Post on 12-Apr-2017
Institutional Presentation April/2017
Disclaimer
This release contains forward-looking statements that are exclusively related to the prospects of the business, its operating
and financial results, and prospects for growth. These data are merely projections and, as such, based exclusively on our
management's expectations for the future of the business and its continued access to capital to fund its business plan. These
forward-looking statements substantially depend on changing market conditions, government regulations, competitive
pressures, the performance of the Brazilian economy and the industry, among other factors, as well as the risks shown in our
filed disclosure documents, and are therefore subject to change without prior notice.
As a goal to maintain a correlation with the Financial Statements prepared by its external auditors, the considerations and
comments contained herein are prepared on a consolidated viewpoint of the economic group Hypermarcas, and not
necessarily individualized by the various legal entities that compose the group.
In addition, unaudited information herein reflects management's interpretation of information taken from its financial
statements and their respective adjustments, which were prepared in accordance with market practices and for the sole
purpose of a more detailed and specific analysis of our results. Therefore, these additional points and data must also be
analyzed and interpreted independently by shareholders and market agents, who should carry out their own analysis and
draw their own conclusions from the results reported herein. No data or interpretative analysis provided by our management
should be treated as a guarantee of future performance or results and are merely illustrative of our directors' vision of our
results.
Our management is not responsible for compliance or accuracy of the management financial data discussed in this report.
which must be considered as for informational purposes only, and should not override the analysis of our audited
consolidated financial statements for purposes of a decision to invest in our stock, or for any other purpose.
2
Agenda
• Overview
• Brazil Pharma Market
• Our Business
• Financials
3
#1 Hypermarcas Aché NC Farma
#2 Sanofi Eurofarma Hypermarcas
#3 Takeda Sanofi Sanofi
#4 Pfizer Novartis Cimed
#5 J&J Hypermarcas Eurofarma
Business overview
39% 30%
31%
Net Rev: R$3.3 bn
Gross Margin: 74.3%
Rankin
g
Key f
acts
Branded
Prescription
Branded
Generics
Consumer
Health
Revenue Breakdown Branded
Prescription¹
Consumer
Health
Branded
Generics²
Focus in Brazil Long experience
Fast growing/
resilient market Diversified portfolio
SOURCE: Company financials – 2016; IMS Health Feb 2017; Hypermarcas. ¹ Ex-patents. ² Branded Generics includes Similars
and Generics.
4
Agenda
• Overview
• Brazil Pharma Market
• Our Business
• Financials
5
Pharma market
SOURCE: IMS Health (May 2016)
2014 Trends 2019
1st United States
2nd China
3rd Japan
4th Germany
5th France
6th USD24 bn
7th Italy
1st United States
2nd China
3rd Japan
4th Germany
5th USD36 bn
6th France
7th Italy
• Aging
• Underdeveloped health
system
• Treatments’ low levels
• Generics low
penetration of generics
(25% of market)
• Peak in economically
active population
6
Main Markets Growth
SOURCE: IMS Health (Average Expected Growth)
1%
1%
3%
3%
4%
5%
6%
6%
7%
7%
8%
8%
9%
12%
France
Japan
Italy
Spain
Germany
RoW
UK
Global
China
Russia
USA
EM
Brazil
India
Forecasted 2016-21 CAGR
7
50% 52% 54% 56% 58%
50% 48% 46% 44% 42%
2012 2013 2014 2015 2016
58% 61% 64% 65% 67%
42% 39% 36% 35% 33%
2012 2013 2014 2015 2016
Local Players Gains Market Share
Mult
inati
onals
Value
(R$)
Volume
(Units)
SOURCE: IMS Health 2016 8
Low levels of per capita consumption
SOURCE: Organization for Economic Co-operation and Development (OECD), 2012
3,484
1,109
1,577
3,289
3,649
4,288
4,811
8,745
OECD
Brazil
Chile
UK
Japan
France
Germany
USA
Healthcare Expenditure per Country (USD/year)
7.9x
9
Latin American Market
Brazil USD24.3 bn
53%
Mexico USD9.7 bn
21%
Argentina USD3.8 bn
8%
Colombia USD3.8 bn
8%
Chile USD2.2 bn
5% Others
USD2.3 bn 5%
SOURCE: Latin American Markets IMS Health (2014)
The largest market in a fragmented region: Latin America
Locals are dominant and
focused in their markets
Absence of strong regional
leaders
10
Fast ageing of population
SOURCE: IBGE (2010)
Population 60+ (MM people)
CAGR
2.8%
14 20
29
42
54
66 74
8% 10%
14%
19%
24%
29%
34%
0%
5%
10%
15%
20%
25%
30%
35%
0
10
20
30
40
50
60
70
80
90
2000 2010 2020 2030 2040 2050 2060
1mm
p.y.
