Galenica Group Investor Presentation - March 2018
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Galenica Group Investor Presentation March 2018
Agenda
Page
1 History 3
2 Galenica at a glance 6
3 Business Sectors 11
4 Financial track record 16
5 Business Update 2017 18
6 Regulatory projects 30
7 Outlook 33
March 2018 − © Galenica 2
1 Building the leading Swiss healthcare platform over 90 years
Foundation of Creation of
Acquisition of
Amavita uniform Acquisition of
Galenica as a Merfen® and
brand in Bahnhof
wholesaler Vita-Merfen®
Organic and Switzerland Apotheke
acquisition-led
expansion of Acquisition of
Expansion of IPO of
pharmacies Acquisition Sun Store
distribution Galenica
network of MediService pharmacies
activities Santé
1927 1995 1996 1999 2000 2002 / 2004 2005 2007 2008 2009 2013 2017 2018
Strategy to Partnership Acquisition of Opening of highly Acquisition of
engage in the with Alliance Anti-Brumm® Acquisition
automated care product
entire Swiss UniChem and Perskindol® of medifilm
distribution centre in
healthcare Niederbipp
value chain
Acquisition of
Pharmapool
Corporate Services Retail Products & Brands
March 2018 − © Galenica 3
1 History of resilient growth and margin improvement
Logistics, HealthCare Information & Retail1,4 Galenica
2007–17 CAGRs
2007-17
4.2% Retail market sales2 2.1%
sales CAGR Galenica net sales 4.2%
Galenica EBIT3 14.3%
2007-17 3'214
EBIT CAGR3
14.3% 5.0%
2'915 3'009
2'766 2'826
2'526 2'603 2'661
2007-17 EBIT
2'467
2'270
margin +278bps 2'129
improvement3
2.5%
2017 cash
conversion5
70%
FTEs
as of c.4’944 0.0%
31 December 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Net sales (CHFm) EBIT margin %
Source: Company information, Galenica Annual Reports, IQVIA (former IMS Health)
Notes: The financial information presented with respect to the financial years ended 31 December 2007 through 2013 has been derived from the audited consolidated financial statements of Galenica AG (now renamed Vifor Pharma
AG) and represent its Logistics, Retail and Other (Healthcare Information) businesses, excluding the Pharma business. The Company, a former wholly-owned subsidiary of Galenica AG (now renamed Vifor Pharma AG),
prepared combined financial statements for the financial years ended 31 December 2014, 2015 and 2016. Accordingly, the financial information derived from the combined financial statements of the Company and from the
consolidated financials of Galenica AG (now Vifor Pharma AG) for its Logistics, Retail and Other (Healthcare Information) businesses, excluding the Pharma business, for prior periods may not be fully comparable.
1 Not including Vifor Consumer Health
2 Retail market sales include direct and indirect pharmaceutical sales through pharmacies, self-dispensing doctors and drugstores
3 2014-16 EBIT from combined financial statements and 2017 EBIT, excludes IAS 19 expense
4 2013 financials as per 2014 financial statements due to changed segment structure (Galenica Santé is reported as a separate segment since 2014). Financials not adjusted to include Products & Brands
5 Calculated as (EBITDA-capex)/EBITDA. 2014-17 EBITDA excludes IAS 19 adjustment; capex includes investments in tangible and intangible assets
March 2018 − © Galenica 4
1 7 April 2017: Outstanding IPO of Galenica Santé
Largest IPO in Europe in H1 2017 and first sizeable 100% subsidiary IPO since
years
Multiple oversubscription with pricing at the top end of the price range at
CHF 39.00 HF
13% RoW 15%
PB
Broadly diversified 30%
US
48.75m 12% 48.75m
allocation Shares1) Shares1) CH
50%
Today already about LO 57%
UK
23%
14’000 shareholders
Performance of Galenica share 2017
20%
18%
16% GALENICA
14%
SPI (Swiss Performance
12% Index)
Strong and stable 10%
8%
trading after IPO 6%
4%
2%
1) Allocation of the shares at the IPO on 7 April 2017
0%
7. Apr 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17
First traded price CHF 43.00, 7.4.2017
March 2018 − © Galenica 5
2 Galenica is the leading healthcare provider in Switzerland
2017 net sales CHF3’214m
2017 EBIT1 CHF148m
Health & Beauty
Services
Retail Products & Brands
Market position2 #1 Consumer Health market position2 #2 Market position2 #1
2017 net sales 2017 EBIT 2017 net sales 2017 EBIT
