Capital Markets Day

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Capital Markets Day
Capital Markets Day
12 May, 2015
1
Agenda
1
• Meda today and tomorrow
Dr. Jörg-Thomas Dierks
• Product opportunities
Dr. Hans-Jürgen Tritschler
2
3
• Business opportunities in Region East
4
• Business opportunities in Region West
5
• Financial perspectives
6
• Focus and priorities for M&A
7
• Concluding remarks
2
Group President and CEO
EVP Global Marketing
Esfandiar Faghfouri
EVP Region East
Ton van’t Hullenaar
EVP Region West
Henrik Stenqvist
CFO, EVP F&P
Dr. Jörg-Thomas Dierks
Group President and CEO
Dr. Jörg-Thomas Dierks
Group President and CEO
Meda today and tomorrow
Dr. Jörg-Thomas Dierks, Group President and CEO
Agenda
1
• Business snapshot
2
• Strategy
3
• Thoughts on 2015
4
We are passionate to become the European
consolidator
The transformational
specialty pharma company
5
The growth story is set to continue
Leap taken in 2014 is just the beginning
Sales (SEK billion)
18,7
20,0
18,0
16,0
14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Footnote:
•
2000 financials have been adjusted for sale of Cross Pharma (parallell trading business); the business unit was sold in 2005
6
2009
2010
2011
2012
2013
2014
Meda at a glance
7
SEK 18,7 billion
SEK 5,4 billion
Ca. 4 800 FTEs
2014 pro forma sales
2014 pro forma EBITDA
Employees at end of Q1 2015
~ 150 countries
~ 60 countries
Number of countries in which our
products are sold
Number of countries in which Meda
has own sales force
A strong leadership
Dedicated team with complementary capabilities and experience
Ton van’t Hullenaar
EVP West
Dr. Jörg-Thomas Dierks
Group President and CEO
Dr. Hans-Jürgen Tritschler
EVP Global Marketing
8
Henrik Stenqvist
EVP Finance & Procurement
Paula Treutiger
VP Corporate
Communications&
Sustainability
Dr. Joachim Maus
EVP Scientific Affairs
Enzo Lacchini
EVP Supply Chain
Rainer Weiss
EVP HR & IT
Esfandiar Faghfouri
EVP East
Magnus Kjellberg
Dr. Mårten Österlund
VP Corporate Strategy
EVP Business
and M&A
Development / Legal and IP
A balanced business between Rx and Cx / OTC with
3 prioritized therapeutic areas
Sales by product category (%)
Rx
Sales by therapeutic area (%)
Dermatology
Cx / OTC
Respiratory
Pain and Inflammation
Other
24%
40%
47%
60%
17%
12%
Balanced business
Footnote:
•
Left hand chart: the sales breakdown excludes Other sales
9
Prioritized therapeutic areas > 50% of sales
A number of strong brands in attractive areas
complemented by a robust base business
Selection of key products in Q1 2015 (SEK million)
223
115
(Elidel)
DERMATOLOGY
PAIN / INFLAMMATION
(Dona)
(Dymista)
193
98
(Saugella)
DERMATOLOGY / GYNECOLOGY
RESPIRATORY
(Aldara)
88
189
(Betadine)
DERMATOLOGY
DERMATOLOGY
141
(Tambocor)
66
(SB12 / CB12)
CARDIOLOGY
DENTAL CARE
63
129
(EpiPen)
10
RESPIRATORY
(Legalon)
GASTROENTEROLOGY
A global business
Covering > 80% of global pharma market
Sales by region (%)
Western Europe
Emerging Markets
14%
19%
67%
Footnote:
•
The sales breakdown excludes Other sales
11
USA
Western Europe contributes most sales but
Emerging Markets enjoy stronger growth
Sales by country
in Western Europe (%)
Finland
Denmark
Sales by top 10 countries in
Emerging Markets (%)
Switzerland
Greece
Ireland
Norway
Portugal
Greater
China
Italy
Netherlands
Other
Russia
Austria
Belgium
Germany
Gulf
Spain
Turkey
Brazil
UK
Saudi
Arabia
France
Mexico
Sweden
CIS
Poland
67% of sales
12
Thailand
19% of sales
Western Europe is the main EBITDA generator (and,
hence, cash flow)
Sales vs. EBITDA contribution (%)
80%
70%
60%
50%
40%
30%
20%
10%
0%
Western Europe
Emerging Markets
Sales by region
Footnotes:
•
Breakdown excludes impact from Other sales
•
USA excludes Valeant revenues
13
EBITDA by region
USA
Ca. 2 750 FTEs in Sales and marketing (out of total
ca. 4 800 FTEs)
Sales and marketing FTEs
by region (%)
Western Europe
Emerging Markets
Top 10 countries by
Sales and marketing FTEs (#)
USA
350
300
250
13%
200
150
47%
100
50
40%
0
14
~2 / 3 of Sales and
marketing FTEs
Proprietary production at 8 locations
Complemented by well-known 3rd party producers incl. 3M, Mylan, Legacy and Cipla
Dublin (Ireland)
•
Around 135 employees
•
Glucosamine sulfate bulk,
sachets, capsules, tablets
•
Key products: Dona / Viatril,
etc., Tromalyt
Decatur (Illinois, USA)
•
Around 100 employees
•
Various preparation forms
•
Key products: Astepro,
Soma and Geritol
Merignac (France)
•
Around 200 employees
•
Liquids and solutions
•
Key product: Betadine
Barcelona (Spain)
•
Around 80 employees
•
Natural plant extracts
•
Key output: Milk thistle extract,
saw palmetto extract,
hypericum extract
Troisdorf (Germany)
•
Around 200 employees
•
Blister, granules (Agiolax) and
semi-solids
•
Key products: Reparil, Agiolax,
Spasmolyt
Cologne (Germany)
•
Around 300 employees
•
Various preparation forms
•
Key product: Novolizer
Confienza (Italy)
•
Almost 90 employees
•
Liquids, semisolids bulk and
creams
•
Key products: Saugella,
Babygella, Armolipid, Fortilase
Goa (India)
•
Around 150 employees
•
Coated and uncoated granules
•
Key products: Agiolax
(pregranulate and granulate)
15
Our shareholder structure today:
Shares and votes outstanding (%)
Swedish owners
Foreign owners
Shares and votes outstanding
among foreign owners (%)
UK
Italy
US
Canada
5%
22%
48%
52%
51%
22%
16
Agenda
1
• Business snapshot
2
• Strategy
3
• Thoughts on 2015
17
Our corporate strategy in a nutshell
1
• Drive sourcing of new business through M&A
