Perrigo to revive flagging OTC allergy sales?

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According to the latest MAT Q1 2018 data, global growth of OTC allergy remedies has slowed to just +0.2%, compared with a rate of +3.7% in the year-ago MAT Q1 2017 period, and +10.3% in the MAT Q1 2016 period. A drop-off in Rx-to-OTC switch activity has been a key factor, so last week’s news that Perrigo has signed an agreement with Merck & Co for exclusive rights to market, sell and distribute a non-prescription version of Nasonex (mometasone furoate monohydrate) in the US will be a welcome boost for the category.

Financial terms were not disclosed and the deal is subject to receipt of all necessary regulatory approvals. Nasonex is currently available on prescription only in USA, where it is marketed by Merck & Co. The corticosteroid anti-inflammatory nasal spray is indicated for the treatment of the symptoms of seasonal allergic or perennial allergic rhinitis in people aged 18+ years. In those markets where the product is available OTC, such as Australia, it is marketed by Bayer.

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Perrigo has often been first to launch private label equivalents of recently switched OTC brands – generic versions of Flonase and Zegerid OTC were launched in 2016, while a copy of Nexium 24HR was launched by the company last summer – but this deal marks a new phase for Perrigo into switching brands.

As Perrigo Executive VP & President, Consumer Healthcare Americas, Jeff Needham, commented: “This product in-licence is the first of its kind for Perrigo. As other similar products that have previously switched from prescription to OTC status, we are working diligently to bring this important product to consumers and customers more quickly than the average 5-year OTC switch timeframe. This strategic investment into the OTC category creates an innovative product offering for Perrigo. We expect to execute the Rx-OTC-switch, fully penetrate this market with a branded offering and provide a future store brand alternative.” 

Comment from Ian Crook, Managing Editor, Nicholas Hall’s Reports: Nasonex enjoys dynamic growth in the handful of markets where it has been switched to OTC by Bayer and generated sales of US$23mn in 2017 (+28% CAGR 2013-17). In the brand’s largest market, Australia (where it switched in 2014), award-winning advertising helped it build a strong presence among consumers; it ranked 4th with sales of US$10mn (+5%) in 2017, comfortably the No.1 in the nasal sprays segment. How the brand will fare in the USA — if and when Perrigo successfully navigates the switch process — remains to be seen. Nasal steroid switches in the USA have historically driven high growth among allergy remedies, but later arrivals like Nasonex are unlikely to make as big a splash as previous INS switches.

Perrigo is one of the Top 20 OTC players profiled in the 2018 version of our bestselling OTC YearBook. This essential annual report also gives an extensive, up-to-date overview of the OTC industry across the globe, including reviews of M&A activity, Top 15 markets and major OTC categories, plus much more. For more information or to order your copy, please contact melissa.lee@NicholasHall.com.

 

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J&J to buy Zarbee’s

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J&J Consumer has entered into a definitive agreement to acquire natural healthcare products company Zarbee’s Naturals for an undisclosed sum. With a 50% CAGR, the Zarbee’s Naturals business racked up sales of US$68mn in 2017, according to Nicholas Hall’s global OTC sales database DB6, and there is lots of room for growth ahead.

J&J’s VMS portfolio accounts for just 0.1% of its total consumer healthcare business, so the Zarbee’s deal will provide a significant boost (see the table from OTC DASHBOARD below showing J&J’s current OTC sales split by major category). There will also be scope to build the brand internationally – at present, Zarbee’s focus is almost exclusively on the US market, so J&J will likely use its considerable marketing muscle to roll out the brand in other key regions where it has a strong presence, like Europe and Asia-Pacific.

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Founded in 2008, Zarbee’s Naturals is majority owned by the Growth Fund of L Catterton in partnership with various minority owners, including Sorenson Capital. The deal, which is expected to complete in Q3 2018, will include the full line of Zarbee’s Naturals products for children and adults.