(pre eliminations of intercompany positions) (pre eliminations of intercompany positions)
CHF1’483m CHF100m CHF2’502m CHF51m
− Leading domestic network of own, joint − Broad range of own, exclusive and − Leading provider of specialised
venture and independent partner partner products for consumer health, pre-wholesale and wholesale distribution
pharmacies beauty and well-being services
− Provision of health and beauty products, − Strong sales and marketing force in − Specialised databases and solutions for
patient advice and new services Switzerland clinical decision support
1 Excludes IAS 19 expense
2 Services based on sales reported at ex-manufacturer price level as of MAT December 2017. Source: QuintilesIMS Market Prognosis 2017-2021, Switzerland; Retail based on number of pharmacies. Source: QuintilesIMS Market
Prognosis 2017-2021, Switzerland, pharmaSuisse 2017 and company websites; Products & Brands based on IQVIA MAT December 2017 sales value for OTC, Patient Care, Personal Care and Nutritionals products
March 2018 − © Galenica 6
Operating in a stable and attractive Swiss healthcare market
2 with favourable long-term fundamentals
Resilient, stable Swiss healthcare retail sector2 Pharmaceutical market in Switzerland (2017)1
CHF bn (based on ex-manufacturer price)
2017-21 CAGR 2.1%3 By value−CHF5.8bn By volume−185 million packs
2007-17 CAGR 2.1%3
5 3.6%
1.1% 9.1%
4
23.7%
3 50.4% 22.3%
4.5 4.6 4.7 4.8 24.8% 65.0%
4.1 4.3 4.4
2 3.8 3.9 3.8 3.9 3.9 3.9 3.9
3.6
1
Pharmacies Self-dispensing doctors Hospitals Drugstores
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E2018 E2019 E2020 E2021
2018E
2019E
2020E
2021E
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Financial crisis Mandatory price cuts Pharmacists play a crucial role in the provision of medicines
Unpegging of Swiss Franc by SNB Proposed mandatory price cuts
− Indispensable role in one of the world's highest quality health
care systems, providing drugs, advice and services
− Underlying healthcare sector growth drivers, including − Continued efforts by government and health insurers to
demographics, lifestyle and innovation make pharmacists the first point of contact
− One of the highest life expectancy rates in the world − Growing importance to meet consumer trends towards more
− Non-discretionary nature of products and services personalized healthcare and self-medication
Source: IQVIA, Pharmamarkt Schweiz, YTD December 2017, QuintilesIMS Market Prognosis 2017-2021, Switzerland
1 Medicines Swissmedic list A, B, C, D sold from suppliers and wholesalers to hospitals, physicians, pharmacies and drugstores
2 Total market without hospitals
3 QuintilesIMS Market Prognosis 2017-2021, Switzerland; published September 2017
March 2018 − © Galenica 7
2 Experienced management team with proven track record
Jean-Claude Clémençon − CEO since IPO
CEO − Head of Business Sector Retail since 2015, 29 years industry experience of which 23 years at Galenica Group
− Joined Galenica Group in 1995
− Previously, Head of Logistics and HCI at Galenica Group, Head of Manufacturing at Rheintub, Rheinsulz and CEO of Raintec
Felix Burkhard − CFO since 2017
CFO − 27 years industry experience of which 23 years at Galenica
− Joined Galenica in 1995
− Previously, Head of Strategic Projects of Galenica Group and Head of Business Sector Retail
Daniele Madonna − Pharmacist
Head of Retail − 16 years industry experience of which 14 years at Galenica
Business sector − Previously Store Manager, Regional Sales Manager and CEO of the joint venture Coop Vitality
Torvald de Coverly Veale − 36 years industry experience of which 3 years at Galenica
Head of Products & Brands − Joined Galenica 2015
Business sector − Previously, responsible for international expansion at Walgreens Boots Alliance and Global Brand Director at Unilever
Christoph Amstutz − 30 years industry experience of which 11 years at Galenica
Head of Services − Joined Globopharm in 2007 (led integration process into Galenica)
Business sector − Previously, Head of G-Pharma & Alloga and Business Unit Head at Bristol-Myers Squibb
March 2018 − © Galenica 8
2 Our ambition and self-perception
Galenica:
The first choice for health,
beauty and wellbeing.