2
• Fully exploit synergy potential
3
• Focus on attractive segments / indications
4
• The Meda way of doing business:
– Fast decision-making, objective driven, clients first , teamwork
5
• Maximize cash flow
18
Competitive edge in two core business activities
New business
Current business
M&A
Sales and
marketing of
branded
products
Differentiated
strategic model
built on core
competencies
Grow and optimize
within framework of
our business model
Superior
shareholder return
+
Screen and
identify, execute
and integrate
19
3 focus areas in our daily business
New business
1
Value-accretive
M&A
Current business
2
~ 30%
Growth business
Emerging Markets
3
Base business
20
~ 1 500 brands
~ 70%
Four overriding M&A criteria
1
• Reinforce existing prioritized areas
• Strong strategic rationale
(therapeutic and / or geographic)
• Selectively build new prioritized areas
(therapeutic and / or geographic)
2
• Attractive market
• Potential for sustainable underlying growth
• Focus on diseases with repeated
prescription and / or purchases
3
• “1 + 1 > 2”
• Significant synergies
• Attractive cash flow
• Free cash flow return > 10% (corresponding
4
returns
21
to WACC + 200 bps)
Agenda
1
• Business snapshot
2
• Strategy
3
• Thoughts on 2015
22
We delivered what we intended to deliver (and
somewhat more)
Q1 2015 sales and profit
ahead of internal plan
23
Greater variation across quarters to be expected
through addition of Cx franchise
Cx business impacted by ordering patterns and seasonality
Although more stable, “Meda standalone” not immune from some quarterly variations
Contribution to annual EBITDA by quarter (%)
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Q1
Q2
Meda: EBITDA by quarter
Footnotes:
•
For Meda based on average in 2012 and 2013
•
For Rottapharm based on average in 2011, 2012 and 2013
24
Q3
Rottapharm: EBITDA by quarter
Q4
Illustrative example
Product development in the context of ordering
patterns for Rx and Cx / OTC products
Rx units by quarter
35
30
Cx / OTC units by quarter
60
Total = 120
30
30
30
Total = 120
30
50
50
25
40
20
30
30
30
Q2
Q3
15
20
10
10
5
0
0
Q1
Q2
Q1
25
10
Q3
Q2
Q3
Q4
Q4
Q1
Q1
Q2
Q3
Q4
Q4
Q1 2015 product “bridge”:
Main positives:
Dymista (+33 CER) and
Thioctacid (+20 CER)
Q1 2015 vs. Q1 2014 at fixed exchange rates (SEK million)
100
50
-66
Main positives:
Acnatac (+13 CER), and
Desunin (+13 CER)
+92
-59
0
Top 10 excl.
Tambocor
Tambocor
Astepro
-50
Aerospan
Minitran
Etofenamate
SB12
Betadine
Other
Total
-37
-26
-100
-22
-21
-19
-150
-200
-72
SEK -250 million
-229
-250
Impact on organic growth (%)
+2,1%
26
-1,5%
-1,3%
-0,8%
-0,6%
-0,5%
-0,5%
-0,4%
-1,6%
-5,2%
Negative impact on organic growth from Astepro
and Aerospan to be less in rest of 2015
Sales (SEK million)
80
70
60
50
40
30
20
10
0
Q1 2014
Q2 2014
Q3 2014
-10
-20
Astepro
27
Aerospan
Q4 2014
Q1 2015
Generic penetration for Tambocor Slow Release in
France has begun to plateau
Generic penetration for Tambocor Slow Release
70%
60%
50%
40%
30%
20%
10%
0%
July 2014
28
August 2014 September October 2014 November
2014
2014
December January 2015
2014
February
2015
March 2015
Upside in Elidel given weakness in Q3 2014 in
particular
Sales Elidel (SEK million)
120
100
80
60
40
20
0
Q1 2014
29
Q2 2014
Q3 2014
Q4 2014
Q1 2015
We remain committed
to our guidance for 2015
30
Product opportunities
Dr. Hans-Jürgen Tritschler, EVP Global Marketing
Agenda
1
• Product opportunities: introduction
2
• Rx opportunities
3
• Cx / OTC opportunities
32
Products that meet particular medical needs (1 / 2)
30+ key products
Complemented by a robust base business
Prescription drugs
Non-prescription drugs
Rx
Respiratory
Aerospan
Azep/
Astepro
Dymista
Dermatology
Acnatac
Aldara
Elidel
Zyclara
Betadine
Babygella
Dermasol AKN
Rantudil
Rheumon
Zamadol
Dona / Viartril
GO-ON
Reparil
Tambocor
Thioctacid
Uralyt
Zyma
Agiolax
ArmoLIPID
Legalon
Saugella
Pain and inflammation
Other key products
Denotes key therapeutic areas
Footnote:
•
Percentages to the right refer to share of Meda group sales in 2014
33
EpiPen
Novolizer
Panifur
Cx
OTC
Fortilase
Ialumar
17%
Endwards
Naloc
24%
12%
CB12
Products that meet particular medical needs (2 / 2)
Product
Indication
Snapshot: competitive edge
ALLERGY / RESPIRATORY
•
Allergic rhinitis
(Rx)
•
•
•
Two to three times more effective than current “gold standard”
Every 2nd patient is well controlled already at day 3 in real life
Premier position endorsed by academia
•
Anaphylaxis (Rx)
•
•
Label extension for patients at risk (also endorsed by EAACI)
Patients campaign sponsored by EAACI
•
Atopic dermatitis
(Rx)
•
Petite study is a breakthrough
−
Longest and largest intervention study ever conducted in infants
−
As effective as topical corticosteroid but better safety (e.g. no skin thinning)
•
Acne (Rx)
•
•
Better efficacy than DUAC® (sales of ca. SEK 325 MM in Europe)
Better local tolerability than Epiduo® (sales of > SEK 200 MM in Europe)
•
Osteoarthritis
(Cx)
•
•
Superior scientific profile with backing by clinical studies and publications in elite journals
Promotes cartilage metabolism, protects joint structure and supports joint mobility
•
Women intimate
hygiene (Cx)
•
•
Clinically proven antibacterial, anti-fungal and anti-inflammatory properties
Strong umbrella offering
•
Good breath
•
•
•
Only product which can ensure good breath for 12 hours (clinically proven)
Patented formula
Professional endorsement
DERMATOLOGY
