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Apresentação Institucional Abril/2017

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Apresentação Institucional Abril/2017 RI

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Apresentação Institucional Abril/2017

  1. 1. Institutional Presentation April/2017
  2. 2. 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
  3. 3. Agenda • Overview • Brazil Pharma Market • Our Business • Financials 3
  4. 4. #1 Hypermarcas Aché NC Farma #2 Sanofi Eurofarma Hypermarcas #3 Takeda Sanofi Sanofi #4 Pfizer Novartis Cimed #5 J&J Hypermarcas Eurofarma Business overview 39% 30% 31% Net Rev: R$3.3 bn Gross Margin: 74.3% RankingKeyfacts Branded Prescription Branded Generics Consumer Health Revenue Breakdown Branded Prescription¹ Consumer Health Branded Generics² Focus in Brazil Long experience Fast growing/ resilient market Diversified portfolio SOURCE: Company financials – 2016; IMS Health Feb 2017; Hypermarcas. ¹ Ex-patents. ² Branded Generics includes Similars and Generics. 4
  5. 5. Agenda • Overview • Brazil Pharma Market • Our Business • Financials 5
  6. 6. Pharma market SOURCE: IMS Health (May 2016) 2014 Trends 2019 1st United States 2nd China 3rd Japan 4th Germany 5th France 6th USD24 bn 7th Italy 1st United States 2nd China 3rd Japan 4th Germany 5th USD36 bn 6th France 7th Italy • Aging • Underdeveloped health system • Treatments’ low levels • Generics low penetration of generics (25% of market) • Peak in economically active population 6
  7. 7. Main Markets Growth SOURCE: IMS Health (Average Expected Growth) 1% 1% 3% 3% 4% 5% 6% 6% 7% 7% 8% 8% 9% 12% France Japan Italy Spain Germany RoW UK Global China Russia USA EM Brazil India Forecasted 2016-21 CAGR 7
  8. 8. 50% 52% 54% 56% 58% 50% 48% 46% 44% 42% 2012 2013 2014 2015 2016 58% 61% 64% 65% 67% 42% 39% 36% 35% 33% 2012 2013 2014 2015 2016 Local Players Gains Market Share Multinationals Value (R$) Volume (Units) SOURCE: IMS Health 2016 8
  9. 9. Low levels of per capita consumption SOURCE: Organization for Economic Co-operation and Development (OECD), 2012 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
  10. 10. Latin American Market 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% SOURCE: Latin American Markets IMS Health (2014) The largest market in a fragmented region: Latin America Locals are dominant and focused in their markets Absence of strong regional leaders 10
  11. 11. Fast ageing of population SOURCE: IBGE (2010) 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
  12. 12. Potential for higher drug consumption SOURCE: IBGE (Consumer Expenditure Survey 2008-09); Values readjusted by inflation (IPCA) to February 2017. Prescription Drugs Expenditure (R$ per month / family) 200.4 193.6 130.9 97.4 71.4 58.6 45.4 70+ 60-69 50-59 40-49 30-39 20-29 10-19 4.4x 12
  13. 13. Retail pharma market Business Segment Product Category Demand Driver Market Size Patents Branded Prescription Trade Direct to Consumer 5.9% 54.9% 11.5% 22.2% • RX with/without prescription retention • OTX • Dermocosmetics R$28.5BPhysicians • Over-the-counter • Nutritionals • Related products R$5.9BConsumer • Innovative patent protected R$3.0BPhysicians • Generics (API) • Similars R$11.5BPharmacist SOURCE: IMS Health PPP Feb 2017 13
  14. 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. 75 K Point of Sales (POS) 67 K POS 6 K POS Larger Retailers (28) * Manufacturer (6) 14
  15. 15. High entry barriers Strict Regulator • Long approval process (3-5 years) • Strict control of manufacturers, products and retailers Fragmented Distribution • Continental country (27 states; >200mm people) • ~70k point of sales • 28 larger chains • ~230 distributors Powerful Local Brands • All generics are branded at retail as in most of the World (ex-US & Canada) 1960 2016 15
