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PHARMACEUTICAL INDUSTRY IN MEXICO
OCTOBER 2018 INDUSTRY REPORT PHARMACEUTICAL INDUSTRY IN MEXICO
The pharmaceutical sector focuses on the research, development, production and commercialization of chemical products or biopharmaceuticals for the prevention or treatment of diseases ▪ The classification of the drugs is by (1) origin, whether they have synthetic origin or biological origin and/or by (2) their prescription: controlled medicines that need a prescription for sale and free prescription (over the counter OTC) for the treatment or prevention of minor conditions that do not require a prescription ▪ Of up to 10,000 substances that are investigated, only one reaches the market as medicine, which implies investments close to US$2,500 million ▪ Pharmaceutical companies in Mexico generate 79,000 direct jobs and just over 310,000 indirect jobs ▪ The pharmaceutical industry represents 0.5% of the national GDP and 2.9% of the manufacturing GDP ▪ The pharmaceutical industry is under strict regulation in all its stages: research, development, approval, promotion and commercialization
Pharmaceutical Mexico 2018 Sources: BMI Research, Secretaría de Economía, INEGI, KPMG Seale & Associates Creative Solutions. Trusted Advice. PHARMACEUTICAL INDUSTRY IN MEXICO
In 2017, the value of the industry in Mexico reached US$10,026 million in sales, an increase of 3.08% over 2016 ▪ Sales were divided as follows: 83.44% were prescription medicines, of which 65.60% were patented medicines (with intellectual property by the creator laboratory) and 34.40% generic medicines (which no longer have patent), while the remaining 16.56% of total sales were OTC prescription medicines ▪ A compound annual growth rate (CAGR) of 5.96% (2017-2022) is expected in the total sales of the industry, in the sales of controlled medicines a CAGR of 5.86% is expected and in sales of medicines of free prescription a CAGR of 6.44%
$16,000 10% $14,000 5% Total Sales of the $12,000 Pharmaceutical Industry $10,000 0% US$ Million $8,000 Mexico $6,000 -5% Historical Forecast $4,000 -10% Growth % y-o-y $2,000 $0 -15%
$12,000 $2,500
$10,000 $2,000 $8,000 $1,500 $6,000 $1,000 $4,000 $2,000 $500
$0 $0
Prescription Medicines Sales OTC Medicines US$ Million US$ Million Patented Generic Historical Forecast
Pharmaceutical Mexico 2018 Seale & Associates Sources: BMI Research, INEGI, Secretaría de Economía Creative Solutions. Trusted Advice. PHARMACEUTICAL INDUSTRY IN MEXICO
The main pharmaceutical product sold both by value and volume were antibiotics with 16.1% and 22.9% respectively, out of the total sales of medicines during 2015 ▪ The second main medicines sold were drugs for the digestive system and metabolism with 13.1% in value and 12.3% in volume, out of total sales
Sales by Pharmaceutical Product 2015 % out of the Total Value Volume
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Antibiotics Digestive System and Metabolism Cardiovascular System Nervous System Vitamins and Vitamin Compounds Respiratory System Veterinary Use Analgesics Food Supplements Locomotor System Dermatologists Hematopoietic System Antiparasitic Vaccinations Oncology Antivirals Others
Pharmaceutical Mexico 2018 Sources: INEGI, Secretaría de Economía Seale & Associates Creative Solutions. Trusted Advice. PHARMACEUTICAL INDUSTRY IN MEXICO