11
Potential for higher drug consumption
SOURCE: IBGE (Consumer Expenditure Survey 2008-09); Values readjusted by inflation (IPCA) to February 2017.
Prescription Drugs Expenditure (R$ per month / family)
200.4
193.6
130.9
97.4
71.4
58.6
45.4
70+
60-69
50-59
40-49
30-39
20-29
10-19
4.4x
12
Retail pharma market
Business
Segment
Product
Category
Demand
Driver
Market
Size
Patents
Branded
Prescription
Trade
Direct
to Consumer
5.9%
54.9%
11.5%
22.2%
• RX with/without
prescription retention
• OTX
• Dermocosmetics
R$28.5B Physicians
• Over-the-counter
• Nutritionals
• Related products
R$5.9B Consumer
• Innovative patent protected R$3.0B Physicians
• Generics (API)
• Similars R$11.5B Pharmacist
SOURCE: IMS Health PPP Feb 2017 13
Retail pharma market
# Companies to reach 42% of market share Pharma Retail
(% Sales)
42% 58%
Larger
Retail
Chain
Smaller Retail
Chain &
Independent
SOURCE: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da
América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Larger retail chains are the Abrafarma members.
75 K Point of Sales
(POS)
67 K POS 6 K POS
Larger Retailers (28)
*
Manufacturer (6)
14
High entry barriers
Strict Regulator
• Long approval
process (3-5 years)
• Strict control of
manufacturers,
products and
retailers
Fragmented Distribution
• Continental country
(27 states; >200mm people)
• ~70k point of sales
• 28 larger chains
• ~230 distributors
Powerful Local Brands
• All generics are branded at
retail as in most of the World
(ex-US & Canada)
1960 2016
15
Resilient growth
2.0 2.3
2.5 2.8
3.3
3.7
2011 2012 2013 2014 2015 2016
CAGR 2011-16: 11.2% CAGR 2011-16: 13.2%
28.1 30.9
34.0 37.1
42.1
47.7
2011 2012 2013 2014 2015 2016
SOURCE: IMS Health – PMB-PPP (December 2016) 16
Agenda
• Overview
• Brazil Pharma Market
• Our Business
• Financials
17
39% 30%
31%
Business overview
* Excluding patents
SOURCE: IMS Health – PMB Feb 17 LTM; Hypermarcas – 2016
Rank
Market
Share
Growth
Opportunities
Consumer
Health
Branded
Generics
Branded
Prescription*
#1
#2
#5
14.8%
14.7%
4.6%
• Launch new product
concepts through brand
extensions
• Improve retail space
• Increase market
presence, especially at
retails chains
• Improve portfolio
coverage especially at
high value products
• Leverage on physicians
visit network
• Launch new products
with untapped demand
Revenue Breakdown
Branded
Prescription
Branded
Generics
Consumer
Health
18
Hypermarcas strategic development
2007 - 2010 2012 - 2015 2017 - 2020
Shareholder
Value
Industry
Consolidation
Business
Restructuring
Pharma
Focus
Cycle 1
Cycle 2
Cycle 3
19
Key objectives of strategic phases
Industry
Consolidation
Business
Restructuring
Pharma
Focus
2007 - 2011 2012 - 2016 2016 - 2020
• Acquisition of outstanding assets (brands/companies) at attractive valuations
1970s 1953 1959 1943 1970
20
Key objectives of strategic phases
Industry
Consolidation
Business
Restructuring
Pharma
Focus
2007 - 2011 2012 - 2016 2016 - 2020
• Developed “outstanding” Go-to-Market platform
• Operations
• Marketing
• Distribution
• Implemented successful product / market strategies
with continuous market share gains
• Successfully executed business portfolio “Churn”
21
45% 59%
100%
55% 41%
2010 2013 2016
Successfully executed business portfolio “churn”
• Materially
improved
capital
structure
• Concentrated
on the most
attractive
Pharma
business
HPC
Pharma
Sale of
Home Care
& Food
Sale of
Cosmetics,
Condoms &
Diapers
SOURCE: Hypermarcas (Net Revenue breakdown) 22
Developed the best Go-to-Market platform
• Largest and most productive
Brazilian manufacturing site
• Highest production volume
• Lowest cost producer
• Most horizontal
distribution
- Mom&Pops
- Regional
- Chains
• Largest field
force at store level
(>70% direct access)
• Most productive
sales force at physicians
• Lowest cost media buying
Distribution
Operations
Marketing
Most Productive
Lowest Cost
Best Distribution
23
3.30
2.99
2.66
2.46
1.71
Aché
Teuto
Medley
EMS
Hypermarcas
Brazilian peers
1.4x
1.6x
1.7x
1.9x
COGS per Unit (R$)
SOURCE: Companies’ Financials 2015; IMS Health PMB – Units 24
Player 1
Player 2
Player 3
Player 4
Brazilian peers
0.8
0.9
1.2
1.9
Productivity R$ MM/Rep per Year
SOURCE: IMS Health – PMB-PPP Oct 16 25
Player 1
Player 2
Player 3
EBIT Margin
Brazilian peers
SOURCE: Companies' Financials 2015.