March 2018 − © Galenica 9
2 Our Strategy - the power of 3 drives sustained value creation
Products & Brands
− Leverage leading positions to promote
higher margin and exclusive products − Develop and launch own and partner
brands and products for pharmacies
Leverage
− Further expand and optimise retail
Retail
2015 2016
network
− Drive efficiency through one single P&G brands
process for all three pharmacy formats
Click & Collect Loyalty cards
Support
2017
Services
− Leverage scale advantages to develop
new, value-added services /
− Continue to drive synergies across the
entire organisation
medifilm GDP-qualified fleet e-health
March 2018 − © Galenica 103 The largest pharmacy retailer in Switzerland Retail
Network of chains (# of pharmacies as of 31 December 2017) Webshop Competitive positioning—#1 market position4
− Largest branded pharmacy network by By number of pharmacies5 Total # of pharmacies as of 2016
number of pharmacies in Switzerland
1’792
1641
160
9%
− The first Swiss pharmacy chain2 ~5.5x more pharmacies
97
than next competitor
− Joint venture (49:51) with Coop, the 2nd largest
retail group in Switzerland
337
75 19% 91
58
− Service provider for independent pharmacies
1603 under Feelgood's brand
No. 2 No. 3
− Specialty pharmacy focused on home healthcare
1 for patients with chronic illnesses Own Independent
Highlights Net sales performance (CHFm)
CAGR 3.6%
− Largest pharmacy network, including online presence
− Offers broad product range, including well-known own brands, as well as
health services and tests 1'390
1'251 1'308 1'349
− Built organically and through targeted acquisitions since 2000
− Including attractive, high customer traffic locations across Switzerland 2014 2015 2016 2017
− Average sales per pharmacy of CHF4.2m > 1.4x Swiss market average6 Health & Beauty7
Sales 1’335 1’393 1’437 1’483
EBIT margin 6.0% 6.4% 6.5% 6.7%
1 Amavita figures include 7 majority and minority holdings in other pharmacies 5 Own includes 75 pharmacies through joint venture with Coop; independent includes 8 Amavita partners
2 Based on 1976 Federal Court law permitting non-pharmacists to own a pharmacy for the first time 6 Retail pharmacy sales for GaleniCare on a like-for-like basis, including Amavita and Sun Store pharmacies only. Swiss
3 Includes 8 Amavita partners market average based on Pharmasuisse, Roka 2015
4 Based on number of pharmacies. Source: pharmaSuisse 2017, QuintilesIMS Market Prognosis 2017-2021, 7 H&B post-inter-segmental eliminations
Switzerland; and company websites
March 2018 − © Galenica 113 Ongoing pharmacy network consolidation and optimisation Retail
Proven track record of delivering synergies Widely spread pharmacy network covers every
through streamlining of business processes and Region in Switzerland
creating value through acquisitions and network
optimisation
Marketing
IT and
Processes Purchasing
Demonstrated M&A track record with an average of 9 pharmacies acquired and 8 net pharmacies added per
year over the last 6 years
2012 2013 2014 2015 2016 2017
Pharmacies acquired 10 20 5 2 13 6
Net pharmacies added1 11 12 6 0 11 8
Total own Pharmacies 300 312 318 318 329 337
1 Includes the impact of acquisitions with concurrent mergers, new openings and closings
March 2018 − © Galenica 123 Diversified product portfolio for health, beauty and wellbeing Retail
GaleniCare’s
retail product offering
in % of sales1
12%
38%
19%
52%
17%
4% 10%
Beauty Nutrition, Personal OTC medicines Prescription medicines
and Patient Care of which originals
of which generics
1 Sales YTD December 2017, includes Amavita and SunStore pharmacies, without Mediservice,
Winconcept and Coop Vitality of which service fees
March 2018 − © Galenica 13Leading role in Consumer Health
3 with broad and innovative product portfolio Products & Brands
Portfolio Competitive position: #2 Consumer Health1 market position
OTC consumer health brands ORAL PAIN
