#1IMPERIAL HEALTH SCIENCES Africa Investors Trip March 2014 TM#2Agenda Africa market Regions in focus Market Needs in Africa Options for Market growth Challenges ad Opportunities Imperial Health Sciences IMPERIAL HEALTH SCIENCES TM#3Distribution Realities In Africa "Lions on the Move" - GDP growth > 5% ... pharma even higher Trading block and language driven economics. Cross border delays, in & outbound Traditional product supply lanes exist for Francophone, Lusophone Compliance ... esp Zone III / Zone IV limitations Governance - internal and environmental Legacy contracts and multiple partners 2nd largest continent - 2nd most populous - 1.1 Bn people. 55 countries -15% of world's population - 50% < 19 years old GDP $2.2T (projected $29T by 2050) 50 NDRAS IMPERIAL HEALTH SCIENCES TM#4The Growth Opportunity Is Material... By 2020, more than half of African households will have discretionary spending power Share of households in each income bracket %, millions of households 100% = 163 196 244 Household income brackets S PPP1 2005 6 8 12 Globals (>20,000) 11 14 17 Consuming middle class 18 (10,000-20,000) 21 23 Emerging consumers (5,000-10,000) Discretionary income 29 32 Basic consumer needs Basic needs 29 (2,000-5,000) 34 24 18 Destitute (<2,000) 2000 2008 2020F Households with 59 85 128 income >$5,000 Million 1 Purchasing power parity adjusts for price differences in identical goods across countries to reflect differences in purchasing power in each country. SOURCE: Canback Global Income Distribution Database (C-GIDD): McKinsey Global Institute_ FIGURE 24 SPENDING BY GEOGRAPHY 2005 $ 605 Bn 6% 12% 1% 11% 7% 2% 20% 2010 2015 $ 856 Bn $ 1,065 1,095 Bn 7% 18% 41% 19 11% 36% 28% 7% 31% 2% 3% 7% 13% 11% 17% 6% 2% US Canada EU5 Rest of Europe Japan S. Korea Pharmerging ROW 2020 – 18.6m diabetics 1m new cancer pts pa 60m hypertensive patients corridors Emerging transport 2025 25% growth in urban pop 2030 2050 - 3.4% pa 60yrs population doubles 60% urbanised "Value for Many" replaces "Value for Money"#5Rising Stars in SSA Morocco $1.2B 2011 Sales '11-'16 CAGR: 6% Algeria 2011 Sales $2.8B '11-'16 CAGR: 9% Nigeria 2011 Sales $1.88 '11-'16 CAGR: 13% Botswana 2011 Sales '11-'16 CAGR: $56M 12% Sources: IMS Health Market Prognosis, Sept 2012 Non-exhaustive Established markets in 2011 Rising stars 2011 Sales Egypt '11 '16 CAGR: $3.0B 14% Kenya 2011 Sales '11-'16 CAGR: $659M 17% South Africa 2011 Sales '11-'16 CAGR: $3.7 B 8%#6African Markets Rapid growth expected until 2020 at circa 10% CAGR Fuelled by increasing healthcare expenditure and NCDs > 50 pharmaceutical manufacturers - 20% local - 80% MNCs 4 major groups - MNCs, Chinese, Indian, Northern and Southern Africa Most imports from India, Switzerland, UK, SA and France Manufacturing relies on imports - 95% of raw materials imported Changing focus of MoH and Donors / NGOs Antibiotics, analgesics, and antihistamines dominate Poverty encourages prevalence of counterfeit drugs Self-medication raises prospects for OTCS Rising health insurance numbers underpin future growth IMPERIAL HEALTH SCIENCES TM#7East Africa Kenya market 2013 circa 642M USD - Patented drugs = 9% Generic drugs = 63% - OTC = 28% Kenya comprises circa 80% of regional volumes = 18% Exports (Tanzania, Uganda, Sudan and Somalia) CAGR = Untapped sales in adjacent countries - Limited distributor funding - Stock outs - Lead times Uganda growth estimated at 27% Ethiopia generic growth with Chinese partnerships IMPERIAL HEALTH SCIENCES TM#8West Africa 2007- 2012- 2007 2012 2013 2014 2015 2017 2012 2017 US$ US$ US$ US$ US$ US$ CAGR CAGR Ghana 233 468 536 607 682 841 15% 12% Nigeria 606 1,137 1,255 1,405 1,585 2,086 13% 13% Ivory Coast 159 199 215 232 250 292 5% 8% Senegal 144 173 181 189 196 211 4% 4% Cameroon 84 120 130 137 144 159 7% 6% What shape is the curve ... and where are we on it? IMPERIAL HEALTH SCIENCES TM#9Needs? 1 - Regulatory Harmonization AU Decision 55 - Abuja Summit January 2005 Mandated AU commission to develop Pharmaceutical Manufacturing Plan for Africa (PMPA) Drug regulation harmonization is a key component of PMPA AMRH established in Feb 2009 through NEPAD Implementation through RECs with support of: - - - African Union Commission, Pan African Parliament WHO, World Bank Gates Foundation, Clinton Foundation - DFID, UNAIDS ... USAID IMPERIAL HEALTH SCIENCES TM#10African Medicines Regulatory Harmonization Aims - - - - Reduce 50 NDRAs to 5-6 regional groups Harmonize registration, technical documentation, procedures & decision making processes Reduce time taken to issue market authorization Improve transparency NEPAD conference "Building partnerships for Sustainable Capacity Development on Medicines Regulation in Africa" - Dec 2013, SA EAC drugs regulation and harmonization programme officially launched March 2012 in Arusha, Tanzania Tanzania, Kenya, Rwanda, Uganda, Burundi and Zanzibar IMPERIAL HEALTH SCIENCES TM#11The Case of EAC Established constitutional tools and technical outlines on implementation - currently in circulation for comments/edits Each country has been given specific tasks Common technical documents with joint reviews and decisions Each country maintains sovereignty of legislature, fees etc. Joint pilot in 2010 - - - Abacavir & Amikacin submitted to WHO PQP & EAC NDRAS Joint review in Copenhagen Products were prequalified and registered simultaneously N.B Harmonization is not the same as mutual recognition! IMPERIAL HEALTH SCIENCES TM#12Needs? 2 = Local Manufacture IMPORTS (1 to 10) • National vs Donor influence Rank Country [R million] 1 India 1,847 •⚫ Health as an electoral issue 2 Germany 1,408 • Health as a macroeconomic issue 3 UK 1,294 4 France 1,204 • Level playing field? 5 Italy 1,113 6 USA 995 • At least REGIONAL collaboration 7 Switzerland 581 India and China's labour costs? 8 Sweden 551 9 Ireland 450 • API before goods finishing? 10 Belgium 376 Ref: Andre Kudlinski, Department of Trade and Industry (DTI): The SA Pharmaceutical Sector IMPERIAL HEALTH SCIENCES TM#13Needs? 3 = Supply Chain Rationalisation A myriad of middle-men - - First line buyers (FLBS) - Push up the cost of products Local distributors - Established logistics > 75% of the private sector is not fully regulated > 75% of private pharmacies are in urban / semi-urban settings Most transport outsourced ... and poor in reach and service Order - delivery lead time and frequency drive working capital PAP 2 PAP 1 PRODUCT AFFORDABILITY POINT IMPERIAL HEALTH SCIENCES TM#14Needs? 4 = Wholesaler Development • . Natural oligopoly . • US-3=85% UK 3=65% - Germany 4 = 75% - The Cs of Success • • ● • ● • Capacity Capability Compliance Conduct Catalogue Competition • Credit • Customers SAMSUNG mobile WESTGA 543 OUR HO COFFOR MIND HOUR DORMAN#15600 500 400 300 200 100 0 Needs? 