  16. 16. Resilient growth 2.0 2.3 2.5 2.8 3.3 3.7 2011 2012 2013 2014 2015 2016 CAGR 2011-16: 11.2% CAGR 2011-16: 13.2% 28.1 30.9 34.0 37.1 42.1 47.7 2011 2012 2013 2014 2015 2016 SOURCE: IMS Health – PMB-PPP (December 2016) 16
  17. 17. Agenda • Overview • Brazil Pharma Market • Our Business • Financials 17
  18. 18. 39% 30% 31% Business overview * Excluding patents SOURCE: IMS Health – PMB Feb 17 LTM; Hypermarcas – 2016 Rank Market Share Growth Opportunities Consumer Health Branded Generics Branded Prescription* #1 #2 #5 14.8% 14.7% 4.6% • 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 Branded Generics Consumer Health 18
  19. 19. Hypermarcas strategic development 2007 - 2010 2012 - 2015 2017 - 2020 Shareholder Value Industry Consolidation Business Restructuring Pharma Focus Cycle 1 Cycle 2 Cycle 3 19
  20. 20. Key objectives of strategic phases Industry Consolidation Business Restructuring Pharma Focus 2007 - 2011 2012 - 2016 2016 - 2020 • Acquisition of outstanding assets (brands/companies) at attractive valuations 1970s 1953 1959 1943 1970 20
  21. 21. Key objectives of strategic phases Industry Consolidation Business Restructuring Pharma Focus 2007 - 2011 2012 - 2016 2016 - 2020 • Developed “outstanding” Go-to-Market platform • Operations • Marketing • Distribution • Implemented successful product / market strategies with continuous market share gains • Successfully executed business portfolio “Churn” 21
  22. 22. 45% 59% 100% 55% 41% 2010 2013 2016 Successfully executed business portfolio “churn” • Materially improved capital structure • Concentrated on the most attractive Pharma business HPC Pharma Sale of Home Care & Food Sale of Cosmetics, Condoms & Diapers SOURCE: Hypermarcas (Net Revenue breakdown) 22
  23. 23. Developed the best Go-to-Market platform • Largest and most productive Brazilian manufacturing site • Highest production volume • Lowest cost producer • Most horizontal distribution - Mom&Pops - Regional - Chains • Largest field force at store level (>70% direct access) • Most productive sales force at physicians • Lowest cost media buying Distribution Operations Marketing Most Productive Lowest Cost Best Distribution 23
  24. 24. 3.30 2.99 2.66 2.46 1.71 Aché Teuto Medley EMS Hypermarcas Brazilian peers 1.4x 1.6x 1.7x 1.9x COGS per Unit (R$) SOURCE: Companies’ Financials 2015; IMS Health PMB – Units 24 Player 1 Player 2 Player 3 Player 4
  25. 25. Brazilian peers 0.8 0.9 1.2 1.9 Productivity R$ MM/Rep per Year SOURCE: IMS Health – PMB-PPP Oct 16 25 Player 1 Player 2 Player 3
  26. 26. EBIT Margin Brazilian peers SOURCE: Companies' Financials 2015. 12.1% 12.5% 13.9% 27.8% 29.9% União Química EMS Eurofarma Aché Hypermarcas 26 Player 1 Player 2 Player 3 Player 4
  27. 27. Market Share Evolution 7.5% 8.0% 8.5% 9.2% 9.8% 10.4% 2010 2011 2012 2013 2014 2015 SOURCE: IMS Health – PMB-PF Feb 17 LTM 27
  28. 28. Key objectives of strategic phases Industry Consolidation Business Restructuring Pharma Focus 2007 - 2011 2012 - 2016 2016 - 2020 • Focus on most attractive Pharma sector, leveraging on superior competitive advantage • Accelerate organic growth through more assertive “business innovation” • Further improve sales & marketing execution capabilities 28
  29. 29. Concentrated on most attractive Pharma business HighLow Low High Pharma Business Attractiveness • Aging of population • Resiliency • Untapped demand Competitive Position • #1 with leadership in many markets • Diversified portfolio • Most productive Go-to-Market platform Accelerate growth • Leverage on “outstanding” platform • Explore underpenetrated markets • Widen product offering 29
