Capital Markets Day September 16th ,2014 Page 1 www.stada.com
Capital Markets Day
Capital Markets Day September 16th ,2014 Page 2 www.stada.com
T&R within the UK Market
Dieno George CEO, T&R
September 2014
Capital Markets Day September 16th ,2014 Page 3 www.stada.com
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• Founded in 1922
• Leading UK OTC branded business with increasing branded Rx NHS presence, particularly dermatology
• Balanced portfolio of market leading brands, growing market share through continued innovation and market support
• Excellent customer relationships throughout the UK pharmacy, grocery and other retail channels as well as NHS including GPs and CCGs
Thornton and Ross overview
• Operates a well invested, fully integrated, highly skilled, cost-effective manufacturing site specialising in pharmaceutical creams, gels, liquids and suppositories
• Growing international presence through licensees, distributors and Stada affiliates
• Strong and experienced management team capable of delivering exceptional growth
• A demonstrable track record of delivering year-on-year growth in sales, margins and EBITDA
Capital Markets Day September 16th ,2014 Page 5 www.stada.com
• Utilise T&R’s strategic and operational expertise to create a Centre of Excellence for OTC, Consumer Medicines and Dermatology
• To strengthen T&R in its core markets by continuing to develop and commercialise new brand extensions and launch new brands with innovative appeal to consumers and healthcare professionals
• Acquire strongly branded OTC products, Rx dermatologicals, and other niche Rx brands including medical devices for sale in the UK and internationally through Stada affiliates
Mission statement
• Continue to invest in our facilities and people
• Ensure we remain competitive and in control of our key processes and activities so that we comply with all regulatory and legal requirements
• By developing the business as indicated, it is anticipated that T&R can continue to profitably grow sales ahead of key competitors and so increase market share in core market segments
• Operating profit and EBITDA progression on an annual basis will be a key measure of success
As part of Stada AG, we will aim to:
Capital Markets Day September 16th ,2014 Page 6 www.stada.com
T&R Total Sales
£33m £33m £39m £42m
£45m £52m
£58m £60m £66m
£72m
£80m
£114m
FY05A FY06A FY07A FY08A FY09A FY10A FY11A FY12A FY13A CY13A CY14E CY14EFY = Previous Financial Year to 31 March CY = Calendar Year
Capital Markets Day September 16th ,2014 Page 7 www.stada.com
T&R Sales 2014
Sales by route Sales by therapeutic area
Cough/Cold 18%
Derma 22%
Topical Analgesic
13%
Household 9%
Generic's 12%
Other 26%
OTC 47%
Rx 40%
International 13%
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T&R Sales 2014
Covonia 14%
Care 13%
Hedrin 10%
Cetraben 10% Zoflora
9%
Movelat 6%
Radian B 5%
Gal 3%
Cerumol 2%
Generic's 12%
Other 16%
9 major brands
72% of sales
Capital Markets Day September 16th ,2014 Page 9 www.stada.com
UK healthcare spectrum
PROFESSIONAL CONSUMER
Hospital CCG Health Centre Pharmacy Grocery Convenience/Discount Consultant
Specialist GP Disp GP
Nurse Pharmacist Staff
Retail Buyer
Place & person
Product
A&P
Biosimilar
Rx brands and generics
Medical devices
OTC brands and generics
FMCG inc disinfectants
Sales and detailing costs Advertising costs
Medicines Managem’t
GENERICS
Capital Markets Day September 16th ,2014 Page 10 www.stada.com
UK Healthcare
20th century: Killer disease Challenge was to address killer diseases caused by poor sanitation and communicable infections
21st Century: Poor lifestyle choices Facing time-bomb of poor lifestyle choices with significant health consequences. Ageing society: considerable growth in over 65s. Chronic disease explosion – eczema, arthritis, diabetes, coronary heart disease and dementia.
The burden on the NHS is arguably unsustainable unless there is a fundamental behaviour change from within the NHS and everyone using the NHS.
