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- 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 Hypera Pharma, 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 Brazilian Market Overview Hypera Pharma at a Glance Strategy and Opportunities Financials 3
- 4. Agenda Brazilian Market Overview Hypera Pharma at a Glance Strategy and Opportunities Financials 4
- 5. Brazil 22.8 bn 42% Mexico 9.6 bn 18% Argentina 7.0 bn 13% Colombia 4.5 bn 8% Chile 2.9 bn 5% Other 7.1 bn 13% Latin American Market (USD) SOURCE: IQVIA World Review Conference (Mar/2018) The largest market in Latin America with the highest real growth 5 1% 2% 2% 5% 7% Real Growth 1Q18 LTM
- 6. Fast-growing market, above Emerging Markets average SOURCE: IMS Health (Average Expected Growth) 5% 6% 6% 7% 7% 8% 8% 9% 12% RoW UK Global China Russia USA EM Brazil India Forecasted 2016-21 CAGR 6
- 7. Local players have been gaining market share in the retail market Multinationals Value (R$) Volume (Units) 7 58% 61% 64% 65% 67% 70% 42% 39% 36% 35% 33% 30% 2012 2013 2014 2015 2016 2017 50% 52% 54% 56% 58% 60% 50% 48% 46% 44% 42% 40% 2012 2013 2014 2015 2016 2017 SOURCE: IMS Health 2017
- 8. Retail 58.8 bn 70% Non Retail 24.9 bn 30% Retail market with relevant growth perspectives Retail Growth CAGR 2017-2021 8,4% Non-Retail Growth CAGR 2017-2021 5,4% Brazilian Market (BRL) SOURCE: IQVIA World Review Conference (Mar/2018)
- 9. RX1 36.8 bn 65% Generics 7.5 bn 13% OTC2 9.2 bn 16% Patents 3.4 bn 6% Brazilian Retail Pharma Market 9 SOURCE: IMS Health PPP Dec 2017, Market Size PPP and Units NOTE: (1) RX, OTX, Dermocosmetics and Branded Generics; (2) OTC and Sweeteners In BRL RX1 2.1 bn 53% Generics 1.3 bn 32% OTC2 0.5 bn 14% Patents 0.03 bn 1% In #Units
- 10. Fast ageing of population driving sustainable growth SOURCE: IBGE (2010), revised in 2018 Population 60+ (MM people) CAGR 2.8% 14 21 30 42 54 66 73 8% 11% 14% 19% 24% 28% 32% 0% 5% 10% 15% 20% 25% 30% 35% 0 10 20 30 40 50 60 70 80 90 2000 2010 2020 2030 2040 2050 2060 1mm Per year 10
- 11. Population ageing increases the “out of pocket” drug expenditure SOURCE: IBGE (2010); Values updated by inflation (IPCA) 200.4 193.6 130.9 97.4 71.4 58.6 45.4 70+ 60-69 50-59 40-49 30-39 20-29 10-19 4.4x 11 Prescription Drugs Expenditure (R$ per month / family) Age
- 12. Agenda Brazilian Market Overview Hypera Pharma at a Glance Strategy and Opportunities Financials 12
- 13. Hypera’s history 2007 - 2011 2012 - 2016 2017 - 2021 Industry Consolidation Business Restructuring Pharma Focus 13 Acquisitions of brands and companies at attractive valuations: Development of an outstanding go-to-market platform: • Largest and most productive Brazilian manufacturing site; • Highest production volume • Lowest cost producer • Most productive sales force at physicians • Lowest cost media buying • Most horizontal distribution (Mom&Pops/ Regional/Chains) • Largest field force at store level (>70% direct access) • Focus on the retail pharma market • Higher resilience • Underpenetrated markets • Untapped demand • Diversified portfolio • Higher Returns (ROIC/ROE) Focus on most attractive pharma sector: ~4x Total Return* in 10 years since IPO 123% 376% IBOV HYPE3 * Total return since the IPO until July 31st
- 14. Consumer Health 36% Consumer Health1 36% RX2 44% Generics 12% 8% Net Revenues: R$3.6bn Gross Margin: 74.5% 14 SOURCE: Company financials; 1OTC products and sweeteners; ²Branded Prescription Products and Branded Generics 2017 Portfolio Breakdown: Strong relevance of branded products Dermo Branded Products 88%
