Q1 2018: Focus on Middle East & Africa

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Our blog this week takes a closer look at some of the trends & developments that emerged from the Q1 2018 OTC update on the Middle East & Africa. With growth of 6.7% in the year to end-March 2018, the region now generates nearly US$9.0bn in sales (a 6.5% share of the global OTC market) and outperformed all regions except Latin America.

Here are 4 key learnings from the latest Q1 update:

  1. South Africa’s OTC market broke through the US$1bn barrier in Q1. Now established as a Top 20 OTC market globally, South Africa generates sales of just over US$1.0bn following 8.6% growth in the MAT Q1 2018 period. OTC sales are forecast to total US$1.8bn by 2027, powered by demographic change (rising middle-class of consumers) and growing investment. Indian companies are showing strong interest, with Cipla now the No.7 OTC marketer in South Africa, while Dr Reddy’s and Lupin have announced plans to expand operations in the country.
  2. Turkey remains the powerhouse of regional OTC growth. Up 14% in the MAT Q1 2018 period, Turkey is fundamental to the rapid OTC progress of the region. Compared to South Africa, multinationals have a more prominent share of Turkey’s OTC market, with Abdi Ibrahim the only local company in the Top 5 – Bayer, Sanofi, GSK and RB are all Top 5 OTC marketers enjoying double-digit growth. The prospect of an official OTC classification in Turkey is encouraging MNCs to invest for future growth.  Screen Shot 2018-07-23 at 09.36.06
  3. Scope for VMS development in Middle East & Africa. One noticeable fact about OTC sales in the region is how heavily reliant the market is on the analgesics and CCA categories. The same is true for the No.1 OTC marketer GSK,  which generates almost 80% of its portfolio turnover in the region from analgesics and CCA. Whereas VMS takes a 30.2% share of the global OTC market, it takes just a 26% share of the Middle East & Africa market, highlighting the need for more VMS product development and investment in education about lifestyle & wellness.
  4. Scope for Lifestyle OTCs development too. Compared to a global share of nearly 10% for Lifestyle OTCs, the category only takes an 8.6% share of Middle East & Africa’s OTC market. Eye care, sedatives & sleep aids and systemic cardiovasculars (low-dose aspirin) currently dominate in the region, while smoking control and EHC only have a small share compared to the global average. As the regulatory landscape evolves and becomes more favourable to OTC, we would expect to see more products making the transition from Rx to OTC status in the region.

Join us in Dubai on 5th November for our CHC Training Academy Workshop, which will empower you and your team with the tools, tips and techniques you need to maximise your potential, with the ultimate goal of achieving sustainable growth for your Consumer Healthcare business.

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E-commerce: Amazon picks up PillPack

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Amazon’s latest foray into the healthcare sector – a definitive agreement to acquire US online pharmacy, PillPack – has huge disruptive potential for the traditional drugstore pharmacy sector. A start-up founded in 2013, PillPack is licensed in 49 US states to offer pre-sorted doses of medications, coordinate refills and renewals, and ensure timely home delivery to customers. Financial terms of the deal were not revealed, but the transaction is expected to close during Q2 2018, subject to regulatory approvals and other customary closing conditions.

Walmart was rumoured to be interested in acquiring PillPack earlier this year, and the company lost US$3bn in market capitalisation after the Amazon deal was announced on Thursday 28th June. The two companies are now locked in an intense global rivalry, with Walmart coming out on top in India after acquiring a 77% stake in Flipkart in May 2018. Such huge M&A investments will advance e-commerce’s share of the pharmaceuticals market in key markets like India and the US, with the potential to revolutionise the consumer healthcare sector too.

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PillPack is currently a small operation, expected to post revenue of US$100mn this year, but Amazon’s existing customer base and shipping infrastructure could allow it to quickly scale up. Brick & mortar pharmacy chains are already seeing the consequences of the deal; as the news broke, shares in Rite Aid fell 11%, Walgreens Boots Alliance 9.9% and CVS Health 6.1%, a collective US$11bn in market value.