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OTC
UK Healthcare Environment
NHS
Severe cost
PPRS
Ageing population
Deregulation from P > GSL > Medical Device
NICE Free Rx
Lifestyle
Consumer information
Widening distribution
GP consultations
Self-care
Capital Markets Day September 16th ,2014 Page 12 www.stada.com
GPs ARE STILL PRESCRIBING MORE…
OTC vs. Rx Performance
951m packs 942m packs
196m packs 189m packs
873m packs 913m packs
2012 2013
Annual unit sales & growth rate
POM packs dispensed on prescription1
OTC packs dispensed on prescription1
OTC packs sold OTC2
1. IMS Xponent 2. IRI Infoscan
+4.6%
-3.6%
-0.9%
Capital Markets Day September 16th ,2014 Page 13 www.stada.com
• Minor ailments take up 20% of a GP’s workload
• Costs NHS £2bn per annum
• Bulk of costs due to – Consultation time – Rx cost
• 90% of minor ailment consultations receive Rx
• 75% of GP’s time on minor ailments spent on just 10 indications
Minor ailments
Examples of minor ailments:
• Coughs • Colds
• Headaches • Eczema
• Indigestion
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Minor ailments
Minor ailment Number of consultations
Average Rx cost
Total cost
Back pain 8.4m £8.23 £64.0m
Heartburn and indigestion 6.8m £8.07 £54.0m
Dermatitis 6.8m £5.30 £35.3m
Nasal congestion 5.3m £3.36 £17.4m
Constipation 4.3m £5.31 £22.2m
Migraine 2.7m £19.58 £51.9m
Cough 2.6m £4.18 £9.0m
Acne 2.4m £10.96 £25.7m
Sprains and strains 2.2m £6.86 £12.1m
Headache 1.8m £8.03 £11.7m
Capital Markets Day September 16th ,2014 Page 15 www.stada.com
UK OTC Market
Pain Relief 22%
Skin 17%
Cough/Cold /Sore Throat
18%
GI 11%
Vitamins & Minerals
14%
Other 18%
£2.4bn MARKET SIZE (2013) Source: IRI Infoscan
Capital Markets Day September 16th ,2014 Page 16 www.stada.com
Top 12 OTC companies in pharmacy SALES AT RSP
£9,1m
£12,3m
£13,9m
£14,2m
£14,5m
£21,0m
£46,2m
£56,0m
£58.9m
£130,4m
£131,8m
£177,4m
Pro Bono Bio
Alliance
Dendron
Forest
P+G H/care
Sanofi
Bayer
Omega
Thornton+Ross
GSK
Reckitt
McNeil
Source: IMS NATOT data – MAT to June 2014 + Care sales at rsp value
Capital Markets Day September 16th ,2014 Page 17 www.stada.com
UK OTC market
£2,07bn £2,13bn £2,17bn £2,28bn £2,30bn £2,27bn £2,28bn £2,27bn £2,33bn £2,38bn
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
+0.7% +3.4% +1.7% +5.0% +0.5% -0.3% +0.3% -0.6% +2.9% +2.2%
All % change numbers are like-for-like comparisons. Source: IRI Infoscan.
STABLE MARKET
Capital Markets Day September 16th ,2014 Page 18 www.stada.com
Sales & Marketing Review
Barry Draude UK Sales & Marketing Director, T&R
September 2014
Capital Markets Day September 16th ,2014 Page 19 www.stada.com
Significant coverage of wholesale and retail markets and the NHS
through dedicated teams.
Routes to UK market
Pharmacy Wholesale
Pharmacy Retail
Grocery Retail
CCG GP Nurse Hospital
28 strong experienced team focused on OTC commercial
48 establish team focused on driving NHS Prescriptions
Pharmacy 9%
Discounters 12%
Grocery 16%
Grocery wholesalers
5% Others 2%
Pharmacy wholesalers
56%
UK sales by channel
Capital Markets Day September 16th ,2014 Page 20 www.stada.com
UK Commercial Deliver double digit growth by: • Continually being better than our competition
• Focus on key activities that make a difference
• Help our customers sell more products through educational training and promotions.
• Communicate and educate consumers in the new media landscape.
• Significant educational & detailing programs to Healthcare professionals (GP’s, CCG’s) driving our Rx Brands.
