2018 Trends: Medical Cannabis

One trend to watch in 2018 is the growing number of medical cannabis consumer healthcare products, with launch activity focused on North America. A recent development was the licensing deal between Level Brands, a marketing and licensing company that provides branding for businesses, and Canadian-based company Isodiol, which commercialises 99%+ pure, bioactive pharmaceutical grade cannabinoids, with products including body balm, tincture, skin care, nano-mist and functional beverages.

Isodiol will work with Level Brands to develop consumer products for kathy ireland Health & Wellness, a licensor to Level Brands, and for Level Brands subsidiary I’M1, a lifestyle brand for men. During the 5-year term of the agreement, Level Brands will receive an initial US$2mn in the form of Isodiol shares, then US$750,000 per quarter (also in the form of Isodiol shares) and a 3% royalty on gross sales. The new Isodiol kathy ireland Health & Wellness and I’M1 products are expected to debut in mid-to-late spring 2018 online and in select retail stores.

Isodiol

Outside North America, Q4 2017 saw a number of significant developments in the medical cannabis category, which will likely translate into increased launch activity in 2018. In October 2017, biotech start-up CIITECH announced the availability of Herbalica’s non-psychoactive, cannabidiol supplements to UK consumers via www.essentialcannabinoids.co.uk. The range of 5 supplements includes products for anxiety, ovulation pain and insomnia. The CBD compound is considered a powerful anti-inflammatory and anti-anxiety agent, with researchers suggesting it could ease chronic pain. Israeli-based Herbalica’s parent company HerbalTune has developed and supplied a range of therapeutic, botanical products to the local market for the past three years.

In Asia-Pacific, the New Zealand Government introduced a bill earlier this month to legalise medicinal cannabis in the country. The bill seeks to amend the Misuse of Drugs Act to make a specific exemption for any person with a qualifying medical condition to grow, process or use cannabis plants and products for therapeutic purposes, provided they have support from a registered medical practitioner. The move, which follows Australia’s legalisation of medicinal cannabis in 2016, aims to make the ingredient more readily available for those suffering with chronic pain or terminal illness. At the same time, Australia announced that it aims to become the fourth country after Uruguay, Canada and the Netherlands to legalise exports of medicinal cannabis.

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NHC’s 40th Anniversary in 2018

New Year’s message from our Chairman & CEO Nicholas Hall:nh

The start of a new year, and already there is a big ripple of activity in the global CHC market. MM&M NewsBrief ran a story on Tuesday headlined: “CPG companies Nestle and Kellogg court OTC”. It is an interesting notion that Kellogg could buy into the mainstream CHC market as their previous forays have focused on functional foods. But it seems a stretch to me, although there would be a certain neatness if Steve Cahillane, the new CEO of Kellogg and formerly Nature’s Bounty President & CEO would bid for Pfizer Consumer, where Paul Sturman was President. And where is Paul now? — Steve’s replacement at Natures Bounty.

So, it’s possible but unlikely that Steve will become a New Friend (or more properly a Friend Reunited), but our New Friend at FDA, Scott Gottlieb, is making interesting noises that could potentially liberalise the rather static US market. Could this include a new 3rd Class, about which I have been a lone voice in the wilderness for almost all of my time in the CHC industry (more on that later)? CHPA and other stakeholders (apart from retail pharmacy) say “No” as this is illiberal. Mmm, I think the other way. Switching more Rx products under the personal supervision of a pharmacist is very liberal, and will certainly lower costs, which is empowering for consumers — a key test of liberalism. And rounding up the last of our New Friends in this New Year issue, let’s welcome Amazon as a CHC brand marketer, not just an online platform. Some would say, who needs friends like Amazon? Well, I would rather have Amazon as a Friend than an Enemy!

Two prominent association leaders are leaving the industry, the Departing Doctors Gerald Dziekan and Hubertus Cranz. They have done amazing work, as my Good Friend Birgit Schuhbauer relates below, and will be very much missed. I hope the NHC Group will have good or possibly even better relations with their successors. Another Departing Friend who will be particularly missed is Senator Orrin Hatch, who did so much to override FDA when we had no friends there at all. Former presidential candidate Mitt Romney will probably succeed to the Utah seat of Senator Hatch. I hope that the man who made millions at Bain will be as — or even more — sympathetic to CHC.