PAIN / INFLAMMATION
Cx (specialized)
OTC
34
3 areas of focus in 2015 and the near term
1
Focus on key
growth areas, now
also including Pain
and Inflammation
In-market growth
and
internationalization
2
International roll-out
of leading Cx
brands, e.g.
Armolipid and
Saugella
[Armolipid]
Leverage the Cx
know-how to other
countries
3
Launch of new
campaigns for CB12
and Endwarts pen
35
Accelerate growth
through new
campaign and line
extensions
Agenda
1
• Product opportunities: introduction
2
• Rx opportunities
3
• Cx opportunities
36
Growing key products
From ca. SEK 950 million to almost SEK 2,5 billion in the past three years
Sales (SEK million)
3 000
2 500
Novolizer
2 000
Zyclara
Endwarts
SB12
1 500
Aerospan
EpiPen
1 000
Dymista
Elidel
500
0
2011
37
2012
2013
2014
We have successfully positioned Dymista as an
appealing treatment
Commercial success
(Market share by country, value)
Footnote:
•
Source: IMS at March 2015
38
•
Ireland:
> 29%
•
Austria:
> 23%
•
Norway:
> 13%
•
Finland:
> 12%
•
Germany:
> 11%
•
Italy:
> 10%
•
Switzerland: > 10%
•
USA:
> 8%
•
Sweden:
> 6%
•
Spain – first month: 1,4%
Dymista is well positioned in the ARIA (Allergic
Rhinitis and its Impact on Asthma) guidelines which
are based on a VAS score
39
Introducing one airway concept  leveraging the comorbidity across products
Up to 80% of asthmatic patients have co-morbid rhinitis
40
One airway disease concept: promoting Dymista
and Novolizer together
Effective allergic rhinitis treatment improves asthma outcome and may prevent
progression to asthma
Dymista is the
drug of choice
for allergic
rhinitis
41
A number of achievements with EpiPen
• Label extension to patients at risk
• Endorsement of label extension
endorsed by EAACI
• EACCI for the first time clearly
defines who is at risk and shall carry
an adrenaline auto-injector
• Patients campaign sponsored by
EAACI
42
Turnaround achieved for Elidel in terms of scientific
recognition
Elidel is as good as topical
corticosteroids…
Patients with treatment success
100%
…combined with other clinical
advantages…
• Elidel advantages over topical
corticosteroids:
− No thinning of skin
90%
− No increased risk of cataract /
glaucoma
80%
− No teleangiectasia
70%
− No delayed wound healing
− No other skin changes (e.g.,
60%
rosacea, strie)
− No increased receptiveness to
50%
infections
40%
0%
0
6
12
39
65
91 130 182 234
Topical corticosteroids
43
Elidel
…and new treatment
algorithm published by
leading experts…
A successful launch of Acnatac
But early days in terms of overall economic impact
Market share (value)
25%
• More effective than DUAC
20%
• Better tolerated than EPIDUO
15%
10%
5%
0%
Lithuania
Belgium
Estonia
March
2014
March
2014
March
2014
Bulgaria
Spain
September
2014
March
2014
Finland
Germany
Poland
March
2014
April
2014
Netherlands Romania
Denmark
Italy
Ireland
Norway
May
2014
September
2014
July
2014
September
2014
Launch date
Footnote:
•
Source: IMS
44
March
2014
April
2014
September
2014
Agenda
1
• Product opportunities: introduction
2
• Rx opportunities
3
• Cx / OTC opportunities
45
Roll-out of Pain-Inflammation
umbrella concept
Seven products to be marketed under one umbrella
Product
Description
Dona
•
Glucosamine sulfate for the treatment of mild/moderate
osteoarthritis
Go-On
•
Intraarticular hyaluronic acid
Reparil
•
Topical/oral NSAID with antiedema properties
Rheumon
•
Topical NSAID that gets into the joints
Rantudil
•
Oral NSAID with very good safety profile
Tramadol
•
Opioid analgesic
47
Pain-Inflammation umbrella concept
48
Dona is a key building block (1 / 2)
A global leader
1
Promotes cartilage metabolism, protects joint structure and
supports joint mobility
2
Formulation is the only clinically proven glucosamine product
available
49
Dona is a key building block (2 / 2)
0.45
Glucosamine sulfate
(primary analysis)
0.64
0.54
Glucosamine sulfate
0.92
0.74
1.01
(sensitivity analysis)
0.81
0.98
1.19
Glucosamine hydrochloride
(primary analysis)
0.91
Glucosamine hydrochloride
1.09
1.29
(sensitivity analysis)
0.77
0.94
Chondroitin sulfate
Avocado soybean
unsaponifiables
0.82
1.14
0.98
0.87
1.17
1.08
1.33
Diacerein
0.4
0.6
0.8
1.0
Odds
Ratio
Odds
Ratio(OR)
(OR)NSAID
NSAID use
50
1.2
1.4
Internationalization of
leading Cx products
An expanding umbrella brand
1
Prevalence of vaginitis (inflation of vagina) is 30% and due to
lifestyle changes
2
Clinically proven antibacterial, anti-fungal and antiinflammatory properties
3
Liquid detergents form a key market entry point, paving the
way for roll-out across different uses and target markets
4
Feminine hygiene product line, based on natural extracts with
pharmacological properties
52
“Saugella is the product family for intimate
hygiene that addresses all women’s needs”
• Intimate
cleansers
• Vaginal gels
• Creams
• Vaginal douches
• Hypoallergenic
sanitary towels
and tampons
53
A leading nutraceutical (1 / 2)
1
Obesity, metabolic syndrome and diabetes is the new
megatrend. Treating cholesterol levels at every stage is a must
2
Launched in 2004
3
Strong scientific reputation based on clinical data, over 15
publications that reference Armolipid
4
Pre-statin natural supplement for treatment of borderline and
prevalent dyslipidemia
54
A leading nutraceutical (2 / 2)
Armolipid(r) Plus is to date the best studied nutraceutical for moderate
hypercholesterolemia and / or hypertriglyceridemia
Aimed for those who need a diet-based approach for controlling blood lipids