• Innovate with products consumers wish to buy and the NHS wish to prescribe
+24%
+13% +15% +17% +18%
+6%
+14% +9%
+2% +5%
+1% -0,3% +0,3% -1% +3% +2%
2006 2007 2008 2009 2010 2011 2012 2013
T&R OTC MarketOTC Market vs. T&R growth
Capital Markets Day September 16th ,2014 Page 21 www.stada.com
MARKET SHARE: 26%
Vision To be a recognised healthcare “power brand” by becoming brand leader in the adult cough category and one of the top 5 brands in all sub-categories where Covonia competes, by the end of 2018.
Strategy • Strong values (Power, Efficacy, Value, Impact, Feel it Working!) • Increase ATL support, distribution points and in-store presence • Innovative NPD aimed at loyal consumers and competitor
switchers • Work with trade partners to increase cough category value:
- Range choice = expertise (products for specific cough types) - Premium priced and larger size launches - Fixture rationalisation (target low-growth brands with no ATL support)
Benylin Buttercup
Meltus
Veno’s
Robitussin
Sales performance index
GROWING
DECLINING
Source: IRI 2002-2014
Importance of NPD
£0m
£2m
£4m
£6m
£8m
£10m
£12m
£14m
£16m
£18m
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014B
Hot Dose
Chesty S/Free
Dry S/Free
Mucus
Lozenges
Dry & Tickly
Catarrh
Cold & Flu
Chesty NPD
Vapour Drops
2002 Range
2013: NPD since 2002 accounted for 80% of sales 2014: Planned to be 87%
£3.9m
£3.7m
0
50
100
150
200
250
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Pharmacy: 22% Grocery multiple: 31% Grocery convenience: 24% Source: IRI data 14 June 14
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Next generation head lice treatment
Vision: The Hedrin Brand will be worth over £10m at MSP in the UK by 2018, taking over 50% of a growing market for head lice treatment /maintenance products through clinically proven product development and above the line support.
• Hedrin 4% lotion • Market leadership in UK
• Hedrin 1 hour • New gel formula • New clinical data – reduced
treatment times
• Hedrin Treat & Go • Breakthrough Octanediol
based non-pesticide • Award winning TV campaign
• Launch of Protect & Go • First protection product
• Hedrin 4% lotion • Brand leader in 6 months • IRI top OTC launch (revenue) • Won 9 industry awards
• Spray pack • Licensed spray added to
pharmacy range and self-select range launched
• Hedrin Once re-launched with new TV ad following breakthrough clinical trial
• £3m support campaign • Smart awards Feb 2013
2006 2007 2008 2009 2010 2011 2012 2013
Track record of innovation
From zero to brand leader… Hedrin Full Marks FM Soln Lyclear Derbac Prioderm Others
2006 0% 36% 1% 21% 22% 7% 13%
2014 41% 0% 21% 21% 0% 0% 17%
1st clinically proven preventive product.
• New £30m+ market - extensively researched with consumer & clinical
• Parents are crying out for it • Gold standard detailing,
training and parents’ educational materials
• Above the line campaign (TV, press & online)
Capital Markets Day September 16th ,2014 Page 23 www.stada.com
Care
95 products, selling 15m units annually
Vision 1. Build on our No. 1 position in pharmacy
and expand into other distribution outlets 2. Evolved into a recognised, credible and
trusted OTC consumer brand
All the care you need for those everyday family ailments
Skin 25%
Cough 13%
GI 19%
Pain Relief 10%
Cold 3%
Other 14%
Revenue by therapy area MAT Jun 14
£8,5m £10,0m
£11,3m £12,5m
£14,4m
2010 2011 2012 2013 2014
Sales Growth
Capital Markets Day September 16th ,2014 Page 24 www.stada.com
Rx derma market
• Largest market T&R operate within
• Fastest growing company in the UK
• T&R to become the emollient therapy experts
£92m £102m £107m £111m £117m
£129m £142m £145m
£154m £166m
£178m £191m
£205m £220m
£236m
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Rx derma market 2004-2018
+18%
Cetraben & Zeroderma co-positioning strategy
+5.3% +8.7% +6.0% +9.5%