REMEDIES5
Market share2 (%)
No. 1
30% market share2
5.7 5.5 5.4
TOPICAL PAIN
Exclusive partner health REMEDIES5
3.4 No. 3
and beauty brands 2.6 14% market share2
COUGH & COLD
OTC retail own brands REMEDIES5
No. 2
No.1 No.3 No.4 No.5 12% market share2
Highlights
Net sales performance (CHFm)3
− Preferred OTC partner for Swiss Pharmacists
CAGR 5.8%
− Broad OTC Sales & Training force -> Distribution partner of choice
844 89 95
− Expanding portfolio of own and exclusive brands & products 804
− Ability to leverage Galenicare Retail platform to distribute own brands
2014 2015 2016 2017
1 Includes OTC, Patient Care, Personal Care and Nutritionals products Growth on a comparable basis
2 Based on IQVIA Health MAT Dec 2017 gross sales value; IQVIA not including rebates, refunds or any sales deductions
3 2014-16 net sales on a comparable basis including 12 month Vifor Consumer Health sales and G-Pharma adjustment
4 Adjusted for disposal of Equazen® in November 2015
5 Market shares in categories are shown for Vifor Consumer Health, not including OTC retail own brands
March 2018 − © Galenica 14Leader in pre-wholesale and wholesale distribution, supported
3 by an innovative healthcare information business Services
Services Competitive positioning - #1 market position1
− Pre-wholesale outsourced storage and distribution Pre-wholesale market share % Wholesale market share %
− Logistics services to pharmaceutical and various healthcare clients (pharmacy)
− Wholesale distribution with three modern sites; main site at Niederbipp 2.5x larger
operates at c.70% automation than next 2.0x larger
− Supplies to pharmacies, self-dispensing doctors' practices, drugstores, competitor than next
nursing homes and hospitals competitor
− One-stop shop
− Prepared medication in blisters
− Product master data and scientific databases
− IT platforms relating to electronic medication process
− Software solutions and services for pharmacies No. 2 No. 3 No. 2 No. 3
Highlights Net sales performance (CHFm)
− 75 customers − Temperature zones:
CAGR 4.8%
− >10,000 products − (i) -80⁰C, (ii) 2-8⁰C, (iii) 15-25⁰C
− 10,000 customers − Access to nearly all dispensers 2'329 2'502
2'171 2'245
− 100,000 products (c.9,000 Rx2) − Present in all three language regions
− >1,100 suppliers − GDP3-compliant services 2.0
1.7 1.6 1.7
− Systemically relevant information and databases
− Solutions for safe and cost-effective provision and application
of medicines
2014 2015 2016 2017
EBIT margin (%)
1 Based on market share. Source: IQVIA Dec 2017
2 Prescription products
3 Good Distribution Practice
March 2018 − © Galenica 15Long-term track record of sustainable growth and
4 attractive cash generation …
Logistics, HealthCare Information & Retail1 Galenica
2007–17 CAGRs
Retail market sales2 2.1%
Galenica net sales 4.2%
Net sales (CHFm)
3'214
Galenica EBIT3 14.3% 3'009
2'661 2'766 2'826 2'915 Above market growth
2'467 2'526 2'603
2'129 2'270
History of margin improvement
4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Reported EBIT (CHFm)3
(40%)6 25%6 63% 70% 70% 78% 78% 74% 74% 80% 70%
134 148 5.0% Attractive cash flow generation
% Cash conversion5 117 126
93 99
EBIT margin (%)3
73 73
56
39 39 2.5%
Well-invested infrastructure
0.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Company information, Galenica Annual Reports, IMS Health
Notes: The financial information presented with respect to the financial years ended 31 December 2007 through 2013 has been derived from the audited consolidated financial statements of Galenica AG and represent its Logistics, Retail
and Other (Healthcare Information) businesses, excluding the Pharma business (please refer to the footnote on page 4)
1 Not including Vifor Consumer Health
2 Retail market includes direct and indirect pharmaceutical sales through retail pharmacies, self-dispensing doctors and mail-order services
