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Apresentação Institucional - Set/2016

The document is a disclaimer for forward-looking statements in an institutional presentation, noting that any projections are based on management expectations and are subject to changing market conditions. It also notes that additional unaudited information reflects management's interpretation and should be independently analyzed by readers. The document states that management is not responsible for the accuracy of any financial data discussed for informational purposes only.

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Institutional Presentation September/2016 V5
Disclaimer This release contains forward-looking statements that are exclusively related to the prospects of the business, its operating and financial results, and prospects for growth. These data are merely projections and, as such, based exclusively on our management's expectations for the future of the business and its continued access to capital to fund its business plan. These forward-looking statements substantially depend on changing market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors, as well as the risks shown in our filed disclosure documents, and are therefore subject to change without prior notice. As a goal to maintain a correlation with the Financial Statements prepared by its external auditors, the considerations and comments contained herein are prepared on a consolidated viewpoint of the economic group Hypermarcas, and not necessarily individualized by the various legal entities that compose the group. In addition, unaudited information herein reflects management's interpretation of information taken from its financial statements and their respective adjustments, which were prepared in accordance with market practices and for the sole purpose of a more detailed and specific analysis of our results. Therefore, these additional points and data must also be analyzed and interpreted independently by shareholders and market agents, who should carry out their own analysis and draw their own conclusions from the results reported herein. No data or interpretative analysis provided by our management should be treated as a guarantee of future performance or results and are merely illustrative of our directors' vision of our results. Our management is not responsible for compliance or accuracy of the management financial data discussed in this report. which must be considered as for informational purposes only, and should not override the analysis of our audited consolidated financial statements for purposes of a decision to invest in our stock, or for any other purpose. 2
Agenda • Overview • Brazil Pharma Market • Our Business • Financials 3
Business overview 4 39% 30% 31% Net Rev: R$3.1 bn Gross Margin: 74.1% RankingKeyfacts Branded Prescription Generics Consumer Health #1 Hypermarcas Aché EMS #2 Sanofi Sanofi Hypermarcas #3 Bayer Eurofarma Sanofi #4 Boehringer Novartis Novartis #5 Takeda Hypermarcas Teuto Revenue Breakdown Branded Prescription¹ Consumer Health Generics² Focus in Brazil Long experience Fast growing/ resilient market Diversified portfolio SOURCE: Company financials – 2Q16 LTM; IMS Health; Hypermarcas. ¹ Ex-patents. ² Generics includes Branded Generics.
Ownership and listings ¹ July 25, 2016 LTM ² July 14, 2016 ³ July 25, 2016 SOURCE: BM&F Bovespa; Hypermarcas 5 Listings • Sao Paulo Stock Exchange: - HYPE3 - BRHYPEACNOR0 • Indexes with Hypermarcas: • Ibovespa Index Ranking³: 35/59 • Trade volume¹: 2.9 MM shares/day • ADR (HYPMY)²: 6.4 MM shares outstanding • Market Cap³: R$16 B (USD5 B) Ownership structure 20.1% 14.8% 6.0% 59.1% Igarapava Participações S.A. Maiorem S.A. de C.V Other Controlling Shareholders Free Float Founder Free Float Maiorem Others Controlling Group 40.9%
Agenda • Overview • Brazil Pharma Market • Our Business • Financials 6
Pharma market SOURCE: IMS Health 7 2014 Trends 2019 1st United States 2nd China 3rd Japan 4th Germany 5th France 6th USD24 bn 7th Italy 1st United States 2nd China 3rd Japan 4th Germany 5th USD36 bn 6th France 7th Italy • Aging • Underdeveloped health system • Treatments’ low levels • Generics low penetration of generics (25% of market) • Peak in economically active population
Low levels of per capita consumption SOURCE: Organization for Economic Co-operation and Development (OECD), 2012 8 3,484 1,109 1,577 3,289 3,649 4,288 4,811 8,745 OECD Brazil Chile UK Japan France Germany USA Healthcare Expenditure per Country (USD/year) 7.9x
SOURCE: IMS Health, as of 2014 9 The largest market in a fragmented region: Latin America #1 #2 #3 #4 #5 Brazil USD24,3 bn 53% Mexico USD9,7 bn 21% Argentina USD3,8 bn 8% Colombia USD3,8 bn 8% Chile USD2,2 bn 5%Others USD2,3 bn 5% Latin American Market Locals are dominant and focused in their markets Absence of strong regional leaders Brazilian Ranking EMS Teuto Aché Sanofi/Medley Hypermarcas
Fast ageing of population SOURCE: IBGE 10 Population 60+ (MM people) CAGR 2.8% 14 20 29 42 54 66 74 8% 10% 14% 19% 24% 29% 34% 0% 5% 10% 15% 20% 25% 30% 35% 0 10 20 30 40 50 60 70 80 90 2000 2010 2020 2030 2040 2050 2060 1mm p.y.