Difference vs. baseline (%)
15%
10%
5%
0%
TOT-C
LDL-C
HDL-C
-5%
-10%
-15%
-20%
-25%
Diet
55
Armolipid Plus
TG
Enhancing the OTC offering
CB12: new campaign launched on 1 April 2015
From treatment to life style theme
Treatment
57
Life style
CB12 video
58
CB12: Communication – “The power is yours”,
“Your daily shot of confidence”
59
New campaign to take CB12 sales to the next level
Sales (SEK million)
400
350
300
250
200
150
100
50
0
2011
60
2012
2013
2014
Endwarts pen: fully fledged launch prepared
61
Business opportunities in Region East
Esfandiar Faghfouri, EVP Region East
Agenda
1
• Emerging Markets: introduction
2
• Key opportunities in Asia
3
• Key opportunities in other Emerging Markets
63
Two Executive Vice Presidents leading the sales
and marketing organizations worldwide
Ton van’t Hullenaar
EVP Region West
Esfandiar Faghfouri
EVP Region East
Greater scale following the Rottapharm acquisition
Rottapharm acquisition increased our sales in Emerging Markets by > 50%
Key was to gain presence in South East Asia
Annual sales (SEK billion)
>3
2,0
L12M sales prior to Rottapharm acquisition
65
Today
A strong business across Emerging Markets
Share of Emerging Markets sales (%)
16%
14%
12%
10%
8%
6%
4%
2%
0%
66
Greater
China
Russia
Gulf
Turkey
Saudi
Arabia
Thailand
CIS
Poland
Mexico
Brazil
Balkan
Eqypt
Hungary
Australia Malaysia
South
Africa
Baltics
Slovakia
Czech Philippines
Republic
India
Export
Dona is the leading product in Emerging Markets
The overall product mix in Emerging Markets is fairly in line with overall Meda at Rx
60% and Cx 40%
Top 20 products (%)
25%
20%
15%
10%
5%
0%
Footnotes:
•
Dark red = Rx
•
Light red = Cx
67
Case in point of “lumpiness”: the two largest
products in Russia
Share of 2014 sales by quarter (%)
40%
35%
30%
25%
20%
15%
10%
5%
0%
Q1 2014
Q2 2014
Q3 2014
Solco
68
Thiotacid
Thioctacid
Q4 2014
Agenda
1
• Emerging Markets: introduction
2
• Key opportunities in Asia
3
• Key opportunities in other Emerging Markets
69
South East Asia represents a highly attractive region
Sizeable region with premium growth prospects
Share of global pharma spending (%)
18%
South East Asia
Rest of world
82%
Footnotes:
•
South East Asia includes China, Indonesia, Taiwan, Vietnam, Thailand, Malaysia, Philippines, Hong Kong, Singapore, Myanmar and Cambodia
•
Source: www.marketresearch.com
70
+11%
growth
Strong growth rate across the region
China dominant accounting for > 85% of the market
Expected pharma spending near term growth rate
25%
20%
15%
10%
5%
0%
Myanmar
Indonesia
China
Vietnam
Thailand
Cambodia Philippines
Taiwan
Malaysia
Hong Kong Singapore
Market size in 2013 (USD billion)
0,4
71
6,5
153,8
4,0
3,3
0,2
2,9
4,6
3,2
1,3
1,0
Growth driven by secular trends
Consumer spending in
Emerging Markets in 2020 is
expected to be 2x the current
in the US
• Growing population
• Aging population
Consumer spending per year in Emerging
Markets (USD trillion)
20
• Growing middle class
8
• Adopting to Western life style
2013
Footnote:
•
McKinsey
72
2020
~ SEK 800 million of sales for Meda in the region
• Products sold in 11 countries
• Majority of business with direct presence
and / or exclusive distributors
• Greater China is the #1 market by sales in
our Emerging Markets’ franchise
73
Sales force structure in South East Asia after
Rottapharm acquisition
• Use Rottapharm affiliates “as is” across the region
• Exploit Cx expertise (hence, limited FTE redundancies)
• Separate sales forces depending on target group and products
• Merger of Meda and Rottapharm affiliates to take place in China, leading to
greater sales force platform
74
Greater China, Thailand and Cx (particularly Dona)
are the key drivers of sales today
Greater
China
Footnote:
•
Sales includes Export business
75
Country
Share of sales (Q1 2015)
Key products
China
•
41%
•
•
•
Dona
Elidel
Azep
Hong Kong
•
24%
•
•
•
Dona
Agiolax
Go-On
Taiwan
•
9%
•
•
Dona
Saugella
Thailand
•
19%
•
•
•
Dona
Reparil
Legalon
Malaysia
•
3%
•
•
Dona
Legalon
Philippines
•
2%
•
Dona
Vietnam
•
1%
•
•
•
•
Dona
Estromineral
Elidel
Kamillosan
Singapore
•
1%
•
Dona
Indonesia
•
< 1%
•
•
Transpulmin
Legalon
Cambodia
•
< 1%
•
Betadine
Myanmar
•
< 1%
•
Dona
Potential for good sales synergies in South East
Asia in the near term
Strategy
Commentary
•
•
•
Build up Pain and Inflammation
portfolio around flagship product
Dona
•
•
Launch Azep and Dymista across
the region
•
•
Dona is today the largest product in Emerging Markets including South East Asia
Intention is to add other products in Pain and Inflammation from Meda and
Rottapharm to create a proper offering
Key examples: Go-On Rantudil, Etofenamate
•
Azep is today #3 in intranasal allergic rhinitis market in China
Intention is to take Azep into other countries in South East Asia by leveraging
lessons learnt in China (e.g. tendering excellence, “allergy school for doctors”,
etc.)
Over time register and launch Dymista (end 2016 and onwards)
•
Market Meda products on our own
•
•
Take product rights back from distributors (e.g. Elidel, Kamillosan)
Elidel already taken back rights in China
•
Internationalize other Cx/ÒTC
products as appropriate
•
Key products under consideration: Saugella, Armolipid, Legalon, CB12 and
Endwarts pen
76
This is our current product and registration estate
Pain
Country
Viartril
Go on
Reparil
Rantudil
Tram adol
Rheum on
Traum on
Dym ista
Azep
CX
Derm a
Elidel
Saugella
Legalon
Arm olipid
China