Though consumers in many markets remain hugely reliant on pharmacist advice when making OTC purchases, there’s no doubt that price is a very sensitive area that makes traditional brick & mortar retailers vulnerable in this evolving retail landscape. Certain OTC categories where there is a strong wellness or personal care element, such as VMS and dermatologicals, are most likely to see a significant rise in e-commerce sales.

E-commerce, as well as OTC adjacencies and digital health, are three of the hot topic areas that OTC DASHBOARD will be focusing on this year, in its weekly briefings, infographics and blogs. For a free trial of the service, please contact hannah.burke@nicholashall.com

OTC benzocaine teething gels withdrawn in USA

In late May, the FDA issued a warning to consumers that OTC teething products containing benzocaine pose a serious health risk to infants and children. The agency said that all oral products containing the pain reliever for temporary relief of sore gums owing to teething should no longer be marketed and is asking companies to stop selling them for this use.

Additionally companies are being requested to add new warnings to all other benzocaine oral health products to describe serious health risk of methemoglobinaemia, a blood disorder that impairs the body’s ability to use oxygen that has been linked to benzocaine use.

Affected brands include Anbesol (Pfizer), Baby Orajel and Orajel (Church & Dwight), Cepacol (Reckitt Benckiser), Chloraseptic (Prestige Brands), Hurricaine (Beutlich Pharmaceuticals), Orabase (Colgate) and Topex (Sultan Healthcare), as well as store brands and generics.

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Figures from Nicholas Hall’s global OTC database, DB6, indicate that the US mouth & dental analgesics category was worth US$126mn in 2017. Before this latest warning, sales were already in decline (-4%) owing to an FDA warning on homeopathic teething products in September 2016. Standard Homeopathic has now re-entered the market with the launch of Hyland’s Baby Oral Pain, 4Kids Oral Pain Relief and 4Kids Oral Pain Relief Nighttime Tablets without belladona or benzocaine. 

Orajel (Church & Dwight) is the leading brand with a 56% share of sales and, according to DB6, some 90% of all mouth & dental analgesics in the US are currently formulated with benzocaine, including the leading brands Orajel and Anbesol. On its brand website, C&D stated that Orajel Medicated Teething Gel, Orajel Medicated Nighttime Teething Gel, Orajel Medicated Daytime & Nighttime Teething Twin Pack and Orajel Medicated Teething Swabs had all been discontinued with immediate effect.

Comment from OTC.NewDirections Consulting Editor, Nina Stimson: This move was probably inevitable, given safety concerns and earlier action against other children’s meds such as cough remedies, but it’s likely to cause a few sleepless nights for parents, teething babies and marketers alike until they figure out the way forward … Official advice to parents now suggests that they should gently massage infants’ sore gums but avoid medication. We think quite a few may turn to a children’s or infants’ systemic analgesic …

To stay up-to-date with the latest regulatory changes, subscribe to OTC.NewDirections, and also meet like-minded professionals at our 1st OTC.NewDirections Executive Conference in London on 12th September 2018Where Innovation meets Regulation. Nicholas Hall and Nina Stimson will be joined by representatives from players including Angelini, Kanabo Research and Medical Brands to review, discuss and debate the major issues impacting innovation, regulation and competition. Sessions cover diverse topics such as New Product Opportunities, Regulatory Affairs (including Switch), Medical Devices and Digital Health, plus Herbals & Naturals and the fast-developing Medical Cannabis market. Book now and benefit from our early bird discounts by contacting lianne.hill@NicholasHall.com

Probiotics behind VMS upturn in 2017

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In the three prior years (2014-16), sales of vitamins, minerals & supplements grew at a slower pace than the global OTC market as a whole, but this trend changed in 2017, when VMS achieved a slightly higher rate (+4.2%) than the global average (+4.1%). VMS was the only major OTC category to see growth improve in 2017 – analgesics, CCA, Derma and Lifestyle OTCs all reported significant slowdowns – and three of the Top 10 best-performing OTC subcategories in 2017 were in VMS: Probiotics (+9.4%), tonics & cure alls (+7.6%) and single vitamins (+5.8%).

