3. Profarma | Disclaimer
This presentation does not constitute an offering, invitation or solicitation of any kind to subscribe for or purchase shares or any other type of securities, nor
does this presentation or any information contained herein form the basis of any type of contract or commitment.
This material should not be construed as investment advice to potential investors. This information is not intended to be complete and is presented as a
summary. No trust should be built upon the basis of the accuracy of the information herein and no representation or guarantee, whether expressed or
implied, is made as to the accuracy of the information herein.
This presentation contains forward-looking statements that may be based upon forecasts which, as such, are no guarantee of future performance.
Investors are advised that these forecasts are and will be subject to countless risks, uncertainties and factors related to Profarma’s operations and
business environments, such as: competitive pressure, the performance of the Brazilian economy and of the pharmaceutical industry and changing market
conditions among other factors mentioned in the documents released by Profarma. These risks may cause the Company’s results to be materially different
from any future results expressed or implied by such forward-looking statements.
Although Profarma believes the expectations and assumptions contained in the forward-looking statements and information to be reasonable and based
upon data presently available to its management, the Company cannot guarantee future results or events. Profarma does not assume the obligation to
update any forward-looking statements and information.
It is summary information not intended to be complete and should not be deemed investment advice by potential investors. This presentation is strictly
confidential and may not be disclosed to any other persons. We make no statements and no guarantee as to the accuracy, suitability or completeness of
the information posted herein, which should not be relied upon for investment decisions.
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5. Profarma | Long-Term Growth Strategy
Profarma’s long-term growth strategy rests on three main pillars.
Selected
Acquisitions
New
Segments
Regional
Expansion
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6. Profarma | A Strategy Based on A Broad Market Vision and Perfect Execution
Strategic Positioning Comments
Business Segment Profarma has been consistently implementing the strategy of
diversifying its pharmaceutical distribution business by
Distribution Hospitals Specialties Services Retail
breaking into new market segments such as:
Scale
The hospital industry
Special products (vaccines, dermatological products,
higher value-added products, etc.)
Price
Value-added services for manufacturers
Goals
Retailing
Quality
Profarma’s new business segments complement and
strengthen the Company’s position in the industry:
Products
Distinct
Higher-margin segments
Synergies with the logistics segment
Initial Focus Synergy Approach New Focus
Synergies with storage services
Selected Portfolio
Synergies with the purchasing department
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7. Profarma | Main Events
A proven history of success: a unique ability to enter new regions and segments and make successful acquisitions.
Timeline
CAGR Market (97-00) = 12% CAGR Market (04-10) = 12% Market (9M11-9M12) = 17%
Dimper’s DC
Hospitals (RS) Prodiet Casa Saba
Minas K+F
Hospitals in SP Brasil
Gerais (SP) DF CE GO
Espírito In RJ IPO Arpmed
Santo Bahia PE
Paraná Vaccines
1996 1998 1999 2001 2003 2004 2005 2006 2007 2009 2011 2012 2013
Organic Growth / New Regions New Segments / Products Selected Acquisitions
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8. Profarma | Our Growth in Figures
Rise in Gross Revenues
In R$ million
3,317
3,042 3,133
2,940
2,832
2,596
1,968
1,725
1,443
1,102
2003 2004 2005 2006 2007 2008 2009 2010 2011 9M12
8.4% 9.3% 9.6% 9.6% 11.5% 11.7% 10.9%* 10.2%* 9.2%* 9.0%*
Market Share | * Not including similar medications
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9. Profarma | Revenues and EBITDA
Diversification EBITDA and EBITDA Margin
As a % of Gross Revenues In R$ MM and as a % of Net Revenues
2.0% 2.7% 3.1% 2.7% 4.3
6.7% 4.1% 4.5% 3.9
12.6% 3.5
3.1 3.0 3.1
17.8% 18.9% 2.7
17.8% 7.1%
110.7
5.7% 5.7% 13.5%
7.0%
8.6% 80.1 79.9
78.7 75.9 73.4
68.1
67.7% 69.7% 66.5%
55.4%
2006 2008 2010 9M12 2006 2007 2008 2009 2010 2011 9M12
Branded Generics OTC
EBITDA EBITDA Margin (%)
Health and Beauty Hospitals + Vaccines Specialties
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11. Global Pharmaceutical Distribution and Retail Industries | Overview
Developed countries: An This process was driven by the
scalability inherent to the industry, This trend benefited companies
establishment process has
which leads to an increase in with higher scales and greater
taken place over the last 15 companies’ earnings thanks to
higher volumes, better negotiation efficiency, able to obtain high
years. There are currently
terms with suppliers and, returns and profitability.