The main producing entities in the pharmaceutical industry during 2014 were Mexico City with 38.6% of the national production, followed by the State of Mexico with 28.1% and Jalisco with 19.3% ▪ By number of economic units, Mexico City leads with 232 units, Jalisco with 166 and the State of Mexico with 82
During the period 2010-2016, the pharmaceutical sector in Mexico has received a Foreign Direct Investment (FDI) of US$5,298 million ▪ The largest investor country has been Israel with an accumulated US$2,012 million and the United States follows with an accumulated investment of US$1,200 million ▪ Mexico presents a 17.1% saving in operating costs in pharmaceutical manufacturing compared to the United States
Israel Luxembourg
US$2,012 US$268
Germany
US$531 USA France
Accumulated FDI 2010-2016 Total US$5,298 Million US$1,200 US$ Million US$402
Other Countries: US$885 Million
Pharmaceutical Mexico 2018 Sources: INEGI, Secretaría de Economía Seale & Associates Creative Solutions. Trusted Advice. PHARMACEUTICAL INDUSTRY IN MEXICO: EXPORTS AND IMPORTS
During 2017, Mexico was the main exporter in Latin America and number 27 worldwide. Mexico exported US$1,357 million and imported US$4,242 million
▪ 35.7% of the exports of the pharmaceutical industry in Mexico went to the United States, 10.2% to Panama and in third destination, to Colombia with 6.7%
▪ 28.9% of imports came from the United States, 18.3% from Germany and 9.1% from France
▪ The main exporting country worldwide during 2017 was Germany with a participation of 16.1%, followed by Switzerland with 13.4%
United States 36.8% Panama 10.3% Colombia 6.7% Ecuador 4.9% Destination of Exports Brazil 4.5% % of Total Exports France 4.4% Total Exports US$1,357 m Guatemala 3.3% Costa Rica 3.0% Peru 2.5% Australia 2.4% Rest of the World 21.2%
United States 28.9% Germany 18.3% France 9.1% Switzerland 5.7% Origin of Imports Italy 4.4% % of Total Imports Spain 4.0% Total Imports US$4,242 m Canada 4.0% Ireland 2.9% Brazil 2.5% China 2.3% Rest of the World 17.9%
Pharmaceutical Mexico 2018 Source:Trade Map Seale & Associates Creative Solutions. Trusted Advice. HEALTH SECTOR IN MEXICO
The economic value of the health sector represents approximately 6% of GDP in Mexico. About 40% of the expenditure made in health is paid out of pocket (direct payment made by households for health services at the time of receiving them), the OECD average is 20% ▪ A great challenge is to stop chronic diseases that represent between 20% and 25% of the causes of death in Mexico ▪ Health expenditures for chronic diseases are growing at a faster rate than the health budget. The budget of the Mexican Institute of Social Security (IMSS) increases to 5% year-on-year (y-o-y) while health expenditures for chronic diseases increase to 7% y-o-y ▪ In Mexico there are 4,437 hospitals by 2017, of which 31.07% are public and 68.93% are private, giving a total of 125,173 beds, 0.97 per 1,000 inhabitants
Total Expenditure in the Health Sector in Mexico US$ Billion Historical Forecast $120,000 20% 18% $100,000 16% 14% $80,000 12% $60,000 10% 8% $40,000 6% 4% $20,000 2% $- 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 Health Expenditure Drug Sales % of Health Expenditure
