Q1 Results Round-Up: J&J, Nestlé and P&G

J&J sales rose by 5.0% on a reported basis in Q1 2022 to US$23.4bn, with operational growth of 7.7%. Consumer Health sales fell by 1.5%, but grew 0.8% operationally. Excluding the net impact of acquisitions, divestitures and translational currency, adjusted CH operational sales increased by 1.6%. This was primarily driven by OTC products, with Tylenol and Motrin, upper respiratory products and Imodium major contributors. 

P&G net sales rose by 7% in Q3 fiscal 2022 (Jan-Mar 2022) to US$19.4bn. Excluding the impact of foreign exchange, acquisitions and divestitures, organic sales grew by 10%, driven by a 3% rise in shipment volumes, 5% from increased pricing, and a 2% increase from positive geographic and product mix, with each category growing. Health Care – US$2.7bn, +13% – was once again P&G’s strongest division. Personal Health Care organic sales were up more than 30%, owing to a stronger cough / cold & flu season vs the prior year, as well as innovation in sleep and digestive wellness.

Nestlé sales rose by 5.4% in Q1 2022 to CHF22.2bn (US$23.4bn). Growth was broadly based across most geographies and categories. E-Commerce sales grew by 5.0%, building on 39.6% growth in Q1 2021. Nestlé Health Science, which earlier this month completed the acquisition of a majority stake in Orgain, a leader in plant-based nutrition, advanced by 55.8% to CHF1.4bn (US$1.5bn). Organic growth was 5.6%, building on two consecutive years of double-digit growth, with real internal growth of 4.3% and pricing +1.3%. 

Source: J&J

Nicholas Hall’s Touchpoints: Here at NHC we are in the final countdown for the Athens Conference, already postponed three times because of Covid. I’m looking forward so much to meeting delegates in the old-fashioned way, even if we are still required to wear masks and preserve some form of social distancing.

And we will have a lot to celebrate at the conference. Even though society is not quite ready for the New Normal – the pandemic is not yet over and almost certainly we will face a global recession in the months ahead – I sense a new optimism in the CHC industry. Some of our players are reporting positive and even spectacular results and the pulse of Licensing & Acquisition never slackens.

With less than two weeks to go until our 32nd European CHC Conference & CHC Training Academy Workshop, why not reserve your place now! Taking place in Athens on 4-6 May 2022, industry experts including speakers from Bayer, J&J, Menarini and Teva will explore how as an industry we can move forward with CHC Innovation. Contact elizabeth.bernos@NicholasHall.com to book your seat.

Nestlé targets doubling of e-Commerce sales by 2025

By 2025, Nestlé expects to nearly double its e-Commerce sales to 25% of group total by significantly increasing its digital marketing spend, reports Reuters. The size of the investment was not disclosed. In Q1-3 2021, Nestlé sales were CHF63.3bn (US$68.3bn), with e-Commerce, which grew 17.2% in that period, reaching 14.1% of total sales. On the back of the success of DtC sales of products such as Nespresso coffee pods (Nespresso.com) and Purina PetCare (Purina.co.uk), the company will use a similar model. Speaking at a virtual investor summit, Executive VP Bernard Meunier said markets such as USA, Europe and China would drive growth. 

Nicholas Hall commented: This is high ambition by Nestlé, bearing in mind that many of its brand leaders are available very widely through retail outlets. Whether its CHC business can also reach this level internationally is a moot point, but in its favour Nestlé competes mainly in the VMS sector, where there are lower regulatory hurdles governing e-Commerce in more conservative countries, so maybe it is a fair ambition. And why not, when we ourselves forecast that e-Commerce will hold a 23% share of the entire global CHC market by 2030?

e-Commerce has had an amazing ride in the past ten years, with very few headwinds and the Gulfstream equivalent caused by the Covid lockdown, but the latest news from China implies that this trend may not continue in such a dynamic way in future. To quote from the unusually downbeat Alibaba: “The extremely high growth that China’s overall e-Commerce market has experienced in recent years is getting harder to maintain following government crackdowns on internet retailing this year.” Perhaps the e-Commerce sector has reached the inflexion point of all growth sectors when additional revenues have to be created rather than assumed.

