Developing an OTC Business using BD&L Resources

Dan Thomas, Chief Corporate Development Officer, Alliance Pharma

3rd March 2017

1

Background to Alliance Pharma

Started in 1998 as a specialty pharma company, using a Buy and Build model

Strong track record of 32 acquisitions in 18 years, building up a portfolio of over

90 products

Sales mainly in Western Europe, but also in 90+ other countries

Balanced portfolio of non-promoted and actively promoted brands

Infrastructure made up of:

Group activities headquartered in UK

Europe - direct presence in UK, Germany, France, Italy, Spain and Ireland

Far East – direct presence in Shanghai for China and Singapore for SE Asia

Other countries via distribution partners

Virtual operating model: manufacturing, warehousing and logistics outsourced

Key therapy areas of interest: dermatology; mother and child; ophthalmology

Sales currently £97.5m (FY2016); c.180 people

No R&D – products sourced from outside organisation

Building the OTC Business – by BD&L

3

2006 2012 2016

Sales £17.3m

50 people

30 products

Mostly Rx

Sales £44.9m

70 people

60 products

Sales £97.5m

180 people

90 products

50% Consumer

Marketing

Investment

Consumer Healthcare Promoted Brands

4

Buy & Build - acquisitions over past 10 years

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Pavacol D

£0.6m

Buccastem

Timodine

£7.5m

Cambridge

£16.4m

Quinoderm

Ceanel

£1.5m

Rizuderm +

5 Products

£2.4m

Anbesol

Ashton &

Parsons

£2.26m

Opus

£8mLypsyl

£1.9m

Syntometrine

(excl. UK)

£7.5m

Irenat

(Germany)Forceval

China

£1.95m

MacuShield

£5.5 - 11.5m

Antimalarials

£4.2m

32 deals in 18 years

Sinclair

£127.5m

Diclectin UK

£1.5m

Diclectin EU

£1.0m

Sinopharm

£1.4m

5

Consumer product deals

Starts with finding the Opportunities

Constant Networking & Relationship Building

Presenting Alliance at face to face meetings

Conferences

Industry associations & licensing clubs

Telephone contact

Agents, brokers, advisors, intermediaries

Direct mailing

Hosting group events, e.g. workshops, training days

Business Insights & Analysis

Sales audits / databases, e.g. IMS, IRI

Targeted searching, corporates and assets

Industry intelligence on deals, e.g. MedTrack,

DataMonitor, MergerMarket, etc

Web, reports, journals, e.g. OTC Bulletin

Government directories, hubs

6

OTC Portfolio Deals

7

Jun ‘06 $17B Listerine, Nicorette, Sudafed, Zyrtec US

July’ 04 $2.9B Aleve, Bepanthen, Rennie

Oct ‘14 $14.2B Claritin, Coppertone, MiraLAX, Afrin

Nov ‘16 $14B Chapstick, Advil ?

Mar’15 $20B Asset Swap JV

8

Opportunities!

Deal Machine Productivity

Screening

90

First Pass Review

55

Final

Offer

Early Evaluation

25

Due Diligence

10

NBO

17

35

8

5

Numbers are annual averages

Funding &

LegalIntegration

5

3 deals

Due Diligence

10

NBOs

17

First Pass

55

90 opportunities

2

7

30

3

9

DD Team – Risk Review

Project Manager

External SA&O

External

Legal

External

Finance

External

Commercial

External

HR

External

Other

Director AnalystFinance

Manager

DD

Co-ordinator

Commercial SA&O Finance Legal HR

Corp

Dev

Wider

Orgs’n

External

10

Target Opportunities

Seeking deals that meet our criteria of:

Dermatology, mother & child, ophthalmology focus therapy areas

Leverage our larger-scale platform

Bedrock: stable sales, limited support costs, limited competition, low risk

Growth: growth possible at economic returns and acceptable marketing risk

Assets or Corporates

Deal-type may be:

Bolt-on acquisitions

Licensing

Transformational deals

Innovative transactions & low-risk development

11

Critical Success Factors

Effective scouting

Select the right targets – effective screening, DD

Sound business case - selective re-investment with good economic

justification - right budget, talent and organisational support

Transition planning – effective integration

Market research and audit (unlocking hidden potential)