Probiotics added another US$330mn in sales in 2017 to create a global market of US$3.8bn, and have maintained high growth thanks to new products with unique positioning, innovative delivery formats and growing awareness of the benefits of probiotics in fast-growing countries like Brazil (+11.7%) and India (+10.4%). Although probiotics growth slowed in several mature markets in 2017, such as Italy, Japan and Germany, it remains high in the world’s two largest arenas for probiotics sales: USA (+10.2%) and China (+14.1%).

Top 5 probiotics markets 2017

One of the hotbeds for probiotics innovation in Q2 2018 has been India. Setu (OmniActive Group) recently launched probiotic supplement YourGut, positioned to assist in balancing intestinal microflora for overall digestive and immune health. Formulated with 9 bifidobacteria and lactobacilli strains, at a dose of 15bn CFUs, YourGut is available in tubs of 30 vegetarian capsules.

Another recent launch came from Sundyota Numandis with SuperFlora GG, containing Lactobacillus GG (ATCC 53103), which can be administered to newborn babies from 1 day old to treat gastroenteritis and antibiotic-associated diarrhoea. Rakyan Beverages, marketer of the Raw Pressery range of cold-pressed juices, also announced last week that it was rolling out a new probiotic drink in India. Thanks to this spike in new product activity, India’s probiotic category looks on course for an even stronger year in 2018.

To find out more about the innovations that are supporting this high growth in the probiotics market, contact Owen (owen.hartnett@nicholashall.com) to arrange your free trial of our OTC New Products Tracker database.

ROW growth accelerates to 6.7% in 2017

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One of the core benefits of your OTC DASHBOARD subscription is unrivalled coverage of the OTC market in the Middle East & Africa. Sales in this region now total US$8.8bn, following an impressive 6.7% upturn in 2017, and below we highlight some of the key recent trends & developments in this dynamic region.

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Two of the region’s Top 5 markets, Turkey and South Africa, feature in the global Top 20 and both outpaced the regional trend in 2017. Turkey’s OTC market was particularly dynamic, partly driven by price inflation but also rising volume sales, thanks to growth in consumer spending and also strong investment from multinational OTC marketers, who compete with well-established local companies like Abdi Ibrahim and Santa Farma.

As well as double-digit growth in Turkey, where Bayer is the No.1 marketer, there were also strong performances from Algeria (+10.0%), Egypt (+16.4%) and Nigeria (+8.2%). GSK occupies a strong position in Egypt and Nigeria, thanks largely to the popularity of painkillers such as Panadol, and is committed to expanding its OTC portfolio and widening distribution.

Sanofi is the leading OTC marketer in Algeria, again thanks to a well-established analgesics portfolio (Doliprane and Aspegic), in addition to a fast-growing CCA range. Overall, GSK, Sanofi and Bayer are the standout OTC marketers in the region, joined by South Africa’s No.1 Adcock Ingram and RB.

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For a deep dive into our Q4 2017 data and trend reporting on all Middle East & Africa markets, be sure to log on to the OTC DASHBOARD website or app (which can be downloaded on Apple or Android smartphones).

Q4 2017 Update Now Live!

We’ve just updated the OTC DASHBOARD website with full-year 2017 data and trends for all regions and all 64 countries that we track worldwide. There’s no better way to start exploring this vast reserve of information than our new homepage, which provides at-a-glance global OTC sales by region, marketer and category, as well as an interactive global map with data on the Top 20 countries. Here, we round up some of the highlights from the latest Q4 2017 update.

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One of the major trends in Q4 2017 was the drop-off in global OTC growth. A 4.1% rise in 2017 was the lowest annual growth for the global OTC market since 2014, with Europe (+2.7%) and North America (+2.9%) at the heart of the slowdown. Asia-Pacific was up 4.3%, while the two smallest major regions – Latin America (+11.8%) and the Middle East & Africa (+6.7%) – grew fastest.