+10.7% +1.5% +6.6% +7.8%
Source: IMS BPI
• First line emollient of choice for patients
• First choice alternative for any patients requiring a change of emollient
• Cost-effective switch alternative for existing patients already on equivalent brands (i.e. chronic repeat scripts)
Company Brand(s) Growth
T&R Cetraben, Zerodema & Flexitol
+23%
J&J Aveena +18%
RB E45 +18%
Dermal Doublebase & Dermol
+12%
GSK Oilatum -
MSD Diprobase +2%
Mölnlycke Epaderm +8%
Market +10%
Fastest growing company
Source: IMS MAT Jan 2014
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Cetraben Vision: 5 year vision to be the UK’s most recommended emollient brand. • Recommended/prescribed by GPs
and Healthcare Professionals • Recommended by family and
friends and online for OTC purchases
£8,3m
£9,8m £11,1m
£13,6m
2010 2011 2012 2013 2014
Cetraben Growth
+18% +14%
+22%
Rx Market • Establish Cetraben as the
most authoritative brand for prescribing problematic dry skin
• A brand renowned for its product and format innovation
• Commitment to improve patient care and outcomes
• Partnership working with NHS
OTC Market • To become No.2 medicated
dry skin brand by 2018
As close to your skin as you are
Capital Markets Day September 16th ,2014 Page 26 www.stada.com
Vision: The Zeroderma range will match over 50% of NHS emollient spend. • The most comprehensive emollient range • Achieve 12% equivalent brand share • 1st Company to provide the NHS with
QIPP (quality, innovation, productivity & prevention) solutions for emollients
£148k £474k
£1.117k
£2.658k
£4.630k
2010 2011 2012 2013 2014
+220%
+235%
+238%
+174% Zeroderma Growth
CCGs who have switched: • Herts Valley • Sheffield • Croydon • Sandwell and West
Birmingham • Nene (Northampton) • Bolton • East and North
Hertfordshire
• Sunderland • Great Yarmouth • North West Surrey • Wakefield • Norfolk areas 4
CCGs • Plus Greater
Glasgow and Clyde health board
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Foot care 26%
Anti fungal 17%
DM/Skin treatment
17%
Medicated skin care 15%
Feminine care 6%
Cold sore 5%
Anti inflammatory
5%
Other 9%
UK OTC skin care market: £495m
Vision: To be the leading brand for Foot Treatments & Speciality Dry Skin areas
• Acquired the UK & Eire rights in June 2014
• 2013 sales were £3.2m combined Rx and OTC markets.
• Utilizing our Rx and OTC sales and marketing expertise
• In-house manufacturing within 6 months
• NPD already underway
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Vision: To be the parents’ first choice for treatment and protection of nappy rash.
• Acquired 2010 • In-house production 2011 • No.3 nappy rash brand • Growing 2x faster than
the competition • Extensive sampling
campaign
794k 790k 807k 808k 813k
2008 2009 2010 2011 2012
UK Birth Rate Source: Office for National Statistics
Mumsnet Product Trial • 89% response – very high! • Instructions clear & easy to apply • Liked texture and only small
amount required • Effective nappy rash prevention
(esp. vulnerable times – teething / runny noses)
• Good night time protection (esp. if nappy soiled)
• Would definitely recommend
We’ve got your baby’s bottom covered!
Capital Markets Day September 16th ,2014 Page 29 www.stada.com
Extremely Strong Consumer Research
TV / Press Communication Disrupts Behaviour “Sand Face” was the favoured visual execution from consumer research: • Attention grabbing, impactful and mildly shocking • Engaging and emotive • But with scientific basis (the importance of the ray-
penetration diagram)
• Powerful USP - enhanced protection against 4x more of the sun’s rays
• True Broad Spectrum Protection
• No other UK brand offers UV-A, UV-B and IR-A protection on skin and at cellular level
• No colourants/perfumes and emulsifier “nasties” to cause irritation
• Unique non-greasy formats available in a range of key SPF thresholds matched to consumer needs.