Pharmaceutical Mexico 2018 Sources: INEGI, BMI Research, KPMG Seale & Associates Creative Solutions. Trusted Advice. HEALTH SECTOR IN MEXICO
Main Causes of Morbidity and Mortality in Mexico % of Growth in 2017
Morbidity Cases per Year Mortality Deaths per Year
Acute Respiratory Infections 23,445,722 Heart Diseases 128,731 Intestinal Infections 4,476,041 Diabetes 98,521 Urinary Tract Infections 4,106,966 Malignant Tumors 79,514 Ulcer, Gastritis and Duodenitis 1,337,562 Accidents 51,697
Gingivitis and Periodontal Diseases 1,106,123 Liver Diseases 47,628
Conjunctivitis 909,106 Cerebrovascular Disease 34,106
Acute Otitis Media 574,022 Pneumonia and Influenza 18,889 Obesity 552,512 Violence 20,762 Vulvovaginitis 490,296 COPD 21,057
% of Population by Coverage Scheme The percentages exceed 100% for the multiple coverages that there are
63% 59%
1.80%
Social Health: IMSS, Seguro Popular Private ISSSTE, Pemex, Sedena and Semar
Pharmaceutical Mexico 2018 Sources: Secretaría de Economía, INEGI Seale & Associates Creative Solutions. Trusted Advice. PHARMACEUTICAL INDUSTRY
$76.5
$54.2
$52.6
$50.1
$40.9
$40.1
$39.6
$38.9
$31.2
$29.2
Biggest Pharmaceutical Companies Worldwide By Sales 2017 US$ Billion
Pharmaceutical Mexico 2018 Source: Bloomberg Seale & Associates Creative Solutions. Trusted Advice. SWOT ANALYSIS OF THE INDUSTRY
STRENGHTS: • The second largest market for medicines in Latin America • Regulatory standards greater than the other Latin American countries • Strong relations with the United States and Canada • Developed industry and strong national and multinational presence
OPPORTUNITIES: • New legislations offer potential for growth in the market for generic medicines • The expansion of public programs such as Seguro Popular can increase spending in the industry • Less restrictions on advertising • The increase in chronic diseases, i.e. diabetes
WEAKNESSES: • The application of the national patent law remains problematic • With 10% of the population without health insurance, the market is sensitive to economic impacts • Inefficient coordination of regulatory and health policies, as well as slow entry into the generic market, has contributed to high pharmaceutical prices
THREATS: • Continued non-compliance with the national patent law may continue to limit investment and product launches • The bureaucracy of the IMSS and the ISSSTE causes long waiting times for the approvals of clinical trials • The uncertainty of the policies to be taken by AMLO
Pharmaceutical Mexico 2018 Source: BMI Research Seale & Associates Creative Solutions. Trusted Advice. CURRENT MARKET SITUATION COMPARABLE PUBLIC COMPANIES - GLOBAL
Annual Average EV / 10/1/18 Price EBITDA Mkt. Cap. Enterprise EBITDA Company Country Sales Margin US$M Value EV / EV / 10/1/18 2015 2016 2017 EBITDA Revenue
Johnson & Johnson USA $139.69 $81,382 34.4% $374,754 $388,698 10.9x 13.0x 14.0x 14.5x 4.8x
Pfizer Inc. USA $44.27 $53,373 40.1% $259,516 $287,423 10.6x 11.3x 11.6x 13.4x 5.4x
Roche Holding AG SUI $243.10 $58,101 38.4% $207,814 $222,596 12.8x 11.7x 10.9x 9.9x 3.8x
Novartis AG SUI $86.40 $52,588 30.8% $200,604 $220,279 13.8x 13.1x 13.7x 9.7x 4.2x
Merck & Co., Inc. USA $71.53 $41,729 33.5% $190,236 $206,349 11.5x 11.3x 12.3x 17.3x 5.0x
AbbVie Inc. USA $95.00 $32,187 41.9% $143,856 $177,866 15.3x 12.5x 13.2x 13.7x 5.7x
Sanofi FRA $89.75 $41,032 27.5% $111,097 $136,111 11.6x 9.6x 10.4x 12.3x 3.4x