Potential for higher drug consumption SOURCE: IBGE (Consumer Expenditure Survey 2008-09); Values readjusted by inflation (IPCA) to April 2016. 11 Prescription Drugs Expenditure (R$ per month / family) 205.2 198.2 134.1 99.7 73.1 60.0 46.4 70+ 60-69 50-59 40-49 30-39 20-29 10-19 4.3x
Resilient market SOURCE: IMS Health (PMB-PPP March 2016); IBGE 12 9.7% 10.7% 5.7% 3.5% 12.5% 9.8% 10.5% 12.6% 11.7% 11.6% 7.3% 3.1% 2013 2014 2015 2016 YTD Pharma Market Nominal GDP Retail Sales
Retail pharma market 13 Business Segment Product Category Demand Driver Market Size Patents Branded Prescription Trade Direct to Consumer 5% 60% 17% 18% • RX with/without prescription retention • OTX • Dermocosmetics R$24.9BPhysicians • Over-the-counter • Nutritionals • Related products R$6.9BConsumer • Innovative patent protected R$2.3BPhysicians • Generics • Smart Generics R$7.7BPharmacist SOURCE: IMS Health Oct. 2015
Retail pharma market # companies to reach 42% of market share Pharma Retail (% Sales) 42%58% Larger Retail Chain Smaller Retail Chain & Independent SOURCE: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Larger retail chains are the Abrafarma members. * Chains that are member of Brasil Pharma; also listed in Brazil. 75 K Point of Sales (POS) 14 67 K POS 6 K POS Larger Retailers (28) Companies listed in Brazil * * * Manufacturer (6)
High entry barriers Regulator • Long approval process (3-5 years) • Strict control of manufacturers, products and retailers 15 Fragmented Distribution • Continental country (27 states; >200mm people) • ~70k point of sales • 18 larger chains • ~200 distributors Powerful Local Brands • All generics are branded at retail as most of the world (ex-US & Canada) 1960 2016
Large and growing pharmaceutical market (R$ billion) SOURCE: IMS Health – PPP (June 2016). 16 30.9 34.0 37.2 42.1 2012 2013 2014 2015 CAGR 2012-15: 10.9%
Agenda • Overview • Brazil Pharma Market • Our Business • Financials 17
39% 30% 31% Business overview * Excluding patents SOURCE: IMS Health – PMB-PPP; Hypermarcas – 2Q16 LTM 18 Hypermarcas Rank Market Share Growth Opportunities Consumer Health Generics Branded Prescription* #1 #2 #5 14.7% 14.2% 4.8% • Launch new product concepts through brand extensions • Improve retail space • Increase market presence, especially at retails chains • Improve portfolio coverage especially at high value products • Leverage on physicians visit network • Launch new products with untapped demand Revenue Breakdown Branded Prescription Generics Consumer Health
Hypermarcas evolution 19 Sustainable growth with value creation Focus on Pharma (2016 onwards) Restructuring (2011 – 2015) Industry Consolidation (2007 – 2010) Embryo in Home Care & Food (2002 – 2006)
Long experience in the pharma market 20 1950 1970 1980 1990 2000 2010 20201960 1970 1953 1970s 1959 Strong brands with leadership, mainly in Prescription, OTC and Dermocosmetics OTC and Prescription brands with over 50 years in the market Most traditional brands in the Brazilian OTC market Leader in branded generics and with an incipient portfolio of generics, also expertise in the application for the registration of off-patent medication
Pharma scope 21 Pharmaceuticals CosmeticsFood Dermo- cosmetics Nutra- ceuticals Nutritionals Nutri- cionals
Consistent gains in market share SOURCE: IMS Health – PMB–PF (June 2016) 22 7.5% 8.0% 8.5% 9.2% 9.9% 10.5% 2010 2011 2012 2013 2014 2015
5.9% 4.7% 4.1% 4.1% 3.4% 2.8% 2.7% 2.6% 2.4% 2.3% 65.0% Diversified revenue base SOURCE: Company data, 2015 23 Other products (Branded Presc.) (Generic) (Branded Presc.) (Branded Presc.) (Branded Presc.) (Consumer Health) (Branded Presc.) (Consumer Health) (Consumer Health) Top 10 Brands: ~35% sales (Consumer Health)
Increasing importance of innovation 7.7% 8.4% 11.4% 17.7% 2012 2013 2014 2015 24 SOURCE: Company data, 2015. % Revenues from pharmaceutical products launched over the past 3 years. Innovation (% Net Revenues)
Diversified distribution 25 SOURCE: Company Data, 2016 • Continental country (27 states; 204mm people) • 28 large chains • ~230 distributors Brazil has a fragmented distribution 34% Direct Channel (51 clients) Indirect Channel (69 clients) 46% Distributor/ Wholesaler Retailer Warehouse Distributor delivers Hypermarcas takes orders Logistics Operation 19% (113 clients) 75,300 Stores Hypermarcas reaches 100% of POS in Brazil
New Business Model 26 Branded Prescription Generics Consumer Health “Go to Market” Platform Innovation Platform • Business strategy • Execution control • Market Insights • Technical capability • Infrastructure • Global Network • Low cost operation • Strong demand generation • Broad distribution
Large scale production facility 27 323,000 m2 land 120,000 m2 constructed area 3,700 employees Distribution Center Solids/ Raw Materials Quality Control Aerosol Efervecent Dermo Liquids Semisolids Injectables R&D PenicilinSolids Semisolids Liquids R&D
High production capacity SOURCE: Hypermarcas, per year 28 Tablets, capsules, coated tablets, pills and effervescent 10 billion Injectable and ophthalmic 45 million Aerosols 11 million Liquids, creams, oils, ointments, lotions and jellies 276 million
New Innovation Center Under Development 29 • Located in Alphaville – São Paulo • Total area of 4,000 m2 • Research with consumers and physicians • Development of new products • Start of operations: 4Q16