5 - Matching Responsibility & Capacity 2... 2... 2... FACILITY Order Confirm Sort & transfer 2... Validate POD CROSS DOCK Confirm Order & Pay Deliver 2... SUPPLIER HIGH LOW VOLUME SITES VOLUME SITES LOW VOLUME / RELIABILITY SUPPLIERS HIGH VOLUME / RELIABILITY SUPPLIERS Determined on a case-by-case basis CMS -30% Stock from small suppliers (or infrequent deliverers) AND to consolidate stock for small volume clinics Cross-Docking -40% Reduce handling of bulk goods and reduce the workload for CMS operational and administrative functions Direct Delivery - 30% Full truck load product volume 7 X Top suppliers 27 Major hospitals = = 70% ! Of volumes#16The New Options For Market Growth ... . . . · "Get me there" "Sell my product” "Build my Brand" KEY REQUIREMENT 3PL Stock Purchase Model CRITICAL SUCCESS FACTORS Minimal touch points Efficiency and competency Consistent service delivery Quality of Infrastructure Network reach Visibility and control Reach/universe • Seamless flow • Strategic future fit • Market intel/understanding • Resource/asset productivity Distributor/Agency Quality • Distribution • Value . Price • · Promotion Presence • Feet on the ground Leverage Partner Acquire#17Challenges And Opportunities By 2016, pharma in Africa reaches US$30 Bn Driven by 10% CAGR US$45 Bn by 2020 Potential of adjacent markets Market reach - owned or through trading partner Lead times vs in-country stock Late nationalisation Regulations Language and trading blocks Cross border Compliance of facilities Acquiring/retaining talent State tenders Counterfeit products Brand activation demands - Reach Need IMPERIAL HEALTH SCIENCES TM#18Imperial ... Africa's Global Player ARMSTRONG ASSOCIATES, INC. Top 50 Global 3PLs Gross Logistics 234567890 2012 Rank 1 DHL Supply Chain & Global Forwarding Kuehne + Nagel Nippon Express Third-Party Logistics Provider (3PL) Revenue (US$ Millions)* 2012 Gross Logistics Revenue Rank Third-Party Logistics Provider (3PL) (US$ Millions)* 31,639 26 Burris Logistics 2,933 22,141 27 Schneider Logistics & Dedicated 2,700 20,321 28 Sankyu 2,689 DB Schenker Logistics 19,789 29 Pantos Logistics 2,601 C.H. Robinson Worldwide 11,359 30 Kerry Logistics 2,490 Hyundai GLOVIS 9,832 31 Norbert Dentressangle 2,366 CEVA Logistics 9,290 32 Ryder Supply Chain Solutions 2,280 UPS Supply Chain Solutions 9,147 33 FIEGE Group 2,090 DSV 7,759 34 BDP International 1,895 10 Sinotrans 7,523 35 Wincanton 1,747 11 Panalpina 7,060 36 Neovia Logistics Services 1,730 12 SDV (Bolloré Group) 7,038 37 Menlo Worldwide Logistics 1,726 13 Toll Holdings 6,760 38 Logwin 1,703 14 Expeditors International of Washington 5,981 39 Nissin Corporation/Nissin Group 1,609 15 Geodis 5,868 40 Americold 1,580 16 DACHSER 5,670 41 APL Logistics 1,555 17 GEFCO 5,267 42 BLG Logistics Group 1,540 18 UTI Worldwide 4,608 43 J.B. Hunt DCS & ICS 1,536 19 Agility 4,605 44 GENCO 1,476 20 IMPERIAL Logistics 3,800 45 Total Quality Logistics 1,387 21 Hellmann Worldwide Logistics 3,593 46 Landstar 1,350 22 Yusen Logistics 3,526 47 Transplace 1,300 23 Damco 3,272 48 OHL 1,200 24 Kintetsu World Express 3,155 49 25 Hub Group 3,124 50 Werner Enterprises Dedicated & Logistics Swift Transportation 1,090 1,058 *Revenues are company reported or A&A estimates and have been converted to US$ using the annual average exchange rate. 8 Copyright © 2013 Armstrong & Associates, Inc.