few players. consequently, higher margins.
M&A Transactions in the Distribution and
Top 3 Distributors’ Market Share
Retail Industries
% of the Total Market In € billion
57% 43%
43 42
100% 36 35
93% 92% 30
23 24 10.4
19 21 21
72% 16
64% 61% 58% 55%
6.6
39% 5.5
4.2 3.9 4.3
2.9 2.5 2.5
13% 1.8 1.9
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Transaction Amounts # of Transactions
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Source: IMS Health 2010. Source: J.P. Morgan
12. Global Pharmaceutical Distribution and Retail Industries | Main Trends
World Ranking of Distributors
Ranking Distributor Growth 11/10 Sales EBITDA Margin Mixed
1 13.0% 31.2 6.4%
2 2.9% 30.8 3.0%
3 -3.0% 28.8 2.6% N.A.
4 3.0% 112.0 2.1%
5 4.0% 102.6 1.8%
6 3.0% 80.2 1.6%
Mixed Model: A Reality Worldwide, with Different Focuses
Strong presence through company-owned chains Source: IMS Health
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Focus on services / franchises
13. The Brazilian Pharmaceutical Market | Overview
A unique combination of high growth rates and sound industry fundamentals.
Sales of the Brazilian Pharmaceutical Industry 1996-2011 (R$ billion)
41.8
36.0
30.0
26.1
23.2
20.9
18.3
16.6
13.1 14.4
10.3 11.2 11.6
8.3 9.4
7.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2001: Argentine Default 2006: Lula’s Re-election 2008: Subprime Crisis
1997: Asian Crisis 2003-04: First Years
1998: Russian Crisis 2002: Pre-Lula of Lula’s Administration
1999: Real Depreciation Election Crisis 2004: Mensalão
2000: Internet Bubble Burst (cash-for-votes scheme)
Scandal
Macro Drivers Micro Drivers Timing
Income Growth Aging Population Generic Drugs Regional Brands Fragmented Market Formalization
Source: IBGE. Farmácia Popular, Health, OMS, IMS, Brazil Central Bank 13
14. Distribution in Brazil | A Fragmented, Highly Competitive Market
Distribution Overview Share of the Top 3 Distributors by Geographical Region
Total area (km²) 8.5 MM
42%
# of Drugstores 60 thd
Share: 7.8%
28% Total Market R$41.8 Bil Market: R$3.2 Bil
Top 3
Area: 1,606,372 km²
# of Drugstores: 6.7 thd
Share: 4.1%
Market: R$1.7 Bil
Area: 3,853,327 km²
2006 2011 # of Drugstores: 4.3 thd
• Highly fragmented: The top 3 account for 42% of
Share: 16.3%
the Brazilian market, vs. 92% in the USA, 72% in Market: R$6.8 Bil
Area: 1,554,257 km²
Mexico and 55% in Argentina;
# of Drugstores: 4.3 thd
• A slow establishment process: mainly labor and
Share: 54.6%
tax liabilities and contingencies hinder
Market: R$22.8 Bil
consolidation in the distribution industry; Area: 924,511 km²
# of Drugstores: 27.2 thd
• Margins under pressure from the consolidation of
the retail industry; Share: 17.2%
Market: R$7.2 Bil
• A drop in part of the tax incentives. Area: 575,410 km²
# of Drugstores: 12.4 thd
Source: IMS, IBGE Source: IMS, IBGE 14
15. Distribution in Brazil | A Fragmented Market with Opportunities
• The Brazilian pharmaceutical distribution market is still much more fragmented than in the U.S. and Europe;
• The top Brazilian distributors have not yet felt the need to adopt the European mixed business model or the
American model, with services.