- 15. 8.3% 6.0% 4.1% 4.0% 3.7% 3.2% 3.2% 2.8% 2.7% 2.5% 59.5% 2017 Revenue breakdown per brand RX RX Dermo RX RX Consumer Health RX Consumer Health Consumer Health Top 10 Brands: ~40% salesConsumer Health 15
- 16. Pain and Fever 21% 25% Dermo 16% Resp3 10% 9% 3% GI5 2% Other 5% 2017 Revenue Breakdown by area SOURCE: Company financials; Branded Prescription and Branded Generics; 2General Practice; 3Respiratory System; 4Central Nervous System; 5Gastrointestinal Orthopedics GP2 and Pediatrics RX1 and Dermo Women/Men’s Health 3% CNS4 3% Endocrinology 3% Cardiology 16
- 17. 2017 Revenue Breakdown by area SOURCE: Company financials; 1OTC products and sweeteners Vitamins General Practice Orthopedics Nutraceuticals Other Consumer Health1 Nutritionals 17
- 18. 3 Business Units with growth, profitability and innovation targets Consumer/MediaDoctorsTrade/POS 18 Hypera Pharma is internally divided into 3 Business Units according to demand generation (POS, Doctors and Media)
- 19. Branded Prescription² 41% 30% 29% #1 Hypera Aché NC Farma #2 Sanofi Eurofarma Hypera #3 GSK Sanofi Cimed #4 Takeda Novartis Sanofi #5 Pfizer Hypera Eurofarma Ranking 2017 Revenue Breakdown 19 Branded Prescription Generics and Similars Consumer Health SOURCE: Company financials; IMS Health December/17; Company data 1OTC products and sweeteners; ²Ex-patents products promoted to physicians; ³Pure and Branded Generics promoted in the POS Consumer Health1 Generics and Similars³ 2017 Revenue and Market Position per Business Unit
- 20. Consistent performance in the Generics & Similars Business Unit Sell-out PPP (MM R$) 1,043 1,122 1,398 1,531 1,609 LTM Sep 13 LTM Sep 14 LTM Sep 15 LTM Sep 16 LTM Sep 17 SOURCE: IMS Health – PMB Sep 17 20 CAGR 11%
- 21. Some traditional generics with double-digit growth SOURCE: IMS Health – PMB Dec 17 1999 +9.2% YoY 1990 +15.2% YoY 2000 +10.5% YoY 1999 +16.6% YoY 1994 +78.2% YoY 2005 +12.3% YoY 2000 +12.1% YoY 1996 +11.1% YoY
- 22. Strong growth in the Prescription Business Unit Sell-out PPP (MM R$) 797 849 1,055 1,233 1,424 LTM Sep 13 LTM Sep 14 LTM Sep 15 LTM Sep 16 LTM Sep 17 CAGR 16% SOURCE: IMS Health – PMB Sep 17 22
- 23. Some of the main prescription brands SOURCE: IMS Health – PMB Dec 17 2008 +26.3% YoY 1961 +9.5% YoY 1992 +17.4% YoY 2000 +16.6% YoY 2003 +24.3% YoY 1959 +15.0% YoY 2006 +12.3% YoY 2014 +34.4% YoY 1978 +9.8% YoY
- 24. Improving Trends in Consumer Health NOTE: Market share in CH markets (Flu, Cough & Allergies, Digestive System, Pain & Fever, Vitamins & Supplements) SOURCE: IMS Health – PMB Sep 17 711 744 804 874 977 12% 24 CAGR 8% LTM Sep 13 LTM Sep 14 LTM Sep 15 LTM Sep 16 LTM Sep 17 Sell-out PPP (MM R$)
- 25. Leading and traditional Consumer Health brands SOURCE: IMS Health – PMB Dec 17 1959 +13.8% YoY 1980 +14.8% YoY 1969 +16.0% YoY 1981 +8.3% YoY 1973 +8.1% YoY 1972 +8.1% YoY 1914 +19.9% YoY 1977 +10.8% YoY 1961 +34.2% YoY 1957 +19.1% YoY
- 26. Transfer Order 30% How we sell: Diversified distribution • Continental country (27 states; ~200mm people) • 28 larger chains • ~230 distributors Fragmented distribution 36% Direct Channel Indirect Channel 34% DistributorRetailer Warehouse Distributor invoices&delivers Hypera takesorders 75,300 Stores Hypera reaches 100% of POS in Brazil SOURCE: Company Data, 2017 26
- 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 How we manufacture: Large scale production facility in Anápolis 27 Production Capacity per year: + 10 billion units of solids + 45 million units of injectable medicines + 275 million units of liquids, creams, oils and lotions Anápolis
- 28. How we innovate: Innovation Structure focused on growth and returns 28 • 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 R&D (Hynova) Consumer Health Branded Prescription Branded Generics