Looking at categories, Derma (+2.5%) underperformed most, while CCA growth slowed to just 4.3% by end-2017, with vitality continuing to drain out of allergy remedies (+3.1%). Cough remedies (+5.4%) and systemic cold & flu (+4.0%) also reported much lower growth by year-end, especially in Europe.

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The overall shares of the global OTC market by major category remained stable in 2017. Analgesics (+4.5%) and Lifestyle OTCs (+4.5%) were the main driving force behind OTC growth, and the Rx-to-OTC switch of Viagra Connect in the UK in 2018 bodes well for development of the erectile dysfunction category. GIs advanced by 4.3%, while VMS (+4.2%) produced another year of solid growth.

As for marketers, the Top 5 remained unchanged in 2017 despite further M&A activity and speculation; in Pfizer’s earnings call yesterday, CEO Ian Read said he has not yet received an acceptable offer for the OTC business and may decide to retain it. The major recent M&A news was that P&G has agreed to buy Merck KGaA Consumer Health and at the same time to dissolve its PGT joint-venture with Teva. By our calculations, the new P&G will rank 7th in the global OTC marketer rankings by value, and the new Teva (assuming it retains its OTC business) will rank 12th.

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Other highlights:

• Looking at OTC brand rankings, analgesics Tylenol and Advil – both of which are former global No.1 OTC brands – now trail by a fair distance behind new No.1 brand Vicks, which grew by 12% in 2017

• Abbott moved ahead of Merck KGaA to claim a spot in the global OTC Top 20, following dynamic growth of 10.6%, including double-digit rises for laxative Duphalac in Russia and antidiarrhoeal Pedialyte in the USA

Log on to OTC DASHBOARD now for access to all Q4 2017 data and trends.

GSK, RB pull out of running for Pfizer OTC

Last week was a dramatic one for M&A news in the OTC industry. In the days running up to the deadline for binding offers for Pfizer Consumer Healthcare, both RB and GSK announced they had withdrawn from the process. 

RB’s CEO, Rakesh Kapoor, said: “Our priority remains organic growth, including the completion of the integration of Mead Johnson Nutrition and creating further value from re-organising into two new business units — Health and Hygiene Home … An acquisition for the whole Pfizer consumer health business did not fit our acquisition criteria and an acquisition of part of the business was not possible.”

GSK’s CEO, Emma Walmsley, later commented: “While we will continue to review opportunities that may accelerate our strategy, they must meet our criteria for returns and not compromise our priorities for capital allocation.”

All three companies are in the Top 6 globally, and a tie-up between No.6 RB and No.5 Pfizer would have created a new No.1 globally. Meanwhile, if the current No.1 GSK had acquired Pfizer, its lead would have been significantly enhanced – see the chart below for a sense of what might have been (assuming both GSK and Pfizer would not have had to make divestments).

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Investors have reacted positively to the news of no M&A deal, sending shares in both RB and GSK higher. In the latter case, some had been concerned that the potential US$20bn deal could have distracted from GSK’s focus on pharma, and jeopardise its dividend.

After RB’s withdrawal, Pfizer stated that it “continues to evaluate potential strategic alternatives for the CH business, which include a spin off, sale or other transaction, and Pfizer ultimately retaining the business. We have not yet made a decision, but continue to expect to make one in 2018.”

Nicholas Hall, in Friday’s OTC.Newsflash, commented: “I recently addressed a group of private equity and hedge fund investors about the future of CHC, and all they wanted to talk about was RB, GSK and the disruption of the industry by private label and Big Tech. The investment community is very concerned about the growth prospects of the CHC industry, and that is one of the reasons strong signals were sent to RB not to overpay for Pfizer Consumer Health; as we now know RB subsequently pulled out of the bidding. Briefly, that left “the last woman standing”, GSK’s Emma Walmsley, but GSK like RB was unprepared to pay the $20bn that seems the generally-accepted valuation for PCH. As readers of this column know, my thinking had tilted towards “no sale” in the past few weeks, and unless there is a last-minute change of heart, the likelihood is that Pfizer will keep its CHC division and look at other options: retain and grow; spin off; make a j-v.”