Bayer Aktiengesellschaft GER $87.37 $43,128 24.0% $81,480 $134,333 14.0x 9.5x 9.4x 12.9x 3.3x
GlaxoSmithKline plc GBR $19.98 $39,480 25.5% $98,198 $128,563 12.4x 13.1x 11.8x 12.5x 3.3x
Novo Nordisk A/S DEN $46.53 $17,153 44.9% $112,064 $109,247 21.8x 16.2x 12.8x 14.2x 6.5x
AstraZeneca PLC GBR $78.13 $21,450 17.6% $98,977 $116,319 13.7x 15.1x 15.9x 26.7x 5.3x
Eli Lilly and Company USA $107.60 $24,278 32.1% $107,331 $112,756 17.6x 16.6x 16.2x 15.3x 4.7x
Bristol-Myers Squibb Company USA $62.10 $22,037 28.8% $101,340 $102,753 23.6x 23.3x 16.3x 17.0x 4.8x
Allergan plc IRL $192.33 $16,034 46.4% $65,285 $88,960 27.0x 20.3x 16.2x 12.0x 5.5x Teva Pharmaceutical Industries ISR $21.46 $19,693 26.4% $21,852 $55,418 10.1x 9.7x 9.3x 10.2x 2.7x Limited MERCK Kommanditgesellschaft GER $104.14 $17,901 20.9% $45,279 $57,704 12.6x 12.5x 12.4x 13.3x 3.3x auf Aktien Zoetis Inc. USA $91.66 $5,721 39.0% $44,164 $47,573 19.0x 18.0x 19.7x 21.9x 8.5x Takeda Pharmaceutical JPN $41.46 $15,594 23.1% $32,512 $39,248 12.6x 11.5x 15.3x 12.5x 2.5x Company Limited Mylan N.V. USA $36.48 $11,594 32.6% $18,808 $33,105 16.7x 10.4x 9.6x 9.6x 2.8x
Bausch Health Companies Inc. CAN $27.34 $8,422 39.7% $9,558 $33,899 20.5x 8.9x 8.4x 10.1x 4.0x
Astellas Pharma Inc. JPN $17.30 $11,523 28.1% $33,283 $30,595 12.3x 8.6x 8.4x 9.8x 2.7x
Chugai Pharmaceutical Co., Ltd. JPN $64.86 $5,049 24.0% $35,486 $33,084 21.1x 17.1x 22.2x 27.9x 6.7x Jiangsu Hengrui Medicine Co., JPN $0.00 $2,363 27.4% $34,045 $32,721 38.0x 34.0x 42.8x 52.8x 14.7x Ltd. Eisai Co., Ltd. JPN $97.82 $5,508 19.8% $28,010 $27,453 29.9x 23.3x 24.8x 28.9x 5.1x Genomma Lab Internacional, MEX $0.85 $644 21.7% $812 $1,012 8.5x 159.8x 9.1x 6.9x 1.6x S.A.B. de C.V.
NR: Not Relevant Mean 16.2x 4.8x Median 13.3x 4.7x
Pharmaceutical Mexico 2018 Source: Capital IQ Seale & Associates Creative Solutions. Trusted Advice. CURRENT MARKET SITUATION COMPARABLE TRANSACTIONS - GLOBAL
Size EV / EV / Date Target Country Description Buyer US$M EBITDA Revenue
Jun-18 Zentiva Group, a.s. CZE Manfactures and distributes generic medecines Advent International Corporation $2,202 - -
Jun-18 Foundation Medicine, Inc. USA Molecular information products Roche Holdings, Inc. $2,395 - NR
May-18 MedReleaf Corp. CAN Cannabis-based pharmaceutical products Aurora Cannabis Inc. $2,556 - NR
Apr-18 Bayer Assets GER Additional Seed and assets businesses BASF SE $2,058 - 2.3x
Apr-18 Consumer Health Business of Merck GER Consumer health business Procter & Gamble Overseas India B.V. $4,169 - -
Takeda Pharmaceutical Company Apr-18 Shire plc IRL A biotechnology company $80,853 12.5x 5.2x Limited
Apr-18 Oncology Business of Shire IRL Oncology business LES LABORATOIRES SERVIER SAS $2,400 - 9.2x
Apr-18 AveXis, Inc. USA A clinical-stage gene therapy company Novartis AG $8,696 - -
GlaxoSmithKline Consumer Healthcare Mar-18 GBR Healthcare company GlaxoSmithKline plc $13,018 - 3.6x Holdings Ltd
Mar-18 LifeScan, Inc. USA Blood glucose monitoring Platinum Equity, LLC $2,100 - 1.4x
Jan-18 Ablynx NV BEL Late-stage clinical biopharmaceutical company Sanofi $4,769 - NR
Jan-18 Bioverativ Inc. USA A biotechnology company Sanofi $11,474 23.2x 9.4x
Oct-17 Advanced Accelerator Applications S.A. FRA Radiolabeled pharmaceuticals and nuclear medicines Novartis Groupe France S.A. $3,917 - NR