- 29. How we innovate: Unique innovation structure in Brazil • Maintenance of existing structure • Focus on improving and adapting the portfolio • Pharmaceuticals R&D - Anápolis • Launched in 2017 • 190 chemists and pharmacists, 26 Ph.D. professionals • Laboratories for Medicines, Dermo and Nutraceuticals • State-of-the-art equipment R&D - Hynova Consumer Insights Center • In process of expansion • Lots in semi- industrial size Pilot plant • Evaluation of the performance of products and packaging based on consumer acceptance and preference. Capacity 4 x higher29
- 30. How we innovate: Increasing importance of innovation 16% 19% 23% 24% 28% 2013 2014 2015 2016 2017 Innovation Index (% Net Revenue) Target: 35% SOURCE: Hypera Financials (% of Net Revenues from products launched over the past 5 years) 30
- 31. 1.7% 2.8% 4.2% 2015 2016 2017 R&D / Net Revenues 31 +2.5pp How we innovate: Increasing the commitment to R&D NOTE: Considers total R&D investments of the year (Expenses and Capitalization), excluding the “Lei do Bem” incentives
- 32. Agenda Brazilian Market Overview Hypera Pharma at a Glance Strategy and Opportunities Financials 32
- 33. • Grow 2-3 percentage points above the market • Maintain profitability • Maintain consistency of cash distribution to shareholders • Finance organic growth with operating cash flow • Maintain net debt close to zero OBJECTIVES 33 Strategic Plan 2017-2021
- 34. 34 • Innovation in underdeveloped markets • Launching brand extension • Being the “first mover” in launching new products • Increased focus in R&D and Partnerships Growth Strategy Innovation Sales & Marketing • Investments behind the leading brands • Promotion of prescription products • Go-to-market synergies • OTC category management Operations • Efficiency gains in manufacturing • Expansion of the manufacturing plant • Technological upgrade
- 35. R&D Innovation pipeline: Main focus on branded products Launch ANVISA Queue Develop- ment Waiting List R$ mm 52 316 31 301 91 1,112 48 970 222 2,700 R$ mm 15 126 10 235 11 266 20 297 Business Development (BD) 56 923 NOTE: 1Central Nervous System; 2Gastrointestinal; 3Potential revenue adjusted for risk and project phase in Dec/2017 Projects Quantity Projects Quantity Potential Revenue3 Potential Revenue3 Launch ANVISA Queue Contract Negotiation 35
- 36. Examples of recent launches developed internally (R&D) 36 Lisador Dip Colflex VitGlycare Biotônico (New flavors)Velunid Bones & Joints 2nd Quarter 2018 Anti-aging Glycolic Acid in Nanoparticles 1st Quarter 2018 Pain & Fever 1st Quarter 2018 Cardio Portfolio 1st Quarter 2018 Urby Vitamins 1st Quarter 2018 Anti-aging Mask 1st Quarter 2018
- 37. Ginecology 4th Quarter 2017 (License-in) Examples of recent launches in Business Development 37 Ofolato Trinida Colflex BioBifilac Adderitos Bones & Joints 2nd Quarter 2018 (Supply Agreement) Phytotherapeutic 2nd Quarter 2018 (License-in) Maracugina Vitamins 1st Quarter 2018 (Supply Agreement) Probiotics 2nd Quarter 2018 (License-in) Antiparasitic 2nd Quarter 2018 (License-in)
- 38. Growth Strategy: Launching extensions of leading brands SOURCE: IMS Health – PMB Dec 17 Sell-out (R$ million) 150 164 159 192 8 23 44 2014 2015 2016 2017 Benegrip Benegrip Multi 39 41 37 42 22 37 40 2014 2015 2016 2017 Doril Doril Enxaqueca 79 80 84 88 17 17 27 19 21 2014 2015 2016 2017 Liquid Pills Gel Caps CAGR 16.3% 183 172 236 111 97 128 96 74 63 82 150 39 CAGR 28.2% CAGR 10.1% 38