12.1%
12.5%
13.9%
27.8%
29.9%
União Química
EMS
Eurofarma
Aché
Hypermarcas
26
Player 1
Player 2
Player 3
Player 4
Market Share Evolution
7.5% 8.0%
8.5% 9.2%
9.8% 10.4%
2010 2011 2012 2013 2014 2015
SOURCE: IMS Health – PMB-PF Feb 17 LTM 27
Key objectives of strategic phases
Industry
Consolidation
Business
Restructuring
Pharma
Focus
2007 - 2011 2012 - 2016 2016 - 2020
• Focus on most attractive Pharma sector, leveraging on superior
competitive advantage
• Accelerate organic growth through more assertive “business
innovation”
• Further improve sales & marketing execution capabilities
28
Concentrated on most attractive Pharma business
Hig
h
Low
Low High
Pharma Business
Attractiveness • Aging of population
• Resiliency
• Untapped demand
Competitive Position
• #1 with leadership in many markets
• Diversified portfolio
• Most productive Go-to-Market platform
Accelerate growth
• Leverage on
“outstanding” platform
• Explore underpenetrated
markets
• Widen product offering
29
Segment the business in “Strategic Business Units” (SBUs)
Segment Name Market Size
“Direct to
Consumer”
#1
14.8% share
• Brand portfolio
• Merchandising
capabilities
• Media Buying
Success Factor
“Medical
Community”
“Trade”
#5
4.6% share
• Product
innovation
• Sales Force
Productivity
#2
14.7% share
Consumer Health
Branded Prescription
Branded Generics
Hyper Position
R$5.9 B
R$28.5 B
R$11.5 B
• Commercial
policy flexibility
• “Fast copier”
• Distribution
network
SOURCE: IMS PMB Feb 17 LTM 30
New Organizational Structure
31
• Offer opportunities based
on deep knowledge of
global technology
• Efficient innovation process
and execution
• Vertical integration of sales
More focused field teams
• Define innovation needs
based on market insights
and business strategy
Innovation Capabilities
Business Development Innovation Center
(Hynova / Lumina)
Consumer
Health
Branded
Prescription
Branded
Generics
6.8%
4.4%
4.2%
3.3%
4.1%
3.0% 2.7%
2.3% 2.9%
2.4%
63.8%
Diversified revenue base
SOURCE: Company data, 2016
Other
products
(Branded Presc.)
(Branded Generic)
(Branded Presc.)
(Branded Presc.)
(Branded Presc.)
(Consumer Health)
(Branded Presc.)
(Consumer Health)
(Consumer Health)
Top 10
Brands:
~36% sales
(Consumer
Health)
32
Increasing importance of innovation
17.2%
16.0%
18.8%
23.0%
24.3%
2012 2013 2014 2015 2016
Innovation (% Net Revenue) Target: 30%
SOURCE: Hypermarcas Sell-in (% Net Revenues; products launched over the past 5 years) Feb 17 33
Logistics
Operation
15%
(113 clients /
17 distributors)
Diversified distribution
• Continental country
(27 states; 204mm people)
• 28 larger chains
• ~230 distributors
Fragmented distribution
31%
Direct
Channel
(51 clients)
Indirect
Channel
(69 clients)
54%
Distributor/
Wholesaler
Retailer
Warehouse
Distrib
uto
r
deliv
ers
Hyperm
arc
as
takes
ord
ers
75,300 Stores
Hypermarcas reaches 100% of POS in Brazil
SOURCE: Company Data, 2016 (Feb 17) 34
Large scale production facility
323,000 m2 land 120,000 m2 constructed area 3,700 employees
Distribution
Center
Solids/
Raw
Materials
Quality
Control
Aerosol
Efervecent
Dermo Liquids
Semisolids
Injectables
R&D
Penicilin Solids
Semisolids
Liquids
R&D
35
High production capacity
SOURCE: Hypermarcas, per year
Tablets,
capsules,
coated tablets,
pills and
effervescent
10 billion
Injectable and
ophthalmic
45 million
Aerosols
11 million
Liquids,
creams, oils,
ointments,
lotions and
jellies
276 million
Occupancy
Rate
65%
36
Innovation: New Center
• Located in Alphaville – São Paulo
• Total area of 4,000 m2
• Research with consumers and physicians
• Development of new products
37
Innovation: Availability of new active substances by country
NOTE: New molecules launched between 2010 and 2014. Availability of molecules in 2015.