Branded Prescription 30 Products Strategy Demand Driver • Drugs promoted to Physicians (OTC / RX) • Intensify therapeutic classes expansion • Physician prescription 39% 30% 31% Branded Prescription Generics Consumer Health Revenue Breakdown
Branded Prescription Launch new products with untapped demand 31 Current Pending Approval Under Development Target 37% 75% 20% 16% Target Market (Retail) (R$ million) SOURCE: IMS Health; Hypermarcas Ps: Share of the market in value that Hypermarcas competes
Branded Prescription Leverage on physician visit network SOURCE: IMS Health (Factory Price); Hypermarcas 32 10.4% 1.1% 9.7% 11.9% 0.6% 2.7% 4.8% 87% 74% 85% 74% 78% 55% 69% Orthopaedics Psychiatry Dermatology Paediatrics Cardiology Gynecology General Practice Largest Specialties Physician Visitation (% of prescriptions; Value) Market Share Portfolio
Branded Prescription Leverage on physician visit network ¹ 2016 33 Physicians Coverage As % of total market demand Covered Specialties Visited Physicians Total Weighted Coverage 93%1 67% 62% • Leadership in Pain/Fever Pediatrics • Leader in Rx for Sun Protection and Corticoids Dermatology • Leverage “General Practice” (Addera/Tamarine) Gynecology • Asthma/Vitamins • Nutraceuticals/ Acne • Contraceptives Opportunities
Branded Prescription Launch new products with untapped demand 34 SOURCE: IMS Health – PMB PF Oct15 YTD Concept • Hypovitaminosis D - Fractures - Muscular strength - Cardio diseases • Treatment dosage - Supplementation - Attack dosage 9 29 43 36 29 29 21 73 93 15 49 64 9 29 43 73 151 186 2011 2012 2013 2014 2015 2T16 LTM Pills (Mar-2014) Sell-Out (R$ million) 2016 Innovation GelCap.TabletGelCap.TabletGelCap.Tablet 1 cm 2 cm0 cm 2015 2016 2015 2016 2015 2016 Drops Pills Pills (Attack) CAGR 96%
35 Branded Prescription Launch new products with untapped demand SOURCE: IMS Health – PMB PF Oct15 YTD 30% of Revenue from products launched in <1 Year +4pp Market Share +27% Demand • Faster renewal of portfolio • Line extensions Innovation • Increased demand team • Focus on POS operation • Proximity to patients Execution • Category gap coverage • Intensification in categories with lower share Diversification
Consumer Health 36 Products Strategy Demand Driver • OTC • Sweeteners • Intensify brand extensions • Mass media 39% 30% 31% Branded Prescription Generics Consumer Health Revenue Breakdown
SOURCE: IMS Health – PMB Oct’15 37 Consumer Health New products concepts through brand extensions Concept • High awareness • Stronger formulation • Product concept: “Good even for migraines” 31.7 30.0 30.1 14.3 2013 2014 2015 Sell-Out (R$ million) Doril 44.4 48%
SOURCE: IMS Health – PMB Oct’15 38 Consumer Health New products concepts through brand extensions 145 171 2014 2015 18% Mkt share + 0.5 p.p. Sell-Out (R$ million)
39 Consumer Health Improve retail space Before After • All drugs (OTC & Prescriptions) were mixed behind the counter • OTC is organized per category and “over the counter” • Sales increase • 30% in Value • 23% in Volume
Generics 40 Products Strategy Demand Driver • Generics (Large Chains) • Smart Generics (a.k.a. Similars; M&Ps) • Defend & grow selectively • Pharmacist recommendation 39% 30% 31% Branded Prescription Generics Consumer Health Revenue Breakdown
SOURCE: IMS Health; Hypermarcas 41 52% 50% 38% 33% 31% 29% 15% 19% 33% Hypermarcas 2014 Hypermarcas 2015 Market Distribution Breakdown Large retail chains Mid-sized chains Independent Generics Increase market presence especially at retails chains
42 Generics Improve portfolio coverage especially with high value products Current Pending Approval Under Development Target 71% 91% 14% 7% Target Market (Retail) (R$ million) SOURCE: IMS Health; Hypermarcas Ps.: Share of the market in value that Hypermarcas competes.
Agenda • Overview • Brazil Pharma Market • Our Business • Financials 43
44 * Calculado com o EBITDA Ajustado dos últimos 12 meses 44 2014 ∆2015 Ps.: Margins calculated on total net revenues (except NR ex-3rd parties) Net Revenues ex-3rd Parties 2,733.4. 100.0% 2,954.7. 100.0% 8.1% - . Gross Profit 2,091.9. 75.6% 2,210.1. 74.8% 5.7% -0.8 p.p. Marketing Expenses (729.1) -26.3% 766.0. -25.9% 5.1% 0.4 p.p. Selling Expenses (360.1) -13.0% (383.5) -13.0% 6.5% - . G&A Expenses (156.0) -5.6% (157.9) -5.3% 1.3% -0.3 p.p. Other Expenses (29.4) -1.1% (16.0) -0.5% -45.8% 0.6 p.p. Depreciation & Amortization 68.6. 2.5% 66.4. 2.2% -3.2% -0.3 p.p. EBITDA 885.2. 32.0% 950.3. 32.1% 7.3% 0.1 p.p. Non-Recurring / Non-Cash Exp. 27.1. 1.0% 32.0. 1.1% 18.1% 0.1 p.p. Adjusted EBITDA 912.3. 33.0% 982.3. 33.2% 7.7% 0.2 p.p. Financial Result (411.3) -14.9% (515.9) -17.4% 25.4% -2.5 p.p. Taxes (67.5) -2.4% (22.5) -0.8% -66.6% 1.6 p.p. Net Income 337.9. 12.2% 345.5. 11.7% 2.2% -0.5 p.p. 2015 Results (Continuing Operations) (R$ million)
45 45 2Q15 ∆2Q16 2Q16 Results (Continuing Operations) (R$ million) Net Revenues 724.3. 100.0% 807.1. 100.0% 11.4% - . Gross Profit 553.0. 76.4% 611.6. 75.8% 10.6% -0.6 p.p. Marketing Expenses (179.5) -24.8% (193.4) -24.0% 7.7% 0.8 p.p. Selling Expenses (97.6) -13.5% (103.3) -12.8% 5.9% 0.7 p.p. G&A Expenses (44.5) -6.2% (41.5) -5.1% -6.8% 1.1 p.p. Other Expenses (5.7) -0.8% 16.4. 2.0% - 2.8 p.p. Depreciation & Amortization 16.7. 2.3% 14.7. 1.8% -12.2% -0.5 p.p. EBITDA 242.0. 33.4% 305.0. 37.8% 26.0% 4.4 p.p. Financial Result (110.2) -15.2% (51.1) -6.3% -53.6% 8.9 p.p. Taxes (22.6) -3.1% (63.1) -7.8% -179.1% -4.7 p.p. Net Income 92.4. 12.8% 176.1. 21.8% 90.5% 9.0 p.p.