  30. 30. Segment the business in “Strategic Business Units” (SBUs) Segment Name Market Size “Direct to Consumer” #1 14.8% share • Brand portfolio • Merchandising capabilities • Media Buying Success Factor “Medical Community” “Trade” #5 4.6% share • Product innovation • Sales Force Productivity #2 14.7% share Consumer Health Branded Prescription Branded Generics Hyper Position R$5.9 B R$28.5 B R$11.5 B • Commercial policy flexibility • “Fast copier” • Distribution network SOURCE: IMS PMB Feb 17 LTM 30
  31. 31. New Organizational Structure 31 • Offer opportunities based on deep knowledge of global technology • Efficient innovation process and execution • Vertical integration of sales More focused field teams • Define innovation needs based on market insights and business strategy Innovation Capabilities Business Development Innovation Center (Hynova / Lumina) Consumer Health Branded Prescription Branded Generics
  32. 32. 6.8% 4.4% 4.2% 3.3% 4.1% 3.0% 2.7% 2.3% 2.9% 2.4% 63.8% Diversified revenue base SOURCE: Company data, 2016 Other products (Branded Presc.) (Branded Generic) (Branded Presc.) (Branded Presc.) (Branded Presc.) (Consumer Health) (Branded Presc.) (Consumer Health) (Consumer Health) Top 10 Brands: ~36% sales (Consumer Health) 32
  33. 33. Increasing importance of innovation 17.2% 16.0% 18.8% 23.0% 24.3% 2012 2013 2014 2015 2016 Innovation (% Net Revenue) Target: 30% SOURCE: Hypermarcas Sell-in (% Net Revenues; products launched over the past 5 years) Feb 17 33
  34. 34. Logistics Operation 15% (113 clients / 17 distributors) Diversified distribution • Continental country (27 states; 204mm people) • 28 larger chains • ~230 distributors Fragmented distribution 31% Direct Channel (51 clients) Indirect Channel (69 clients) 54% Distributor/ Wholesaler Retailer Warehouse Distributor delivers Hypermarcas takesorders 75,300 Stores Hypermarcas reaches 100% of POS in Brazil SOURCE: Company Data, 2016 (Feb 17) 34
  35. 35. Large scale production facility 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 35
  36. 36. High production capacity SOURCE: Hypermarcas, per year 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 Occupancy Rate 65% 36
  37. 37. Innovation: New Center • Located in Alphaville – São Paulo • Total area of 4,000 m2 • Research with consumers and physicians • Development of new products 37
  38. 38. Innovation: Availability of new active substances by country NOTE: New molecules launched between 2010 and 2014. Availability of molecules in 2015. SOURCE: IMS Institute for Healthcare Informatics, Dec 2015 128 108 102 88 83 79 73 67 61 60 58 41 USA Germany Great Britain Italy Japan Spain Canada France South Korea Mexico Polonia Brazil 170 new substances (2010-14) Business development - sourcing R&D Availability in December/2015 38
  39. 39. 1,621 467 1,154 Innovation: Significant R&D activity worldwide High potential for partnering in innovative products Late stage development or recently launched products Yes No “Go-to-Market” presence in Brazil • Fixed dose combinations • Extended release • Inhalation devices • Transdermal patches • Nano-tech • Quick release • Sub-lingual • ODT • Oral films • Others 70% SOURCE: Thomson Reuters (Cortellis) and Hypermarcas 39
  40. 40. Innovation: growth of Brazilian pharma companies NOTE: ¹ Adjusted by inflation. ² Considers products launched before 2008. ³ Considers products launched between 2008-2015 SOURCE: IMS Health - PMB Retail • Negative performance of legacy portfolio • Growth comes from new products -0.8% 7.9% 1 CAGR 11.9 -0.3 3.0 14.6 2012 Legacy New products 2015 2 3 40