SOURCE: IMS Institute for Healthcare Informatics, Dec 2015
128
108 102
88 83 79
73 67
61 60 58
41
USA Germany Great Britain Italy Japan Spain Canada France South Korea Mexico Polonia Brazil
170 new
substances
(2010-14)
Business development - sourcing
R&D
Availability in December/2015
38
1,621
467
1,154
Innovation: Significant R&D activity worldwide
High potential for partnering in innovative products
Late stage
development or
recently launched
products
Yes No
“Go-to-Market”
presence in Brazil
• Fixed dose
combinations
• Extended release
• Inhalation devices
• Transdermal patches
• Nano-tech
• Quick release
• Sub-lingual
• ODT
• Oral films
• Others
70%
SOURCE: Thomson Reuters (Cortellis) and Hypermarcas 39
Innovation: growth of Brazilian pharma companies
NOTE: ¹ Adjusted by inflation. ² Considers products launched before 2008. ³ Considers products launched between 2008-2015
SOURCE: IMS Health - PMB Retail
• Negative
performance of
legacy portfolio
• Growth comes
from new products
-0.8% 7.9%
1
CAGR
11.9
-0.3
3.0
14.6
2012 Legacy New products 20152 3
40
Launch
preparation
Development and /
or Negotiation
Business Case Building
Idea Generation
Creation Order
41
Executives Directors (individually)
Innovation Comittee
Business Committee
CEO (Meetings as needed)
Process Leader
Innovation
Manager
Innovation
Management
OD: P&D
--
ON: Business
development
Product
Manager and
Project Manager
(PMO)
Order of Devel. or Negotiation
ODs and ONs Priorization
Release Order
Sell – in
Product strategy review
Approval / revision forum
Executive Committee
Monitoring Committee
Innovation: professional process
Branded Prescription
Products
Strategy
Demand Driver
• Drugs promoted to
Physicians (OTC / RX)
• Intensify therapeutic
classes expansion
• Physician prescription
39% 30%
31%
Branded
Prescription
Branded
Generics
Consumer
Health
Revenue Breakdown
42
Ranking
#1
#2
#3
#4
#5 4.6%
5.4%
6.3%
6.7%
9.6%
11%
18%
17%
12%
19%
21%
Market Share Growth YoY
Total Market
Company
Branded Prescription Market Positioning
SOURCE: IMS Health – PMB-PPP Feb 17 LTM 43
1.9
0.8
0.9
1.2
750
1,300
1,900
2,300
NC - Farma
Eurofarma
Aché
Team size
# representatives
Productivity
R$ MM/Rep per Year
Branded Prescription Productivity of medical reps team
SOURCE: IMS Health – PMB-PPP Oct 16 44
Player 1
Player 2
Player 3
• Antihypertensives
• Antidepressants
• Antibiotics
• Analgesics
• Anti-inflammatory
• Photoprotection
• Moisturizing
• Anti-aging Skincare
11%
Skincare 21%
Chronic 63%
Chronic 29%
Acute 26%
Acute 50%
MARKET HYPERMARCAS
R$27.6bn R$1.3bn
Growth
YoY
Growth
YoY
+14%
+13%
+11%
+28%
+11%
+28%
Market
Relevance
Relevance
+13% Acute
Chronic
Skincare
+18%
Therapeutic class examples
Branded Prescription Portfolio Composition
SOURCE: IMS Health – PMB Dec 16 45
Rank Company Market Share Growth YoY
#1 16.9% 19%
#2 9.0% 10%
#3 9.0% 11%
Total 100.0% 13%
Rank Company Market Share Growth YoY
#1 7.8% 21%
#2 7.3% 12%
#15 2.2% 33%
Total 100.0% 13%
Rank Company Market Share Growth YoY
#1 33.5% 19%
#2 13.3% 28%
#3 11.9% 3%
Total 100.0% 11%
Acute
Chronic
Skincare
Branded Prescription Portfolio & competitive position
SOURCE: IMS Health – PMB Dec 16 46
Marketing / Conceptual
• New treatment concept: attack
(50,000 ui) and maintenance
(7,000 ui & 1,000 ui)
Pharmaceutical Form
• Pills
• Gel caps
4 5 5 7 8 9 9 10 12 12 10 9 9 8 7 7 8 7 7 7 8 7
4
12 20 20
25
36 41 39 41
48
41
8 18
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
SOURCE: IMS Health
Sell-out PPP R$ MM
Type of
innovation
Hyper
Marketing / Conceptual
• Importance of
Hypovitaminosis D
treatment
• Medical visitation
Pharmaceutical Form
• Liquid
Pharmaceutical Form
Soft Gel Caps
• Modernity &
innovation