Net Debt Reduction (R$ million) 46 Net Debt / EBITDA*Debt Profile 3.9x 3.1x 2.9x 2.6x 1.7x -0.8x 2011 2012 2013 2014 2015 LTM Proforma 3T15 Gross Debt 1,918.1 Cash (1,836.1) Net Debt 82.1 Hedge (334.2) Net Debt after Hedge (252.2) (540.0) Net Debt after RB Deal (792.2) Remaining Proceeds from RB Deal 2Q16 * Until 2015, Adjusted EBITDA (EBITDA before non-recurring expenses and other non-cash expenses)
2016 guidance 47 EBITDA of Continuing Operations around R$1.1 billion
Company’s Main Tax Shields (1/4) 48 EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts Tax Shield Summary Source: Hypermarcas ¹ Federal tax credits are usable to pay any federal tax payment R$ Million Expense for Tax only Tax Rate Cash Value* Origin Goodwill 1.729 34% 588 - Acquisitions; Amortizable for tax purporses only - It does NOT impact the PnL, only the Cash Flow Income Losses 1.008 - Negative pretax due to Goodwill amortization Recoverable Taxes 280 - Withholding tax from investments - Credits from Acquisitions Total 1.876 * - Sum of future tax shields
Company’s Main Tax Shields (2/4) 49 EV/EBITDAP/E Cash flowReturns Source: Hypermarcas Net income Possible analysis impacts Goodwill amortization • Acquisitions • Reduces Pretax for Tax Purposes only (i.e. an extra expense for tax calculation) • Difference between P&L and Fiscal Authorities calculation is deffered • Earnings Release (Table with Remaining Goodwill Amortization for Tax Purposes) (R$ million) 2016 430 2017 555 2018 541 2019 198 2020 4 Total 1,729 Expense for Tax Purposes only; it does NOT impact P&L Tax Rate 34% Tax Shield 588 Reason Information source Effect 2Q16
Company’s Main Tax Shields (3/4) 50 Source: Hypermarcas Tax Credits from Income tax losses carry-forward (R$ Thousand) June 30, 2016 • Explanatory Note 23(a) – Quarterly Financial Statements EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts • Lower pretax due to goodwill amortization • It is actually an Tax credit (not another expense as goodwill amortization) • It pays up to 30% of Federal taxes due in a given year Tax Credit Reason Information source Effect 1,007,774 - 62,005 84,913 58,467 25,160 101,431 1,339,800
Company’s Main Tax Shields (4/4) 51 Recoverable Taxes EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts • Withholding tax from financial investments • Tax credits from acquisitions • It is actually a Tax credit (not another expense as Goodwill Amortization) • Can be used to offset Federal tax payments • Balance sheet (Recoverable Taxes) • Explanatory Note 13 – Quarterly Financial Statements Reason Information source Effect Tax Credit June 30, 2016 Federal Taxes¹ 280,216 172,966 259,583 107,250 539,799 Source: Hypermarcas; it includes continuing and discontinued operations
52 Phone: +55 (11) 3627-4242 ir@hypermarcas.com.br http://www.hypermarcas.com.br/ir
Backups
54 Consumer Health Improve retail space Before After Alphabetical Order • All drugs (OTC & Prescriptions) were mixed behind the counter • OTC is organized per category and “over the counter” • Sales increase • 30% in Value • 23% in Volume OTC behind the counter Counter removed
Retailers X Manufacturers 55 11 278 Manufacturer All Pharma Chains (>5 stores) # Companies (56% market share) Retail channel (% Sales) 46% 46% 46% 44% 54% 54% 55% 56% 2012 2013 2014 2015 All Pharma Chains (>5 Stores) Independent Sources: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Retailers with more than five stores are considered pharma chains. 25.3x 100%
Brazilian Pharma Retailers 56 Stores 87,0% 86,4% 86,1% 86,4% 13,0% 13,6% 13,9% 13,6% 2012 2013 2014 2015 All Pharma Chains (>5 stores) Independents Sources: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Pharma retailers with at least five stores are considered a chain. Sales 46,4% 46,0% 45,5% 44,4% 53,7% 53,9% 54,5% 55,6% 2012 2013 2014 2015 100% 100%
Apresentação Institucional - Set/2016

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Apresentação Institucional - Set/2016

  • 1.
  • 2.
