Galenica Group

Half year results 2020

Conference call, 4 August 2020

2 p.m. CEST

Galenica - the first choice for health, beauty and wellbeing

Galenica Group – Half year results 2020
Agenda

“COVID-19 has clearly demonstrated Galenica’s key role in

the Swiss healthcare market”
Marc Werner, CEO

“Strong sales growth and solid results despite COVID-19 “

Felix Burkhard, CFO

Q&A ALL

04.08.2020 © Galenica Group 2

COVID-19 “lows”
Corona pandemic decelerated our business

− Sales
− EBIT
− New projects
− Ongoing projects

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COVID-19 “highs”
The way we dealt with corona challenges was a highlight

− high increase in digital demand THANKS TO THE GREAT

− stronger link between online and
offline world  Omni-channel!
− Bichsel classified as a
systemically important company
COMMITMENT OF ALL EMPLOYEES,
BASIC SUPPLY OF MEDICATIONS
IN SWITZERLAND ASSURED AT
ALL TIMES.

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Conclusion
Results improved despite COVID-19 !

DESPITE COVID-19, WE
NET SALES EBIT1) NET PROFIT1)
CLEARLY EXCEEDED
+5.6% +3.0% +5.3% MARKET GROWTH WITH
Galenica Group Galenica Group Galenica Group SALES , AND WE
CHF 1,690.4 CHF 83.6 million CHF 68.4 million
million FURTHER IMPROVED
EBIT AND NET PROFIT.

1) adjusted: excluding the effects of IAS 19 and IFRS 16

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COVID-19
Some key figures from March 2020 - Retail

~ 30 1’700 + 220%
COVID-19 infos plexiglas safety online-sales
to employees barriers

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COVID-19
Some key figures from March 2020 – Products & Brands

+ 717% + 49% + 51%

Septo Clean® Eubos® Algifor®
sales sales sales

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COVID-19
Some key figures from March 2020 - Services

6x 700’000 + 60%
more online-order packages per logistics volumes
packages / day day peak

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Conclusions
The pandemic has clearly …

… DEMONSTRATED THE KEY ROLE

THAT THE GALENICA GROUP PLAYS
IN THE SWISS HEALTHCARE MARKET.

… BOOSTED THE USE OF DIGITAL

CHANNELS AND CONFIRMED OUR
OMNI-CHANNEL STRATEGY.

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Expansion
Despite COVID-19 we further developed operations

6 1 THE PHARMACY NETWORK

new mail-
new own
pharmacies
order WAS EXTENDED BY 6 NEW
pharmacy
LOCATIONS AND VERFORA
STRENGTHENED ITS
PARTNERSHIPS AND
3 1 PRODUCT PORTFOLIO.
new partner company
products acquisition

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Business outlook 2020

WE WILL CONTINUE
Pharmacy network Expanding digital Broad-based launch
TO FURTHER
further developing market presence mail-order pharmacy DEVELOP OUR
PHARMACY NETWORK
AND CONSISTENTLY
EXPAND THE DIGITAL
MARKET PRESENCE.
Integration new Launch of ERP & construction
licened products Vita-Merfen® work projects

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New Head Services Business Sector as of 1st September 2020

Christoph Amstutz Andreas Koch

Head Services Business Sector Head Services Business Sector

till 30 August 2020 as of 1st September 2020

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My first impressions & experiences as CEO of Galenica

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Strategic frame and business model

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Analysis of strategic framework

Strategic projects Strategic programmes

− Expansion logistics Omni-Channel

capacities
− New ERP system

market
Care
− New mail-order pharmacy
− Expansion online offering Professionals
− Primary Care
− …….

inside
Efficiency

Transformation & organisational

development
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We want to shape the change!

Strategic programmes

Omni-Channel
WHAT

market
we do Care
and …
Professionals

inside
Efficiency

Transformation & organisational … HOW

development we do it.
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Galenica Group
Half year results 2020

Felix Burkhard
CFO

Analyst Conference, 4th August 2020

Galenica - the first choice for health, beauty and wellbeing

H1 2020
Remarkable achievement

Despite COVID-19 burdens,

− strong sales growth + 5.6%

− EBIT adjusted increase + 3.0%

− and a positive Free Cash Flow

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Swiss pharmaceutical market by channel YTD June 2020
Value (ex-factory): CHF 3’090.6 million Volume (packs): 93.9 million
CHF +87.6 million / +2.9% +1.0 million / +1.1%