• Easy swallowing
• Size reduction
• Exclusivity
7,000/50,000UI
• Preferred by 70%
patients
Drops Pills Gel caps
Branded Prescription Taking Addera D3 to a new leve
cm
47
2011 2012 2013 2015 2016 2014
66 64
48 46
48
44
32
27 28
21
13
SOURCE: IMS Health - PMB Retail PF (Feb/17) & internal analyses
Infa
nt
A
dult
Consumer
• Media campaign
• Packaging relaunch
• Unique identity
• + Impact
• + Visibility
• Launch of blister x 3
POS
• 50% increase in channel investments
Medical demand
• Valuing prescription and shielding
• Co-promotion: 2 teams
POS
• Better exposure
• Winter campaign with flu-symptom drugs
Alivium demand evolution – Sell-out (R$ MM)
11% 3%
-7% -3% 5% 0%
27%
Growth
YoY
Branded Prescription Alivium positive conversion
19 22
19 20 20 22
20 22
4
5
4 4 4
5 9 9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Liquid Pills
48
31
29 27
24 24 23
27
23
-1%
1%
17%
19%
27%
SOURCE: IMS Health – PMB Oct’16
¹ Dermocosmetics market growth: 8.9%
Highest Growth Rates (LTM Oct/16 - PPP)
• Innovation
- Fast launches
- Attractive/innovative
products
• Diversification
- Portfolio renewal
(cleansing, moisturizing, anti-
aging)
- Entrance in new markets
• Execution
- Expansion of demand team
- Focus on POS execution
Branded Prescription Skin Care – Important growth driver
49
1%
11%
1%
10%
12%
1%
3%
5%
Ophthalmics
Orthopaedics
Psychiatry
Dermatology
Peadiatrics
Cardiology
Gynecology
General Practice
Market share (% R$ PF)
93%
87%
74%
85%
74%
78%
55%
69%
SOURCE: IMS Health (Oct/2016); Hypermarcas
Main
visited specialties Current
portfolio
Future pipeline
opportunities
Branded Prescription Portfolio optimization by therapeutic classes
Visitation coverage (% of prescriptions – R$ PF)
50
Products
Strategy
Demand Driver
• OTC
• Sweeteners
• Intensify brand extensions
• Mass media
39% 30%
31%
Branded
Prescription
Branded
Generics
Consumer
Health
Revenue Breakdown
Consumer Health
51
52
Ranking Company Market Share Growth
YoY
#1
#2
#3
#4
#5
Total CH
Sell-out
SOURCE: IMS Health – PMB-PPP Fev 17 LTM
14.7%
14.3%
6.7%
5.9%
5.7%
Consumer Health Market positioning
9.6%
8.1%
5.9%
6.4%
1.8%
6.3%
53
Cosmetics Food
Dermo-
cosmetics Nutra-
ceuticals
Nutri-
tionals
Pharmaceuticals
• Safe and well tolerated
• Simple dosages
• Fast relief of minor symptoms
• Ease of access
• Good distribution
• Wide range of options
• Affordable prices
Self Care
Universe Characteristics
POS Communication
Education & Knowledge
Consumer Health Business scope
54
2012 2013 2014 2015 2016
6.7%
SOURCE: IMS PMB-PPP Feb 17
• More stable market
• Unfavorable regulation
• Products
• POS
• Hyper portfolio focused on
more mature categories
CAGR
12-16
Consumer Health 9.7%
Consumer Health Hypermarcas sell-out evolution
41%
89%
37%
6% 22%
5%
MARKET HYPERMARCAS
Growth
YoY
6.4%
-9.6% 16.2%
18.7%
10.8%
11.1%
Share of the
Market
Share
10.3% 9.7%
Main Markets
Development
Mature Attack
Mature Leadership
• Vitamins & Supplements
• Nutraceutics
• Probiotics
• Antispasmodics
• Muscle relaxant
• Antiflatulants
• Analgesics
• Gastro
• Flu Symptoms
Development
Mature Attack
Mature Leadership
Mature market,
Hyper share >14%
Mature market,
Hyper share <5%
Dynamic market,
Hyper share <5%
Growth
YoY
SOURCE: IMS Health – PMB Oct 16
Consumer Health Portfolio composition
55
Development
Rank Company Market Share
#1 17.6%
#2 13.7%
#3 10.8%
#6 3.6%
Total 100.0%
Mature Attack
Rank Company Market Share
#1 13.6%
#2 12.0%
#3 9.5%
#11 2.7%
Total 100.0%
Mature Leadership
Rank Company Market Share
#1 29.8%
#2 19.0%
#3 12.9%
#4 10.6%
Total 100.0%
Development
Mature
Attack
Mature
Leadership
SOURCE: IMS Health – PMB Oct 16
Consumer Health Portfolio & competitive position
56
SOURCE: IMS Health PMB – PPP LTM Out’16.