What about Remaining Friends? Well, that’s us. I almost can’t believe it, but we set up NHC in January 1978. Indeed, a few minutes ago one of my Very Best Friends sent congratulations on our 30th Anniversary. Obviously we were having too much fun to count! I still have clients and colleagues from that era, including the redoubtable Gilbert (Sans Frontieres) Mertens, who still comes to our conferences and last year was our guest in Singapore. 40 years is an amazing length of time, but we at NHC are all about the Future.

So after many years of some change and a lot that’s still the same, good or bad, it is with very great pleasure that all of us at NHC Group wish our contacts a Happy New Year for the 40th time. May it be one of good health, great happiness, peace, success and prosperity. We will be here for another 40 years (at least corporately) and we hope you will be too!!

MAT Q3 2017: Trends to look out for in 2018

OTCINACTION

Intense work is underway to complete the Q3 2017 update early next week, which will provide OTC DASHBOARD subscribers with the latest trend info and analysis on the performance of the global OTC market. In the meantime, taking a closer look at the latest news and data does reveal a few trends that are likely to characterise the OTC space in 2018, not least:

The growing power of the Emerging Markets

A coming shake-up of the global Top 10 OTC marketers

As this week’s infographic demonstrates, Turkey was one of the leading contributors to OTC growth in the MAT Q3 2017 period. Over recent years, both Turkey and South Africa have emerged as global Top 20 OTC markets, powered by high growth (though the trend in South Africa did show signs of slowing in Q3 2017). In No.21 spot, Algeria looks poised to enter the Top 20 in the very near future, thanks to continued high growth (+10% MAT Q3 2017). To keep up with the latest trends in the Middle East & Africa, OTC DASHBOARD remains your best port of call.

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Top 3 Middle East & Africa markets, according to MAT Q2 2017 data

As for the leading OTC marketers, the big news in 2017 was Pfizer’s October announcement that it would be starting a bidding war for its consumer healthcare division, with RB, J&J and GSK all widely cited as possible suitors. However, there were at least two other major developments in 2017 that could cause a shake-up of the global Top 10 in the coming years – in October 2017, Novartis announced that plans to spin off its Alcon eye care business, following a strategic review, would be delayed until H1 2019 at the earliest, while in the same month the FT reported that Merck KGaA was pressing ahead with the sale of its consumer healthcare unit.

Nestle has been cited as a potential suitor for Merck KGaA’s OTC business and will be one of the companies to watch next year. Last week, Nestle agreed to acquire Canadian-based Atrium Innovations from investors led by Permira Funds for US$2.3bn cash. Atrium will become part of Nestle Health Science upon closing, which is expected in Q1 2018. Atrium’s largest brands are Florida-based Garden of Life, which manufactures certified organic, non-GMO supplements sold in health food stores and online in the US, and the Pure Encapsulations line of hypoallergenic, research-based dietary supplements sold in the US via healthcare practitioners, online and in pharmacies in several European markets. The portfolio also includes specialty brands such as Wobenzym, an oral enzyme combination containing proteolytic enzymes + bioflavonoid for osteoarthritis pain. 

If Nestle were to also acquire the Merck KGaA OTC business next year, and continue on its path of strong M&A growth, it could soon break into the global OTC Top 10. In addition, Merck KGaA would not only be a good fit with Nestle’s strategy of expanding in the field of high-quality vitamins, minerals & supplements, but would also give the company a strong foothold in the Emerging Markets, where Merck KGaA currently generates around half of its global Consumer turnover.

Q3 2017: Global OTC growth stays at 4.7%

According to the latest figures published by Nicholas Hall’s global OTC sales database DB6, the OTC market maintained 4.6% growth in MAT Q3 2017. Commenting on the results, DB6 VP Celine Waller said: “Russia remained the fastest-growing leading market, though its growth slowed slightly compared to MAT Q2 2017 (+17.3%). Brazil and Turkey (+13.1%) also both achieved double-digit growth. Growth in the US increased marginally, with an improved performance in cough & cold offset by continued weakness in gastrointestinals and dermatologicals. France and Australia (-0.7%) remained in decline – France owing to the poor performance of the large OTx sector and reverse switch of some cough ingredients, and Australia driven by a slowdown in demand from Chinese consumers buying VMS products for resale in China (daigou or ‘suitcase entrepreneurs’).”