    Disclaimer This release containsforward-looking statements that are exclusively related to the prospects of the business, its operating and financial results, and prospects for growth. These data are merely projections and, as such, based exclusively on our management's expectations for the future of the business and its continued access to capital to fund its business plan. These forward-looking statements substantially depend on changing market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors, as well as the risks shown in our filed disclosure documents, and are therefore subject to change without prior notice. As a goal to maintain a correlation with the Financial Statements prepared by its external auditors, the considerations and comments contained herein are prepared on a consolidated viewpoint of the economic group Hypermarcas, and not necessarily individualized by the various legal entities that compose the group. In addition, unaudited information herein reflects management's interpretation of information taken from its financial statements and their respective adjustments, which were prepared in accordance with market practices and for the sole purpose of a more detailed and specific analysis of our results. Therefore, these additional points and data must also be analyzed and interpreted independently by shareholders and market agents, who should carry out their own analysis and draw their own conclusions from the results reported herein. No data or interpretative analysis provided by our management should be treated as a guarantee of future performance or results and are merely illustrative of our directors' vision of our results. Our management is not responsible for compliance or accuracy of the management financial data discussed in this report. which must be considered as for informational purposes only, and should not override the analysis of our audited consolidated financial statements for purposes of a decision to invest in our stock, or for any other purpose. 2
  • 3.
    Agenda • Overview • BrazilPharma Market • Our Business • Financials 3
  • 4.
    Business overview 4 39% 30% 31% NetRev: R$3.1 bn Gross Margin: 74.1% RankingKeyfacts Branded Prescription Generics Consumer Health #1 Hypermarcas Aché EMS #2 Sanofi Sanofi Hypermarcas #3 Bayer Eurofarma Sanofi #4 Boehringer Novartis Novartis #5 Takeda Hypermarcas Teuto Revenue Breakdown Branded Prescription¹ Consumer Health Generics² Focus in Brazil Long experience Fast growing/ resilient market Diversified portfolio SOURCE: Company financials – 2Q16 LTM; IMS Health; Hypermarcas. ¹ Ex-patents. ² Generics includes Branded Generics.
  • 5.
    Ownership and listings ¹July 25, 2016 LTM ² July 14, 2016 ³ July 25, 2016 SOURCE: BM&F Bovespa; Hypermarcas 5 Listings • Sao Paulo Stock Exchange: - HYPE3 - BRHYPEACNOR0 • Indexes with Hypermarcas: • Ibovespa Index Ranking³: 35/59 • Trade volume¹: 2.9 MM shares/day • ADR (HYPMY)²: 6.4 MM shares outstanding • Market Cap³: R$16 B (USD5 B) Ownership structure 20.1% 14.8% 6.0% 59.1% Igarapava Participações S.A. Maiorem S.A. de C.V Other Controlling Shareholders Free Float Founder Free Float Maiorem Others Controlling Group 40.9%
  • 6.
    Agenda • Overview • BrazilPharma Market • Our Business • Financials 6
  • 7.
    Pharma market SOURCE: IMSHealth 7 2014 Trends 2019 1st United States 2nd China 3rd Japan 4th Germany 5th France 6th USD24 bn 7th Italy 1st United States 2nd China 3rd Japan 4th Germany 5th USD36 bn 6th France 7th Italy • Aging • Underdeveloped health system • Treatments’ low levels • Generics low penetration of generics (25% of market) • Peak in economically active population
  • 8.
    Low levels ofper capita consumption SOURCE: Organization for Economic Co-operation and Development (OECD), 2012 8 3,484 1,109 1,577 3,289 3,649 4,288 4,811 8,745 OECD Brazil Chile UK Japan France Germany USA Healthcare Expenditure per Country (USD/year) 7.9x
  • 9.
    SOURCE: IMS Health,as of 2014 9 The largest market in a fragmented region: Latin America #1 #2 #3 #4 #5 Brazil USD24,3 bn 53% Mexico USD9,7 bn 21% Argentina USD3,8 bn 8% Colombia USD3,8 bn 8% Chile USD2,2 bn 5%Others USD2,3 bn 5% Latin American Market Locals are dominant and focused in their markets Absence of strong regional leaders Brazilian Ranking EMS Teuto Aché Sanofi/Medley Hypermarcas
  • 10.
    Fast ageing ofpopulation SOURCE: IBGE 10 Population 60+ (MM people) CAGR 2.8% 14 20 29 42 54 66 74 8% 10% 14% 19% 24% 29% 34% 0% 5% 10% 15% 20% 25% 30% 35% 0 10 20 30 40 50 60 70 80 90 2000 2010 2020 2030 2040 2050 2060 1mm p.y.
  • 11.
    Potential for higherdrug consumption SOURCE: IBGE (Consumer Expenditure Survey 2008-09); Values readjusted by inflation (IPCA) to April 2016. 11 Prescription Drugs Expenditure (R$ per month / family) 205.2 198.2 134.1 99.7 73.1 60.0 46.4 70+ 60-69 50-59 40-49 30-39 20-29 10-19 4.3x
  • 12.
    Resilient market SOURCE: IMSHealth (PMB-PPP March 2016); IBGE 12 9.7% 10.7% 5.7% 3.5% 12.5% 9.8% 10.5% 12.6% 11.7% 11.6% 7.3% 3.1% 2013 2014 2015 2016 YTD Pharma Market Nominal GDP Retail Sales
  • 13.
    Retail pharma market 13 Business Segment Product Category Demand Driver Market Size Patents Branded Prescription Trade Direct toConsumer 5% 60% 17% 18% • RX with/without prescription retention • OTX • Dermocosmetics R$24.9BPhysicians • Over-the-counter • Nutritionals • Related products R$6.9BConsumer • Innovative patent protected R$2.3BPhysicians • Generics • Smart Generics R$7.7BPharmacist SOURCE: IMS Health Oct. 2015
  • 14.
