Grupo Biotoscana presentation delivered at the 34th Annual J.P. Morgan Healthcare Conference on 01/13/2016.

Transcription

1 TRANSCRIPT Grupo Biotoscana Grupo Biotoscana presentation delivered at the 34th Annual J.P. Morgan Healthcare Conference on 01/13/2016. MICHAEL: Good afternoon, everyone. My name is Michael [inaudible 0:02]. I'm with J.P. Morgan Healthcare Investment Banking. It's my pleasure to welcome you to our 34th Annual Healthcare Conference. With us today is Grupo Biotoscana. We have Mariano Garcia-Valiño, who is going to be presenting for the company. MARIANO GARCIA-VALIÑO: Thank you for coming. Thank you for giving us time. I think that we're going to spend with you about 20 minutes, and we hope that we can show you a little bit of what we've been doing for the past four or five years, building this company in Latin America. We are very proud of what we have accomplished so far, and I hope that we can leave with you some of that enthusiasm. Let me start by where it all started, which is with the vision we wanted to build in Latin America. Basically, our logic was, "Latin America's growing faster than the rest of the world." Some people say two times as fast. Some people say three times as fast. This particular one says something like four times as fast. In any case, it's definitely growing faster than the average market out there. The other thing that we noticed was specialty, of course, is growing faster than retail, so if you can put the two together, you should have something that grows fairly fast. No one was doing that. We thought that if we can actually bolt that together, we would have something that would be eventually of value. The other thing that we realized is that no one was playing the region as a region. People were playing these on a country-by-country basis. Some country operations had some other satellite countries, so you would see some companies there. If you look at this, the graph on the right, for example, out of a 100 companies in the region, only some 29 companies have more than five countries. When you actually drill down that, only four companies are actually private. The rest are the subsidiaries of multinational companies, so it's really a big scarcity of regional players that eventually can become a vehicle for global investors. Another way of looking at that is, on the graph on the left, is the amount of companies that have already become public. When you actually look at pharmaceutical companies in the region that have become public, you actually only have three, going very quickly down to two, because CFR has been acquired by Abbott, as probably you all know. You only have Genomma Lab in Mexico, which is a regional company, but mostly a resale company, and OTC, generally, and Hypermarcas in Brazil, who is also a Brazil pure play. A very interesting company, but a retail company mostly, and a big portion of OTC. We thought, "You know, we can build this in a way that is regional, in a way that is specialty, and in a way that people can take advantage of this globally. Then we have something that can actually be of value." This is what we came with, a profile of a company that we should go after, and we started discussing with private equity and says, "Would you guys allow us to build something like this, or buy something like this if it is there?" We basically said that the company has to have three things. The first thing is that it has to have the reach, so the company has to have all the countries. It has to play in specialty, and it has to be diversified. Some countries in the

2 region really don't have the critical mass to be able to support a one- or two-product company. You need to go there with several products to be able to pay for the visits, and to be able to build the infrastructure that you need in each country. The second group of things was around managing this company to global standards, so things about compliance, things about having perfect accounting, things of that sort. As you know, there are many companies in the region that do it, but it's not a given in the Latin American region, so we set out to build a company that was perfectly suitable for global investors. The third thing that we wanted was about growth. We wanted a company that would be able to grow out of partnerships, out of their own products, and out of M&A, so that a company would become the consolidator in the region that is really very fragmented there, like 1,000 companies in the region. Many of them are very small, to actually being able to attract capital or to grow significantly. We feel that there was an opportunity there as well. We set out to try to buy something like this. There was not something like this, and so our logic was, "Let's build a puzzle, and let's find the pieces and put them together," and this is what came out of it. In 2011, basically backed by Advent International and Essex Woodlands, two large private equity funds -- and I'm going to talk about them a little bit more later -- we buy Biotoscana, a company in Colombia. The company was pure play specialty, basically had licensees of very nice companies like Actelion, CSL, and some others, in pharma, of course, which is here. The company was present in four or five markets. We expanded it a little bit. We expanded it to a few more markets, and in 2014, we found a company in Brazil called United Medical. Pretty much the same concept, a company that was growing out of licensees, licenses out of very nice companies like Gilead or Celgene. 100 percent focus in Brazil at that time, but Biotoscana was 100 percent outside of Brazil, so it geographically was perfect, and we put them together. When I say we put them together, it's very important that you understand that we are not integrating these companies that much. These markets in Latin America are very particular to each market. You need to play the market the way the market needs to be played. You cannot really have one model for all of them. We respect the way United Medical works in Brazil. We respect the way Biotoscana was working in each of the countries. We're not trying to make one model out of this company. We are trying to take advantage of the increased footprint and of the availability of capital that we now have with [inaudible 5:56] fund. Last year, we found the third piece of our puzzle, a company called LKM. Pure play oncology and HIV in Argentina, a little expansion to the countries that we are besides Argentina. The company produces its own products from API all the way to manufacturing and market. It produces branded generics in those areas. The company was not present in Colombia, not present in Brazil, so it was an opportunity for us to expand a little bit our reach and to have products that we now can take to the other geographies to sell. When you put the three together, you can see that we now have a company that looks like the company I was describing, a company that can grow from M&A, a company that can grow from their own products, and a company that can still be the partner of choice for global biotechnology or global pharmaceutical, specialty pharmaceutical companies that want to come to the region. Let me show you a little bit more of the focus. When we say we focus on specialty, and you build a company out of M&A, you normally cannot buy 100 percent specialty, so we need to build that into our DNA little by little.

