targeting international expansion.

FMCG players too would benefit from working with partners that could maximise sales of newlypurchased assets, Nicola said, while regional firms looking to grow beyond their domestic market needed an outsourcing provider that brought “market access, domain expertise and supply chain management”.

Outsourcing is not just about cost reduction, but allowing companies to gain expertise, additional intellectual property, value-added services, and flexibility, leading to an enhanced positive outcome.

With such furious M&A activity in consumer healthcare, now was an “exceptional time” for brand owners and outsourcing service providers to “build strategic relationships”, Nicola claimed.

“FMCG firms are the most active in this group,” Nicola noted. “The rationale is pretty straightforward – there is an overlap in terms of channels, as well as the supply chain,” Nicola explained. “But the key reason is they want to offset declining growth in their core markets, to get a slice of the solid growth the consumer healthcare sector is providing today.”

While the investors in consumer healthcare were diverse, Nicola said outsourcing could offer all players, large or small, significant benefits.

Multinational OTC firms needed to work with partners that could “optimise, rationalise and help them foster” their increasingly complex portfolios, Nicola asserted. Following a deal, the top-20 players often shifted marketing focus from older brands to the newly-acquired assets, Nicola noted, but it was vital that these brands did not become “unloved”. “These old brands are still very important if you look at their contribution to gross margin,” he said. Outsourcing partners could address this issue by providing access to “specialised capabilities and growth-enhancing services”.

Turning to financial buyers, Nicola suggested that these investors should work with a partner that could offer “market access”. “Someone that can take the brands and commercialise them in as many markets as possible. They need a partner to manage the supply chain,” he noted, “someone that brings data and insights.”

“Outsourcing services provide unique go-to-market solutions to maximise sales of acquired brands,” Nicola argued, “while keeping investments at low levels.”

“This is an opportunity for outsourcing service providers to build solutions or infrastructure that helps brand owners to maximise potential opportunities and unlock growth in the consumer healthcare sector,” he argued.

For consumer healthcare investors unsure of the value of outsourcing, Nicola pointed to the proliferation of such activity in the pharmaceutical industry.

“The outsourcing penetration in pharma over the past 10 years has been growing at rates of 10%-15% and in some segments, 60%-70%,” he pointed out. “We see the outsourcing penetration in consumer healthcare to be significantly behind this level. However, the drivers, the challenges, and hence the opportunities, for both brand owners and investors are the same.”

Echoing Nicola’s comments, Keith Garrity, Ceuta International’s director of international development, told delegates that outsourcing could assist companies “against the backdrop of a dynamic and disruptive global marketplace, which is delivering many financial and challenging implications”.

“Outsourcing is not just about cost reduction,” Garrity pointed out, “but allowing companies to gain expertise, additional intellectual property, value-added services, and flexibility, leading to an enhanced positive outcome.”

“From optimising a brand portfolio, to breaking into new markets or trade channels; from managing and developing brands, to turning a great product idea into a great commercial launch, outsource provision should bring agility, and cost efficiencies to brands,” he argued.

Ceuta International was seeing a “significant uptake” in brand fostering among a number of consumer healthcare players, Garrity noted, with outsourcing provision becoming a “key element in business strategies”.

International Alliance Conference 2018 media coverage

5

How Pfizer achieves switch success Market readiness, company capabilities and selecting a product with the right attributes are the three most important factors for securing a successful prescription-to-OTC switch, says Pfizer’s director of regulatory affairs for its Northern European cluster, Michelle Riddalls.

At the recent 13th Annual Ceuta International Alliance Conference in London, Riddalls told delegates that Pfizer had enjoyed “switch success” with the reclassification of Viagra Connect last year and Nexium Control in 2013 by concentrating its efforts on these three factors.

Firms looking to achieve similar success to Pfizer, Riddalls suggested, had to make sure they had the selected the right candidate to switch; had identified the appropriate market for the application; and, importantly, had the internal know-how and commitment to see the process through.

Beginning with product attributes, Riddalls said firms had to make sure their switch candidate met “an unmet consumer need”.

You can have the greatest product and your company can be ready to go, but if the market isn’t ready, you’re not going to be able to switch the product.

“There needs be a gap in the market in the OTC world which isn’t being fulfilled,” she advised.

“Generally, the medicine has to be simple to use, you don’t want a very intricate posology or indication that complicates things and makes it hard for a consumer to understand.”

To maximise the investment made behind the switch application it was also important to have a potential pipeline to expand the brand, Riddalls said, highlighting as an example Pfizer’s Nexium Control Mini-Capsules line extension launched last year.

Once a company was certain it had a promising switch candidate, it was vital to have in-house a “really good medical and safety department, on both the prescription side and the consumer side”, Riddalls said.

“The prescription side will hold all of the knowledge of the product,” she noted, “but you need the consumer side to translate that information and work out what’s going to work from an OTC perspective to make sure it’s a viable proposition in the market.

And that can mean narrowing down a really wide indication, or changing the population involved.”

Supporting the regulatory team, Riddalls explained it was imperative to have a good government and corporate affairs team to interact with key opinion leaders and professional bodies, as well as “specialised” marketing and sales teams to take the product to market once switched. “It’s no good just having a prescription sales team who are used to detailing doctors, you need people that are used to retail, trade, and talking to pharmacists,” she insisted.

“It’s always helpful if the product is in the company core capabilities – so it’s a product that you know about and you’ve got experience with.”

Furthermore, the substance had to be delivered in an appropriate dosage form, “as injectable medicines can’t usually be pharmacy medicines”, Riddalls pointed out, and needed to have an “acceptable safety profile and positive benefit risk assessment”.

With the right candidate selected and a strong team in place, the next piece of the jigsaw, Riddalls said, was identifying the most appropriate market or markets for the switch. “You can have the greatest product and your company can be ready to go, but if the market isn’t ready, you’re not going to be able to switch the product,” she insisted. “And that can happen in a number of different ways, there can be many barriers to switch.”

A switch candidate that already had brand recognition as a prescription medicine – as was the case with both Viagra Connect and Nexium Control – gave it a better chance of commercial success, she noted.

One of the biggest potential barriers, Riddalls pointed out, were the medicines regulators themselves. “If the regulators don’t believe that a product is viable in the self-care arena for a particular condition, then

International Alliance Conference 2018 media coverage

6

it’s unlikely you’ll be able to persuade them that it’s a positive move and to get the switch approved,” she observed. “You can provide data but sometimes there are set beliefs held by some of the authorities.”

For firms looking to switch, it was “really important” to ensure that the regulator in the selected market accepted that the substance addressed a condition that could be treated in a self-care environment, Riddalls noted.

But gaining regulatory approval was not the final hurdle, Riddalls warned. “The regulators may have said yes [to the reclassification] but if the pharmacist doesn’t feel confident in supplying that product, you’re not going to achieve switch success.”

Training was key, Riddalls believed, to getting pharmacists to support a switch. “Pfizer has put a big emphasis on training pharmacists adequately to make sure they understand the product and have confidence in supplying it to consumers in a safe way,” she revealed.

From Pfizer’s point-of-view, securing successful switches could not only help to extend the life of a brand, Riddalls noted, but also offered a “very good public health benefit”, reducing healthcare costs and enabling consumers to “take control of their own conditions”.

International Alliance Conference 2018 media coverage

7