Novartis’ OTC future comes into focus

OTCINACTION

Still ranked No.10 globally among OTC marketers, Novartis has nevertheless been gradually disinvesting from the consumer healthcare market in recent years, as it pursues its plan to “become a more focused innovative medicines company”, according to CEO, Vas Narasimhan. Deciding on the future of Sandoz and Alcon is key to this plan, and two developments over the past week have made Novartis’ objectives clearer.

First, Alcon filed an initial Form 20-F registration statement with the US Securities & Exchange Commission in relation to Novartis’ intention to spin off its eye care division Alcon as an independent, publicly-traded company. The deal is expected to complete in H1 2019 – subject to general market conditions, tax rulings and opinions, final endorsement from the Board of Directors and shareholder approval at the 2019 AGM – and “for Alcon, it means more strategic focus and flexibility to pursue compelling growth opportunities in eye care devices, where it has the strongest portfolio and unmatched ability to serve patients worldwide,” says Narasimhan.

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Secondly, despite further spin-off rumours, a Novartis spokesman told Reuters that the company was “completely committed” to Sandoz and “looking at transforming it and making it as strong as it can be in the global generics business.” Novartis recently agreed to sell its Sandoz US dermatology business and generic US oral solids portfolio to Indian-based Aurobindo Pharma. Novartis spokesman Sreejit Mohan said: “The whole goal is to try to make Sandoz as agile as possible … to give it the autonomy to be as agile as possible. That’s essentially been the message that we’ve been delivering, so I have no idea how that led to saying ‘split off.’”

Both developments make the future of the Novartis consumer healthcare business a little clearer, with sales likely to be fairly evenly split between a new standalone Alcon division – including key brands such as Systane, Tears Naturale and Vitalux – and the legacy Novartis OTC business, largely made up of Sandoz. Both these subsidiaries, Sandoz and Alcon, were excluded from the consumer healthcare j-v with GSK, and together have helped establish a Top 10 OTC company – however, split apart, it looks unlikely either will rank in the Top 20 by the second half of 2019.

To keep track of the latest innovations to hit the CHC market, OTC New Products Tracker is the ideal competitive intelligence tool. Last week it also unveiled a major update, with eye-catching new graphs and powerful search filters that help you visualise and explore the vast archive according to your exact requirements. To trial the updated database or for a demo, contact waisan.lee-gabell@NicholasHall.com

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MAT Q3 2017: Trends to look out for in 2018

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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.

Health Ads To Make You Laugh (or Cry)

Disgusting? Definitely. Funny? I reckon. Memorable? Yes. Novartis’ recent UK TV ad for its Otrivin topical decongestant has probably turned a few stomachs, but also managed to capture the attention of a UK national newspaper and earned close to 3.5mn hits on YouTube at the time of writing. The ad features under-the-weather overweight office worker Kenneth who fantasises about his female co-workers drooling over him as he spreads menthol rub over his unsightly chest, before being advised by the narrator to take Otrivin instead. The message of efficacy is perhaps not immediately as clear as in previous promotions for the product, starring an animated nose and mouth, or a man surrounded by tissues, but the new content is ridiculous enough to deserve another watch… and then another, until the product’s claimed benefits do stick. It is not the first time Novartis has pushed the comedy boat out for Otrivin. Back in 2011 the marketer won a Cannes Lion Advertising award for Swiss ads featuring “mouth breathers”, or people unable to breathe through their blocked noses, carrying the tagline, “You look dumber with your mouth open”.

Comedy was at the heart of the Nicholas Hall & Company’s coveted Best European OTC Advertising Award in 2014, with Dr Reddy’s ad for its Nise topical analgesic winning over delegates. As Russian soldiers line up on the training ground, one poor soldier is utterly unable to twist his neck owing to muscle pain, a piece of slapstick with a message so simple that there is no need to understand the Russian orders barked at him by his commanding officer. The campaign certainly didn’t do Nise’s Russian sales any harm, with the brand posting impressive growth in 2013.

If you have an OTC ad campaign you’re particularly proud of, funny, serious, simple or surreal, which ran between 1st February 2014 and 31st January 2015, why not enter it into the Nicholas Hall Awards? Shortlisted entries will be judged and the winner announced at the OTC Marketing Awards Ceremony on 16th April 2015 in Paris. The categories include, “The Most Innovative Global OTC Marketing Campaign” and “The Colin Borg Award for the Best European OTC Advertising”, while we will also crown the winner of “The Most Innovative European New Product of the Year”.

Deadline for entries is 1st February 2015. For more info on entry requirements, please download our brochure or contact Jennifer O’Donnell.