3 When you see here, when we first bought Biotoscana, it was a 60 percent specialty company. When we added United Medical, we became 83 percent specialty. When we add LKM, we become 86 percent specialty. We still carry a few products that are not specialty, but the majority of our products are specialty. The other thing you can see here is our portfolio is nicely diversified. We're not 100 percent oncology. We have 30 percent oncology, 30 percent infectious diseases and rare diseases and some others, so we have a nice, broad selection of products that we can take into the markets. Other interesting facts -- geographic footprint. You won't see many companies that are not multinationals that has this breadth of a geographic footprint. We are everywhere from Mexico to Tierra del Fuego in Argentina. In every single of those countries, except for Venezuela, we have our own office, our own operation, our own regulatory staff, our own marketing staff, 100 percent owned and controlled by us. We can drive a product in every single of these markets through our own field force. We can guarantee that you have the quality, the performance, and the compliance in every single of those markets. In Venezuela, incidentally, we are not present because of obvious reasons, but we are partnered with LETI, which is the number one company in Venezuela, so we can also deploy our product in Venezuela. Same thing with diversification, so when we started, we wanted a company that would be own products plus licensed products. We started with a company that was mostly licensed first. Gray is licensed, green is owned. 58 of the company was Actelion and CSL. Great licensees, but a little bit too much on all the eggs in one basket. We bought United Medical. Still, we're majoritarily a licensed company, but now we have four major partners that came up with most of our sales. When we add LKM, we reduced the amount of percentage of our revenues that come from licensees. We have 30 percent of our own products, and by the time we can take those products to other markets, we can probably go to around 40 or 45 percent of our revenues coming from our own products with the assets we have now. Let me show you a little bit of stories of how we've been as a partner. On the left, you have AmBisome, a product that United Medical has owned for 25 years, out of a license and agreement with Gilead, which we cherish and are very honored to have. The drug is, as you know, amphotericin and a liposomal. It has been there forever. We're still growing that drug at 16 percent per year. Interesting thing that we like to say about this graph, Gilead is actually present in Brazil. They have been there for four or five years now, and we still have half this product. This contract is 25 years old, so you can imagine that if they wanted the product back, they could. They're not only not taking that product back, but they're giving us more product. They've already given us Sovaldi, and they're giving us another product as well. On the right, we have the same thing for Actelion. We launched the product in the region. We've managed to grow this drug 44 percent in the past four or five years, and we are basically the leaders everywhere we have this product, which is about six countries in Latin America. Let me drill down on Tracleer a little bit, because I think it's going to tell you a little bit of what, when I say that you need to understand this market really, really carefully, it's what allows you to do. Actelion didn't have a patent for Tracleer in Argentina. This is data from Argentina. Back in 2009, we had not launched yet, and there was already a generic there. There was a generic in 2009 in Argentina. We launched the product in Generics undercut our price by two-thirds. Their price is a third of our price. You can see what happened. This is number of patients across the years. Last year, there were four generics in the market. We owned 49 percent of the patients. In dollars, we probably owned 80 percent of that market.