Product innovation has been one of the main drivers behind exceptional growth for Zarbee’s Naturals. In April 2018, the company introduced three Children’s Complete Multivitamins in a gummy format, including Complete Multivitamin + Iron, Complete Multivitamin + Probiotic and Complete Multivitamin + Immune. In partnership with Amazon, Zarbee’s also released a Baby Bee Essentials Gift Set complete with a bee romper and products such as Gripe Water and petroleum-free Baby Soothing Chest Rub. Paediatric products like these will fit well with J&J’s family-friendly image.

As Health and Wellness climbs up the list of consumer priorities, the market for herbal and natural options is booming. Take a look at what the future holds for this market with Nicholas Hall’s upcoming report Herbals & Naturals: Opportunities in a Vast & Dynamic Area of Consumer Health. Scheduled for publication in August, this report will include coverage of 9 leading global markets, analysis into a wide range of categories including Herbal & Natural Supplements, Topical Analgesics, Cough Remedies, Laxatives and more, plus forecast sales. Benefit from early bird rates when you pre-order today! For more information, or to pre-order your copy, please contact melissa.lee@nicholashall.com.

Medical cannabis products legal in UK

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Three hot topics we focus on at OTC DASHBOARD, in our blogs and infographics, are OTC adjacencies, e-commerce and new technology. Medical cannabis falls within the sphere of OTC adjacencies, and here at Nicholas Hall & Company we believe that this category will progressively become part of the consumer healthcare market.

Recent legislative moves show that government attitudes to cannabis use are becoming more and more liberal. Just last week, the UK Home Secretary made the decision to allow the legal prescription of cannabis-derived medicinal products by specialist doctors. The UK’s regulatory agency, MHRA, is now working on a clear definition of what constitutes a cannabis-derived medicinal product.

The UK has also been one of several markets that have seen the launch of innovative cannabidiol (CBD) products, such as CannaQIX (Precision Healthcare / Creso). Launched in April 2018, CannaQIX is formulated with CBD organic hemp extract, as well as vitamins and minerals. Available as lozenges, the product is positioned as a cognitive booster that maintains mental and nervous function, reduces fatigue and releases energy. The product is also available in Switzerland and being rolled out across Europe.

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Other key countries for CBD products include Germany, Israel, Australia and the USA, with 45 products in the latter market already listed in our OTC New Products Tracker archive, in a variety of innovative formats including pens, vaporisers and gummy bears.

Canada is another country becoming more liberal in its approach to cannabis. In June 2018, legislation permitting Canadians to consume cannabis for recreational purposes was finalised, the final step that will pave the way for official legalisation in October 2018. The regulatory package is 390 pages long and provides details about how cannabis may be grown, harvested, processed and sold.

Looking ahead, Europe and North America are likely to be at the forefront of market development. According to a report from Prohibition Partners, the European cannabis market will be worth €115.7bn (US$135bn) by 2028, with the majority of European states expected to pass legislation to legalise medical cannabis programmes and recreational cannabis in that time. For more details, see the full report here.

Nicholas Hall’s upcoming OTC.NewDirections Executive Conference will reflect rising interest in the fast-developing cannabis market worldwide with two presentations on this key topic, from Canada and Israel. Being held on 12 September in London, this one-day meeting will explore Where Innovation Meets Regulation. For details of the full agenda or to reserve your place contact lianne.hill@NicholasHall.com

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.

MAT Q1 2018: 5 key trends & developments

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Our latest Q1 2018 trend reports on the OTC market at global, regional and Top 20 level are now available on the OTC DASHBOARD website. Here we highlight some of the key trends & developments that have emerged in the latest data.