Marketing planning and execution

Manage the supply chain and compliance

12

Opportunities

& Risks

Alliance has a Balanced Portfolio

Bedrock: core portfolio of established products

Non-Promoted

c.50%

Dermatology

Kelocote

Hydromol

Promoted

Mother & Child

Ashton & Parsons

Anbesol

Diclectin

MolluDab

Promoted

Opthalmology

MacuShield

Promoted

Breathing Life into Medicines…

14

Case StudiesAshton & Parsons Infant Powders

Reckitt Benckiser – March 2011

Merger anti-competition deal following SSL International

£0.8m sales at acquisition; £1.9m in 2016

UK rights

Lypsyl

Novartis Consumer Health – Dec 2013

Pre-GSK/Novartis JV deal ‘tidy up’

c.£1.2m sales at acquisition (09/13)

UK and ROI rights

Macushield

MacuVision – Feb 2015

Small corporate. £2.7m sales at acquisition; £5.3m in 2016

UK + Europe, Russia, NZ, Australia, RSA

Kelo-Cote

Sinclair – Dec 2015

Transformational deal

Sales of £7.5m at acquisition; £10.1m in 2016; now our largest consumer brand

Global

15

Optimisation

16

Commercial & Operations

Talent, Organisation

Promotion

Distribution

Technical

Product

Pricing

•Awareness

•Creative, branding

•Digital

•Web, TV

•Ceuta partnership

•Grocery

•OTIF

•Proactive

•Supply chain pricing

•Packaging

•Variants

•NPD

•New equipment

•New CMO TT

•New formulations

•Deliver Value

•Limited

control cf Rx

but market

thresholds

apply

17

Ashton & Parsons®

Infant Powders

Ashton & Parsons Infants’ Powders

Indicated for the relief of teething pain and symptoms

associated with teething

Ingredients: Tincture of matricaria (German Chamomile)

Natural/Herbal positioning – Traditional Herbal Remedy (THR)

Suitable from 3 months

Pack Sizes: 20 sachets & 30s

Challenges

Supply security – production machines needed upgrading

Only sold through Boots

Low supply led to erratic selling and reselling patterns online-

highlighted the ongoing product demand

Dossier was pre-THR

18

150 Years of Teething

19

1867

Originally

developed by

Ashton &

Parsons,

Pharmacy in

London City

Sold to the

Beecham’s

Group Ltd

Acquired by

Reckitt

Benckiser

from SSL

International

Acquired by Alliance from RB

(along with Anbesol), with

knowledge of declining

manufacturing capacity and

investment requirement

1935 20102009

Sales of £1.2m

(1.1m units)

2011

20

April 1939

Breathing Life into Medicines

21

2012

Alliance invests in new

machinery leading to 6 month

stock out and erratic stock

production until Q1 2014

2014 2015

A&P is re-categorised

as a THR

A&P stock issues: Teetha

takes market share

Alliance launch ‘Back in

Stock’ campaign with

new packaging and

creatives, launch on

social media and

internet advertising

Alliance’s first ever TV

campaign continued to

increase consumer

awareness. ‘Lullaby’

book first produced

A&P Re-established

as No1. Teething

Product in

Pharmacies

New Website launch

Focus on Increasing

distribution in the

Grocery channel –

gained ASDA listing

Develop an exclusive

30s pack for Boots –

1386 stores

A&P wins Silver in

Gentle Parenting

Award

Upgraded Manufacturing Equipment

Continued Growth

23

2016

Continue to gain

key listings

A&P continues to

gain back market

share from Teetha

as awareness and

distribution

increases

A&P continues to win

key consumer awards

Ongoing work on Dossier to open up

international opportunities

New convenience listings

gained – progressing 10

pack SKU to increase listings

in convenience channel

Boots 30s exclusivity

ends, gain Tesco 30s

listing

2017

Internationalise – once

work on dossier is complete

Website traffic highest

ever with 18k hits –

70% from marketing

activity

Continue to gain

key listings Feb

2017

New Ad campaign

Launched Feb 2017

Ssshhhh!

Key Activities

Increased distribution

Compliance - upgraded to full THR licence

Creative marketing campaign using the brand heritage

Investment in machinery to secure supply

Pricing

Awareness

24

Sales Performance

25

-

500

1,000

1,500

2,000

2,500

MA

T £

'000

Ashton & Parsons

MAT Cash Sales

Acquisition March 2011

26

Lypsyl®

Lypsyl

The Lypsyl range covers a cosmetic lip balm and a medicated

cold sore gel

Lypsyl brand has been registered in the UK for over a century

with great heritage

Challenges

Was previously the #1 brand until 2003, but had suffered

significant sales and market share decline. At acquisition had

6.7% share in the £42.5m UK lip care market. Major

competitors such as Nivea, Vaseline and Chapstick are active

Several old stick variants and a range of packaging - blister,

hanging card, tower

Sales direct to major grocery retailers and high street - but

under threat of delisting.

