lotus pharmaceutical · operating synergy emerging following transitions in portfolio and s&m...
TRANSCRIPT
Page I 1
LOTUS PHARMACEUTICALBUILDING A REGIONAL LEADER
Nov 2017
Page I 2
Safe Harbor Statement
Except for historical information contained herein, the matters set forth in this presentation are forward
looking statements that are subject to risks and uncertainties that could cause actual results to differ
materially. These forward looking statements are not based on historical facts but rather on
management’s expectations regarding future growth, results of operations, performance, future capital
and other expenditures, competitive advantages, business prospects and opportunities. Statements in
this presentation about our future plans and intentions, results, level of activities, performance, goals or
achievements or other future events constitute forward looking statements. Wherever possible, words
such as “anticipate”, “believe”, “expect”, “may”, “could”, “will”, “potential”, “intend”, “estimate”, “should”,
“plan”, “predict”, or the negative or other variations of statements reflect management’s current beliefs
and assumptions and are based on the information currently available to our management. Investors
are cautioned not to place undue reliance on these forward looking statements, which are made
as of the date of this presentation and we assume no obligation to update or revise any forward
looking statements.
Page I 2
Page I 3
Table of Contents
Page I 3
Company Overview
3Q 2017 Financial Results
Recent Developments
Profitable Growth
Page I 4Page I 4
COMPANY OVERVIEW
Page I 5
LOTUS PHARMACEUTICAL IS AN APAC GENERICS LEADER
1
Page I 5
Founded in 1966Lotus Pharmaceutical is among Taiwan’s largest specialty-generic drug
developers and one of the early movers to export to the US market since 2011
Its portfolio includes CNS, CVS, oncology, women health, anti-obesity, respiratory
and pain relief in forms of tablet, capsule, and soft gel capsule
The rising generic leader in APACLotus is positioned as a regional platform for Alvogen Group (63.4% holding in
Lotus) since Aug 2014 through a reverse merger, and leverages Alvogen Group’s
cross-border reach to scale up
The current operation scope of Lotus spans across Lotus Taiwan’s domestic
business, Alvogen Korea’s domestic business, Alvogen Pharma India’s CRO
business, and export businesses
Capital market milestone
Lotus Pharmaceutical (1795. TWO) has been listed on Taipei Stock Exchange
since 2010 and became a Taiwan Market Biotechnology and Medical Care Index
stock in July 2017
Extraordinary quality management Lotus’ R&D and manufacturing facilities in Nantou is the only one in Asia that’s
approved by US FDA, EU EMA, Japan PMDA and TFDA PIC/S
1
2
3
4
Page I 6
70+ Generic products in pipeline
2 Biosimilar products in pipeline (mab’s)
8 MAs in the US; 25 MAs in Europe;
9 MAs in Japan; 1 MA in China
A FAST GROWING GENERICS & SPECIALTY PHARMACEUTICAL POWERHOUSE
Lotus facts
Page I 6
1000+ Employees
3 Manufacturing and R&D Centers
300+ Marketed products
150+ Submissions since 2012
11%
19%
23%
47%
Lotus Taiwan EmployeesTotal: 380
G&A
R&D
S&M
Plant
9%7%
52%
32%
Alvogen Korea Employees Total: 549
G&A
R&D
S&M
Plant
Page I 7
36% 34% 34%30% 30% 28% 29%
41.7%
26%22% 24%
12%12% 10%
12% 10% 14%16%
8.9%
10%10% 9%
4%4% 7%
7%4%
4%6%
15.7%
6%
4%6%
5.4% 6.8%11.4%
8.5% 10.4%12.9%
5.6%
-13.0%
5.6%10.6% 10.6%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