Hong Kong

Taiw an

Thailand



under reg.
Malaysia



under reg. MA expired

reg.
Philippines



under reg.


Indonesia

reg.
under reg.


Singapore






Vietnam





Cambodia



Myanmar

77

Respiratory



reg.
under reg.
reg.
reg.
under reg.
reg.








under reg.
reg.




reg.
MA expired
reg.
reg.
under reg. MA expired
reg.
reg.


Greater China
Greater China is a key market for Meda
1
Medicines sold in China (mainland) since 1994
2
Own affiliate since late 2011
3
Around 180 medical representatives
4
Today annual sales of around SEK 400 million
79
Some of our key products are marketed or under
registration in China
(under registration)
(under registration)
80
Azep (azelastine) is a success story for us in China
#3 in the intranasal allergic rhinitis market after Nasonex and Avamys
Azep sales (SEK million)
+84%
70
+41%
60
+89%
50
+82%
40
30
+87%
20
10
0
2011
81
2012
2013
2014
Agenda
1
• Emerging Markets: introduction
2
• Key opportunities in Asia
3
• Key opportunities in other Emerging Markets
82
Snapshot: Russia
Parameter
Data
Sales:
• 2% of group sales
FTEs:
• 170 of whom 150 in sales and marketing
Largest products:
• Solco, Dona, Thioctacid, Elidel and Otinum
Main strategies:
• Drive further growth from established products
(Dona and Thioctacid)
• Strengthen the OTC business with CB12
• Re-launch of Go-On and line extension for
Saugella
• Launch of Rantudil as part of pain umbrella
concept
83
Snapshot: MENA
Parameter
Data
Sales:
• 3% of group sales
FTEs:
• 150 of whom 120 in sales and marketing
Largest products:
• Reparil, Elidel, Uralyt, Hydrochinone and
Agiolax
Main strategies:
• New product launches / line extensions such
as Dona, Plantaben and Reparil
84
Business opportunities in Region West
Ton van’t Hullenaar, EVP Region West
Agenda
1
• Western Europe: introduction
2
• Key opportunities in Western Europe
3
• Key opportunities in US
86
Two Executive Vice Presidents leading the sales
and marketing organizations worldwide
Ton van’t Hullenaar
EVP Region West
14
Esfandiar Faghfouri
EVP Region East
A highly balanced business across products
Top 3 products 16% of sales
Top 20 products: share of sales (%)
7%
6%
5%
4%
3%
2%
1%
0%
Footnotes:
•
Dark red = Rx
•
Light red = Cx
88
Italy, Germany, France and Sweden are the main
drivers of sales
Share of Western Europe sales (%)
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
89
Low single digit growing business
Sales (SEK million) and organic growth (%)
12 000
+2%
10 000
Export
Greece
Ireland
+3%
+2%
Switzerland
Portugal
8 000
Finland
Denmark
Norway
6 000
Austria
Netherlands
Belgium
4 000
Spain
UK
Italy
2 000
Sweden
France
Germany
0
2010
90
2011
2012
2013
2014
Largely stable profitability over time
Almost SEK 8 billion of EBITDA over past 9 quarters, corresponding to a margin of 36%
EBITDA margin (%)
45%
40%
40%
37%
35%
36%
36%
35%
35%
37%
34%
34%
30%
25%
20%
15%
10%
5%
0%
Q1 2013
91
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2013
Q4 2014
Q1 2015
~ 75% of redundancies from Rottapharm acquisition
in Western Europe
France restructuring is proceeding according to plan
FTE efficiencies (#)
250
200
150
100
50
0
1
92
1
1
1
1
1
1
Cx product offering integrated into the respective
Rx and pharmacy sales force teams in the main
countries
1
Rx and Cx products sold by Rx sales force to physicians
2
Cx and OTC products sold by pharmacy sales force to pharmacists
93
Agenda
1
• Western Europe: introduction
2
• Key opportunities in Western Europe
3
• Key opportunities in US
94
Snapshot: Italy
Parameter
Data
Sales:
• 12% of group sales
FTEs:
• 280 of whom 250 in sales and marketing
Largest products:
• Saugella, Armolipid, Tambocor, Linea Capelli
and Minitran
Main strategies:
• Stabilize sales of base business
• Focus on key growth products: Armolipid,
Dymista, Saugella and Parfinur
• Develop the Cx / OTC business by direct sales
to pharmacies
95
Snapshot: Germany
Parameter
Data
Sales:
• 10% of group sales
FTEs:
• 250 of whom 230 in sales and marketing
Largest products:
• Novolizer range, Marcoumar and Epipen
Main strategies:
• Focus on key growth products: Dymista,
Acnatac, Zyclara and CB12
• Additional rebate contracts with health insurers
for Novolizer and Rottapharm portfolio
• Expansion of Cx model to other brands (e.g
Endwarts)
• Launch of one airway disease concept
96
Snapshot: France
Parameter
Data
Sales:
• 9% of group sales
FTEs:
• 290 of whom 260 in sales and marketing
Largest products:
• Betadine, Tambocor, Zyma, Go-On and Aldara
/ Zyclara
Main strategies:
• Continue to grow the newly launched products
− Epipen, Armolipid, Endwarts pen
• Maintain growth of established products
− Zyma, Go-on and Betadine
• Defend Tambocor
97
Snapshot: Sweden
Parameter
Data
Sales:
• 8% of group sales
FTEs:
• 80 of whom 60 in sales and marketing
Largest products:
• Treo, Cocillana-Etyfin, calcium, Heracillin and
Arcasin/Kåvepenin/Tikacillin
Main strategies:
• Continue to push growth through Dymista,
Acnatac, Novolizer, osteoporosis range and
CB12
• Defend the price level of antibiotic portfolio
• Launch of one airway disease concept
98
Snapshot: UK & Ireland
Parameter
Data
Sales:
• 5% of group sales
FTEs:
• 100 of whom 80 in sales and marketing
Largest products:
• Epipen, Difflam, Dymista, SB12, Acupan and
Elleste
Main strategies:
• Focus on key growth products: SB12,
Dymista, Acnatac and Epipen
99
Divisun: strong take-off following launch
Case in point – Netherlands
Launched as a fully reimbursed vitamin D Rx product