    Retail pharma market #companies to reach 42% of market share Pharma Retail (% Sales) 42%58% Larger Retail Chain Smaller Retail Chain & Independent SOURCE: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Larger retail chains are the Abrafarma members. * Chains that are member of Brasil Pharma; also listed in Brazil. 75 K Point of Sales (POS) 14 67 K POS 6 K POS Larger Retailers (28) Companies listed in Brazil * * * Manufacturer (6)
  • 15.
    High entry barriers Regulator •Long approval process (3-5 years) • Strict control of manufacturers, products and retailers 15 Fragmented Distribution • Continental country (27 states; >200mm people) • ~70k point of sales • 18 larger chains • ~200 distributors Powerful Local Brands • All generics are branded at retail as most of the world (ex-US & Canada) 1960 2016
  • 16.
    Large and growingpharmaceutical market (R$ billion) SOURCE: IMS Health – PPP (June 2016). 16 30.9 34.0 37.2 42.1 2012 2013 2014 2015 CAGR 2012-15: 10.9%
  • 17.
    Agenda • Overview • BrazilPharma Market • Our Business • Financials 17
  • 18.
    39% 30% 31% Business overview *Excluding patents SOURCE: IMS Health – PMB-PPP; Hypermarcas – 2Q16 LTM 18 Hypermarcas Rank Market Share Growth Opportunities Consumer Health Generics Branded Prescription* #1 #2 #5 14.7% 14.2% 4.8% • Launch new product concepts through brand extensions • Improve retail space • Increase market presence, especially at retails chains • Improve portfolio coverage especially at high value products • Leverage on physicians visit network • Launch new products with untapped demand Revenue Breakdown Branded Prescription Generics Consumer Health
  • 19.
    Hypermarcas evolution 19 Sustainable growth with valuecreation Focus on Pharma (2016 onwards) Restructuring (2011 – 2015) Industry Consolidation (2007 – 2010) Embryo in Home Care & Food (2002 – 2006)
  • 20.
    Long experience inthe pharma market 20 1950 1970 1980 1990 2000 2010 20201960 1970 1953 1970s 1959 Strong brands with leadership, mainly in Prescription, OTC and Dermocosmetics OTC and Prescription brands with over 50 years in the market Most traditional brands in the Brazilian OTC market Leader in branded generics and with an incipient portfolio of generics, also expertise in the application for the registration of off-patent medication
  • 21.
  • 22.
    Consistent gains inmarket share SOURCE: IMS Health – PMB–PF (June 2016) 22 7.5% 8.0% 8.5% 9.2% 9.9% 10.5% 2010 2011 2012 2013 2014 2015
  • 23.
    5.9% 4.7% 4.1% 4.1% 3.4% 2.8% 2.7% 2.6% 2.4% 2.3% 65.0% Diversified revenue base SOURCE:Company data, 2015 23 Other products (Branded Presc.) (Generic) (Branded Presc.) (Branded Presc.) (Branded Presc.) (Consumer Health) (Branded Presc.) (Consumer Health) (Consumer Health) Top 10 Brands: ~35% sales (Consumer Health)
  • 24.
    Increasing importance ofinnovation 7.7% 8.4% 11.4% 17.7% 2012 2013 2014 2015 24 SOURCE: Company data, 2015. % Revenues from pharmaceutical products launched over the past 3 years. Innovation (% Net Revenues)
  • 25.
    Diversified distribution 25 SOURCE: CompanyData, 2016 • Continental country (27 states; 204mm people) • 28 large chains • ~230 distributors Brazil has a fragmented distribution 34% Direct Channel (51 clients) Indirect Channel (69 clients) 46% Distributor/ Wholesaler Retailer Warehouse Distributor delivers Hypermarcas takes orders Logistics Operation 19% (113 clients) 75,300 Stores Hypermarcas reaches 100% of POS in Brazil
  • 26.
    New Business Model 26 Branded Prescription Generics Consumer Health “Goto Market” Platform Innovation Platform • Business strategy • Execution control • Market Insights • Technical capability • Infrastructure • Global Network • Low cost operation • Strong demand generation • Broad distribution
  • 27.
    Large scale productionfacility 27 323,000 m2 land 120,000 m2 constructed area 3,700 employees Distribution Center Solids/ Raw Materials Quality Control Aerosol Efervecent Dermo Liquids Semisolids Injectables R&D PenicilinSolids Semisolids Liquids R&D
  • 28.
    High production capacity SOURCE:Hypermarcas, per year 28 Tablets, capsules, coated tablets, pills and effervescent 10 billion Injectable and ophthalmic 45 million Aerosols 11 million Liquids, creams, oils, ointments, lotions and jellies 276 million
  • 29.
    New Innovation CenterUnder Development 29 • Located in Alphaville – São Paulo • Total area of 4,000 m2 • Research with consumers and physicians • Development of new products • Start of operations: 4Q16
  • 30.
    Branded Prescription 30 Products Strategy Demand Driver •Drugs promoted to Physicians (OTC / RX) • Intensify therapeutic classes expansion • Physician prescription 39% 30% 31% Branded Prescription Generics Consumer Health Revenue Breakdown
  • 31.
    Branded Prescription Launch newproducts with untapped demand 31 Current Pending Approval Under Development Target 37% 75% 20% 16% Target Market (Retail) (R$ million) SOURCE: IMS Health; Hypermarcas Ps: Share of the market in value that Hypermarcas competes
  • 32.