SM GA RD OPM
THE PAST 2 YEARS WERE TRANSITIONAL
Operating synergy emerging following transitions in portfolio and S&M strategies
OPEX % 69% 50%
1,590 2,780Total OPEX
(NT$mn)
50% 50% 49%
669 711 725
44%
631
52%
675
46%
742
Page I 7
51%
729
43%
33% 32%
24%
20%
12% 12%
10%
6%
5% 8%
5%
FY2014 FY2015 FY2016 9M17
52%
3,084
66%
982
42%
592
39%
1,788
37%
580
39%
616
Page I 8
2015-2016
POST MERGERINTEGRATIONPHASE
2017-2018
INITIALGROWTHPHASE
2019~
EXPLOSIVEGROWTHPHASE
LOTUS SEES TANGIBLE PROGRESS TOWARD TRANSFORMATION
Page I 8
• Upgrade Nantou plant
• Change management team
• Reshape Portfolio and
pipeline
• Adjustment sales and
marketing strategy
• Resolve legacy issues
• Solidify local portfolio
through key launches
• Focus on specialty driven
markets
• Continue to increase
operational efficiency
• Export revenues to
significantly grow from
several successful key PIV-
challenges
• High value products and
economies of scale to drive
up gross margin
• Become category leaders in
APAC market
• Strengthen balance sheet
• Balance organic and
inorganic growth
Page I 9
EXPANDING REVENUE AND GROSS MARGIN ARE OUR TOP PRIORITIES
Revenue (NT$m) Gross margin
663
12941337
14171473
1425
1594
14041479
1436
1577 1579
Q4'14Q1'15Q2'15Q3'15Q4'15Q1'16Q2'16Q3'16Q4'16Q1'17Q2'17Q3'17
Page I 9
43%
58% 57%
62%
58%55%
59%57%
54%
47% 47%50%
Page I 10Page I 10
3Q 2017 FINANCIAL RESULTS
Page I 11
Unit: NT$000 3Q 2017 % 3Q 2016 % 2Q 2017 % QoQ YoY
REVENUE $1,579,129 100 $1,403,603 100 $1,577,430 100 0.11% 12.51%
COGS 795,802 50 596,618 42 829,640 53 -4.08% 33.39%
GROSS PROFIT 783,327 50 806,985 58 747,790 47 4.75% -2.93%
OPEX
S&M 378,099 24 411,211 29 350,393 22 7.91% -8.05%
G&A 146,660 9 227,403 16 160,021 10 -8.35% -35.51%
R&D 91,065 6 90,215 7 69,653 4 30.74% 0.94%
Total OPEX 615,824 39 728,829 52 580,067 37 6.16% -15.51%
OPERATING PROFIT (LOSS) 167,503 11 78,156 6 167,723 11 -0.13% 114.32%
NON-OP INCOME & EXP
Finance costs -68,104 -4 -70,303 -5 -63,341 -4 7.52% -3.13%
Others 17,445 1 10,525 1 1,774 0 883.4% 65.75%
Total non-op expenses, net -50,659 -3 -59,778 -4 -61,567 -4 -17.72% -15.25%
INCOME BEFORE TAX 116,844 8 18,378 2 106,156 7 10% 535.78%
INCOME TAX EXPENSE
(BENEFIT)47,752 3 38,133 3 48,632 3 -2% 25.22%
NET ERANINGS (LOSS) 69,092 4 -19,755 1 57,524 4 20% NA
EPS $0.20 -$0.14 $0.15 33% NA
GROSS MARGIN RECOVERY UNDERWAY
Page I 11
Page I 12Page I 12
RECENT DEVELOPMENTS
Page I 13
84.5%
10.4%
3.1% 2.0%
2017 IS THE TIPPING POINT OF GEOGRAPHIC DIVERSIFICATION
Page I 13
2016FY 9M2017
While Korea remains our backbone thanks to its market potential and favorable
regulatory environment, Lotus has started to balance its geographic exposure by
growing Taiwan domestic and export market
2017
85.4%
8.0%
2.6% 4.0%
Korea
Taiwan
Export
India CRO
Page I 14
NEW PRODUCT LAUNCHES IN OUR TURF SECURE LONG TERM GROWTH
Page I 14
Product Indication YTD (NT$mn) YoY (%) Remarks
1 Goserelin (Zoladex) Breast cancer 乳癌 404.8 -Exclusive marketing alliance with
AstraZeneca KR; launched Oct’16
2 Sarpogrelate Anticoagulant 抗凝血 303.2 -2% Dosage improved to 1/day
3 Rosuvastatin/EzetimibeCardiovascular降血脂與膽固醇
224. +51% FDC; launched in 1Q16
4Calcium Polystyrene
SulfonateNephrology 腎臟病 270.3 -4%
5 Seroquel (Quetiapine) Schizophrenia 精神分裂症 233.2 -10%Exclusive marketing alliance with
AstraZeneca KR; launched Oct’15
6 Desogestrel/EE (Mercilon)Oral contraceptive
口服避孕藥204.9 +52%
Acquired from Bayer; launched in
May’16