  41. 41. Launch preparation Development and / or Negotiation Business Case Building Idea Generation Creation Order 41 Executives Directors (individually) Innovation Comittee Business Committee CEO (Meetings as needed) Process Leader Innovation Manager Innovation Management OD: P&D -- ON: Business development Product Manager and Project Manager (PMO) Order of Devel. or Negotiation ODs and ONs Priorization Release Order Sell – in Product strategy review Approval / revision forum Executive Committee Monitoring Committee Innovation: professional process
  42. 42. Branded Prescription Products Strategy Demand Driver • Drugs promoted to Physicians (OTC / RX) • Intensify therapeutic classes expansion • Physician prescription 39% 30% 31% Branded Prescription Branded Generics Consumer Health Revenue Breakdown 42
  43. 43. Ranking #1 #2 #3 #4 #5 4.6% 5.4% 6.3% 6.7% 9.6% 11% 18% 17% 12% 19% 21% Market Share Growth YoY Total Market Company Branded Prescription Market Positioning SOURCE: IMS Health – PMB-PPP Feb 17 LTM 43
  44. 44. 1.9 0.8 0.9 1.2 750 1,300 1,900 2,300 NC - Farma Eurofarma Aché Team size # representatives Productivity R$ MM/Rep per Year Branded Prescription Productivity of medical reps team SOURCE: IMS Health – PMB-PPP Oct 16 44 Player 1 Player 2 Player 3
  45. 45. • Antihypertensives • Antidepressants • Antibiotics • Analgesics • Anti-inflammatory • Photoprotection • Moisturizing • Anti-aging Skincare 11% Skincare 21% Chronic 63% Chronic 29% Acute 26% Acute 50% MARKET HYPERMARCAS R$27.6bn R$1.3bn Growth YoY Growth YoY +14% +13% +11% +28% +11% +28% Market Relevance Relevance +13% Acute Chronic Skincare +18% Therapeutic class examples Branded Prescription Portfolio Composition SOURCE: IMS Health – PMB Dec 16 45
  46. 46. Rank Company Market Share Growth YoY #1 16.9% 19% #2 9.0% 10% #3 9.0% 11% Total 100.0% 13% Rank Company Market Share Growth YoY #1 7.8% 21% #2 7.3% 12% #15 2.2% 33% Total 100.0% 13% Rank Company Market Share Growth YoY #1 33.5% 19% #2 13.3% 28% #3 11.9% 3% Total 100.0% 11% Acute Chronic Skincare Branded Prescription Portfolio & competitive position SOURCE: IMS Health – PMB Dec 16 46
  47. 47. Marketing / Conceptual • New treatment concept: attack (50,000 ui) and maintenance (7,000 ui & 1,000 ui) Pharmaceutical Form • Pills • Gel caps 4 5 5 7 8 9 9 10 12 12 10 9 9 8 7 7 8 7 7 7 8 7 4 12 20 20 25 36 41 39 41 48 41 8 18 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q SOURCE: IMS Health Sell-out PPP R$ MM Type of innovation Hyper Marketing / Conceptual • Importance of Hypovitaminosis D treatment • Medical visitation Pharmaceutical Form • Liquid Pharmaceutical Form Soft Gel Caps • Modernity & innovation • Easy swallowing • Size reduction • Exclusivity 7,000/50,000UI • Preferred by 70% patients Drops Pills Gel caps Branded Prescription Taking Addera D3 to a new leve cm 47 2011 2012 2013 2015 20162014 66 64 48 46 48 44 32 2728 21 13
  48. 48. SOURCE: IMS Health - PMB Retail PF (Feb/17) & internal analyses InfantAdult Consumer • Media campaign • Packaging relaunch • Unique identity • + Impact • + Visibility • Launch of blister x 3 POS • 50% increase in channel investments Medical demand • Valuing prescription and shielding • Co-promotion: 2 teams POS • Better exposure • Winter campaign with flu-symptom drugs Alivium demand evolution – Sell-out (R$ MM) 11% 3% -7% -3% 5% 0% 27% Growth YoY Branded Prescription Alivium positive conversion 19 22 19 20 20 22 20 22 4 5 4 4 4 5 9 9 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Liquid Pills 48 31 29 27 2424 23 27 23
  49. 49. -1% 1% 17% 19% 27% SOURCE: IMS Health – PMB Oct’16 ¹ Dermocosmetics market growth: 8.9% Highest Growth Rates (LTM Oct/16 - PPP) • Innovation - Fast launches - Attractive/innovative products • Diversification - Portfolio renewal (cleansing, moisturizing, anti- aging) - Entrance in new markets • Execution - Expansion of demand team - Focus on POS execution Branded Prescription Skin Care – Important growth driver 49