    Branded Prescription Leverage onphysician visit network SOURCE: IMS Health (Factory Price); Hypermarcas 32 10.4% 1.1% 9.7% 11.9% 0.6% 2.7% 4.8% 87% 74% 85% 74% 78% 55% 69% Orthopaedics Psychiatry Dermatology Paediatrics Cardiology Gynecology General Practice Largest Specialties Physician Visitation (% of prescriptions; Value) Market Share Portfolio
  • 33.
    Branded Prescription Leverage onphysician visit network ¹ 2016 33 Physicians Coverage As % of total market demand Covered Specialties Visited Physicians Total Weighted Coverage 93%1 67% 62% • Leadership in Pain/Fever Pediatrics • Leader in Rx for Sun Protection and Corticoids Dermatology • Leverage “General Practice” (Addera/Tamarine) Gynecology • Asthma/Vitamins • Nutraceuticals/ Acne • Contraceptives Opportunities
  • 34.
    Branded Prescription Launch newproducts with untapped demand 34 SOURCE: IMS Health – PMB PF Oct15 YTD Concept • Hypovitaminosis D - Fractures - Muscular strength - Cardio diseases • Treatment dosage - Supplementation - Attack dosage 9 29 43 36 29 29 21 73 93 15 49 64 9 29 43 73 151 186 2011 2012 2013 2014 2015 2T16 LTM Pills (Mar-2014) Sell-Out (R$ million) 2016 Innovation GelCap.TabletGelCap.TabletGelCap.Tablet 1 cm 2 cm0 cm 2015 2016 2015 2016 2015 2016 Drops Pills Pills (Attack) CAGR 96%
  • 35.
    35 Branded Prescription Launch newproducts with untapped demand SOURCE: IMS Health – PMB PF Oct15 YTD 30% of Revenue from products launched in <1 Year +4pp Market Share +27% Demand • Faster renewal of portfolio • Line extensions Innovation • Increased demand team • Focus on POS operation • Proximity to patients Execution • Category gap coverage • Intensification in categories with lower share Diversification
  • 36.
    Consumer Health 36 Products Strategy Demand Driver •OTC • Sweeteners • Intensify brand extensions • Mass media 39% 30% 31% Branded Prescription Generics Consumer Health Revenue Breakdown
  • 37.
    SOURCE: IMS Health– PMB Oct’15 37 Consumer Health New products concepts through brand extensions Concept • High awareness • Stronger formulation • Product concept: “Good even for migraines” 31.7 30.0 30.1 14.3 2013 2014 2015 Sell-Out (R$ million) Doril 44.4 48%
  • 38.
    SOURCE: IMS Health– PMB Oct’15 38 Consumer Health New products concepts through brand extensions 145 171 2014 2015 18% Mkt share + 0.5 p.p. Sell-Out (R$ million)
  • 39.
    39 Consumer Health Improve retailspace Before After • All drugs (OTC & Prescriptions) were mixed behind the counter • OTC is organized per category and “over the counter” • Sales increase • 30% in Value • 23% in Volume
  • 40.
    Generics 40 Products Strategy Demand Driver • Generics(Large Chains) • Smart Generics (a.k.a. Similars; M&Ps) • Defend & grow selectively • Pharmacist recommendation 39% 30% 31% Branded Prescription Generics Consumer Health Revenue Breakdown
  • 41.
    SOURCE: IMS Health;Hypermarcas 41 52% 50% 38% 33% 31% 29% 15% 19% 33% Hypermarcas 2014 Hypermarcas 2015 Market Distribution Breakdown Large retail chains Mid-sized chains Independent Generics Increase market presence especially at retails chains
  • 42.
    42 Generics Improve portfolio coverageespecially with high value products Current Pending Approval Under Development Target 71% 91% 14% 7% Target Market (Retail) (R$ million) SOURCE: IMS Health; Hypermarcas Ps.: Share of the market in value that Hypermarcas competes.
  • 43.
    Agenda • Overview • BrazilPharma Market • Our Business • Financials 43
  • 44.
    44 * Calculado como EBITDA Ajustado dos últimos 12 meses 44 2014 ∆2015 Ps.: Margins calculated on total net revenues (except NR ex-3rd parties) Net Revenues ex-3rd Parties 2,733.4. 100.0% 2,954.7. 100.0% 8.1% - . Gross Profit 2,091.9. 75.6% 2,210.1. 74.8% 5.7% -0.8 p.p. Marketing Expenses (729.1) -26.3% 766.0. -25.9% 5.1% 0.4 p.p. Selling Expenses (360.1) -13.0% (383.5) -13.0% 6.5% - . G&A Expenses (156.0) -5.6% (157.9) -5.3% 1.3% -0.3 p.p. Other Expenses (29.4) -1.1% (16.0) -0.5% -45.8% 0.6 p.p. Depreciation & Amortization 68.6. 2.5% 66.4. 2.2% -3.2% -0.3 p.p. EBITDA 885.2. 32.0% 950.3. 32.1% 7.3% 0.1 p.p. Non-Recurring / Non-Cash Exp. 27.1. 1.0% 32.0. 1.1% 18.1% 0.1 p.p. Adjusted EBITDA 912.3. 33.0% 982.3. 33.2% 7.7% 0.2 p.p. Financial Result (411.3) -14.9% (515.9) -17.4% 25.4% -2.5 p.p. Taxes (67.5) -2.4% (22.5) -0.8% -66.6% 1.6 p.p. Net Income 337.9. 12.2% 345.5. 11.7% 2.2% -0.5 p.p. 2015 Results (Continuing Operations) (R$ million)
  • 45.
