Self-Care/OTC Medicine: Essential for Global Health Systems

1. Self-Care/OTC Medicine: a key part of health systems around the worldANDI10 June 2015 Andy Tisman, Senior Principal Consumer Health IMS Health

2. Agenda 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. Global At $107bn, OTC continues to show healthy growth while Pharma growth improves 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. ConsumerEmpowerment IMS Health - ANDI 2015

7. Global And this shift of focus towards health & wellness has led to new transversal market segments. Blurring the boundaries (or broadening the scope!) and attracting new competitors Cosmeceuticals Nutraceuticals 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 Topically applied Vitamins, herbs, various oils, and botanical extracts typically added May not claim drug-like or therapeutic effects Ingestible. Containing ingredients such as botanical actives, enzymes, proteins, and vitamins. Marketed specifically as beauty aids Nutricosmetics IMS Health - ANDI 2015

8. Global As OTC becomes increasingly attractive, industry players become more diverse. Global Pharma FMCG/CPG Consumer Health Consumer packaged goods CPG moving into consumer health Pharma 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 Total OTC Total OTC Source: IMS OTC audits plus estimates • USA Data: 2013 is a 53 week data period, whereas 2014 is 52weeks, therefore growth rates are impacted IMS Health - ANDI 2015

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% 400 68% 29% 29% 300 34% 100 200 16% 20% 100 9% 7% 7% 10% 0 0 MAT Q1 10 MAT Q1 11 MAT Q1 12 MAT Q1 13 MAT Q1 14 MAT Q1 10 MAT Q1 11 MAT Q1 12 MAT Q1 13 MAT Q1 14 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 The big 5 categories account for 75-80%, with CCR fastest growing due to a strong 2014-15 winter Global OTC – Key Categories Value Share (%) Value Growth (%) Source: IMS OTC Global Analysis IMS Health - ANDI 2015

15. Agenda IMS Health - ANDI 2015

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

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

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

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

20. Pharmerging 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/herbalremedies 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. Pharmerging Several factors drive this strong interplay between Consumer Health and Pharma in EM. 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 • It is often possible to buy Rx medicines without a prescription • Combined with limited reimbursement, can encourage sufferers to visit pharmacy first • 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 IMS Health - ANDI 2015

22. Agenda IMS Health - ANDI 2015

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

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

25. OTC Trends Product-based NPD is still key; use of social media and technology in innovation is now commonplace. The most common, but a proven way to extend a brands life. 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 For discussion purposes only.  Not approved by management.  IMS Confidential. IMS Health - ANDI 2015

26. Rx/OTC Switch Rx/OTC Switch is a key element in OTC development, making more products available for self-care 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? W Europe • The path to switch is well established 9 of top 20 brands are recent switches, accounting for 12% of OTC sales 7 of top 20 brands are switches, accounting for 5% of OTC sales • EU Central Switch route has yet to be fully leveraged 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. Rx/OTC Switch 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. Yet the global Switch environment is diverse...and is evolving in a number of geographies outside LatAm Rx/OTC Switch In other countries OTC is less well defined from a regulatory viewpoint, and or government cost/reimbursement perspective IMS Health - ANDI 2015

31. And in LatAm many of the products available OTC in Europe still remain Rx Rx/OTC Switch 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. Rx/OTC Switch Many factors impact the size of the OTC switch and levels of success; there are no common benchmarks IMS Health - ANDI 2015

33. Rx/OTC Switch Consumer insight driven No extension beyond original switch product Cross category and brand extensions Satisfied market Professionals engagement Low consumer understanding New OTC category leader Follower into existing OTC market Multi regional and/or country launch Launch country only Professional disengagement Unsatisfied market However a number of key implementation criteria have been identified that can impact market success High level Low level Level of consumer insight & or interest Level of existing market satisfaction Level of pharmacist /physician engagement Level of roll out into countries Level of brand extension deployed/possible 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 IMS Health - ANDI 2015

34. In the US, Prilosec switch created a strong brand position through consumer insight into heartburn 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, Rx/OTC Switch Prilosec OTC % MS evolution OTC heartburn & acid market Prilosec OTC vs. Rx volume evolution IMS Health - ANDI 2015

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

36. 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 Rx/OTC Switch IMS Health - ANDI 2015

37. And if the consumer proposition is not strongly motivating it can lead to commercial ‘heartbreak’ 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. Rx/OTC Switch Consumer proposition Consumer proposition A tale of 2 brands Take Levonelle once and I won’t get pregnant. “New, improved” version just launched through EU central switch process IMS Health - ANDI 2015

38. Rx/OTC Switch Bayer have driven success for Canesten by adding line extensions to grow the theoriginal switch product 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. Rx/OTC Switch Nurofen is a further example of leveraging switch through line extensions and channel development Nurofenline extensions in the UK No of prods 4 6 9 10 9 8 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 Rx/OTC Switch 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. And the potential for further Rx/OTC Switch molecules and categories is still significant Rx/OTC Switch “Accepted” new switch categories New molecules in existing categories Switch potential but issues to be addressed around molecules and/or conditions for self-care IMS Health - ANDI 2015

42. Agenda IMS Health - ANDI 2015

43. OTC Trends A range of key factors is involved in driving superior performance in Pharmerging markets. Fast responsiveness Integrated distribution Local adaptation Launch many products & new lines Affordable products Local government support Recruit & keep local talent • 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. 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? OTC Trends Market concentration & localisation determine the portfolio and operation required to succeed. Where to play and how to win? Country segmentation Illustrative * LatAm High East EU Medium Market concentration 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. Latin America Highlights and Implications for LatAm and Colombia. OTC/CHC continues to play an important role in healthcare, increasing in the future OTC growth in LatAm remains strong, and Consumer Health is an attractive business. Empowering consumers to manage their health rather than just to treat their illness. Consumer Centricity will become key to driving the right innovation for future growth. Innovation in NPD and Rx/OTC Switch is key to meeting market demands. Innovation is a MUST for continued growth, meeting market demands. Gaining alignment among all stakeholders will be key: industry plays a major role LatAm Markets offer excellent growth but bring a range of specific challenges. IMS Health - ANDI 2015

46. For contact: Andy TismanSenior Principal Consumer HealthIMS Health atisman@uk.imshealth.com +44 (0)20 3075 5295 IMS Health - ANDI 2015