Focus on Japan: Q2 results point to further CHC decline

CHCINACTION

According to government data released today, GDP in Japan fell 7.8% quarter on quarter in Q2 2020 (April to June), with Covid-19 having an impact both on domestic consumer spending and exports. Japan’s economy is heavily dependent on exports, especially to China, and demand there has remained subdued during Q2. This downturn does not bode well for the world’s No.3 CHC market, which had already failed to match the boost in OTC spending seen in Europe and North America in Q1, with Japan recording flat sales in MAT Q1 2020 owing to the loss of in-bound tourists from China and Taiwan.

Japan’s OTC market has not outperformed the wider economy, as has been the case in other regions during Covid-19, with several key local marketers reporting Q2 declines in line or in excess of Japan’s 7.8% GDP fall. Daiichi Sankyo saw OTC revenues decrease by 7.3% in fiscal Q1 2020 (Apr-Jun 2020), owing to the impact of Covid-19, while Taisho reported an even more dramatic fall in its Q2 domestic Self-Medication sales, with its OTC portfolio in Japan down 16.4% in fiscal Q1 2020 (Apr-Jun 2020). Tonic drink Lipovitan and CCA range Pabron both led the decline, impacted by Covid-19.

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Takeda outlined size of OTC divestitures still to come

While Takeda no longer reports on the performance of its Self-Medication business in its quarterly results, it did reveal in its Q2 results presentation the value of the various regional portfolios of non-core and OTC products that it plans to divest in the near future. In late 2019, Takeda sold a portfolio of non-core OTC and Rx products to Swiss-based Acino, covering what the describes as its North Europe, Middle East & Africa (NEMEA) region, as well as a larger portfolio to Stada, covering Russia / CIS. Takeda now intends to complete even larger divestments in Latin America and Europe.

In late July, it was announced that Taisho is reportedly in advanced talks to acquire Takeda’s Consumer Healthcare unit in Japan, according to people familiar with the matter. Blackstone, Bain Capital and CVC Capital Partners were also understood to be among the final bidders. If Taisho does secure the deal for Takeda’s CHC portolio in Japan – which DB6 valued at US$571mn in the MAT Q1 2020 period – it will extend its domestic dominance as Japan’s No.1 CHC marketer but still remain the global No.7 behind P&G. Either way, Taisho will be looking to move beyond the business uncertainty caused by Covid-19 and M&A, with a view to reviving growth in Japan’s CHC market in H2 2020.

If you are interested in making an acquisition, or need licensing or business development support, Nicholas Hall’s Consultancy team is available to give confidential advice. We work with a number of strategic and financial partners to evaluate potential opportunities for buyers and sellers in the M&A, licensing and fundraising space. To find out more contact kayleigh.griffinhooper@NicholasHall.com

Lifestyle OTCs still the best hope for OTC switch revival

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2019 has been a slow year for Rx-to-OTC switch news, with activity dropping off markedly in the key US market in recent years, and Asia-Pacific (especially China, Japan and Indonesia) and Europe (Poland especially) the main source of developments. In this context, it was welcome news last week that Norway will become the second European market for OTC Viagra, after the Norwegian Medicines Agency approved the OTC sale of Viagra Reseptfri (Pfizer, sildenafil 50mg) erectile dysfunction treatment to men aged 18+ years, with this to be accompanied by pharmacist advice.

Pfizer plans to launch Viagra Reseptfri in pharmacies in early 2020, while Rx Viagra will remain available. The medicines agency recommends that men have a check-up with their doctor within six months of purchase so that any potential underlying conditions can be investigated. Viagra Reseptfri will be the first medicine available in Norway under the country’s new category of non-prescription medicine with guidance, and the Rx-to-OTC switch follows similar measures elsewhere in Europe. In Poland, sildenafil 25mg is available OTC from a number of domestic players, with initial launch from Adamed in May 2016, while Viagra Connect was launched in the UK in March 2018.

Of the 20 key markets covered by OTC New Products Tracker every month since the start of 2013, Poland has been the most active in terms of Rx-to-OTC switch activity, with 54 products reclassified to non-prescription status. A liberal switch environment has helped bring about a raft of Rx-to-OTC switches since 2014, including Europe’s first OTC erectile dysfunction brand and Poland’s first OTC systemic cold sore treatment.