Hospitals Hospitals 8.9%

797.7 million 8.4 million 3.6%
+3.5% -2.0%
25.8%
Drugstores 43.5% Drugstores
33.1 million 3.4 million 22.3%
+12.4% 1.1% +11.8%
64.1%
Physicians 25.3% Physicians 1.1%
780.4 million 20.9 million
+2.1% 4.3% -1.7%

Pharmacies Stationary Mail-order Pharmacies Stationary Mail-order

1’479.4 million 1’345.5 million 133.9 million 61.2 million 60.2 million 1.0 million
+2.8% +3.3% -1.7% +2.0% +2.1% -1.3%

Source: APO/SD/DRO/SPI Index, Swissmedic A, B, C, D

Medicines Swissmedic lists A, B, C, D, sold from suppliers and wholesalers to hospitals, physicians and drugstores

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Galenica Group - Swiss pharmaceutical market 2020 19
Swiss pharmaceutical market monthly development
Value (ex-factory) YTD June 2020: CHF 3’090.6 million
CHF +87.6 million / +2.9%

Source: APO/SD/DRO/SPI Index, Swissmedic A, B, C, D

Medicines Swissmedic lists A, B, C, D, sold from suppliers and wholesalers to hospitals, physicians and drugstores

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Galenica Group - Swiss pharmaceutical market 2020 20
Consumer healthcare market YTD June 2020

3.5% OTC
12.8% +5.7%

Personal
CHF million care -5.2%
1’294
20.9% +3.9% Patient non-medication products +0.8%
62.8% care +10.4%

Nutrition
+6.5%

Source: Pharma Trend for pharmacies and drugstores in Switzerland, streetprices

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©Galenica Group
2020 IQVIA 21
H1 2020
Strong sales growth
Net sales (in CHF million)

Galenica Group +5.6%

Retail +2.9%

Products &
+1.0%
Brands

Services +7.9%

H1 2019 H1 2020
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Retail Business sector
Sales growth driven by expansion
Net sales (in million CHF)

+2.9%

48%

Elements of growth:
Expansion1): +5.6% +5.1% +4.3% thereof Bichsel Group: +3.2%

Organic2): +0.4% -0.7% -1.4%

thereof impact of price reductions3): -1.8% -1.9% -1.9%

thereof one-time effect of process optimisation4): -1.3%

 Estimated impact of COVID-19 on sales: -1%

 Ongoing COVD-19 impact on high-frequency locations (part of around 10% of sales of Amavita and Sun Store pharmacies)
1) Calculated for points of sale without a full year period comparison, Half-year Report 2020, page 28
2) Consolidated net sales minus expansion effect, Half-year Report 2020, page 28
04.08.2020 © Galenica Group 3) Mandatory price reductions of reimbursed medications of the specialities list, calculated based on volumes of previous period, Half-year Report 2020, page 28 23
4) As a part of a process optimisation, various intersegmental sales transactions were discontinued at the beginning of 2020.
Products & Brands Business sector
Strong growth of international sales
Net sales (in million CHF)

+1.0%

+14.0% International sales

53%
-2.6% Sales in the Swiss market

 New distribution of Bucco-Tantum®, Omni-Biotic®, launch of Veractiv® and discontinuation of

distribution of Ginsana ® and Equazen® with +2.6% net impact on Swiss market sales growth

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Services Business sector
Strong sales growth
Net sales (in million CHF)

+7.9%

49%

impact of price reductions1): -2.3% -2.6% -1.8%

One-time effect of adapted invoicing models2): +1.9%

 Estimated impact of COVID-19 on sales: +3%

 Growth of 5.9% in the pharmacy wholesale market (63% of net sales)
 thereof 3.0% thanks to the expansion of the Retail business sector
 Growth of 10.4% in the physician wholesale market (26% of net sales)
1) Mandatory price reductions of reimbursed medications of the specialities list, calculated based on volumes of previous period, Half-year Report 2020, page 28
04.08.2020 © Galenica Group 2) In the context of the new Ordinance on Integrity and Transparency in the Therapeutic Products Sector (OITTP), agreements with suppliers as well as invoicing models were adapted to the new transparency obligations, which 25
influenced the sales development in the Services business sector.
H1 2020
Solid results

EBITDA (in million CHF) EBIT (in million CHF)

+2.1%
-0.6%

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H1 2020
EBITDA and EBIT adjustments1)

EBITDA (in million CHF) EBIT (in million CHF)