Strong relationships with pharmacists and support from
multi channel marketing programs have been key success factors
MAT (IMS) sales (SEK million)
100
90
80
70
60
50
40
30
20
10
0
100
Agenda
1
• Western Europe: introduction
2
• Key opportunities in Western Europe
3
• Key opportunities in US
101
US is a key market from several angles
1
The world’s largest pharma market
2
A market where innovation translates into growth potential
3
High prices  potential for strong profitability
102
Snapshot: US
Parameter
Data
Sales:
• 13% of group sales
FTEs:
• 410 of whom 340 in sales and marketing
Largest products:
• Dymista, Felbatol, Proctofoam, MUSE and
Epifoam
Main strategies:
• Continue to invest in growth products Dymista
and Aerospan
• Selected price increases in base business
103
Dymista
The second largest brand in the US
Branded market share in TRx (%)
14%
12%
10%
ASTELIN
ASTEPRO
8%
DYMISTA
FLONASE
OMNARIS
6%
PATANASE
QNASL
4%
VERAMYST
ZETONNA
2%
0%
Footnote:
•
Source: IMS
•
The analysis excludes Nasonex
105
New strategy puts a greater focus on patient
feedback and removing barriers to prescribing
1
• Integrate unbranded and branded consumer campaigns
– Convert them into reasons for sufferers to demand a better treatment/DYMISTA by
name
2
• Maximize prescription pull-through
– Physician campaign that presents Dymista as the treatment of choice for anyone who
feels miserable enough to go to the doctor
3
• Address external factors that are barriers to prescribing,
including access and cost
4
• Consider partnering for the GP area
– Opportunity to broaden the franchise
106
New campaign sets Dymista apart from
competition and highlights new indication down to
the age of 6
107
Aerospan
New campaign in place
109
Volumes doubled since end of February
New strategy, along with improved managed care access driving growth
Aerospan TRx
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
110
Coffee break
Financial perspectives
Henrik Stenqvist, EVP Finance and Procurement
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2015
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
113
3 focus areas in our daily business
New business
1
Value-accretive
M&A
Current business
2
~ 30%
Growth business
Emerging Markets
3
Base business
114
> 1 500 brands
~ 70%
Thoughts on financial expectations for Meda (1 / 2)
Top line development:
• Product portfolio consists of 70% base products with stable sales trend
• Acquisitions and divestments are not likely to materially change this
• Meda will not excel in organic sales development in the short to mid term
• Currently aiming for underlying growth of 1% - 2% over time (quarterly
variations)
Profitability:
• Gross margin improvement is a long-term effort
– The target is a gradual gross margin improvement from today´s levels
• EBITDA, strict cost control and realization of synergies are key
• EBITDA Margin above 30% moving towards 35% over time
115
Thoughts on financial expectations for Meda (2 / 2)
Cash flow:
• Strong cash flow is a prerequisite and a consequence of the business model
• EBITDA cash conversion at 60% - 70%
• FCF margin of around 20%
• Cash EPS accretion
Returns:
• Growth by acquisitions assumes accumulation of capital employed in a short period of time
– long lifecycles of pharmaceuticals generate returns over many years
• Target Free cash flow / Capital Employed >10%, (~2% above WACC)
Leverage:
• Debt financing of acquisitions implies higher leverage in the short term
• Comfortable with peak level above 5x considering strong deleveraging capacity
• Business model implies recurrence
116
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2015
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
117
P&L:
(SEK million)
Q1 2015
Net sales
4,583
Cost of sales
-1,750
Gross profit
2,833
Operating costs
-2,240
EBIT
593
Financial net
-308
EBT
285
Tax
-68
Net profit
217
EBITDA
EBITDA, %
118
1,403
30.6%
Perspectives on guidance full year 2015 (1 / 2)
“For 2015, we expect sales of around SEK 20 billion (assuming current
exchange rates) and an improved EBITDA margin compared to 2014”
Comments on sales:
• Seasonally lower sales in Q1 (and Q3)
• Underlying sales development to improve
• What will be up vs. Q1 2015?
– Dymista: wholesaler inventory management had negative impact in Q1
– Lower price in Q2-Q4 2014
–
–
–
–
–
119
Aerospan: negative impact from launch quantities in Q1 2014
CB12: ramp up of promotional activities in Q2
Astepro: reduced impact from Q2 and onwards
Elidel return vs delivery problems in 2014
Tambocor: Declining impact from generics
Perspectives on guidance full year 2015 (2 / 2)
Comments to margins:
• Gross margin expected to be similar to Q1 for the full year
• Improvement in EBITDA margin largely driven by higher sales than in Q1
• Additional synergy benefits from restructuring activities partly offset by new
investments:
–
–
–
–
120
Launch of Dymista in new markets
Addition of sales and marketing infrastructure in Brazil, Mexico and Canada
Increased marketing efforts in China and South East Asia
Short term margin impact
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2014 – synergies
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
121
Cash flow:
Free cash flow (excl. non-recurring effects) (SEK million)
800
709
709
700
600
595
500
400
59% conversion of
EBITDA into FCF
51% conversion of
EBITDA into FCF
Q1 2014
Q1 2015
300
200
100
0
122
Perspectives on EBITDA cash conversion:
• EBITDA cash conversion expected to be 60% or above for the full year