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Despite some notable failures (such as urinary product Flomax Relief), so-called “lifestyle” drugs remain the primary source of switch activity, helping to extend the reach of the OTC market into new categories such as contraception, erectile dysfunction and cardiovascular disease. A key switch development in 2019 was the downscheduling in Japan of Taisho’s hyperlipidaemia treatment Epadel T (ethyl eicosapentaenoate) to Class I OTC, where sales are permitted in pharmacies (and online) after professional consultation. Downscheduling may have come just in the nick of time – sales data suggest Epadel T had failed to make any noticeable impact on the OTC market in its almost six years as an Instruction-Required Drug.

There also remains hope that Sanofi may one day market Eli Lilly’s erectile dysfunction treatment Cialis as an OTC medicine (it owns the rights to market Cialis OTC in the USA, UK, Canada and Australia), but is switch application has been stuck at the FDA a full five years since its submission. In July 2019, Sanofi also signed a deal with Roche for the exclusive OTC rights to Tamiflu (oseltamivir 75mg capsules, Genentech / Roche Group) for flu prevention and treatment in the USA. Under the terms of the agreement, Sanofi will be responsible for leading negotiations with the US FDA for the OTC switch and subsequent exclusive marketing, scientific engagement and distribution of Tamiflu OTC in the USA. Let’s hope for the sake of OTC growth that its negotiations go smoothly.

Clear your diary for Nicholas Hall’s 31st European Conference, which will be held in Athens on 28-30 April 2020, on the theme of Advancing in CHC: The Must-Dos and  Reasons Behind Them. To register your interest in this event, or for more information on sponsorship opportunities, please contact jennifer.odonnell@NicholasHall.com.

CHPA Report & Conference

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Last week, to tie in with its Annual Executive Conference (AEC), the Consumer Healthcare Products Association released a white paper that found, on average, every dollar spent on OTC medicines saves the US healthcare system around US$7.20, resulting in nearly US$146bn in savings annually. CHPA President & CEO Scott Melville commented that the “healthcare system undervalues the contribution of our industry’s products”, and explained that the research will support legislative initiatives promoting financial incentives for consumers to buy OTCs using health insurance flexible spending plans.

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Done in partnership with IRI, the study was conducted in part to raise the profile of OTC products in USA. It found that around 90% of people who buy an OTC product for a condition would seek medical care if the OTC product had not been available. The study analysed nine OTC categories to identify the primary contributors of cost savings to the healthcare system. The categories include allergy, analgesics, antifungals, cough / cold / flu, lower GI, medicated skin, upper GI, sleep and smoking control. The research showed that OTC medicines provide additional value through expanded access to more than 27mn consumers who would otherwise forgo treatment – more than 13mn Americans for allergies alone.

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Writing from Florida, Nicholas Hall said: “Trust was a major theme of CHPA’s Annual Executive Conference … Edelman presented data showing that consumer trust of healthcare is improving after plummeting last year. Speakers agreed that trust goes beyond building brands. In a session I moderated on Tuesday, Bayer CH President Heiko Schipper said that our industry needs to, “articulate better what we do. We are doing a lot of good things like being responsible for the environment and employee diversity”.

Taisho Executive VP Ken Uehara agreed: “Trust can’t be built instantly, certainly for our company, it’s our most important asset.” Alan Main, Executive VP, Sanofi, commented that in the past it was about building the brand: “I still think the brand comes first in people’s minds, but we have to look after the brands, not just for five years but for 30-40 years.” Katie Devine, who is moving into a new leadership role at J&J, said companies can choose not to reply to every tweet, but should maintain a fact-based conversation about being responsible in the treatment of employees, the population and planet.

Other questions I addressed to the Leadership Panel concerned the lack of Rx-to-OTC switch (Alan Main said switch has an important role to play in the future of self-care); CBD (all panellists believe it will develop well beyond the current US$500mn quoted by IRI, although Katie’s point, “I know how to switch from Rx to OTC, but not from illegal to legal”, was well taken); and the number one item on their wish list — speed to market and improved innovation were favourites … I liked the concentrated format of this year’s AEC, with two half-day sessions, which allowed time for networking, and was proud to have been one of three Preferred Sponsors of the meeting, in the good company of Google and the Emerson Group.”

Nicholas Hall will discuss the latest Market Trends and Innovation impacting the CHC market at our annual North American CHC Conference (26-27 June) in collaboration with our partners EverythingHealth. As well as the chance to network with other industry players, you can hear from Google, Jefferson Health, Persuadable Research and other industry experts. Don’t hesitate — book before 31 March to save with our generous early-bird booking discount! To find out more about this event, please contact elizabeth.bernos@NicholasHall.com.