    45 45 2Q15 ∆2Q16 2Q16 Results(Continuing Operations) (R$ million) Net Revenues 724.3. 100.0% 807.1. 100.0% 11.4% - . Gross Profit 553.0. 76.4% 611.6. 75.8% 10.6% -0.6 p.p. Marketing Expenses (179.5) -24.8% (193.4) -24.0% 7.7% 0.8 p.p. Selling Expenses (97.6) -13.5% (103.3) -12.8% 5.9% 0.7 p.p. G&A Expenses (44.5) -6.2% (41.5) -5.1% -6.8% 1.1 p.p. Other Expenses (5.7) -0.8% 16.4. 2.0% - 2.8 p.p. Depreciation & Amortization 16.7. 2.3% 14.7. 1.8% -12.2% -0.5 p.p. EBITDA 242.0. 33.4% 305.0. 37.8% 26.0% 4.4 p.p. Financial Result (110.2) -15.2% (51.1) -6.3% -53.6% 8.9 p.p. Taxes (22.6) -3.1% (63.1) -7.8% -179.1% -4.7 p.p. Net Income 92.4. 12.8% 176.1. 21.8% 90.5% 9.0 p.p.
  • 46.
    Net Debt Reduction (R$million) 46 Net Debt / EBITDA*Debt Profile 3.9x 3.1x 2.9x 2.6x 1.7x -0.8x 2011 2012 2013 2014 2015 LTM Proforma 3T15 Gross Debt 1,918.1 Cash (1,836.1) Net Debt 82.1 Hedge (334.2) Net Debt after Hedge (252.2) (540.0) Net Debt after RB Deal (792.2) Remaining Proceeds from RB Deal 2Q16 * Until 2015, Adjusted EBITDA (EBITDA before non-recurring expenses and other non-cash expenses)
  • 47.
    2016 guidance 47 EBITDA ofContinuing Operations around R$1.1 billion
  • 48.
    Company’s Main TaxShields (1/4) 48 EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts Tax Shield Summary Source: Hypermarcas ¹ Federal tax credits are usable to pay any federal tax payment R$ Million Expense for Tax only Tax Rate Cash Value* Origin Goodwill 1.729 34% 588 - Acquisitions; Amortizable for tax purporses only - It does NOT impact the PnL, only the Cash Flow Income Losses 1.008 - Negative pretax due to Goodwill amortization Recoverable Taxes 280 - Withholding tax from investments - Credits from Acquisitions Total 1.876 * - Sum of future tax shields
  • 49.
    Company’s Main TaxShields (2/4) 49 EV/EBITDAP/E Cash flowReturns Source: Hypermarcas Net income Possible analysis impacts Goodwill amortization • Acquisitions • Reduces Pretax for Tax Purposes only (i.e. an extra expense for tax calculation) • Difference between P&L and Fiscal Authorities calculation is deffered • Earnings Release (Table with Remaining Goodwill Amortization for Tax Purposes) (R$ million) 2016 430 2017 555 2018 541 2019 198 2020 4 Total 1,729 Expense for Tax Purposes only; it does NOT impact P&L Tax Rate 34% Tax Shield 588 Reason Information source Effect 2Q16
  • 50.
    Company’s Main TaxShields (3/4) 50 Source: Hypermarcas Tax Credits from Income tax losses carry-forward (R$ Thousand) June 30, 2016 • Explanatory Note 23(a) – Quarterly Financial Statements EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts • Lower pretax due to goodwill amortization • It is actually an Tax credit (not another expense as goodwill amortization) • It pays up to 30% of Federal taxes due in a given year Tax Credit Reason Information source Effect 1,007,774 - 62,005 84,913 58,467 25,160 101,431 1,339,800
  • 51.
    Company’s Main TaxShields (4/4) 51 Recoverable Taxes EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts • Withholding tax from financial investments • Tax credits from acquisitions • It is actually a Tax credit (not another expense as Goodwill Amortization) • Can be used to offset Federal tax payments • Balance sheet (Recoverable Taxes) • Explanatory Note 13 – Quarterly Financial Statements Reason Information source Effect Tax Credit June 30, 2016 Federal Taxes¹ 280,216 172,966 259,583 107,250 539,799 Source: Hypermarcas; it includes continuing and discontinued operations
  • 52.
    52 Phone: +55 (11)3627-4242 ir@hypermarcas.com.br http://www.hypermarcas.com.br/ir
  • 53.
  • 54.
    54 Consumer Health Improve retailspace Before After Alphabetical Order • All drugs (OTC & Prescriptions) were mixed behind the counter • OTC is organized per category and “over the counter” • Sales increase • 30% in Value • 23% in Volume OTC behind the counter Counter removed
  • 55.
    Retailers X Manufacturers 55 11 278 Manufacturer AllPharma Chains (>5 stores) # Companies (56% market share) Retail channel (% Sales) 46% 46% 46% 44% 54% 54% 55% 56% 2012 2013 2014 2015 All Pharma Chains (>5 Stores) Independent Sources: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Retailers with more than five stores are considered pharma chains. 25.3x 100%
  • 56.
    Brazilian Pharma Retailers 56 Stores 87,0%86,4% 86,1% 86,4% 13,0% 13,6% 13,9% 13,6% 2012 2013 2014 2015 All Pharma Chains (>5 stores) Independents Sources: IMS Health World Review Conference 2016 (May 5, 2016; Dinâmicas e Perspectivas do Mercado Farmacêutico da América Latina e do Brasil); IMS PMB-PPP February 2016; Hypermarcas. Pharma retailers with at least five stores are considered a chain. Sales 46,4% 46,0% 45,5% 44,4% 53,7% 53,9% 54,5% 55,6% 2012 2013 2014 2015 100% 100%