Business Segments of the Main Pharmaceutical Distributors in Brazil
Retail / Distribution European Mkt U.S. Mkt
Distributor Medications Vaccines Hospital Health and Beauty Specialties Government Retail Services
Source: IMS Health
Profarma has the scale, efficient operational platform and execution capacity needed to become one of the
major mixed distribution players in Brazil.
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16. The Retail Industry in Brazil | A Fragmented Market
The retail market is still very fragmented, with about 60,000 drugstores in Brazil. Independent stores continue to play
an important role in the retail industry – The top chains in Brazil are establishing themselves through geographical
expansion whereas medium-sized chains are establishing themselves regionally.
Top Established Players – 2011 Presence of Chains by Brazilian Region
Groups Names # of Stores Relevant Market Chains S SW MW NE N
Droga Raia 389 Raia Drogasil
Aug 2011
Drogasil 363 DSP Pacheco
Top 5 Chains São Paulo 374 23,3% Pague menos
Aug 2011 Pacheco 348 Brazil Pharma
Pague Menos 466 Araújo
Araújo 99
Panvel
Catarinense 197
Nissei
Top 6-10 Chains Nissei 209 7,2%
Onofre
Panvel 274
Extrafarma
Ultrafarma 6
Drogasmil
Bifarma
Bigfarma 86
Venâncio
Bom Preço 180
Brazil Pharma
Big Bem (PA) 128 Drogal
Rosário (DF) 85 Angélica
Venâncio 17 Drogãosuper
Top 11-20 Chains 8,5% Indiana
Extrafarma 177
Estrela Galdino A Nossa Drog
Mais Econômica (RS) 187
Guararapes
Santana (BA) 103 Permanente
Farmais
Onofre 39 São Bento
São João (RS) 240 Moderna
Other Chains Outras 3.713 12,8% Santa Lúcia
Independent Independentes 57.825 48,3% Minas Brasil 16
Source: Media publications. IMS Distribution Study.
17. The Retail Industry in Brazil | Opportunities for Establishment in the Retail Industry
The Growth of 3 of the Top 5 Players – Number of Stores
1,050
828
688 776 737
582
503 555
423 489
400
333
2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012
2011 2011 2011
Sales EBITDA Net Income Sales EBITDA Net Income Sales EBITDA Net Income
R$4.7 Bil R$271.5 MM R$151.4 MM R$2.6 Bil R$155.4 MM R$95.7 MM R$2.9 Bil R$232.2 MM R$109.1 MM
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19. The Mixed Model | Recent Moves in Latin America in Line with a Global Trend
Mexico Chile
• Socofar is one of the top three pharmaceutical
• Founded in 1892, Grupo Casa Saba is the top distributors in Chile;
• It owns the largest retail chain in that country (Farmacias
pharmaceutical distributor in Mexico, with US$2.8 billion
Cruz Verde), which has over 500 stores and established
net revenues in 2010;
itself after the acquisition of Farmacias Conosur in 2001
• Grupo Casa Saba is also present in the retail market. It
(ranking 4th in the industry).
had over 160 stores under the brands Farmacias ABC and
Farmacias Provee de Especialidades (in Mexico) and Peru
Drogasmil (in Brazil) at the close of 2009;
• In October 2010, Grupo Casa Saba acquired Farmacias
Ahumada AS and became the largest mixed distributor in
• Quimica Suiza, the top pharmaceutical distributor in Peru,
Latin America, with a retail platform of over 1,500 stores acquired Boticas BTL, one of the top drugstore chains in
in Mexico, Brazil, Chile and Peru. that country in 2011 and now has a retail platform of over
300 stores.