Bayer Aktiengesellschaft, Selected Crop Oct-17 GER Businesses of bayer BASF SE $6,986 15.3x 4.5x Science businesses
Aug-17 IFM Therapeutics, Inc. USA A biopharmaceutical company Bristol-Myers Squibb Company $2,320 - -
Jul-17 STADA Arzneimittel Aktiengesellschaft GER Pharmaceutical company Bain Capital Equity $4,993 12.6x 2.3x
Feb-17 ZELTIQ Aesthetics, Inc. USA Products for reduction of fat Allergan plc $2,471 NR 6.8x
Jan-17 Actelion Ltd SUI Low molecular weight drugs Johnson & Johnson $29,853 NR 12.2x
Jan-17 ARIAD Pharmaceuticals, Inc. USA An oncology company Takeda Pharmaceuticals U.S.A., Inc. $5,452 - NR
Dec-16 LifeCell Corporation USA A pharmaceutical company Allergan plc $2,900 - -
Dec-16 Capsugel, Inc. USA Dosage forms and solutions Lonza Group Ltd $5,500 16.0x 5.5x
Aug-16 Medivation, Inc. USA Medical therapies to treat serious diseases Pfizer Inc. $14,331 NR 13.6x
Jun-16 Vogue International LLC USA Hair care products Johnson & Johnson Consumer Inc. $3,300 - -
May-16 Anacor Pharmaceuticals, Inc. USA Small-moleculre therapeutics Pfizer Inc. $4,633 - NR
Apr-16 Stemcentrx, Inc. USA Therapies for cancer patients AbbVie Inc. $9,325 - -
Feb-16 Meda AB SWE A specialty pharma company Mylan N.V. $10,071 13.0x 4.3x
Dec-15 Bristol-Myers Squibb, VIH Clinic USA A HIV clinic ViiV Healthcare Company $2,905 - -
Dec-15 Acerta Pharma B.V. NED Oncology and autoimmune diseases AstraZeneca PLC $4,000 - -
NR: Not Relevant Mean 15.5x 6.2x
Median 14.2x 5.2x
Source: Capital IQ Pharmaceutical Mexico 2018 Seale & Associates Creative Solutions. Trusted Advice. CURRENT MARKET SITUATION REPRESENTATIVE TRANSACTIONS - GLOBAL
Summary Target Buyer
On April 19, 2018, Takeda Pharmaceutical Company Ltd., Japanese pharmaceutical, announced the acquisition of Shire Plc., Irish pharmaceutical company specializing in rare diseases, for US$61.5 billion, representing implied multiples of 12.6x EBITDA and 5.3x revenue
On January 26, 2017, Johnson & Johnson, US pharmaceutical company, announced the acquisition of Actelion Ltd, for US$29,853 million, representing implied multiples of 32.2x EBITDA and 12.2x revenue
On August 22, 2016, Pfizer Inc., a US pharmaceutical company, announced the acquisition of Medivation, Inc., a US biopharmaceutical company, for US$14,331 million, representing implied multiples of 30.7x EBITDA and 13.6x sales.
On March 27, 2018, GlaxoSmithKline plc, developer of vaccines and medicines in the United Kingdom, announced the acquisition of the remaining 36.5% stake of GlaxoSmithKline Consumer Healthcare Holdings Ltd. to Novartis AG, for US$13,018 million, representing an implied multiple of 3.6x revenue
On January 22, 2018, Sanofi, a French pharmaceutical company, announced the acquisition of Bioverativ Inc., a US biotech company for hemophilia treatments, for US$11,474 million, representing implied multiples of 23.2x EBITDA and 9.4x revenue
Sources: Capital IQ, MergerMarket Pharmaceutical Mexico 2018 Seale & Associates Creative Solutions. Trusted Advice. GLOBAL REPRESENTATIVE TRANSACTION
On April 19, 2018, Takeda Pharmaceutical Company The final agreement is about 46 Ltd., Japanese pharmaceutical company, announced the percent in cash and 54 percent acquisition of Shire Plc., an Irish pharmaceutical of the shares, which leaves the company, for US$61.5 billion Shire shareholders with half the combined group.