Gastro 32.2%
Tranquilizers 35.0%
Antihemorrhoids 36.2%
Laxatives 41.3%
Flu Symptoms 73.0%
Antiseptics 75.2%
Market Size (R$ MM)
387
41
249
23
73
654
Brands Market Share 1st
Consumer Health Mature products – Hyper leadership market
57
Topical Pain Relief
Antispasmodics
Supplements
Infant Vitamins
Nutritionals
Adult Vitamins
Market Hypermarcas
Portfolio Extension
SOURCE: IMS Health – PMB Oct’16
Consumer Health Innovation
58
SOURCE: IMS Health – PMB Feb 17
Consumer Health New products concepts through brand extensions
Concept
• High awareness
• Stronger formulation
• Product concept: “Good even for migraines”
29.3 28.2 29.7 31.7
14.3
31.5
2013 2014 2015 2016
Sell-Out (R$ million)
124%
63.2
44.0
59
SOURCE: IMS Health – PMB Feb 17
Consumer Health New products concepts through brand extensions
116 128
133
7
20
2014 2015 2016
Benegrip Benegrip Multi
32%
Mkt share
+ 0.5 p.p.
Sell-Out (R$ million)
153
135
60
Specialist Team CH
Focus on execution
Resources Optimization
Grow Weighted Distrib.
Verticalization of the Sales & Merchandising
Teams Convert Market Share in POS space via block
exposure of brands
Consumer Health Distribution
61
Pilot Project – Extrafarma
Before After
Category Management – Education & Expansion
SOURCE: IMS Health – PMB Oct 16
Consumer Health Distribution
62
Products
Strategy
Demand Driver
• Generics (Large Chains)
• Similars (Independent)
• Defend & grow selectively
• Pharmacist recommendation
39% 30%
31%
Branded
Prescription
Branded
Generics
Consumer
Health
Revenue Breakdown
Branded Generics
63
#1
#2
#3
#4
#5
SOURCE: IMS Health – PMB - PPP LTM Feb/17
Similars & Generics
Companies
Market
Share
CAGR
2012-16
25.3%
6.0%
6.9%
8.4%
13.6%
21.3%
17.7%
-7.3%
13.1%
8.1%
Branded Generics Outstanding position with solid evolution
64
888
1,049
1,192
1,435 1,553
2012 2013 2014 2015 2016
SOURCE: IMS Health – PMB - PPP Feb 17
CAGR 15%
R$ MM
Branded Generics Sell-out demand evolution
65
SOURCE: IMS Health – PMB - PPP Feb 17
Similars Generics
288
359
419
550 602
2012 2013 2014 2015 2016
CAGR 20%
600
690 773
886 951
2012 2013 2014 2015 2016
CAGR 12%
R$ MM
Branded Generics Sell-out demand evolution
66
Generics Similars
SOURCE: IMS Health - PMB- PF LTM Feb/17
Market
Share
#1 19.2%
#2 17.3%
#3 14.4%
#4 5.7%
#5 5.5%
Market
Share
#1 28.0%
#2 13.7%
#3 11.8%
#4 10.9%
#5 8.0%
Branded Generics Ranking by market segment
67
SOURCE: IMS Health - PMB
1st Sildenafil
3rd generics market
Orlistat
5th generics market
Torsilax
4th biggest market
Neosoro
1st product
by units
Doralgina
5th OTC market
Losartan 1st generics market
Generics Similars
Branded Generics Leadership in main molecules
68
70%
5%
6%
7% 88%
Total Under
development
2021-23
Launches
2019-20
Launches
2017-18
Current
portfolio
Strategy: • 1st to market
• High-barrier markets
• High-potential markets
SOURCE: IMS Health – PMB – PF LTM Jun/16
Branded Generics Pipeline opportunities
69
2nd generic version of the market
Launched in 2016