• Relatively higher cash flow from sales in the coming quarters will have a
positive effect
• Less impact from working capital expansion is expected for the remainder of
the year
123
Managing accounts receivables
Days sales outstanding (#)
120
100
80
60
40
20
0
DSO-GROUP
DSO-MEDA
Q4/2014
124
Q1/2015
DSO-ROTTAPHARM
Controlling inventory levels
Days inventory on hand (#)
200
180
160
140
120
100
80
60
40
20
0
MEDA Q3/2014
125
COMBINED Q1/2015
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2014 – synergies
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
126
Debt financing sources:
(SEK billion)
30
25
20
15
10
5
0
Syndicated bank facility
127
Swedish bonds
Bilateral facility
Thoughts on leverage and acquisition financing
Leverage:
• What is the maximum level of leverage?
• In what range will Meda operate going forward?
Acquisition financing:
• Maximize debt financing
– Continued reliance on banks
– Complemented by increased share of debt from bond market
– Preparations for Euro bond market issuance
• Equity components possible – if conditions are right
– Directed share issues as part of purchase price
– Rights issues
128
Committed to previous guidance
From webcast 31 July, 2014
129
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2014 – synergies
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
130
Our M&A criteria
Strategic criteria (in short):
• Strategic rationale
• Attractive market
• Significant synergies
Financial criteria:
• Fast EBITDA margin accretion
• FCF return on capital employed >10% post integration (at sustainable
earnings level), corresponding to WACC+2%
• Post-integration multiples below valuation of Meda
• Cash EPS accretion
• EPS accretion
131
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2014 – synergies
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
132
Thoughts on gross margin and COGS
• Meda gross margin currently at 62%
Selling prices:
• Larger share of business now under “free pricing” regimes
– Cx/OTC
– US
– Emerging Markets
• Less negative impact from mandatory price reductions in Western Europe in
recent past
COGS:
• Focus on improvement of COGS
– External manufacturing (CMO’s)
– Internal manufacturing
133
There are four key component of COGS
Component of COGS (~SEK 7,5 billion)
External manufacturing
Internal manufacturing
Storage and distribution
9%
10%
52%
29%
134
Other
Thoughts on external manufacturing
• Around 50% of cogs
• Large network of >150 CMO’s
• Largest COGS 5% - 6% of sales
How to reduce supply prices?
• Negotiating with CMO’s
• Transfer of manufacturing
– Lead time of ~3 years
135
8 internal manufacturing sites
Dublin (Ireland)
•
Around 135 employees
•
Glucosamine sulfate bulk,
sachets, capsules, tablets
•
Key products: Dona / Viatril,
etc., Tromalyt
Decatur (Illinois, USA)
•
Around 100 employees
•
Various preparation forms
•
Key products: Astepro,
Soma and Geritol
Merignac (France)
•
Around 200 employees
•
Liquids and solutions
•
Key product: Betadine
Barcelona (Spain)
•
Around 80 employees
•
Natural plant extracts
•
Key output: Milk thistle extract,
saw palmetto extract,
hypericum extract
Troisdorf (Germany)
•
Around 200 employees
•
Blister, granules (Agiolax) and
semi-solids
•
Key products: Reparil, Agiolax,
Spasmolyt
Cologne (Germany)
•
Around 300 employees
•
Various preparation forms
•
Key product: Novolizer
Confienza (Italy)
•
Almost 90 employees
•
Liquids, semisolids bulk and
creams
•
Key products: Saugella,
Babygella, Armolipid, Fortilase
Goa (India)
•
Around 150 employees
•
Coated and uncoated granules
•
Key products: Agiolax
(pregranulate and granulate)
136
Thoughts on internal manufacturing (1 / 2)
• Share of Group COGS between internal manufacturing sites
–
–
–
–
–
–
–
–
Troisdorf, 6%
Cologne, 6%
Merignac, 6%
Dublin, 4%
Confienza, 3%
Decatur, 2%
Barcelona, 2%
Goa, 0%
• Overlapping technologies
– Cologne-Troisdorf-Dublin-Decatur
137
Thoughts on internal manufacturing (2 / 2)
Capacity utilization (based on two shift cycles) (%)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Barcelona
138
Merignac
Goa
Cologne
Troisdorf
Dublin
Confienza
Decatur
COGS expectations going forward
• Meda COGS display a very fragmented picture
• Changes to current structure will take time and come at a cost
Opportunities to improve Gross Margin:
• Negotiating with CMO’s
– Transfer to new sites
• Merging internal manufacturing sites
– Increasing capacity utlisation
Expectations on COGS development:
• Small steps towards better gross margin through product
mix effects and lower supply prices
139
Agenda
1
• Meda business model – financial expectations
2
• Financial performance 2014 – synergies
3
• Focus on cash flow – working capital
4
• Financial leverage – financing of new acquisitions
5
• M&A criteria – a financial perspective
6
• Supply chain and COGS
7
• Summary
140
Summary
• 2015 guidance reiterated
• Implications of business model:
–
–
–
–
Focus on growth areas
Management of base business
Low single-digit underlying growth
M&A the prime growth driver
• Leveraged capital structure  focus on cash flow
• Balanced acquisition model
– Focus on integration of acquired targets / deleveraging
– Compliance with clear acquisition criteria
141
Focus and priorities in M&A
Dr. Jörg-Thomas Dierks, Group President and CEO
Agenda
1
• R&D vs. M&A driven growth
2
• Improving businesses
3
• “Kiss many frogs” approach in M&A work
143
Two key ways to drive growth in pharma
R&D
144
M&A
Value creation through M&A: “low risk, high return”