DB6-MAT-Q3-2017-Dashboardlogo

Though OTC growth remains high in many of the Emerging Markets, the established markets of North America, Japan (+0.6%) and western Europe – notably Germany (+1.8%), France (-1.2%), Italy (+2.0) and UK (+1.7%) – remain relatively flat. Innovative Rx-to-OTC switches, such as the UK MHRA’s recent approval of the POM-to-P reclassification of Viagra Connect, or the emergence of new OTC categories, such as e-cigarettes or medical cannabis, offer the most promising route back to growth for many of these established OTC markets.

Nicholas Hall said: “Q3 data confirms 4.6% as the baseline for CHC growth, and frankly it’s not good enough!! Only the sleepiest or most risk-averse companies will accept competing in a market where growth is only modestly ahead of inflation + higher population. That is why the first serious step by Pfizer to switch Viagra is so important. Since we made our first detailed review of the ED category for a Big Pharma client exactly 5 years ago, we have been convinced that Viagra is potentially the world’s largest consumer health brand. Some might say that it already is, although that would be true only for the use of the Viagra brand name on the internet as most of the blue pills sold in that channel are not from Pfizer. As a legitimate CHC category, and with recreational use included — which Big Pharma companies dislike as they see ED brands as treatments — the overall CHC reproductive health category, including ED brands, condoms, oral contraceptives, EHC and conception products and diagnostics, could easily reach sales of US$20bn at MSP in all channels of distribution.”

World first digital pill gets FDA green light

OTCINACTION

Otsuka (in association with Proteus Digital Health) has been granted approval by the US FDA for Abilify MyCite, the world’s first digital pill, which contains a sensor that tracks when the medicine has been ingested by the patient. Though Abilify is an Rx medicine for schizophrenia and bipolar disorder, its approval has far-reaching implications for both prescription drugs and consumer healthcare.

How it works: Containing a sensor the size of a grain of sand, Abilify MyCite emits an electrical signal when it comes into contact with stomach acid, and this signal is received by a patch on the patient’s rib cage. In turn, this patch communicates with a smartphone app via Bluetooth, providing data such as time of ingestion and dosage. As well as the doctor and patient, up to 4 other people (including family members) can have access to the app’s data – though, importantly, the patient has control and can revoke access.

 

Mitchell Mathis, Director of the Division of Psychiatry Products at the FDA’s Center for Drug Evaluation & Research, said: “The FDA supports the development and use of new technology in prescription drugs and is committed to working with companies to understand how technology might benefit patients and prescribers.” Inevitably, during the initial phase, the digital pill will be incorporated solely into Rx medicines – to allow the FDA to monitor its impact on safety and adherence – however, at a later date, there is nothing to stop this new technology being part of innovative Rx-to-OTC switches.

Patients, doctors and insurers are increasingly coming to appreciate the ability to access objective data about the whole range of our medical consumption – from Rx drugs to OTCs and supplements. Once the price of these new sensors is reduced to a certain level of affordability, we could see a much wider rollout of the technology.

That said, a major stumbling block could be the issue of privacy. Some are concerned that patients who fail to take their medicines on a regular basis may be punished by their health insurers, while others have worries that the technology could be used as a coercive tool against certain types of patients. However, those concerns aside, the future for healthcare looks increasingly digital and the FDA is already hiring more staff in anticipation of a raft of new applications for digital pills.

Striving for Success in Latin America

OTCINACTION

Though it still only accounts for a small share (just under 6%) of the global OTC market, Latin America remains by far the most dynamic region, with growth of 12% in the MAT Q2 2017 period. As the second-largest market in the region after Brazil, Mexico has seen its OTC growth accelerate in recent quarters thanks to rising consumer confidence throughout 2017, and its vibrant capital – Mexico City – was the venue for our 3rd Latin American Conference held last week.

Focusing on the theme, “Striving for Success in Latin America”, the conference was opened by Nicholas Hall and his annual keynote speech, highlighting key trends across the region – such as an increasing consumer preference for prevention, the widespread use of social media and a lack of regulatory improvement – and the impact these will have on the future of the industry.