3 2014-16 EBIT from combined financial statements and 2017 EBIT, excludes IAS 19 expense
4 2013 financials as per 2014 financial statements due to changed segment structure (Galenica Santé is reported as a separate segment since 2014). Financials not adjusted to include Products & Brands
5 Calculated as (EBITDA-capex)/EBITDA. 2014-17 EBITDA excludes IAS 19 adjustment; capex includes investments in tangible and intangible assets
6 Cash conversion impacted by high Capex due to construction of Niederbipp logistic centre
March 2018 − © Galenica 164 … demonstrating strong performance in both segments
Health & Beauty Services
Retail Health & Beauty Logistics and HCI Services
Net sales (CHFm)
19.5% 3.6% 1.2% 4.8%
2'502
2'329
2'011 2'158 2'171 2'245
1'335 1'393 1'437 1'483
1'246
429
2007A … 2013AHealth & Beauty2015A
2014A 2016A 2017A 2007A … 2013AHealth & Beauty2015A
2014A 2016A 2017A
25.3% 7.7% 10.3% 12.0%
9%
93 100 9%
EBIT (CHFm)
80 89
6%
63 6% 51
6.7% 40
35 36 36
3%
3% 20
16
2.0%
0% 0%
…
2007A …… 2013A 2014A 2015A 2016A 2017A 2007A 2013A 2014A 2015A 2016A 2017A
EBIT margin (%) CAGRs
Source: Company information, Galenica Annual Reports
Note: The financial information presented with respect to the financial years ended 31 December 2006 through 2013 has been derived from the audited consolidated financial statements of Galenica AG and represent its Logistics,
Retail and Other (Healthcare Information) businesses, excluding the Pharma business (please refer to the footnote on page 4)
March 2018 − © Galenica 175 2017 in figures - Pleasing performance thanks to all Business sectors Galenica Group: in million CHF Sales: 3,214.2 + 6.8% EBIT1): 148.2 + 10.5% Net profit1): 124.4 Dividend2): CHF 1.65 per share 1) Excluding the effects of IAS 19 2) Proposal to the Annual General Meeting on 9 May 2018 March 2018 − © Galenica 18
EXPANSION
5 2017: expansion in all Business sectors
Retail Products & Brands Services
8 new locations New products Acquisitions
and partnerships
− Own pharmacies: 337 − Merfen® and Vita-Merfen® − Pharmapool
− Total network: ~ 500 − Beauty brands: Lierac, − New exclusive
Phyto partnerships
− Partner brands: Excilor, with Clarins and Coty
Adler Schüssler mineral
salts
March 2018 − © Galenica 19INNOVATION
5 2017: new services for clients and partners
Retail - online Services Aprioris
b
Uninterrupted cold chain New products Documedis
(Deep freeze) cold chain (down to -80°C)
March 2018 − © Galenica 20EFFICIENCY
5 2017: synergies developed and consistently utilised
1. New ERP project
(pre-wholesale and wholesale)
2. Triapharm® introduced throughout the Group
(incl. direct invoicing) Synergies
3. Back-office functions in Retail centralised
Healthcare
and further process adjustments Information
March 2018 − © Galenica 215 Swiss Pharmaceutical market − continuous value growth (YTD Dec 2017)
Market1 Value CHFm Share Change Market1 Value CHFm Share Change
Total: 5’824.6 100% -1.3% Retail2: 4’442.3 100% -1.0%
4.2% 3.0%
-4.0% -0.2%
Hospitals: 1’382.3 23.7% RX3: 3’705.0 83.4%
8.1% 3.7%
-0.5% -1.8%
Physicians: 1’446.7 24.8% OTC4: 737.3 16.6%
4.9% -0.4%
Pharmacies: 2’933.8 50.4% -0.8%
2.3% Market development highlights:
-7.2%
Growth of high-priced special medications
Drugstores: 61.8 1.1%
-5.4% Growth in hospitals and specialist doctors
channel
Volume (sold packages)
Value (at ex-factory prices) Declining volumes
Declining beauty and personal care market
Source: IQVIA, Pharmamarkt Schweiz, YTD December 2017
(~ -3.5%5)
1 Medicines Swissmedic list A, B, C, D sold form suppliers and wholesalers to hospitals, physicians, pharmacies and drugstores
2 Medicines Swissmedic list A, B, C, D sold form suppliers and wholesalers to pharmacies, physicians and drugstores
3 Medicines Swissmedic list A, B
4 Medicines Swissmedic list C, D
5 IQVIA, PharmaTrend, YTD Dec, personal care, patient care and nutrition products sold in pharmacies and drugstores to street prices
