Seale & Associatesmnamexico.com/wp-content/uploads/2019/06/Pharmaceutical-indust… · OTC Medicines US$ Million Seale & Associates Creative Solutions. Trusted Advice. In 2017, the

Seale & AssociatesCreative Solutions. Trusted Advice.

PHARMACEUTICAL INDUSTRY IN

MEXICO

OCTOBER

2018INDUSTRY REPORT

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

Sources: BMI Research, Secretaría de Economía, INEGI, KPMGSeale & Associates

Creative Solutions. Trusted Advice.

PHARMACEUTICAL INDUSTRY IN MEXICO

Pharmaceutical Mexico 2018

$0

$500

$1,000

$1,500

$2,000

$2,500

Sources: BMI Research, INEGI, Secretaría de Economía

Prescription Medicines Sales

US$ Million

OTC Medicines

US$ Million


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%


$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Total Sales of thePharmaceutical Industry

US$ Million

Mexico

-15%

-10%

-5%

0%

5%

10%

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Historical Forecast

Growth % y-o-y

Patented Generic Historical Forecast


Sources: INEGI, Secretaría de Economía



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 Product2015

Value Volume

% out of the Total


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

Sources: INEGI, Secretaría de Economía



Accumulated FDI 2010-2016 Total US$5,298 MillionUS$ Million

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

US$2,012

US$531

US$268

US$402

US$1,200

Other Countries: US$885 Million

Israel

USA

France

Germany

Luxembourg


28.9%

18.3%

9.1%

5.7%

4.4%

4.0%

4.0%

2.9%

2.5%

2.3%

17.9%

United States

Germany

France

Switzerland

Italy

Spain

Canada

Ireland

Brazil

China

Rest of the World

36.8%

10.3%

6.7%

4.9%

4.5%

4.4%

3.3%

3.0%

2.5%

2.4%

21.2%

United States

Panama

Colombia

Ecuador

Brazil

France

Guatemala

Costa Rica

Peru

Australia

Rest of the World

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%

Source:Trade Map

PHARMACEUTICAL INDUSTRY IN MEXICO: EXPORTS AND IMPORTS


Destination of Exports

Origin of Imports

% of Total Exports

Total Exports US$1,357 m

% of Total Imports

Total Imports US$4,242 m


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

2014 2015 2016 2017 2018 2019 2020 2021 2022

Health Expenditure Drug Sales % of Health Expenditure

Sources: INEGI, BMI Research, KPMG

HEALTH SECTOR IN MEXICO


Total Expenditure in the Health Sector in Mexico

US$ Billion

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

Historical Forecast


Sources: Secretaría de Economía, INEGI

HEALTH SECTOR IN MEXICO


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

Main Causes of Morbidity and Mortality in Mexico

% of Growth in 2017


63%59%

1.80%

Social Health: IMSS,

ISSSTE, Pemex,

Sedena and Semar

Seguro Popular Private

Source: Bloomberg

PHARMACEUTICAL INDUSTRY


Biggest Pharmaceutical Companies WorldwideBy Sales 2017US$ Billion

$76.5

$54.2

$52.6

$50.1

$40.9

$40.1

$39.6

$38.9

$31.2

$29.2


Source: BMI Research

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



CURRENT MARKET SITUATIONCOMPARABLE PUBLIC COMPANIES - GLOBAL

Source: Capital IQPharmaceutical Mexico 2018

Price

10/1/18 2015 2016 2017EV /

EBITDA

EV /

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

LimitedISR $21.46 $19,693 26.4% $21,852 $55,418 10.1x 9.7x 9.3x 10.2x 2.7x

MERCK Kommanditgesellschaft

auf AktienGER $104.14 $17,901 20.9% $45,279 $57,704 12.6x 12.5x 12.4x 13.3x 3.3x

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

Company LimitedJPN $41.46 $15,594 23.1% $32,512 $39,248 12.6x 11.5x 15.3x 12.5x 2.5x

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.,

Ltd.JPN $0.00 $2,363 27.4% $34,045 $32,721 38.0x 34.0x 42.8x 52.8x 14.7x

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,

S.A.B. de C.V.MEX $0.85 $644 21.7% $812 $1,012 8.5x 159.8x 9.1x 6.9x 1.6x

NR: Not Relevant Mean 16.2x 4.8x

Median 13.3x 4.7x

Annual Average EV /

EBITDA10/1/18

Company Country SalesEBITDA

Margin

Mkt. Cap.

US$M

Enterprise

Value


CURRENT MARKET SITUATIONCOMPARABLE TRANSACTIONS - GLOBAL

Source: Capital IQPharmaceutical Mexico 2018

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 - -

Apr-18 Shire plc IRL A biotechnology companyTakeda Pharmaceutical Company

Limited$80,853 12.5x 5.2x

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 - -

Mar-18GlaxoSmithKline Consumer Healthcare

Holdings LtdGBR Healthcare company GlaxoSmithKline plc $13,018 - 3.6x

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

Oct-17Bayer Aktiengesellschaft, Selected Crop

Science businessesGER Businesses of bayer BASF SE $6,986 15.3x 4.5x

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

BuyerSize

US$M

EV /

EBITDA

EV /

RevenueDate Target Country Description

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


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


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 Seale & AssociatesCreative Solutions. Trusted Advice.