4 This is purely because we offer a better service, purely because we know the ways to get reimbursement for these products, purely because the patients trust us and doctors trust us. Really, they pay three times the price for Tracleer than for the generics. They're still getting our products. To give you an idea of how our portfolio is developing, we started with Actelion, with Tracleer. We now have Opsumit, Veletri, and Zavesca, so they're giving us more products. We started with AmBisome with Gilead. Now we have Sovaldi and Truvada as well. We started with Celgene with Vidaza. Now we also have Istodax. Little by little, we like to build partnerships where we get more products out of the same partner, and we think that that reflects in the way that we treat our partners in the long run. We also have this nice amount of brands, in total, 70 brands that are very high quality branded generics, at this point being commercialized mostly in Argentina, and we are developing channels to commercialize these in the rest of the platform that we have. If I told you about a Latin American company, normally you would think that innovation is not a big driver in our growth, so we wanted to show you this figure here. This is the freshness thing. Some of you may be familiar to what the freshness thing is. This is the amount of sales on this year that come from products that you have launched in the past five years. In our case, in the past five years, we've averaged 24 percent of our sales coming from new or recently launched products. Just to give you an idea of how high this is, in 2013, there was an article by "Forbes" where they compared many of the large companies in the world and how they fared up to this number. In that article, Novartis was a 19. GSK was a 12. Pfizer was a 10, and you can see the rest. Our number is definitely not Gilead's number, which is probably close to 60, but it's fairly decent for global standards. We have a portfolio that gets renewed constantly, fairly decently. And, this stopped working. OK. Our management is the other thing that I told you we'd crafted very carefully. I think we're proud that we have assembled a team that can take advantage of this opportunity. You see people here that have done interesting things like CFR, and as you probably know, CFR is a big success story in the region. We have people here that have been at Bausch & Lomb. You probably know that that was a big story as well in terms of investment. You have people here that have worked for multinationals and for local companies -- Brazilians, Argentinians, Colombians. All the nationalities are there. We really believe in tapping into each of the resources and building a team that I feel proud that we can tee up to any other company in the region and stand on our own. A fairly large amount of effort has gone into crafting a team that can take this company to the next level. Our investors, which we actually like very much, the way they tee up together, two big private equity funds. Essex Woodlands -- Toby is present here -- has been fantastic at giving us access to Essex Woodlands. This is a large fund, 100 percent dedicated to health care. They are the ones that tells us where the industry's going and allows us to understand which products will work better with our portfolio, where we get them, and where the global partners are. Advent International, on the other hand, is a very large fund globally, the largest fund in the region. It has been there for 18 years, and Ivan has worked this platform play in many, many industries. You probably remember Dufry, which is a duty-free shop company all around the world, built out of M&A by Advent, or IMC, or many others that they have built in the region as well.

5 We think that this capital structure has not only given us the funds to do this, but has been giving us a lot of intelligence on how to put this platform together. Finally, I just wanted to show you a little bit of our results. On the left, you have our sales for the last five years in US dollars. We've been growing at 25 percent for the past five years in US dollars. As you know, the region has been particularly volatile in terms of currency, so if we hadn't had any devaluations, if we could measure this in just local currency, we would have been growing at 42 percent for the past five years, so fairly decent growth. We believe that we have sustainable runway in each of the three avenues to continue doing that. No strategy is forever. The M&A strategy's not going to be forever, but we still think that there is a space there. We believe that it's a huge amount of space in licensees, and we are looking now at... We're now to how much? 42 or 43? 42 opportunities for licensing products, and of course, we're not going to get the 42. We'll maybe get 5 or 6, but we are very actively looking for more partners, and we have at this point, something close to 25 or 26 of the brands that I showed you in Argentina that we're taking to Colombia and to the rest of the region as well. We are definitely engaged into growing this company more, and eventually we have the aspiration of becoming a public company, so eventually we'll come back for the checkbooks, but not the time now. We just wanted you to be aware that we are there, of what we are doing. Hopefully I've convinced you that, in general, we are a company that was crafted uniquely to do this, and I think we have come to the point where we can show you that it's working, that we are taking results out of our strategy, and we hope that year after year, we'll come back here, and we'll tell you that we've continued to get results out of this strategy. If the strategy doesn't work anymore, then we'll change it, and we'll tell you about another thing, but this one is going to work, we believe, for a few years still. We hope that we convinced you also that this is a fairly rare thing to do, and it takes a long time, a lot of effort, and a lot of putting things together, so it's probably going to be difficult to replicate. We hope that it's going to be difficult to replicate. Hopefully we'll be there for a long time, alone in being the truly Latin American specialty pharma company. We have the three avenues of growth, which we believe still have considerable space to go. We'll work our partnerships, conservation, transformation, and provide the R&D, and I hope we can convince you as time goes by that we can have some track record of financial performance which can continue to be in the future. That leaves us with about five minutes for any questions that you guys may have. MARIANO: You don't have to do them, but... [laughter] AUDIENCE MEMBER: Can you talk about the profitability [inaudible 18:45]? MARIANO: We don't make the dower or those figures public, but it's fairly profitable, above average for the region. MARIANO: Anything else? AUDIENCE MEMBER: [inaudible 19:08] MARIANO: Do you remember? 200? 200 now. There is a fact sheet somewhere. We can get one to you. OK? Thank you very much, if there's no other question, and thanks for your time. Webcasting and transcription services provided through MAP Digital, Inc.