March 2018 − © Galenica 22Galenica Group −
5 Pleasing development in challenging market environment
Net sales (in million CHF) EBIT adjusted1 (in million CHF)
+6.8%
+10.5%
+6.8% +6.9% +14.1% +6.8%
49% 51% 49% 51% 52% 48%
50% 50%
4.5% 4.4% 4.5% 4.8% 4.4% 4.6%
1 excluding the effects of IAS19 EBIT Margin (ROS)
Highlights:
Strong growth thanks to:
- Acquisition of Pharmapool (about +4.9% impact on Group sales growth)
- Expanded pharmacy network (about +0.4% impact on Group sales growth)
- Growth of high-priced special medications mainly at Mediservice
- Launch of new products and partner brands
CHF 7.0 million positive one-off EBIT effects
5.3% EBIT growth without one-off effects
March 2018 − © Galenica 235 Health & Beauty segment − Solid growth and margin improvement
Net sales (in million CHF) EBIT (in million CHF)
+3.2%
s +6.7%
s
+2.9% +3.5% +6.5% +6.9%
49% 51% 49% 51% 50% 50% 50% 50%
6.6% 6.8% 6.7% 6.7%
6.5% 6.5%
EBIT Margin (ROS)
Highlights:
1.1% Retail growth thanks to the expansion of the pharmacy network
More than 20% growth of sales by mail order, mainly with high-priced special medications
Like-for-like sales growth of generics in our pharmacies by about 6%
Successful launch of Merfen® and partner brands Lierac, Phyto and Adler’s Schüssler mineral salts
EBIT margin increase (+20 basis points) mainly thanks to strong growth of Products & Brands
March 2018 − © Galenica 245 Net sales - Retail and Products & Brands
Retail (in million CHF) Products & Brands (in million CHF)
+3.1%
s
+6.0%
s
+2.5% +3.6%
+6.8% +5.2%
49% 51% 49% 51%
54% 54%
46% 46%
March 2018 − © Galenica 255 Services segment − Expanded offering with Pharmapool
Net sales (in million CHF) EBIT (in million CHF)
+7.4%
s
+26.7%
+7.4% +7.4% +41.9% +11.0%
49% 51% 49% 51% 57%
51% 49% 43%
2.3% 2.0%
1.8% 1.7% 1.7% 1.7%
EBIT Margin (ROS)
Highlights:
Successful integration of Pharmapool from day one on
(about +6.3% impact on sales growth of the Services segment)
Stable organic growth of about +1.1%
EBIT growth at 9.2% (resp. 7.5% H1) without one-off effects (CHF 7.0 million in H1)
ROS stable at 1.7% without one-off effects
March 2018 − © Galenica 265 Net profit exceeds expectations
of which one-off effects 2017
(in million CHF) 2017 2016 disposals deferred tax
EBIT adj.1) 148.2 134.2 7 million
(Effect of IAS 19) -6.4 -10.4
EBIT 141.8 123.8 7 million
Financial result -1.9 -19.5
EBT 139.9 104.3 7 million
Taxes -21.0 -20.9 -0.7 million 4.3 million
Tax rates 15.0% 20.0% +0.5% points +3.1% points
Net profit 118.9 83.4 6.3 million 4.3 million
(Effect of IAS 19) -5.5 -8.7
Net profit adj.1) 124.4 92.1 6.3 million 4.3 million
March 2018 − © Galenica 1) excluding effects of IAS 19 275 Pleasing free cash flow
(in million CHF)
Divestment of assets and disposal
of subsidiaries
Cash flow from operating
activities
Investments in assets
Purchase of subsidiaries
March 2018 − © Galenica 285 Galenica Group − Robust balance sheet
Investments in million CHF Net debt / Equity in million CHF
% of sales 1.2% 1.7%
Debt coverage2 2.0x 1.6x
Cash conversion3 80% 70%
48%
45%
21% 17%
1
Investments in intangible assets Investments in tangible assets
Equity Net debt
% of Total liabilities and shareholders' equity
Highlights:
Without the acquisition of Merfen® and Vita-Merfen®,
capex at 1.3% of net sales and cash conversion at 78%
Net debt reduced to CHF 301 million
1 shareholders’ equity and net debt of pro-forma balance sheet as of 1 January 2017
2 calculated as net debt / EBITDA adjusted, excluding the effects of IAS 19
3 calculated as (EBITDA-capex)/EBITDA, EBITDA excluding the effects of IAS 19, capex includes investments in tangible and intangible assets
March 2018 − © Galenica 296 Swiss Pharmaceutical market – regulatory projects
Reduction in drug
prices 2018 2019 2020
Change of category of
OTC products1)
2019
LOA IV LOA V 2020
Price of generics
Amendment of Health from 2020 ….