Among the other top CHC players, the ratio of e-Commerce sales is generally on a par with Nestlé. In Q3 2021, Unilever and Reckitt announced that e-Commerce now accounts for 12% of group net revenues, while at GSK it represents 7% of sales. However, during a recent earnings call, Consumer Healthcare CEO Brian McNamara noted that in Q1-3 2021, e-Commerce had grown in the mid-20% range, adding: “Our ongoing investment in digital capabilities continues to position us well for growth in this key channel.” With online shopping clearly appealing to consumers and continuing to grow in popularity even as lockdowns ease, it is likely other companies will have similar targets to Nestlé’s in mind.

We are pleased to announce that the next title from Nicholas Hall’s Reports will focus on Herbals & Naturals. You will be able to review the latest trends, developments and sales, look at pure herbal & natural categories, along with products within topical analgesics, cough remedies, sleep aids, plus much more. To pre-order your copy and save up to GB£2,100, or for further information, please contact melissa.lee@NicholasHall.com.

Galderma to be the latest healthcare IPO

Swiss-based derma specialist Galderma, which was spun out of Nestlé in 2019, is in talks with international investors, and banks have been appointed for a potential US$22bn initial public offering in H1 2022, reports the UK Financial Times. According to CEO Flemming Ornskov, bumper growth owing in part to the pandemic has led to accelerated strategic planning.

He added: “Digitalisation and social media have underscored something that was always part of this [business] — the emotional part. The skin is the largest organ in the body and we look at it every day. We react to it. We look at people and their skin and we judge whether they are healthy or in a good mood … Many hours spent on screens have reinforced that.”

Nicholas Hall commented: Galderma has been an outstanding success story since the company was sold by Nestlé in 2019 to three private equity companies led by EQT. We can’t rule out Galderma’s being taken over in a very lucrative acquisition, which was the fate of Shire, whose CEO, Flemming Ornskov, is now the CEO of Galderma. More likely there will be an IPO as a stepping-stone to a full listing, which makes perfect sense.

Private equity has been a significant player in the CHC market in the past ten years, but the question is always, “What next?” In some instances, private equity has sold on to a strategic buyer, as happened recently when HRA was acquired by Perrigo and The Bountiful Company was sold to Nestlé. Often private equity sells to another financial institution when it closes its fund after 5-7 years, but sometimes the asset is too big to sell on, and that is when an IPO is contemplated. Galderma is a case in point, and I’m sure the PE owners of Stada will be looking at this option very carefully.

With just over a week to go until our APAC e-Conference 2021take the opportunity to register while spaces are still available! Alongside Nicholas and the team, a panel of industry experts will host sessions on key topics including digital trends, e-Commerce, consumer / patient centricity, plus much more! For further details, or to book your place, please contact elizabeth.bernos@NicholasHall.com without delay.

Nestle and Valbiotis in prediabetes partnership

CHCINACTION

Last week, French-based R&D company Valbiotis signed a global long-term strategic partnership with Nestle Health Science for the development and commercialisation of Totum-63, a patented combination of five plant extracts specifically designed to reduce the risk of developing T2 diabetes in prediabetics. According to reports, Nestle Health Science will pay CHF5mn (US$5.1mn) upfront, development & sales milestone payments up to CHF66mn (US$68mn) and tiered royalties on net sales. The partnership will support Valbiotis’ work in a number of ways, including funding the latest clinical development phase until health claims are obtained in USA and Europe. 

Back in September 2019, Valbiotis released positive results from the Phase IIa study of Totum-63, revealing that it met its primary endpoint of reducing fasting blood glucose levels among 51 participants who received 5g / day or placebo for six months. The full results show that Totum-63 also met secondary endpoints, significantly reducing blood triglyceride levels by 32.2%, fatty liver index by 18.7%, arterial hypertension in hypertensive people and blood LDL cholesterol levels by 11.7% vs placebo. A preclinical study (in mice) also found that Totum-63 corrected blood levels of insulin, glucagon and glucagon-like peptide-1, hormones central to the regulation of blood glucose. At the time, Valbiotis CEO Sebastien Peltier said these results pave the way for new opportunities in “promising markets”, such as non-alcoholic fatty liver or arterial hypertension.

valbiotis-logo.jpg

Diabesity was one of the chapters in our recent signature New Paradigms report, with one section looking at the huge potential of supplements for diabetes management. However, many of these are local brands that have only managed to carve out a small niche in their respective markets. The potential for a CHC brand for prediabetes / diabetes with a truly global scale is vast. According to Valbiotis, there are an estimated 900mn people worldwide that are prediabetic, and around 700mn people globally are forecast to contract T2 diabetes by 2045.