Reference: Lasix
Line extension
1st half 2017
Reference: Sotacor
Escitalopram Furosemide
Sotalol
2nd generic version of the market
Launched in 2016
Reference: Selozok
2nd generic version of the market
1st half 2017
Reference: Nebilet
Metoprolol Succinate
Neolefrin
Biggest “controlled drugs” market
Launched in 2016
Reference: Lexapro
Branded Generics Main short-term launches
70
Nebivolol
Biggest OTC-Similar market
Launched in 2016
Reference: Naldecon
Market
Relevance
53%
25%
23%
46%
21%
33%
SOURCE: IMS Health - ED
Large
chains
Mid-sized
chains
Independent retail
Branded Generics Channel opportunities
71
SOURCE: IMS Health – PMB-PPP LTM Jun/16
21.5%
17.5%
14.4% 14.0%
9.3%
NORTHNORTHEASTSOUTHEASTMIDWESTSOUTH
Market Share
14.5%
Branded Generics Regional opportunities
72
Brand awareness and use
27%
54%
80%
96% Knows
Tried
Uses Regularly
Uses frequently
Brand with lowest level of rejection
¹ Average of 5 largest competitors
SOURCE: Nationwide quantitative survey
87%
44%
68%
24%
AVG
leaders¹
Branded Generics Well-known brand with loyal consumers
73
Base Inventory
Price Point
Exposure Training
Field team:
• +100 employees
Coverage:
• ~20% POS
• ~50% of sell-out demand
Branded Generics POS execution
74
Price, base inventory & exposure reviewed
SOURCE: IMS Health – MDTR (Moving quarterly average , Sell-out – PMB PF)
Doralgina sell-out evolution – National large chains
+26%
Branded Generics POS execution – Doralgina
75
The Brazilian Family’s Medicine
“ We dedicate all of our efforts to provide more health and
wellness so that everyone can fully enjoy happy moments with
their families”
TV | Radio | Print media | Digital | PDV
Branded Generics Action plan: new media campaign
76
Agenda
• Overview
• Brazil Pharma Market
• Our Business
• Financials
77
78
2015 ∆ 2016
Net Revenues 2,956.6. 100.0% 3,288.7. 100.0% 11.2% - .
Gross Profit 2,210.1. 74.8% 2,442.0. 74.3% 10.5% -0.5 p.p.
Marketing Expenses (766.0) -25.9% (810.1) -24.6% 5.8% 1.3 p.p.
Selling Expenses (383.5) -13.0% (413.5) -12.6% 7.8% . 0.4 p.p.
G&A Expenses (157.9) -5.3% (153.8) -4.7% -2.6% 0.6 p.p.
Other Expenses* (16.0) -0.5% (25.0) -0.7% 56,3% -0.2 p.p.
Depreciation & Amortization 66.4. 2.2% 64.2. 2.0% -3.4% 0.2 p.p.
EBITDA* 950.3. 32.1% 1,106.4. 33.6% 19.2% 1.5 p.p.
Financial Result (515.9) -17.4% (192.1) -5.8% -62.8% -11.6 p.p.
Taxes (22.5) -0.8% (202.4) -6.2% 798.9% -5.4 p.p.
Net Income 345.5. 11.7% 674.5. 20.5% 95.2% 8.8 p.p.
2016 Results
* It excludes reimbursement agreement signed with the Company’s former Corporate Relations officer 78
Net Debt Reduction (R$ million)
Net Debt / EBITDA¹ Debt Profile
3.9x
3.1x 2.9x
2.6x
1.7x
-1.6x
-0.3 x
2011 2012 2013 2014 2015 LTMProforma
K Red.,Divid. &Buyback
3T15
Gross Debt 907.6
Cash (1,348.0)
Net Debt (440.4)
Hedge (351.5)
Net Debt after Hedge (792.0)
4Q16
¹ Until 2015, Adjusted EBITDA (EBITDA before non-recurring expenses and other non-cash expenses)
² Buybacks considers a average of R$ 28.00/share.