#19IHS ... Our Values And Pillars of Excellence Pride - - - Values Sustainability Corporate stability Independence Execution - - Flexibility "Can Do" response Responding to Africa Appreciation - Placing our clients FIRST Performance management Respect - - Innovation - EUC, Unjani Debt collection Security Pillars Of Excellence People - - - Multi-tiered development - Management stability – Ave 7 years Thought leadership - CCF, PLASA, PtD, Rx360, PCMA, PHEF Quality - - ISO 9001:2008 Cold chain Reach Geography - pan-SSA - - - Channels - FMCH / veterinary care - Models of channel management Service Delivery performance IMPERIAL HEALTH SCIENCES - Flexibility - MediQ TM#20IHS Coverage & Services Provides end-to-end supply chain solutions including: ✓ FCL consolidation ex Europe ✓ Inbound Freight Management ✓ Warehousing ✓ Order Management ✓ Secondary Repackaging ✓ Kitting ✓ Outbound Distribution ✓ Customer Services ✓ 3PL, Stock Purchasing Model or Distributor ✓ Debtor management ✓ Reverse logistics ✓ Cold chain specialists ✓ Infrastructure deployment Health system strengthening ✓ Consulting & training WESTERN SAMARA MOROCCO TUNESIA ALGERIA LIBYA EGYPT MAURITANIA Mali Niger CHAD SENEGAL Gambia GUINEA BURKINA FASO Benin Nigeria Abuja Togo SIERRA LEONE Cote D'ivoire Ghana Tema SAP SABS ISO 9001 ERITREA South Sudan Ethiopia SOMALIA CENTRAL AFRICAN REP Cameroon EQUATORIA SAO TOME GUINEA & PRINCIPE CONGO GABON Uganda Rwanda Kenya Nairobi DRC Seychelles Tanzania Malawi COMOROS Angola Zambia Madagascar Zimbabwe Botswana Mozambique Mauritius Namibia South Africa Gauteng Swaziland Lesotho IMPERIAL HEALTH SCIENCES TM#21Imperial's Current Footprint Western Sahara Morocco Algeria Tunisia Libya Egypt Logistics operations Distributor operations IHS warehouse operations Countries serviced by IHS Agents Cape Verde Senegal The Gambia- Guinea-Bissssa Burkina Faso Guinea Sierra Leone- Cote O Benin Nigeria Mauritania Mali Niger Chad Eritrea Sudan -Djibouti Ethiopia Liberia D'Ivoire Ghana Central African Republic Toggo Equatorial Guinea Sao Tome Democratic Republic of The Congo Somalia Gabon Uganda O Kenya & Principe Rep. of the Congo Tanzania Infrastructure in 13 countries Cross border deliveries in 18 more 674 vehicles > 75 regional and local warehouses Planned capex $150m in healthcare acquisitions in 18 months In development Beira Corridor DCs in Beira and Lusaka Kenya hub and Lagos hub & Kampala. Recent Acquisitions: WWCVL and MDS Angola Malawi Zambia Zimbabwe Namibia Botswana Mozambique Swaziland Lesotho South Africa Comoros Madagascar Seychelless Mauritius#22IHS Client Base Pfizer AstraZeneca gsk Abbott GlaxoSmithKline Nutrition aspen Janssen adcock ingram adding value te fe RANBAXY TEVA MERCK SERONO ■ Mylan inova Baxter BIOSWISS ADVANCING DIABETES SOLUTIONS pharmaceuticals SANDOZ astellas Leading Light for Life GALDERMA Committed to the future of dermatology AMGEN novo nordisk Pharmaceutical Companies Medicines, Vaccines, Consumer Healthcare Products THE GLOBAL PEPFAR The Global Fund FUND (USG HIV Program in Africa) (MPP Program) PPP - Public Private Partnerships NDOH SOUTH AFRICA#23IHS Southern Africa Region - Centurion MOROCCO TUNESIA ALGERIA LIBYA EGYPT MAURITANIA Mali Niger CHAD South Africa - Centurion ► Warehouse 32,000 m² 22,500 pallet spaces 1,100 cold