Nicholas Hall Writes: When Nestle walked away from the Merck Consumer Health bidding in February 2018, citing high price expectations, I wondered what that meant for the Health Science strategy. To judge by Valbiotis and other recent deals, Nestle seems more interested in buying new technologies than brands. Work we’ve done recently in this category has shown that there is a large population at risk of contracting diabetes, particularly in the Emerging Markets; but this prediabetes initiative will require vast amounts of consumer and HCP education. The question is whether the Valbiotis product, in the safe commercial hands of Nestle Health Science, can persuade consumers to take a pill for a condition they don’t yet have. But it’s worth the effort and could be a significant opportunity for both parties.

Join Nicholas Hall and Everything Health in New Jersey on 8 October 2020 to explore The Future is Now! Consumer Healthcare Reimagined with an optional workshop on 9 October hosted by The CHC Training Institute. To book your place and save with the early-bird booking discount, or to find out about sponsorship opportunities, please contact elizabeth.bernos@NicholasHall.com.

Bidding starts for Nestle Skin Health

OTCINACTION

According to a Reuters report, private equity companies Cinven and Advent have teamed up to table a joint bid for Nestle Skin Health, which sources believe values the company at CHF7bn (US$7bn). It is reported that other private equity companies, including Blackstone, KKR and Carlyle, are likewise poised to make bids, while sources also say that Merz Pharma is interested and looking for private equity partners. 

In terms of the timeline, Nestle’s Board of Directors decided to explore strategic options for the skin health business in September 2018, after concluding that future growth opportunities lay increasingly outside the group’s strategic scope. Information memos on the sale, being run by Credit Suisse and Evercore, are expected to be sent by the end of this month and first-round bids are likely to be submitted in early March.

Screen Shot 2019-01-28 at 11.38.43.png

Nestle Skin Health divides its portfolio into two units – its range of largely Rx “medical solutions” marketed under the Galderma umbrella and its “consumer solutions”.  Differin Gel is one example of a Galderma Rx skin care medicine which has been switched to OTC status, gaining FDA approval in 2016 and launched in the US in early 2017. Despite being the first genuinely new allopathic treatment in the acne category, Differin sales only reached US$17mn in the brand’s first full year since switch, leading Nestle to revamp the brand in late 2017 with line extensions and packaging updates.

Nestle Skin Health’s key consumer brands are Cetaphil, Loceryl and Benzac, as well as the home treatment acne programme Proactiv. Cetaphil is its key OTC brand, according to DB6, thanks to its expansive range and wide skin care positioning, from eczema & psoriasis to acne and anti-itch. Cetaphil Dermacontrol and Cetaphil Restoraderm are both well-established in the US market, while Cetaphil also has a strong presence in Australia, Brazil, Germany and several Middle Eastern countries.

Nicholas Hall’s recent report, Dermatologicals: Trends, Innovations, Opportunities, analyses the Derma market from the global level down to individual category-by-category reviews. This key report also examines medical devices, cosmeceuticals and much, much more. It covers launch activity, innovations and emerging niches, spanning a range of categories, including eczema & psoriasis, cold sore treatments and wound care. To purchase your copy or to find out more, please contact melissa.lee@NicholasHall.com.

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.

MEA Q2 2017.png

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.

OTCs in Action Episode 49: Cholesterol targeted in Brazil; Fatigue fought in Italy

OTCinActionheader

OTCs in Action in Brazil and Italy help consumers fight high cholesterol and low energy with dietary supplements. Abbott’s phytosterol-based Duplostat lowers cholesterol when taken twice daily, coupled with the adoption of a healthy lifestyle. The 800mg softgel capsules help reduce the absorption of LDL-cholesterol from the third week, according to Abbott.

Additionally, when used in conjunction with statins, the efficacy in cholesterol reduction is the equivalent of doubling the statin dosage without any adverse affects. Research undertaken by the Ministry of Health (quoted by Abbott) indicates that around 35% of Brazilians aged 65 years or over are affected by high cholesterol.

For more new products from Latin America, click below:

Nicholas Hall’s OTC INSIGHT LATIN AMERICA, OCTOBER 2015

In Italy, Nestlé Health Science has served up Meritene Vitachoco, Swiss chocolate squares with 12 vitamins (including A, B6 and B12) and five minerals (including zinc and iron). The product is positioned to revitalise adults and older consumers in times of fatigue and stress, especially those with insufficient dietary intake.

For more new products from Europe, click below:

Nicholas Hall’s OTC INSIGHT EUROPE, OCTOBER 2015