  50. 50. 1% 11% 1% 10% 12% 1% 3% 5% Ophthalmics Orthopaedics Psychiatry Dermatology Peadiatrics Cardiology Gynecology General Practice Market share (% R$ PF) 93% 87% 74% 85% 74% 78% 55% 69% SOURCE: IMS Health (Oct/2016); Hypermarcas Main visited specialties Current portfolio Future pipeline opportunities Branded Prescription Portfolio optimization by therapeutic classes Visitation coverage (% of prescriptions – R$ PF) 50
  51. 51. Products Strategy Demand Driver • OTC • Sweeteners • Intensify brand extensions • Mass media 39% 30% 31% Branded Prescription Branded Generics Consumer Health Revenue Breakdown Consumer Health 51
  52. 52. 52 Ranking Company Market Share Growth YoY #1 #2 #3 #4 #5 Total CH Sell-out SOURCE: IMS Health – PMB-PPP Fev 17 LTM 14.7% 14.3% 6.7% 5.9% 5.7% Consumer Health Market positioning 9.6% 8.1% 5.9% 6.4% 1.8% 6.3%
  53. 53. 53 CosmeticsFood Dermo- cosmetics Nutra- ceuticals Nutri- tionals Pharmaceuticals • Safe and well tolerated • Simple dosages • Fast relief of minor symptoms • Ease of access • Good distribution • Wide range of options • Affordable prices Self Care Universe Characteristics POSCommunication Education & Knowledge Consumer Health Business scope
  54. 54. 54 2012 2013 2014 2015 2016 6.7% SOURCE: IMS PMB-PPP Feb 17 • More stable market • Unfavorable regulation • Products • POS • Hyper portfolio focused on more mature categories CAGR 12-16 Consumer Health 9.7% Consumer Health Hypermarcas sell-out evolution
  55. 55. 41% 89% 37% 6% 22% 5% MARKET HYPERMARCAS Growth YoY 6.4% -9.6%16.2% 18.7% 10.8% 11.1% Share of the Market Share 10.3% 9.7% Main Markets Development Mature Attack Mature Leadership • Vitamins & Supplements • Nutraceutics • Probiotics • Antispasmodics • Muscle relaxant • Antiflatulants • Analgesics • Gastro • Flu Symptoms Development Mature Attack Mature Leadership Mature market, Hyper share >14% Mature market, Hyper share <5% Dynamic market, Hyper share <5% Growth YoY SOURCE: IMS Health – PMB Oct 16 Consumer Health Portfolio composition 55
  56. 56. Development Rank Company Market Share #1 17.6% #2 13.7% #3 10.8% #6 3.6% Total 100.0% Mature Attack Rank Company Market Share #1 13.6% #2 12.0% #3 9.5% #11 2.7% Total 100.0% Mature Leadership Rank Company Market Share #1 29.8% #2 19.0% #3 12.9% #4 10.6% Total 100.0% Development Mature Attack Mature Leadership SOURCE: IMS Health – PMB Oct 16 Consumer Health Portfolio & competitive position 56
  57. 57. SOURCE: IMS Health PMB – PPP LTM Out’16. Gastro 32.2% Tranquilizers 35.0% Antihemorrhoids 36.2% Laxatives 41.3% Flu Symptoms 73.0% Antiseptics 75.2% Market Size (R$ MM) 387 41 249 23 73 654 BrandsMarket Share 1st Consumer Health Mature products – Hyper leadership market 57
  58. 58. Topical Pain Relief Antispasmodics Supplements Infant Vitamins Nutritionals Adult Vitamins MarketHypermarcas Portfolio Extension SOURCE: IMS Health – PMB Oct’16 Consumer Health Innovation 58
  59. 59. SOURCE: IMS Health – PMB Feb 17 Consumer Health New products concepts through brand extensions Concept • High awareness • Stronger formulation • Product concept: “Good even for migraines” 29.3 28.2 29.7 31.7 14.3 31.5 2013 2014 2015 2016 Sell-Out (R$ million) 124% 63.2 44.0 59
  60. 60. SOURCE: IMS Health – PMB Feb 17 Consumer Health New products concepts through brand extensions 116 128 133 7 20 2014 2015 2016 Benegrip Benegrip Multi 32% Mkt share + 0.5 p.p. Sell-Out (R$ million) 153 135 60
  61. 61. Specialist Team CH Focus on execution Resources Optimization Grow Weighted Distrib. Verticalization of the Sales & Merchandising Teams Convert Market Share in POS space via block exposure of brands Consumer Health Distribution 61
  62. 62. Pilot Project – Extrafarma Before After Category Management – Education & Expansion SOURCE: IMS Health – PMB Oct 16 Consumer Health Distribution 62
  63. 63. Products Strategy Demand Driver • Generics (Large Chains) • Similars (Independent) • Defend & grow selectively • Pharmacist recommendation 39% 30% 31% Branded Prescription Branded Generics Consumer Health Revenue Breakdown Branded Generics 63
  64. 64. #1 #2 #3 #4 #5 SOURCE: IMS Health – PMB - PPP LTM Feb/17 Similars & Generics Companies Market Share CAGR 2012-16 25.3% 6.0% 6.9% 8.4% 13.6% 21.3% 17.7% -7.3% 13.1% 8.1% Branded Generics Outstanding position with solid evolution 64
  65. 65. 888 1,049 1,192 1,435 1,553 2012 2013 2014 2015 2016 SOURCE: IMS Health – PMB - PPP Feb 17 CAGR 15% R$ MM Branded Generics Sell-out demand evolution 65
  66. 66. SOURCE: IMS Health – PMB - PPP Feb 17 Similars Generics 288 359 419 550 602 2012 2013 2014 2015 2016 CAGR 20% 600 690 773 886 951 2012 2013 2014 2015 2016 CAGR 12% R$ MM Branded Generics Sell-out demand evolution 66
  67. 67. GenericsSimilars SOURCE: IMS Health - PMB- PF LTM Feb/17 Market Share #1 19.2% #2 17.3% #3 14.4% #4 5.7% #5 5.5% Market Share #1 28.0% #2 13.7% #3 11.8% #4 10.9% #5 8.0% Branded Generics Ranking by market segment 67
  68. 68. SOURCE: IMS Health - PMB 1st Sildenafil 3rd generics market Orlistat 5th generics market Torsilax 4th biggest market Neosoro 1st product by units Doralgina 5th OTC market Losartan 1st generics market GenericsSimilars Branded Generics Leadership in main molecules 68
  69. 69. 70% 5% 6% 7% 88% TotalUnder development 2021-23 Launches 2019-20 Launches 2017-18 Current portfolio Strategy: • 1st to market • High-barrier markets • High-potential markets SOURCE: IMS Health – PMB – PF LTM Jun/16 Branded Generics Pipeline opportunities 69
  70. 70. 2nd generic version of the market Launched in 2016 Reference: Lasix Line extension 1st half 2017 Reference: Sotacor Escitalopram Furosemide Sotalol 2nd generic version of the market Launched in 2016 Reference: Selozok 2nd generic version of the market 1st half 2017 Reference: Nebilet Metoprolol Succinate Neolefrin Biggest “controlled drugs” market Launched in 2016 Reference: Lexapro Branded Generics Main short-term launches 70 Nebivolol Biggest OTC-Similar market Launched in 2016 Reference: Naldecon
  71. 71. Market Relevance 53% 25% 23% 46% 21% 33% SOURCE: IMS Health - ED Large chains Mid-sized chains Independent retail Branded Generics Channel opportunities 71
  72. 72. SOURCE: IMS Health – PMB-PPP LTM Jun/16 21.5% 17.5% 14.4%14.0% 9.3% NORTHNORTHEASTSOUTHEASTMIDWESTSOUTH Market Share 14.5% Branded Generics Regional opportunities 72
  73. 73. Brand awareness and use 27% 54% 80% 96%Knows Tried Uses Regularly Uses frequently Brand with lowest level of rejection ¹ Average of 5 largest competitors SOURCE: Nationwide quantitative survey 87% 44% 68% 24% AVG leaders¹ Branded Generics Well-known brand with loyal consumers 73
  74. 74. Base Inventory Price Point ExposureTraining Field team: • +100 employees Coverage: • ~20% POS • ~50% of sell-out demand Branded Generics POS execution 74
  75. 75. Price, base inventory & exposure reviewed SOURCE: IMS Health – MDTR (Moving quarterly average , Sell-out – PMB PF) Doralgina sell-out evolution – National large chains +26% Branded Generics POS execution – Doralgina 75
  76. 76. The Brazilian Family’s Medicine “ We dedicate all of our efforts to provide more health and wellness so that everyone can fully enjoy happy moments with their families” TV | Radio | Print media | Digital | PDV Branded Generics Action plan: new media campaign 76
  77. 77. Agenda • Overview • Brazil Pharma Market • Our Business • Financials 77