room locations Transportation Local: own vehicles Export: own & contractors Facility GDP compliant ISO 9001:2008 certified SA's only bonded facility WESTERN SAURA SENEGAL Gambia GUINEA SIERKA LECINE ERITREA Cote D'ivoire Ghana Tema BURKIN FASO Benin Nigeria Abuja Togo Ethiopia South Sudan SOMALIA CENTRAL AFRICAN REP Cameroon Uganda EQUATO SAO TOME GUINE & PRINCIPE CONGO GABON Rwanda DRC Kenya Nairobi Seychelles Tanzania Ma'awi COMOROS Angola Zambia Madagascar Zimbabwe Botswana Mo ambique Mauritius Namibia South Africa Gauteng Swaziland Lesotho#24IHS SA - Centurion 30 Слошл 4111 VIO High Risk#25IHS Southern Africa Region - Cape Town South Africa - Cape Town ► Warehouse 7,500 m² 8,092 pallet spaces 504 cold room locations Transportation Local: own vehicles Export: own & contractors ► Facility GDP compliant ISO 9001:2008 certified WESTERN SAMARA MOROCCO TUNESIA ALGERIA LIBYA EGYPT MAURITANIA Mali Niger CHAD SENEGAL Gambia GUINEA SIERRA LECINE Cote D'ivoire BURKIN FASO Nigeria Benin Abuja Togo ERITREA South Sudan Ethiopia SOMALIA CENTRAL AFRICAN REP Cameroon Ghana Tema EQUATO SAO TOME GUINE CONGO & PRINCIPE GABON Uganda Rwanda DRC Kenya Nairobi Seychelles Tanzania Greening/Sustainability initiatives employed Malawi COMOROS Angola Zambia Madagascar Zimbabwe Botswana Moz mbique Mauritius Namibia South Africa Gauteng Swaziland Le no#26IHS SA - Cape Town 1 IMPERIAL JOHEALTH SCIENCES IMPERIAL HEALTH SCIENCES IMPERIAL HEALTH SCIENCES#27IHS East Africa Region - Nairobi Kenya Nairobi - Current warehouse 7,000m² 6,800 pallet spaces 100 cold room 20 dangerous goods High risk / High value area 2015 new WH 10,000m² Transportation Local owned Ntl/Export contractors ► Facility MIS GDP compliant ISO 9001:2008 certified SAP, CRM, SLE/TIMS, MEDIQ WESTERN SARANA MOROCCO TUNESIA ALGERIA LIBYA EGYPT MAURITANIA Mali Niger CHAD SENEGAL Gambia GUINEA SIERKA LEONE ERITREA South Sudan Ethiopia SOMNA CENTRAL AFRICAN REP Cameroon Uganda EQUATO BURKIN FASO Benin Nigeria Abuja Cote Togo D'ivoire Ghana Tema SAO TOME GUINE & PRINCIPE CONGO GABON Rwanda DR Kenya Nairobi Seychelles Tanzania Malawi OMOROS Angola Zambia Madagascar Zimbabwe Botswana Mozambique Mauritius Namibia South Africa Gauteng Swaziland Lesotho#28IHS - Nairobi, Kenya IMPERIAL IMPERIAL HEALTH SCIENCES IMPERI HEALTH SOENC IMPERIAL HEALTH SCIENCES IMPE HEALTH SO#29IHS West Africa Region ... Ghana - Tema Warehouse 2,300m² 2,550 pallet spaces 40 cold room 20 dangerous goods High risk/High value area Transportation Export Facility GDP compliant ISO 9001:2008 in Q2 12 Bonded Nigeria - Abuja Shared facility 1800m² 1600 pallet spaces Nigeria Lagos [in planning] MIS - SAP, CRM, SLE/TIMS, MEDIQ WEST SANA MOROCCO TUNESIA LIBYA EGYPT MAURITANIA Mali Niger CHAD SENEGAL Gar bia GUINEA SIERIA LEONE Cote D'ivoire ERITREA BURKING FASO Benin Togo Nig ria Abu South Sudan Ethiopia SOMALIA CENTRAL AFRICAN REP Cameroon Ghana Tema Uganda EQUATO SAO TOME GUINE & PRINCIPE CONGO GABON Rwanda DRC Kenya Nairobi Seychelles Tanzania Malawi COMOROS Angola Zambia Madagascar Zimbabwe Botswana Mozambique Mauritius Namibia South Africa Gauteng Swaziland Lesotho#30IHS - Accra, Ghana REVENSE IMPERIAL STRICTLY REVERSE PARKING SA ISO#31IHS Malawi ... Malawi - Lilongwe ► Warehouse 2,000m² 1250 pallet spaces High risk / High value area ► Transportation Domestic 667 sites. Facility GDP compliant MIS SAP, CRM, SLE/TIMS, MEDIQ WESTERN SARANA MOROCCO TUNESIA ALGERIA LIBYA EGYPT MAURITANIA Mali Niger CHAD SENEGAL Gambia GUINEA SIERKA LEONE BURKIN FASO Nigeria Benin Abuja Cote D'ivoire Togo Ghana Tema SAO TOME GUINE & PRINCIPE ERITREA South Sudan Ethiopia SOMALIA CENTRAL AFRICAN REP Cameroon EQUATO CONGO GABON Uganda Kenya Nairobi Seychelles Tanzania Panda DRC Malawi COMOROS Angola Zambia Ma agascar Zimbabwe Botswa Mozambique Mauritius Namibia South Africa Gauteng Swaziland Lesotho#32IHS- Malawi, Lilongwe Facility RTT RTT RTTE#33Excellence - Service Delivery, Security, Standards Service levels to be managed proactively - High Level Client Care Trending, root cause analysis and prompt corrective action Client queries managed through the High Level Client Care team are addressed within an hour IHS Service levels over the last 6 months - 98.11% "Eyes of the customer"- measures customers experience of service levels - assist clients with customer perception SAP Implement Change Assess R 360 Review and Discuss SABS ISO 9001 Plan for Change Member#34Excellence - Cold Chain Validated to WHO guidelines & PDA technical report 39 Validation methodology published in SA Pharmacy Journal Validation audited and approved by our multi-national clients Controlled processes Pan-SSA Thought leadership EU Consolidation ORTIA re-icing FRIDGE LINE UNPACK IMMEDIATELY DO NOT FREEZE DELIVERY IMPERIAL Customer Care Line 0860 655 600 IMPERIAL HEALTH SCIENCES TM#35Excellence - Innovation EUROPEAN CONSOLIDATION FACILITY Serialisation & Authentication with Trustatag Order Confirm Мон Control Tower Validate Sort & transfer POD Confirm Order & Pay CROSS DOCK Unjani Clinics UNJANI CLINIC PRIVATE HEALTHCARE QUALITY AFFORDABLE Deliver UNJANI CLINIC SUPPLIER#36Excellence - Sustainability B-BBEE is a strategic imperative Level 3 contributor with Value Add Supplier Status 137.5% Procurement Spend Recognition Environmental Impact ► Reduced consumption of electricity by 8.13% in 2013 Cape Town facility uses environmentally responsible and resource-efficient principles: - LED lighting and motion sensors AGRated Independent Credible Assurance. Company Name Trade Name Location Registration Number AQRate VERIFICATION SERVICES MEASURED ENTERPRISE IMPERIAL Logistes a Division of IMPERIAL Group Ltd carponding Sad and D-D IMPERIAL Logistics a Division of IMPERIAL Group L Der Geldenhuis & Van Dort Street Gemston 1400 Vat Number Centricate Number Equity Ownership Management & Control Employment Equity Skills Development 1983/000088/06 4670110032 IMP00311-GREV1.1 B-BBEE SCORE PER ELEMENT 19.34 591 838 Preferential Procurement Enterprise Development 20.00 15.00 Socio Economic Development Total Score 500 78.86 B-BBEE STATUS BBBEE Procurement Recognition Level 110% BBBEE Status Level Three Contbutor Black Ownership 27.30% Black Female Ownership 9.84% Value-Adding Supplier Yes Level 3 Enterprise Development Beneficiary Yes Beneficiary Category Category B Applicable Scorecard Transport Sector Genesc Scorecard Road Freight Sub-secto Applicable BEE Code Gazetted Codes 32511 Verification Date 27 November 2013 - Thermo-painted with shield coating Reduced waste generated from operations by 70 % in 2013 Water recycling in Centurion saves +/- 10 000 L per day Expey Date Auck at Mag 25 November 2014 sanas#37IMPERIAL HEALTH SCIENCES TM Africa's Leading Healthcare Logistics Partners