27

28

First

produced

in 1891

Originally owned by Vinolia – company

provided soap for use on Titanic & in 1900

received Royal Warrant as soap makers to

Queen Victoria

Vinolia and Lever

Brother receive

Royal Warrant as

soap makers to

King George VI

In 1953, Lypsyl

was used by the

team who first

conquered Everest

Alliance acquired

Lypsyl Dec 2013

1891

Lypsyl

relaunched

with added

sunscreen

Lypsyl - 125 years of lip care

201619531940 20131980

New Improved Formulation

New formulation does not contain preservatives or artificial colours*

Shea Butter -Emollient / Skin

conditioning

Avocado Oil -Skin conditioning

Cocoa Butter –Emollient / Skin

conditioning

Vitamin E –antioxidant

Aloe Vera –moisturising / anti-

inflammatory

Bees Wax - Emollient

SPF15

SPF50

2016

*except Coconut & Almond

Lypsyl New Packaging 2016

30

Nominated for Best New OTC Packaging Design

in 2017 - OTC Marketing Awards

New Variants

31

‘Soft Where It Matters’ Campaign

32

TV advert airing in

Feb and March ‘17

Key Activities

New improved formulation

Pack re-design and reformulation

Selection of 7 product variants (3 formerly)

New creative campaign - TV campaign, E-commerce, digital

advertising, website, social adverts

Pricing

Distribution – gained new listing in Tesco for 3 SKUs

33

200

400

600

800

1000

1200

1400

1600

MA

T £

'000

Lypsyl

MAT Cash Sales

Sales Performance

34

Acquisition Dec 2013

35

MacuShield®

Evidence-based food supplements for eye health

What is MacuShield?

36

Indicated for general eye health in UK

OTX - recommended by ophthalmologists to patients where there is a concern over AMD - based on the wealth of scientific data

Contains 3 carotenoids present in the macula

The UK’s & Ireland’s most recommended eye care supplement - significant growth brand

Challenges

Sub-optimal distribution partner agreements and structure

New SKU EnergEyes had launched January 2015 – no prior investment or strategy

Multiple international markets underperforming

37

Key Activities

Re-align distribution model – rationalised commercial partner contracts to increase opportunity in pharmacy and health food channels

Re-allocation of promotional spend to key SKU’s -removal of EnergEyes UK promotional spend

New promotion: Ophthalmology KOL endorsement & DTC

Strengthened research

Focus on international markets

#1 best seller on Amazon in ‘Combination VMS’

#1 value leader in eye health VMS in Boots; awarded ‘Boots Consumer Favourite in Eye Health’ category, 2016

Featured on ‘Trust me I’m a Doctor’

Sales at acquisition Feb 2015 were £2.7m; 2016 sales were £5.3m

38

MolluDab®

• Molluscum contagiosum is a skin infection caused by a

virus (relatively harmless but highly contagious)

• Keratolytic, 5% potassium hydroxide

• How is it spread? It spreads by touching the affected skin

or surface with the virus e.g. towels, bed linen

• Spots can appear on body, arm and legs

• 80% cases children under 15 years of age

• Most common children aged 1 and 5 years old

• Left untreated can take up to 18 months to clear

• Licensing contract inherited through a portfolio

acquisition, unlaunched

What is MolluDab?

A proven treatment for molluscum contagiosum

MolluDab Launch

MolluDab was launched to the UK market

July 2013

Proven treatment, results in 1-5 weeks

Available on prescription in England, Wales,

NI and OTC from pharmacies

Approval for reimbursement at NHS expense

England, Wales and Northern Ireland - NHS

previous practice was to watch and wait

The launch included a new website,

promotional activities to HCPs and

consumers; GP RX system sponsorship

Sub-£0.5m brand, but growing c.15% pa

40

41

Kelo-Cote®

What is Kelo-Cote?

Range of 5 SKUs based on patented silicone gel

Normalises collagen production

Indicated for prevention & treatment of hypertrophic & keloid scars

Extensive evidence base; best in class; strong IP

Challenges

No inherited global brand strategy at acquisition

Managing distribution partners in >60 markets

Reaching HCPs across multiple therapy areas, in multiple markets

Maintaining ‘best in class’ position in a fast-moving category

Pricing pressure from cheap local competitive products, esp. Asia

The world’s most proven product to prevent & treat excessive scarring

42

Summary

43

ExecutionPlanningBusiness

CaseScreeningScouting