- 39. Growth Strategy: Being the “first mover”, especially in generics 1 2 – 5 6 – 10 > 10 Weight of the portfolio, in value # of competitors (Branded G. and Generics) 55% 26% 17% 2% Neo Química Profitability Focus: 1st to market and markets with high entry barriers 39 SOURCE: IMS Health – PMB Dec 17
- 40. SOURCE: Dunhhumby Anti-flu + Decongestant - YTD Sep 16 vs. 17 Example: OTC Category Management Growth Strategy: Improving POS distribution/execution 40
- 41. Probiotics Growth Strategy: Investing in underdeveloped markets in Brazil SOURCE: IMS PMB – Sep 17 – PPP / Mintel – Vitamins, Minerals and Supplements – US – Sep 17 Niche market, underdeveloped in the Pharma channel Great potential market: US$2.2 Billion Supplements R$440 Million in Brazil: Diarrhea and colic only Weight Loss Flavored for kids Chocolate w / Antioxidants Probiotics Chewable for kids Cholesterol 41
- 42. Growth Strategy: Launching of innovative treatments, such as Addera D3 SOURCE: IMS Health – PMB Dec 17 Developing new treatments Sell-out (MM R$) 36 29 29 30 36 122 169 175 26 80 2014 2015 2016 2017 Drops Pills Gel Caps CAGR 58.0% 224 151 284 72 New pharmaceutical forms/packaging: – Family 10,000 UI – Economic presentations 7,000UI 10 Pills – 10 weeks treatment 30 Pills – 30 weeks treatment • Strong efforts with Physician and Pharmacy • Exclusive gel caps 42
- 43. Agenda Brazilian Market Overview Hypera Pharma at a Glance Strategy and Opportunities Financials 43
- 44. 2.8 3.0 3.2 3.6 2014 2015 2016 2017 912 950 1,092 1,233 2014 2015 2016 2017 Financial Highlights 44 Net Revenues R$ bn EBITDA R$ mm Net Income R$ mm 338 346 647 1.112 2014 2015 2016 2017 CAGR 9% CAGR 10,5% CAGR 49%
- 45. 2017 Results (R$ million) GROS PROFIT R$2,711.7 +13.2%1 EBITDA2 R$1,232.5 +12.9%1 NET INCOME2 R$1,111.5 +71.7%1 EPS2,3 R$1.76 +70,7%1 NET REVENUES R$3,638.5 +12.7%1 | | | | | GROSS MARGIN 74.5% +30bps1 EBITDA MARGIN2 33.9% +10bps1 NET INCOME2 30.5% +1050bps1 | | | NOTE: 1 2017 vs. 2016; 2 Continuing Operations; 3 in R$ per share45
- 46. 1,348 1,522 846 933 (158) (54) 721 765 (80) (409) (822) 676 Gross Cash 2016 Operating Cash Flow CAPEX Intangibles Free Cash Flow 2017 Assets Sales Financing Cash Flow* Dividends Capital Reduction Gross Cash 2017 Gross Debt Net Cash 2017 Cash Flow and Debt 46 +5.8% vs 2Q17 0.7x LTM EBITDA +8,0% vs 2Q17 * Financing cash flow net of interest from financial investments
- 47. 2016 2017 2018 R$0.65 R$0.50 R$0.92 NOTE: It considers the dividends paid in the respective periods; Dividend Yield calculated based on the price of May 29, 2018 Dividend Yield: 1.8% 2.4% 47 Dividends/IOC CAGR 36% 3.4% 42% R$ per share
- 48. NOTE: ROE calculation is a result of the division of Continuing Operations Consolidated Net Income by the Consolidated Shareholders' Equity quarterly average of the year. ROIC calculation is a result of the division of Continuing Operations Consolidated NOPAT (Cash Taxes) by the Consolidated quarterly invested capital average of the year, excluding assets and liabilities for sale. 7.2% 14.0% 2016 2017 48 ROE & ROIC 15.4% 18.8% 2016 2017 ROE – Return on Equity ROIC – Return on Invested Capital
- 49. ¹ July, 2018 LTM ² July, 2018 ³ July, 2018 SOURCE: B3; Company data Ownership and listings Listings • Sao Paulo Stock Exchange: - HYPE3 - BRHYPEACNOR0 • Indexes with Hypera: Ownership structure Controlling Group 35% 49 20% 15% 65% Founder Free Float Maiorem • Trade volume¹: 2.2 MM shares/day • ADR (HYPMY)²: 9.2 MM shares outstanding • IBOVESPA Index Ranking³: 34/58 • Market Cap³: R$17.993 Bn (USD4.70 Bn)
- 50. Senior Management Organizational Chart Branded Prescription CEO BD & IR CCO & Legal Consumer Health Generics & Similars CFO HR Fiscal R&D Operations VP Sales & Mkt