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Summarising his speech in 9 key points, Nicholas Hall said: “We must manage our brands in a more effective way if we are to sustain the current rate of growth, bearing in mind that Latina will probably be a late adopter of many features of the New Paradigm, including digital marketing for CHC products:

  1. With the flood of new products each year, it is essential that our brands stand out in a sea of mediocrity, by clear positioning that demonstrates both new functional benefits and emotional benefits
  2. Most successful brands in Latina and globally are old brands — the CHC market is unique in rejecting new brands in favour of those that are tried and tested; we should search for hidden gems that can be dusted off and given a new lease of life
  3. There is a constant reference from all quarters to the need for more innovation and I agree!! The best strategy is to bolt on a new ingredient, with an improved positioning, to a famous and trusted brand name
  4. There are many opportunities in LatAm: we have conducted Gap Analyses in many countries, including Brazil and Mexico. We found lots of open gaps with unmet or only partially met demand, many in adjacent categories, as most launches are in the mainstream categories rather than emerging niches — please contact my colleague Ekaterina Panteleeva (ekaterina.panteleeva@NicholasHall.com) for more information on the way we conduct Gap Analysis
  5. TV is still the main medium, but not without problems of loss of viewers, so we should test-market more for optimum spend
  6. The retail sector is consolidating fast, yet we don’t engage with the big chains through modern Key Account Management programmes, and the concept of Category Captaincy is hardly known; not least we must work with the big chains to manage the inevitable growth of private label
  7. There has been much talk of liberalisation, but the regulations are still quite drastic and are preventing more Rx-to-OTC switches, especially in Brazil
  8. Overall, the region is growing well at 10% (constant currency) in the past 5 years and is forecast to grow by 8% in the next 5 years
  9. So let’s work hard to maintain double-digit growth. To misquote President Trump, “Let’s make CHC great again!”

Monica Feldman also provided an insightful regional overview, reminding us of the major differences between certain markets (such as mass market vs pharmacy sales) and the growing prevalence of digital health. Hector Bolanos and Juan Knobloch both emphasised the importance of lobbying government for an improved regulatory framework in Mexico, while Henry Adler discussed diversification strategies as a means of avoiding regulatory delays in Brazil.

Rodrigo Arcila drew attention to Colombia’s dynamic Rx-to-OTC switch environment and rapidly-advancing national health system, while the day’s final speaker, Anne Engerant, focused on how OTC companies can help combat wider public health issues, such as antibiotic resistance, and promote responsible self-medication. Day 1 closed with a panel discussion moderated by Monica Feldman: Roy Bateman and Maria Barros y Muradas debated the mid-term future of the industry, including digitalisation and the evolution of POS, before the floor was opened to questions.

This week, Nicholas is back in India for the 2017 Annual Conference in association with CubeX. As consumers exist in a volatile, uncertain, complex and ambiguous marketplace, we can say that today’s self-care landscape is a VUCA world, which is why this year’s theme is Consumer Healthcare in VUCA World. With seats still available, you can secure your place now by emailing conference@cubex.co.in

Nicholas Hall’s Closing Speech at 4th Asia Pacific Conference

Nicholas Hall’s 4th Asia-Pacific Conference has just taken place in Singapore, which included the APAC Consumer Healthcare Awards, an opportunity to recognise innovation in Asia-Pacific’s OTC industry that produced the following winners:

Asia-Pacific Creativity in Consumer Healthcare Award

Panadol 1st

Systane 2nd

Bactidol 3rd

Worldwide Digital in Consumer Healthcare Award

Insto 1st

OBH 2nd

APAC New Product of the Year in Consumer Healthcare Award 

Scotts DHA Gummies 1st

Dimetapp Ultra Plus 2nd

As Nicholas Hall made clear in his closing speech, which you can watch in full above, the high number of companies supporting their awards entries with passionate case studies was an encouraging sign in an OTC industry currently undergoing huge disruption. Some of the uncertainty is emanating from the renewed focus on M&A activity.

Nicholas Hall pointed to the uncertain future ahead of us, arguing that there are now no guaranteed business models for OTC companies. That said, he believes that brands will survive, as long as marketers and product managers “feed and water them” and also convey real emotional benefits to consumers.

Though the OTC industry is currently experiencing poor rates of growth across the world – with the exception of some markets like Vietnam – Nicholas Hall remains positive for the future, insisting on the need for OTC marketers to constantly refresh their portfolios, while also engaging more with the digital world. Now more than ever, the global OTC industry is desperate for continuity and innovation.

Following on from the Asia-Pacific Consumer Healthcare Awards Ceremony at our Singapore Conference, we now look ahead to our 2018 European Marketing Awards! Click here for more details on the awards for which you can enter. With entries closing on 1st February, please contact jennifer.odonnell@NicholasHall.com to find out about entry criteria or to book your place at the conference now!