• Specific kids range for extra skin-kind benefits
• Impactful support
• ATL and PR campaigns to engage and educate consumers in order to change purchasing behaviour
A “Game Changer” to the UK Sun Care Category…
• Oct-Dec 2013 - a massive 575 consumers
• Instructions clear & easy to apply • “I’m always looking for better
protection” • “Why haven’t we been told about
IR-A before?” • “I’d be worried that there were
products on the market that didn’t have IR-A protection”
• “In over 30 years, I’ve never seen such strong purchase interest scores” (Tony Moore, PPCR Research)
100% likely to
buy 82% very likely 18% fairly likely
0% unlikely
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Operations Review
Bryan Close Operations Director, T&R
September 2014
Capital Markets Day September 16th ,2014 Page 31 www.stada.com
T&R Operations
To supply consumers with branded OTC & Rx medicines and other pharmaceutical, healthcare and disinfectant products, and to utilise our manufacturing skills in our core areas of liquids, creams, gels and suppositories.
Fully integrated business on one site
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Thornton and Ross
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Creams/Gels • 4 manufacturing vessels
– 2 Calmix at 400kg and 600kg – 2 Dinex at up to 3000kg each
• 3 filling lines – 2x tubes and 1x tubs/jars
Powders • 2 filling booths • 1 specialist booth for
Methadone
Current Production Equipment
Liquid Medicines • 5 manufacturing vessels • 10 filling lines
Household • Continuous manufacturing
of disinfectant • 3 filling lines
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T&R Production
LINE 5
LINE 6
LINE 7
LINE 8/11
LINE 4+12
LINE 1
MARCHESINI
NORDEN
FD11
Zoflora 1-3
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Supply Strategy
39%
61%
Sales 2014 Third party • Solid dose • Powders
Manufactured • Liquids • Creams • Gels • Ointments • Suppositories
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Supply Strategy
20%
80%
Sales 2018 Third party • Solid dose • Powders
Manufactured • Liquids • Creams • Gels • Ointments • Suppositories
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Dedicated Hedrin Production Line
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Future Creams Manufacturing
Cetraben, Derma, Flexitol and Ladival
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Tube Filling
for Radian B, Flexitol and Ladival
Capital Markets Day September 16th ,2014 Page 40 www.stada.com
Site layout
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Summary
• Confident we can deliver the quality, service and cost required going forward
• £16 million needs to be spent over the next 4 years to ensure we have the asset and facility capability on the existing site to support the planned growth
• Investment required in improvement initiatives to ensure machine performance, cost and working capital targets are delivered
• Small increases in headcount
• Aim to leverage existing infrastructure and people on site.
• Stada’s fully integrated OTC centre of excellence on one site
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T&R – A Centre of Excellence
Dieno George CEO, T&R
September 2014
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Investing in the Future
Centre of Excellence
Capital Markets Day September 16th ,2014 Page 44 www.stada.com
Aims: To provide the leadership, competence, infrastructure and technical capabilities to deliver new opportunities throughout the Stada Group in:
• OTC • Consumer marketing • Dermatology
Centre of excellence
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Centre of excellence
Capital Markets Day September 16th ,2014 Page 46 www.stada.com
Bundled International OTC / Derma Expertise for STADA success
Mission Statement : “Implementing an interdisciplinary
committee of OTC and Derma experts with the competence to make strategic decisions from international perspectives to improve the OTC and Derma performance at STADA”
The objectives of a Centre of Excellence
Capital Markets Day September 16th ,2014 Page 47 www.stada.com
Main Goal: Long-term
OTC & Derma pipeline and
portfolio development
Centre of excellence
• Focus on the concept of a “think-tank” to generate new product ideas
• Analysis of potential OTC & Derma markets for STADA
• Stimulate target-oriented internal development projects on a global basis
• Possibility for all STADA affiliates to submit product ideas to the Centre of Excellence at any time
• Links to universities (particularly Huddersfield University) to be maintained and developed
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World Class Development Laboratories
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World Class Development Laboratories
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Structure: Interdisciplinary
working group incorporating
skills in:
Centre of excellence
• New product development • Regulatory affairs • Clinical trials • Operations • Market research • Brand marketing • Business development • Led by Thornton & Ross but
incorporated within Stada corporate processes and practices
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Capital Markets Day Questions