Insurance Act (KVG)
1) Swissmedic categories C, D
March 2018 − © Galenica 306 Swiss Pharmaceutical market – regulatory matrix for products & channels
Upcoming distribution changes expected to be largely favourable for pharmacies
Hospital Doctor Online pharmacies Pharmacy Drugstore Large retailers Changes expected
Prescription
Swissmedic A
1
Regulated4)
Swissmedic B Soft deregulation in
(1) drug categories 2
Swissmedic C
Prohibited by law towards the market
OTC
Swissmedic D 3
Swissmedic E
Non-regulated4)
Praxis-Lab-Utiltities
Medtec
Cosmetic and Body-Care
House and Home
Regulatory changes in discussion have limited impact on Galenica
1 Prescription for select Cat. B drugs may no longer be required Still, consumers likely to continue purchasing non-prescription Cat. B drugs in pharmacies
2 Drugstores could start to compete for Cat. C products(2) Limited impact expected in light of market share drugstores already have in Cat. C drugs
3 Large retailers might compete strongly in Cat. D OTC products(3) Impact likely strongest on drugstores
Source: Swissmedic and company information
Notes: FOPH stands for Federal Office of Public Health.
1 Category C medicinal products can only be sold through drugstores on an exceptional basis, i.e., if a canton concludes that a canton-wide dispensation cannot otherwise be achieved
2 Once Category C is integrated into Category D
3 Once these are re-classified into Category E
4 With respect to market access
March 2018 − © Galenica 316 Swiss Pharmaceutical market – composition of drug prices
Fixed margin elements help to offset price reductions
Composition of the price of a prescription/ reimbursable drug: c.3/4 of the retail margin secured by fixed elements
~ 8 %(1) LOA – Retail ~ 8% Per prescription / line
service fees
FOPH defines price and margin - Margin covers wholesale and retail
Reimbursed
~ 28% - 30% Galenica ~ 24% Retail ~ 2/3 Fixed Ex-factory price
~ 29% + + price-related surcharge + surcharge per pack
total margin; thereof (in CHF)
~ 5% Wholesale ~ 1/3 Variable
~ 4% - 6% Wholesale 0.05-4.99 12.0% 4.00
Ex-factory 5.00-10.99 12.0% 8.00
11.00-14.99 12.0% 12.00
15.00-879.99 12.0% 16.00
880.00-2,569.99 7.0% 60.00
~ 70% – 72% Supplier margin From 2,570.00 – 240.00
~ 71%
Market price structures and Galenica Santé's retail service fees limit impact of price cuts
Ongoing ex-factory price declines Pricing structure likely limits impact on Galenica Santé from margin squeeze
Potential reduction in distribution margin Potential reduction would be compensated with increase in service fee
Potential new price model for generics Would probably require change in legislation
Source: Swissmedic and company information LOA: Service based compensation
Note: FOPH stands for Federal Office of Public Health; sets prices based on basket of nine countries and quality aspects
1 Based on Company internal figures.
March 2018 − © Galenica 327 Galenica Group − Outlook Dividends 2017 CHF 1.65 dividend per share from capital contribution reserve1) Outlook for 2018 Sales growth of 2% to 3% EBIT (excluding effect of IAS 19) similar to that in 2017 2018 dividend at least at prior-year level 1) Proposal to the Annual General Meeting on 9 May 2018 March 2018 − © Galenica 33
Galenica Group Contact information Investor Relations Media Felix Burkhard Christina Hertig CFO Galenica Head Corporate Communication Tel.: +41 58 852 85 29 Tel.: +41 58 852 85 17 Mail: investors@galenica.com Mail: media@galenica.com March 2018 − © Galenica 34
Disclaimer Certain statements, beliefs and opinions in this presentation are forward-looking, which reflect the Company’s or, as appropriate, the Company’s directors’ current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. A multitude of factors including, but not limited to, changes in demand, competition and technology, can cause actual events, performance or results to differ significantly from any anticipated development. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. As a result, the Company expressly disclaims any obligation or undertaking to release any update or revisions to any forward-looking statements in this presentation as a result of any change in expectations or any change in events, conditions, assumptions or circumstances on which these forward-looking statements are based. Neither the Company nor its advisers or representatives nor any of its of their parent or subsidiary undertakings or any such person’s officers or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does either accept any responsibility for the future accuracy of the forward-looking statements contained in this presentation or the actual occurrence of the forecasted developments. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. March 2018 − © Galenica 35
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