R&D
Unknown capital commitment
over long time frame
M&A
Known capital commitment at a
specific point in time
Bet on science
Bet on management capabilities
Not core of Meda’s DNA
Core of Meda’s DNA
“High risk, often low return”
145
“Low risk, high return”
Consequently, M&A is a core element in Meda’s
strategy
1
• Drive sourcing of new business through M&A
2
• Fully exploit synergy potential
3
• Focus on attractive segments / indications
4
• The Meda way of doing business:
– Fast decision-making, objective driven, clients first , teamwork
5
• Maximize cash flow
146
Our view is clear
Acquiring undermanaged
businesses generates
superior return
147
Agenda
1
• R&D vs. M&A driven growth
2
• Improving businesses
3
• “Kiss many frogs” approach in M&A work
148
Three key reasons why M&A is an attractive source
of growth for Meda
M&A logic
 “Bigger is better” in pharma
 Exploit economies of scale
 Pharma industry is fragmented
 Many targets to go after
 M&A is the key source of new business
and a core competence in Meda
149
 Apply competitive edge
“Bigger is better” in pharma
Pharma is an industry where size is important
8%
8%
8%
EBITA margin outperformance of large vs. small companies (%)
8%
7%
6%
4%
3%
2%
2%
1%
1%
1%
0%
0%
Pharma
Telecoms
Software
IT services
Retail
Median
Paper
Chemicals
Capital goods
Health
providers
Transportation
-2%
-3%
-4%
-4%
-6%
Footnotes:
•
Source: McKinsey 2015. Median earnings before interest, taxes and amortization of large companies (top quartile revenue in industry) minus the median EBITA of small
companies (third-quartile revenue in industry)
•
Median is based on 23 industry observations
151
Pharma industry is highly fragmented
A number of targets across Europe (1 / 2)
We have identified more than 60 potential targets across Europe with combined
sales of more than SEK 350 billion
Sales (SEK billion)
90
80
70
60
50
40
30
20
10
0
1
1
1
1
1
1
1
1
10
7
10
8
7
3
5
Number of potential targets
13
Footnote:
•
Refers to companies of EUR 100 million to EUR 3 000 million in sales
153
A number of targets across Europe (2 / 2)
Sales (EUR MM)
2 000
1 800
1 600
1 400
1 200
1 000
800
600
400
200
0
Footnote:
•
Source: JP Morgan
154
~ 2 000
M&A is the key source of new business
and a core competence in Meda
A track record of sourcing new business through M&A
Examples of past acquisitions
Enterprise value (SEK billion)
25
Europe
Recip
CEE
2006
2007
2008
20
15
10
5
0
2005
156
2009
2010
2011
2012
2013
2014
Excellence in M&A execution and integration have
been key value drivers in past acquisitions (1 / 2)
EBITDA multiple (x)
25,0x
20,0x
15,0x
10,0x
5,0x
0,0x
Viatris
3M
At time of acquiistion
157
MedPointe
Recip
One year after acquisition
Valeant
CEE
Excellence in M&A execution and integration have
been key value drivers in past acquisitions (2 / 2)
1
• > 30 acquisitions of companies and product right
over the past 15 years
2
• Team largely intact, added new expertise
3
• Excellent growth in sales, profitability and cash flow
4
• Proven shareholder value creation
158
Agenda
1
• R&D vs. M&A driven growth
2
• Improving businesses
3
• “Kiss many frogs” approach in M&A work
159
“You have to kiss many frogs to find your prince(ss)”
160
“Frogs-kissing” required to build M&A pipeline
Focus on building pipeline
for M&A in 2016
161
We are monitoring around 10 acquisition situations
which are left-overs from last year but still
appealing from a number of perspectives
Number (#)
140
122
120
100
75
80
60
Primarily large scale
opportunities
40
18
20
~10
1
0
Companies with value between
USD 1 - 6 billion
162
Sub-sectors: respiratory,
dermatology and branded
products
Outcome
Short listed (ongoing monitoring)
Deal: Rottapharm
57 new opportunities screened year to date (1 / 3)
Building pipeline
Product
30%
Company
70%
163
57 new opportunities screened year to date (2 / 3)
Building pipeline
Global
19%
Other
2%
EU
46%
Emerging
Markets
16%
US
17%
164
57 new opportunities screened year to date (3 / 3)
Building pipeline
Cx / OTC
30%
Allergy /
respiratory
7%
Dermatology
19%
Pain /
inflammation
4%
Other TA
40%
Footnote:
•
References to therapeutic areas are for Rx
165
Concluding remarks
Dr. Jörg-Thomas Dierks, Group President and CEO
3 focus areas in 2015
1
Focus on fully exploiting the synergy potential in the
integration of Rottapharm
2
Improving the working capital efficiency in 2015
3
Gearing up for further M&A
 Building pipeline for 2016
167
Relentless work towards building a bigger, stronger
and better Meda
• Meda is a unique European specialty pharma company
– Combines the “best of both worlds”: M&A complemented by underlying business expansion
• Our underlying growth drivers are twofold
– Products:
– Continued in-market sales growth and internationalization of our key growth products
– International roll-out of leading Cx brands
– Accelerate growth through new campaigns one line extensions in OTC
– Geographies: Emerging Markets
– Continue to take market share and benefit from high market growth
– Geographic cross-fertilization from Rottapharm acquisition (both directions) is imperative
• Focus is on value-accretive M&A in 2016
– Support our strategic direction, attractive market for sustainable growth and significant synergies
– Free cash flow return on capital employed > 10%
• Continuous focus on operational and cost efficiency
• Building a bigger, stronger and better Meda to realize our mission
168
169
Thank you for your attention
Q&A

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