Diapers Deal (1,000.0)
Cap. Red., Divid. & Buybacks² 1,511.4
Proforma Net Debt (280.6)
79
Dividends
R$0.50
R$0.60²
R$0.05¹
Paid in 2016 Paid in 2017
R$0.65
R$0.50
30%
Ps.: 2017 YTD. Dividend Yield calculated with average stock price; 2017 refers to Feb 16, 2017 YTD. ¹ To be paid in Feb 24, 2017. ² To be paid after the approval on 2017 Annual Shareholders Meeting.
Dividend Yield: 1.9% 2.4%
80
R$ 0
.65
Dividends & Capital Reduction
R$ 0.50 R$0.60
R$ 0.05
R$1.30
Paid in 2016 Paid in 2017
¹ Paid in Feb 24, 2017. ² To be paid after the approval on 2017 Annual Shareholders Meeting.
Capital Reduction
Dividends
30%
R$1.95
81
Company’s Main Tax Shields (1/4)
EV/EBITDA P/E Cash flow Returns Net income Possible analysis impacts
Tax Shield Summary
Source: Hypermarcas
¹ Federal tax credits are usable to pay any federal tax payment
R$ Million Expense for
Tax only Tax Rate Cash Value* Origin
Goodwill 1,299 34% 442 - Acquisitions; Amortizable for tax purporses only
- It does NOT impact the PnL, only the Cash Flow
Income Losses 965 - Negative pretax due to Goodwill amortization
Recoverable Taxes 208 - Withholding tax from investments
- Credits from Acquisitions
Total 1,615
* Cash impact sum of tax shields
82
Company’s Main Tax Shields (2/4)
EV/EBITDA P/E Cash flow Returns
Source: Hypermarcas
Net income Possible analysis impacts
Goodwill Amortization
• Acquisitions
• Reduces Pretax for Tax Purposes only (i.e. an extra expense for tax calculation)
• Difference between P&L and Fiscal Authorities calculation is deffered
• Earnings Release (Table with Remaining Goodwill Amortization for Tax Purposes)
(R$ million)
2017 701
2018 452
2019 145
Total 1,299
Expense for Tax Purposes only It does NOT impact P&L
Tax Rate 34%
Tax Shield 442
Reason
Information source
Effect
4Q16
83
Company’s Main Tax Shields (3/4)
Source: Hypermarcas
Tax Credits from Income tax losses carry-forward
(R$ Thousand) December 31,
2016
• Explanatory Note 23(a) – Quarterly Financial Statements
EV/EBITDA P/E Cash flow Returns Net income Possible analysis impacts
• Lower pretax due to goodwill
amortization
• It is actually an Tax credit (not another expense as goodwill amortization)
• It pays up to 30% of Federal taxes due in a given year
Tax Credit
Reason
Information source
Effect 964,873
- 68,155 67,093 58,468 21,398
130,899
1,310,886
84
Company’s Main Tax Shields (4/4)
Recoverable Taxes
EV/EBITDA P/E Cash flow Returns Net income Possible analysis impacts
• Withholding tax from financial investments
• Tax credits from acquisitions
• It is actually a Tax credit (not another expense as Goodwill Amortization)
• Can be used to offset Federal tax payments
• Balance sheet (Recoverable Taxes)
• Explanatory Note 13 – Quarterly Financial Statements
Reason
Information source
Effect
Tax Credit
December 31,
2016
Federal Taxes¹ 207,896
128,679 254,537 79,217
462,433
Source: Hypermarcas; it includes continuing and discontinued operations
85
20%
15% 65%
Igarapava Participações S.A.
Maiorem S.A. de C.V
Other Controlling Shareholders
Founder
Free Float
Maiorem
Ownership and listings
¹ March 27, 2017 LTM
² March 27, 2017
³ March 27, 2017
SOURCE: BM&F Bovespa; Hypermarcas
Listings
• Sao Paulo Stock Exchange: - HYPE3
- BRHYPEACNOR0
• Indexes with Hypermarcas:
• Ibovespa Index Ranking³: 30/58
• Trade volume¹: 2.8 MM shares/day
• ADR (HYPMY)²: 6.4 MM shares outstanding
• Market Cap³: R$18.34 B (USD5 B)
Ownership structure
Controlling
Group
35%
86
Phone: +55 (11) 3627-4242
ir@hypermarcas.com.br
http://www.hypermarcas.com.br/ir
87