MAT Q2 2018: 5 Key Trends & Developments

Our latest Q2 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. Europe and Asia drive CCA upturn: Improving CCA growth helped the global OTC market report a slight upturn in Q2 (+4.2%). This followed a return to CCA growth in Europe (+2.7%) in Q2 2018, powered by the UK (+5.8%) and Germany (+4.1%), while France (+0.5%) also returned to positive territory. CCA growth in Asia-Pacific (+5.7%) likewise improved in Q2, thanks to a clear upturn for Systemic cold & flu (+4.7%), with key markets like S Korea enjoying high growth (+6.6%) on the back of OTC innovations such as the relaunch of Dong-A’s Pantec Q.
  2. Sanofi reclaims the No.3 spot from J&J: While GSK maintains its clear lead as the global OTC No.1 marketer, a tight three-way race remains in play for the No.2 spot between Bayer, Sanofi and J&J. Bayer is still the global No.2, while Sanofi reclaimed its position as the global No.3 in Q2 2018, moving ahead of J&J. In Sanofi’s Q2 results, the company reported a return to OTC growth in Europe and a continued strong rise in Emerging Markets, especially in Latin America. The company reported a CCA upturn in both regions, offsetting US allergy decline.
  3. US market behind VMS upturn: Higher Q2 growth in North America’s vast supplements market (+4.0%) has been the key trend behind the improving global picture. In Q2, multivitamins (+2.8%) underwent a clear upturn while the trend for probiotics (+6.9%) and immune supplements (+10.4%) also improved. The latter category has been a particularly vibrant source of OTC innovation in recent months; for example, Nestle has launched elderberry immune gummies as part of its mykind Organics line, while post-surgery immunity supplements and those with a digestive health crossover have also been popular.
  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. Canada recently voted to legalise cannabis, though the future for CBD and THC supplements remains uncertain. We don’t yet include sales of medical cannabis products in OTC DASHBOARD, though 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: Rest of World countries (mainly Middle East & Africa) enjoyed continued high in Q2 2018, with sales up 6.6% in the 12 months to end-June 2018, to total US$9.2bn. High growth for analgesics (+7.2%) and CCA products (+6.7%) ensured a strong regional rise overall, allied with a dynamic performance in the key regional market of Turkey (+13.3%). RB is one marketer performing well in the region, claiming a spot among the Top 5 OTC marketers in Q2 2018, following dynamic growth of its CCA portfolio, powered by sore throat remedy Strepsils and its strong support via A+P and line extensions.

With M&A activity in the CHC industry increasing rapidly, now may be the right time for your business to explore growth opportunities. 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

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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).

Pfizer and GSK.png

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.”

Pfizer OTC up for sale: How the OTC industry could be transformed

Near the end of last week, a Reuters news story broke indicating that Pfizer would be opening an auction process for its OTC business as early as this November, and that preliminary discussions had already taken place. GSK and RB have been tipped as frontrunners in securing a deal, though P&G, Sanofi, J&J and Nestlé have also been cited as possible bidders.

In Friday’s OTC.Newsflash bulletin, Nicholas Hall stated that there could possibly be 3-4 strategic buyers in the final bidding, and that the eventual selling price of Pfizer’s OTC unit could rise above US$20bn.

During GSK’s Q3 2017 results presentation, CEO Emma Walmsley confirmed that the company is interested in bidding for Pfizer’s OTC division and “building up our Consumer business”. However, there was a note of caution when the GSK CEO stated that “our first focus in capital allocation was clearly around our biggest business in Pharma, and R&D within that”. 

Using the latest DB6 figures for the MAT Q2 2017 period, now available on the OTC DASHBOARD website, we have created a graph below showing how the global Top 5 in the OTC industry would be transformed if GSK was to snap us Pfizer’s OTC business (assuming, of course, that there wouldn’t be any divestments):

GSK+Pfizer.jpg

As you can see, the deal would put GSK far ahead of its rivals, and make it the standout OTC marketer in what it is currently a very tight and competitive Top 4. Likewise, we also analysed the data to see the impact of RB acquiring Pfizer’s OTC unit on the global Top 5 and again the result would likely be a clear new global No.1:

RB+Pfizer.jpg

As ever, it’s hard to be sure how the situation will unfold, and it’s possible that Pfizer may even decide to hold on to its OTC business, but whatever happens we’ll be sure to keep you updated with the latest news and analysis here at OTC DASHBOARD.

OTCs in Action Episode 35: More play time instead of pain time in Nigeria

OTCinActionheaderThis week, OTCs are in Action in Nigeria where RB has just launched the leading global ibuprofen brand, Nurofen, for both children and adults. “Nigerians are known to be hard working, constantly seeking ways to lead a better life; they therefore do not want anything that would weigh them down or slow their pace,” Mr. Rahul Murgai, General Manager, RB West Africa, said at the launch ceremony. “Nurofen can provide them instant relief from headaches, lower back pain, cold symptoms, dental pain and fever thereby giving them more play time instead of pain time.”

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Rahul Murgai, General Manager, RB West Africa

Legitimate OTC brands that offer consumers safe and efficacious self-medication in developing countries are very important, because they offer an alternative to the under-the-counter (without a prescription) distribution of Rx drugs, which is in common practice. As governments regulate pharmaceuticals, and national healthcare programmes are prioritised, enforcement against UTC sales will become more rigourous. For the time being, the Nigerian government is curbing distribution of counterfeit and substandard drugs, with new government drug distribution centres and a ban on the flow of drugs between manufacturers / importers and retailers.

Markets such as Nigeria will benefit from these regulatory measures, encouraging investment such as RB’s launch of Nurofen. Although the OTC market is quite small at $114mn (+9%) in the 12 months to end-March 2015, Nigerian OTC will continue to grow as brands like Nurofen expand consumer options for legitimate self-medication.