  1. Growth draining out of allergy remedies: In the MAT Q1 2018 period, global growth of OTC allergy remedies slowed to just +0.2%. Compare this with a rate of +3.7% in the year-ago MAT Q1 2017 period, and +10.3% in the MAT Q1 2016 period. This gradual slowdown, caused primarily by a drop-off in Rx-to-OTC switch activity, has been one of several key factors in the continued low growth of the global OTC market (+4.1%) in Q1.
  2. J&J edges ahead of Sanofi: The latest MAT Q1 2018 data indicates that J&J is now the No.3 OTC marketer globally, marginally ahead of Sanofi and just behind Bayer. Every one of the Top 5 OTC marketers grew at a rate below that of the global OTC market in the MAT Q1 2018 period, indicating the difficulty in finding new growth opportunities and the continued emphasis on M&A.
  3. Has probiotics growth peaked? Though it remains high at +9.2% in the year to end-March 2018, the global growth of the probiotics category has slowed over the past year, when compared with a rate of +14.0% in the year-ago MAT Q1 2017 period, and +10.8% in the MAT Q1 2016 period. Innovation and expansion of the category into new countries and niches, such as diabetes, have fuelled its growth thus far, but we’ll be keeping a close eye over coming quarters to see if this trend is a temporary blip or the start of a long-term slowdown.
  4. Where’s the growth potential? 1. Adjacencies: OTC marketers are increasingly looking to build new consumer healthcare adjacencies, either via switch – in the case of erectile dysfunction and Pfizer’s Viagra Connect – or new product innovation, in the case of medical cannabis. Though we don’t yet include sales of medical cannabis products in OTC DASHBOARD, we do track developments in this category closely in both our innovation database, OTC New Products Tracker, and regulatory newsletter, OTC.NewDirections.
  5. Where’s the growth potential? 2. New territories: Coverage of the OTC market in the Middle East & Africa is one of the main benefits of being an OTC DASHBOARD subscriber, and looking at the latest Q1 data highlights the importance of this region to the relative success of GSK and RB. GSK performed better than the rest of the Top 5, with its CCA brand Otrivin moving up the Middle East & Africa rankings to the No.3 spot in Q1 after double-digit growth, while global No.6 RB (+4.4%) outperformed the global OTC rate thanks in part to the high MEA growth of Gaviscon and Strepsils.

Explore how we can innovate (and manage the impact of regulatory challenges) 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 speakers from Medical Brands, Angelini and Arqus Advisory among others to review, discuss and debate major issues impacting the competitive landscape in an industry in which the regulatory goalposts are continually moving. Sessions span New Product Opportunities, Regulatory Affairs (including the potential impact of Brexit across the EU), Medical Devices, Switch, Digital Marketing, New Distribution and e-Commerce. Don’t hesitate — book before 31 July to save with our early-bird discount! For more information on this pivotal meeting, please contact Lianne.Hill@nicholashall.com

BMS to sell French subsidiary?

According to an exclusive report in Reuters, BMS is looking to sell its French OTC subsidiary, Upsa, in a potential deal which could exceed €1bn (US$1.2bn). Deutsche Bank and Jefferies are said to be preparing the auction process, which will begin after the summer. It is rumoured that potential bidders may include Stada, Zentiva, Mylan and P&G, while Recordati could also decide to make a play for the company.

Upsa has been in operation for over 80 years and the company itself is a well-established brand in France, by far BMS’s key OTC market. According to DB6, BMS generated global OTC sales of US$477mn in 2017, 60% of which were generated in France (US$285mn). BMS’ next two biggest OTC markets are Belgium and China.

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Upsa’s key brands are Dafalgan and Efferalgan analgesics (both paracetamol), as well as the paracetamol-based Fervex systemic cold & flu line. According to the latest OTC DASHBOARD trend report, Upsa is the No.2 OTC marketer in France behind Sanofi but sales there fell by 4.8% in 2017, with mid-single digit declines for Dafalgan and Efferalgan.

Price cuts for reimbursed semi-ethical painkillers like Dafalgan and Efferalgan have contributed to the decline in France, causing marketers like Upsa to shift focus from reimbursed options to pure OTCs; reimbursed Efferalgan SKUs were rebranded as Efferalganmed in October 2015. In December 2017, the marketer also rebranded Fervex medical device options as Les Élémentaires, in response to rising concerns about the use of umbrella branding which could confuse consumers.

With M&A activity in the CHC industry rapidly increasing, it might be the right time for your business to explore interesting and suitable growth opportunities coming from M&A. Our specialist M&A boutique is working with a number of strategic and financial partners to assess potential opportunities — for buyers and sellers — and is well placed to discuss the current business climate and possible synergies. To find out more, please contact ammar.basit@NicholasHall.com.

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