  78. 78. 78 2015 ∆2016 Net Revenues 2,956.6. 100.0% 3,288.7. 100.0% 11.2% - . Gross Profit 2,210.1. 74.8% 2,442.0. 74.3% 10.5% -0.5 p.p. Marketing Expenses (766.0) -25.9% (810.1) -24.6% 5.8% 1.3 p.p. Selling Expenses (383.5) -13.0% (413.5) -12.6% 7.8% . 0.4 p.p. G&A Expenses (157.9) -5.3% (153.8) -4.7% -2.6% 0.6 p.p. Other Expenses* (16.0) -0.5% (25.0) -0.7% 56,3% -0.2 p.p. Depreciation & Amortization 66.4. 2.2% 64.2. 2.0% -3.4% 0.2 p.p. EBITDA* 950.3. 32.1% 1,106.4. 33.6% 19.2% 1.5 p.p. Financial Result (515.9) -17.4% (192.1) -5.8% -62.8% -11.6 p.p. Taxes (22.5) -0.8% (202.4) -6.2% 798.9% -5.4 p.p. Net Income 345.5. 11.7% 674.5. 20.5% 95.2% 8.8 p.p. 2016 Results * It excludes reimbursement agreement signed with the Company’s former Corporate Relations officer78
  79. 79. Net Debt Reduction (R$ million) Net Debt / EBITDA¹Debt Profile 3.9x 3.1x 2.9x 2.6x 1.7x -1.6x -0.3 x 2011 2012 2013 2014 2015 LTM Proforma K Red., Divid. & Buyback 3T15 Gross Debt 907.6 Cash (1,348.0) Net Debt (440.4) Hedge (351.5) Net Debt after Hedge (792.0) 4Q16 ¹ Until 2015, Adjusted EBITDA (EBITDA before non-recurring expenses and other non-cash expenses) ² Buybacks considers a average of R$ 28.00/share. Diapers Deal (1,000.0) Cap. Red., Divid. & Buybacks² 1,511.4 Proforma Net Debt (280.6) 79
  80. 80. Dividends R$0.50 R$0.60² R$0.05¹ Paid in 2016 Paid in 2017 R$0.65 R$0.50 30% Ps.: 2017 YTD. Dividend Yield calculated with average stock price; 2017 refers to Feb 16, 2017 YTD. ¹ To be paid in Feb 24, 2017. ² To be paid after the approval on 2017 Annual Shareholders Meeting. Dividend Yield: 1.9% 2.4% 80
  81. 81. R$0.65 Dividends & Capital Reduction R$ 0.50 R$0.60 R$ 0.05 R$1.30 Paid in 2016 Paid in 2017 ¹ Paid in Feb 24, 2017. ² To be paid after the approval on 2017 Annual Shareholders Meeting. Capital Reduction Dividends 30% R$1.95 81
  82. 82. Company’s Main Tax Shields (1/4) EV/EBITDAP/E Cash flowReturns Net income Possible analysis impacts Tax Shield Summary Source: Hypermarcas ¹ Federal tax credits are usable to pay any federal tax payment R$ Million Expense for Tax only Tax Rate Cash Value* Origin Goodwill 1,299 34% 442 - Acquisitions; Amortizable for tax purporses only - It does NOT impact the PnL, only the Cash Flow Income Losses 965 - Negative pretax due to Goodwill amortization Recoverable Taxes 208 - Withholding tax from investments - Credits from Acquisitions Total 1,615 * Cash impact sum of tax shields 82
  83. 83. Company’s Main Tax Shields (2/4) 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) 2017 701 2018 452 2019 145 Total 1,299 Expense for Tax Purposes only It does NOT impact P&L Tax Rate 34% Tax Shield 442 Reason Information source Effect 4Q16 83
  84. 84. Company’s Main Tax Shields (3/4) Source: Hypermarcas Tax Credits from Income tax losses carry-forward (R$ Thousand) December 31, 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 964,873 - 68,155 67,093 58,468 21,398 130,899 1,310,886 84
  85. 85. Company’s Main Tax Shields (4/4) 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 December 31, 2016 Federal Taxes¹ 207,896 128,679 254,537 79,217 462,433 Source: Hypermarcas; it includes continuing and discontinued operations 85
  86. 86. 20% 15%65% Igarapava Participações S.A. Maiorem S.A. de C.V Other Controlling Shareholders Founder Free Float Maiorem Ownership and listings ¹ March 27, 2017 LTM ² March 27, 2017 ³ March 27, 2017 SOURCE: BM&F Bovespa; Hypermarcas Listings • Sao Paulo Stock Exchange: - HYPE3 - BRHYPEACNOR0 • Indexes with Hypermarcas: • Ibovespa Index Ranking³: 30/58 • Trade volume¹: 2.8 MM shares/day • ADR (HYPMY)²: 6.4 MM shares outstanding • Market Cap³: R$18.34 B (USD5 B) Ownership structure Controlling Group 35% 86
  87. 87. Phone: +55 (11) 3627-4242 ir@hypermarcas.com.br http://www.hypermarcas.com.br/ir 87

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