H1 H1 H1 H1
2019 2020 2019 2020

EBITDA 126.7 129.3 EBIT 82.8 82.3

Adjustment IAS 19 -0.3 2.4 Adjustment IAS 19 -0.3 2.4
Adjustment IFRS 16 -24.6 -26.4 Adjustment IFRS 16 -1.4 -1.1
EBITDA adjusted 101.8 105.3 EBIT adjusted 81.1 83.6

1) Details of the adjustments in the Half-year Report 2020, pages 29 and 30

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H1 2020
EBIT growth despite negative COVID-19 impact
EBIT and EBIT margin adjusted1)
(in million CHF / %)

4.9%
Galenica Group +3.0%
5.1%

7.7%
Health & Beauty +2.5%
7.7%

1.8%
Services -0.3%
1.9%

04.08.2020 © Galenica Group H1 2019 H1 2020 1) Excluding effects of IAS 19 and IFRS 16, Half-year Report 2020, pages 29 and 30
28
H1 2020
Financial result and taxes
Financial result (in million CHF) Taxes (in million CHF)

Tax rate excluding 3)

one-time effects2) 18.2% 18.9% 17.0%

-15.1 -13.6
-29.7
-15.1 -13.6

-8.4

-38.1

2019 H1 2019 H1 2020

Financial result adjusted 1) Taxes excluding one-time effects

Effects of IAS19 and IFRS16 1) One-time effects of deferred taxes 2019 2)

1) Details of the adjustments of IAS19 and IFRS16 effects, in the Half-year Report 2020, pages 29 and 30
2) Details of one-time effects of deferred taxes, in the Annual Report 2019, pages 118 and 119
3) Taxe rate would be at 17.9% excluding the effects of changes in tax rates of +0.7 million CHF

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H1 2020
Pleasing net profit growth

(in million CHF)

125.3
+2.2% One-time effects of deferred taxes1)

64.9 66.3
Net profit comparable, adjusted2) and
134.2
excluding one-time effects of deferred taxes1)
65.0 68.4 +5.3%
Effects of IAS19 and IFRS162)
-8.4 -0.1 -2.1
-0.5
2019 H1 2019 H1 2020

1) Details of one-time effects of deferred taxes, in the Annual Report 2019, pages 118 and 119
2) Details of the adjustments of IAS19 and IFRS16 effects, in the Half-year Report 2020, pages 29 and 30

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H1 2020
Investments
(in million CHF)
1.6% 1.5% 1.6%
% of net sales

Investments
in intangible assets

Investments
in tangible assets

 COVID-19 has delayed the strategic efficiency projects in the Services business sector:
 Replacement of the ERP system in Wholesale and Prewholesale
- Duration of the project expected until 2023 with investments to be made of ~CHF 13 million
 Renovation and modernisation distribution center Lausanne-Ecublens
- Duration of the project expected until 2022 with investments to be made of ~CHF 22 million
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H1 2020
Solid free cash flow1)
(in million CHF) H1 2019 H1 2020 Change

Cash flow from operating activities before working

capital changes 116.0 118.7 +2.7
Payment of lease liabilities -23.4 -24.4
Cash flow from operating activities before working
capital changes adjusted 92.6 94.3 +1.7

Working capital changes -41.2 -53.9

Cash flow from operating activities adjusted 51.5 40.4 -11.0
Cash flow from investing activities without M&A -24.6 -22.1
Free cash flow before M&A 26.8 18.4 -8.5
Cash flow from M&A -54.6 -2.4
Free cash flow -27.8 16.0 +43.8
1) Details of free cash flow in the Half-year Report 2020, page 31
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H1 2020
Solid balance sheet
(in million CHF)

Debt coverage1) 2.1x 2.6x 2.4x

Debt coverage adjusted2) 1.5x 2.0x 1.9x

Equity adjusted3)

Effect of IFRS163)

Net debt adjusted3)

IAS19 and IFRS16

effects on equity3)

1) Net debt / EBITDA, Half-year Report 2020, page 33

2) Net debt adjusted / EBITDA adjusted excluding effects of IAS19 und IFRS16, Half-year Report 2020, page 33
3) Detail of the adjustments in the Half-year Report 2020, page 32
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Outlook 2020

 Galenica Group net sales +2% to +5%

 EBIT (excluding the effects of IAS19 & IFRS16) approximately

on prior year level

 Dividend for 2020 at least at prior year level

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Q&A
And now we are looking forward to answering your questions!

Marc Werner, CEO Felix Burkhard, CFO

04.08.2020 © Galenica Group

Disclaimer
Disclaimer Galenica
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.

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