BUYER TAKEDA PHARMACEUTICAL TARGET COMPANY LTD., ANNOUNCED THE ACQUISITION OF SHIRE PLC.
The combined value of Takeda On May 8 an acquisition and Shire is US$31 billion in agreement was reached after sales, making it the 9th largest 5 offers by Takeda pharmaceutical
The transaction represents implied multiples of 12.6x EBITDA and 5.3x revenue
INCOME OF US$15.6 INCOME OF US$15.6 BILLION BILLION
+30,000 EMPLOYEES +23,000 EMPLOYEES
FOUNDED IN 1781 FOUNDED IN 1986
Pharmaceutical Mexico 2018 Sources: Capital IQ, Takeda Seale & Associates Creative Solutions. Trusted Advice. MEXICAN REPRESENTATIVE TRANSACTION
On October 1, 2015, Teva Pharmaceutical Industries Ltd., announced the acquisition of Representaciones y Investigaciones Rimsa presented an annual growth Médicas, S.A. of C.V. (Grupo Rimsa), for US$2,300 million rate in its revenues of 10.6% from 2011 to the date of acquisition
BUYER TARGET TEVA PHARMACEUTICAL INDUSTRIES LTD., ANNOUNCED THE ACQUISITION OF GRUPO RIMSA
Mexico is the second largest Teva is the world's largest market in Latin America for the generic pharmaceutical for its pharmaceutical industry and sales one of the 5 most important among emerging countries
The transaction represents an implied multiple of 10.1x revenues
INCOME 2016 OF $9.4 INCOME 2014 OF BILLIONS US$227 MILLION
PRESENCE IN +60 +2,600 EMPLOYEES COUNTRIES
+40,000 EMPLOYEES FOUNDED IN 1970
Pharmaceutical Mexico 2018 Sources: Capital IQ, Teva, The Wall Street Journal Seale & Associates Creative Solutions. Trusted Advice. REPRESENTATIVE MEXICO ENGAGEMENTS
intelectiva® has acquired has merged with merged its merged its has acquired has acquired beverage division beverage division with with KFC Costa Rica a business of from
has partnered with has partnered with has been acquired by Corporate Acquisition Acquisition Finance a subsidiary of Advisory Advisory Advisory Services Services Services
has formed a partnership in has formed a has carved out and sold the casting tools business sold partnership to market sold between its concrete pumping and develop oil storage assets in Mexico and distribution in Corporate to Mexico with Finance to and to Advisory Services
has sold has acquired Holding company of Cosmocel Química to has been acquired by Corporate Corporate Finance Finance dealers of acquired a 61% stake on
a business unit of Advisory Advisory Services Services
has sold has acquired its sanitaryware business Grupo Galaz, S.A de C.V. has acquired has been acquired by workshop and store in and has been acquired by Mexico City from Acquisition Advisory to Services
Washington, D.C. | Mexico City | Monterrey Mexico Contact Seale & Associates Information Creative Solutions. Trusted Advice. James A. Seale President Since 1999, Seale & Associates has been the trusted advisor [email protected] to highly respected public and private companies from around Brett M. Carmel the world, with a track record of success in a diverse range of Senior Managing Director & Co-founder [email protected] industries. Seale is an elite boutique global investment banking firm with extensive experience in mergers and acquisitions Felipe Bueno Viesca Senior Director (M&A), corporate finance advisory, and enterprise level [email protected]
strategy consulting. Our experienced team of professionals are Sergio Garcia del Bosque committed to serving clients with excellence and integrity, Managing Director [email protected] while offering innovative ideas and solutions to address Adan Sierra complex dealings. All securities related transactions are cleared Vice President through Seale Capital, Inc., a registered broker dealer and [email protected]
member of FINRA and SIPC. Carlos Hernandez Vice President ADVISOR TO LEADING COMPANIES WORLDWIDE [email protected]
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* Multiple engagements CONTACT INFORMATION Andres Cardenas Analyst [email protected]
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