CURRENT MARKET SITUATIONREPRESENTATIVE TRANSACTIONS - GLOBAL


GLOBAL REPRESENTATIVE TRANSACTION

BUYER

The final agreement is about 46

percent in cash and 54 percent

of the shares, which leaves the

Shire shareholders with half the

combined group.

The transaction represents implied multiples of

12.6x EBITDA and 5.3x revenue

On April 19, 2018, Takeda Pharmaceutical Company

Ltd., Japanese pharmaceutical company, announced the

acquisition of Shire Plc., an Irish pharmaceutical

company, for US$61.5 billion

TARGETTAKEDA PHARMACEUTICAL COMPANY LTD.,

ANNOUNCED THE ACQUISITION OFSHIRE PLC.

On May 8 an acquisition

agreement was reached after

5 offers by Takeda

INCOME OF US$15.6

BILLION

+30,000 EMPLOYEES

FOUNDED IN 1986FOUNDED IN 1781

+23,000 EMPLOYEES

INCOME OF US$15.6

BILLION


Sources: Capital IQ, Takeda

The combined value of Takeda

and Shire is US$31 billion in

sales, making it the 9th largest

pharmaceutical


MEXICAN REPRESENTATIVE TRANSACTION

Rimsa presented an annual growth

rate in its revenues of 10.6% from

2011 to the date of acquisition

The transaction represents an implied

multiple of 10.1x revenues

On October 1, 2015, Teva Pharmaceutical Industries Ltd.,

announced the acquisition of Representaciones y Investigaciones

Médicas, S.A. of C.V. (Grupo Rimsa), for US$2,300 million

TEVA PHARMACEUTICAL INDUSTRIES LTD., ANNOUNCED

THE ACQUISITION OF GRUPO RIMSA

Mexico is the second largest

market in Latin America for the

pharmaceutical industry and

one of the 5 most important

among emerging countries

INCOME 2014 OF

US$227 MILLION

+2,600 EMPLOYEES

FOUNDED IN 1970+40,000 EMPLOYEES

PRESENCE IN +60

COUNTRIES

INCOME 2016 OF $9.4

BILLIONS


Sources: Capital IQ, Teva, The Wall Street Journal

Teva is the world's largest

generic pharmaceutical for its

sales

BUYER TARGET


REPRESENTATIVE MEXICO ENGAGEMENTS

Washington, D.C. | Mexico City | Monterrey

to

Holding company of

merged its

beverage division

with

has merged with

a business of

has partnered with

a subsidiary of

has sold

to

its sanitaryware business

and

a business unit of

has sold

Cosmocel Química

to

intelectiva®

has acquired

KFC Costa Rica

from

sold

to

sold

to

Grupo Galaz, S.A de C.V.

dealers of

has partnered with

workshop and store in

Mexico City from

Acquisition

Advisory

Services

Corporate

Finance

Advisory

Services

has formed a partnership in

the casting tools business

between

and

has acquired

has acquired

has been acquired by


has acquired

has acquired

has acquired



merged its

beverage division

with

Acquisition

Advisory

Services

has carved out and sold

its concrete pumping

assets in Mexico

has formed a

partnership to market

and develop oil storage

and distribution in

Mexico with

Corporate

Finance

Advisory

Services

Corporate

Finance

Advisory

Services

acquired a 61% stake on

Acquisition

Advisory

Services

Corporate

Finance

Advisory

Services

Since 1999, Seale & Associates has been the trusted advisor

to highly respected public and private companies from around

the world, with a track record of success in a diverse range of

industries. Seale is an elite boutique global investment banking

firm with extensive experience in mergers and acquisitions

(M&A), corporate finance advisory, and enterprise level

strategy consulting. Our experienced team of professionals are

committed to serving clients with excellence and integrity,

while offering innovative ideas and solutions to address

complex dealings. All securities related transactions are cleared

through Seale Capital, Inc., a registered broker dealer and

member of FINRA and SIPC.

ADVISOR TO LEADING COMPANIES WORLDWIDE

CONTACT INFORMATION

950 N. Glebe RoadSuite 950Arlington, Virginia 22203Phone: +1 (703) 294 6770

37, Moliere GranadaMexico City, 11520Phone: +52 (55) 8000 7463

Please contact us if you would like further information about M&A trends and/or specific transaction multiples for your industry.

Washington, D.C. | Mexico City | Monterrey

Mexico ContactInformation

Established presence in

Monterrey , Mexico

*

*

*

*

**

**

* Multiple engagements

*

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

* *

1999

Founded

2016 2017 2018

James A. Seale

President

[email protected]

Brett M. Carmel

Senior Managing Director & Co-founder

[email protected]

Felipe Bueno Viesca

Senior Director

[email protected]

Sergio Garcia del Bosque

Managing Director

[email protected]

Adan Sierra

Vice President

[email protected]

Carlos Hernandez

Vice President

[email protected]

Alejandro Montemayor

Associate

[email protected]

Sofia Felix

Business Development

[email protected]

Andres Cardenas

Analyst

[email protected]

Armando RiosAnalyst

[email protected]

Miguel LealJunior Analyst

[email protected]

Diego HernandezJunior Analyst

[email protected]


Documents

Seale & Associatesmnamexico.com/wp-content/uploads/2019/06/Pharmaceutical-indust… · OTC Medicines US$ Million Seale & Associates Creative Solutions. Trusted Advice. In 2017, the