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20. The Mixed Model | The Changing Reality in Brazil
Examples of Brazilian Pharmaceutical Distributors Migrating to the Mixed Model
Northeast • Grupo Jorge Batista, one of the top distributors in Northeastern Brazil, owns the retail chain
Globo Guararapes (with 30 stores in Rio Grande do Norte State), has recently acquired
Lusitana chain (with 25 stores in Piauí State) and is engaged in negotiations with Drogaria
Ceará, which has 20 stores in Fortaleza, Ceará State.
Mid-West
• Founded in 1972, Distribuidora Brasil distributes pharmaceuticals in the states of Mato
Grosso and Mato Grosso do Sul and has recently expanded its presence to the states of São
Paulo and Paraná, and the Federal District. It operates in the retail industry through Drogaria
São Bento, a chain with about 75 drugstores in Mato Grosso and Mato Grosso do Sul.
Southeast
• Headquartered in Ribeirão Preto (São Paulo State), Drogacenter is a pharmaceutical
distributor operating in the states of São Paulo, Minas Gerais, Goiás and Rio de Janeiro. The
company owns the largest drugstore chain in the country of São Paulo State (Drogão Super),
with over 50 stores inland, in the Santos area and Southern Minas Gerais State.
North
• Imifarma is a pharmaceutical distributor based in Belém (Pará State). The company owns
Extrafarma drugstore chain, with over 70 stores located in the states of Pará, Maranhão and
Ceará.
South
• Dimed was one of the first distributors to adopt the mixed model in Brazil. It operates in the
industry under the Panvel brand, which is currently the largest drugstore chain in Southern
Brazil, with 290 stores. 20
21. The Mixed Model | The Main Advantages for Profarma
Vertical integration offers Profarma several opportunities to create value.
Efficiency Gains Higher Gross Margin
A management structure combining Adoption of the best purchasing
optimized logistics, an integration terms and conditions and gross
between systems and processes, a margin and leveraging of the
dispersal of expenses and the combined scale of purchases in
elimination of redundancies. new business negotiations.
Complementarity
Strategic access to information Growth
and market needs will be able to Entry into the retail industry, a
leverage new business (e.g. provision fragmented market with multiple
of additional services to industry and opportunities for establishment
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23. Profarma | Overview of Casa Saba Brasil
Highlights Transaction
Geographical Coverage
• Two strong brands in the market: “Drogasmil” and • Aquisition of 100% of CSB Drogarias S.A.(Drogasmil
“Farmalife” with complementary positioning.
/ Farmalife) total equity, for R$ 87.0 million, to be paid
net of debt and cash balances;
• Platform of 85 stores;
• Gross Revenue of R$ 332.8 million in 2011; • 100% paid upon CADE´s approval of the operation.
• Leading position in Rio de Janeiro (2nd largest
market in Brazil); Geographical Coverage
• Strong presence in shopping malls (less
competitive environment);
• Relevant participation in the hygiene and beauty
segment, and also dermocosmetics. RJ
Rio de Janeiro State
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24. Casa Saba Brasil | Transaction Rationale
Robust entry on the retail sector through an 85 store platform, being one of the largest
Diversification drugstore chains in Brazil, second largest in Rio de Janeiro.
and Scale Creation of one of the largest mixed distribution and pharmaceutical retail platforms in Latin
America, and the largest in Brazil
Company with a differentiated position to become an important player of the industry
consolidation process;
Growth
Improved flexibility and capillarity for the entry into new markets where Profarma already has
operations (support from the local Profarma team).
Support from regional industry managers, generating possible synergies in purchases,
marketing funds, logistics and back-office;
Sinergy
Tax optimization in Rio de Janeiro;
Easier integration and management of retail operations.
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25. Profarma | A New Company
Mixed Model
Distribution Retail
A Solid Regional Expansion and
Diversification of Channels and A Fragmented Retail Market
Products
3rd largest distributor in Brazil, with 12 Mixed operation model (distribution +
distribution centers and nationwide retail) already established in the
coverage. European market;
The Company also has two platforms + Greater consolidation opportunity:
(Prodiet and Arpmed) focused on the more than 80% of the points of sale are
hospitals, government and specialties still independent shops.
segments.
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