7 Phentermine Anti-obesity 減肥 190.9 -25%
8 Bicalutamide Prostate cancer 攝護腺癌 167.4 +294%Exclusive marketing alliance with
AstraZeneca KR; launched Oct’16
9 Phendimentrazine Anti-obesity 抑制食慾 142.8 -24%
10 Anastrozole (Arimidex) Oncology 癌症 139.4 -Exclusive marketing alliance with
AstraZeneca KR; launched 4Q’16
11 Zoledronic Acid (Aclasta) Osteoporosis 骨質疏鬆症 114.4 -Acquired from Novartis; launched
Apr’17; TW product
12 Orlistat Anti-obesity 減肥 114.4 -39%
13 Topiramate CNS 抗癲癇 58.7 -36%
14 Diltiazem Cardiovascular 降血壓 58.6 -1%
15 Bethanechol Chloride Bladder problem 泌尿道 43.6 +28%
Page I 15
WE ARE ALSO MAKING GREAT PROGRESS IN INNOVATION
Page I 15
2017 R&D Projects for
Export Markets
LATE PHASEVinorelbine softgel capsules for Europe
LP149 for Europe and US
SUBMISSIONS
Methotrexate for US
Gefitinib for Europe
Lenalidomide for US, Europe and APAC
LAUNCHES Temozolomide for US, Europe and APAC
Levetiracetam ER & IR for US
Calcium Acetate for US
LAUNCH PREPERATIONSLevonorgestrel for US
Paricalcitol softgel capsules for US
5+ Expected submissions for US and Europe markets in 2017
10+ # total active R&D projects
~85% % of R&D projects launching between 2018 – 2021
Norethisterone/Ethinylestradiol LD for JP
TS-1 for KR
Page I 16
WE BEGAN TO SEE SIGNIFICANT PROGRESS IN LOTUS ONCOLOGY FRANCHISE
Page I 16
Lotus officially started building its global oncology franchise through self
developed “fast follower” products, exclusive marketing alliances with brands,
and CMO projects with APAC biotech star-ups
2017
High Potency Products
Cytotoxics
Hormones
TabletsHard gel capsules
Softgelcapsules
Why are high potency products key to growth?
• Oncology drugs are dominating US approvals: According to
Evercore, cancer drug approvals from 2012 to 2016 in the US
were 50, doubling from 2007 to 2011 numbers and >200%
higher than treatments for other therapeutic areas
• By 2022, global TAM for top 15 oncology drugs will be US$
90 billion small molecules and biosimilar combined according
to IMS
• By 2020, oncology is the only therapeutic area that will have
double digit CAGR according to EvaluatePharma
Page I 17Page I 17
PROFITABLE GROWTH
Page I 18
OUR GOAL IN THE NEXT 3 YEARS IS TO DELIVER PROFITABLE GROWTH
Back to Basics
Value Differentiation
Geared Up For The Future
Page I 18
Profitable
Growth
Page I 19Page I 19
BACK TO BASICS
• Strongest Portfolio
• Best Service
• Best Quality
Page I 20
28%
22%
4%3%2%
41%
Anti-obesity/lifestyle & Gastrointestinal productsCardiovascularCentral Nervous SystemOncologyWomen healthcare
STRONGEST PORTFOLIO SURROUNDING 5 SPECIALTY AREAS
Page I 20
Note: Others include respiratory system, pain killers, nephrology, anti-inflammatory and so on
2016A to 2020F therapeutic area revenue breakdown
2016A
19%
19%
8%17%
6%
31%
9M2017
Page I 21
STRONGEST LOCAL PORTFOLIO WITH MARKET SHARE LEADER POSITION
Page I 21
KOREA TAIWAN
Market
Size
• Population: 50mn
• Pharmaceutical market: US$15.8bn @
3.7% YoY growth
• Population: 23mn
• Pharmaceutical market: US$5.5bn @
7.1% YoY growth
Market
Position
• Focuses on Incrementally Modified
Drug such as Fixed Dosage
Combination
• Anti-obesity drugs market share leader
(20%) in Korea
• OTC contraceptive drug market share
leader (40%) in Korea
• Leading player in CVS, CNS and
nephrology drugs
• Top 3 pharma company in Taiwan on
consolidated revenue base
• Leading player in CNS, oncology and
hormonal drugs
Page I 22
LOTUS PHARMACEUTICAL PROVIDES BEST SERVICE IN EVERY ASPECT
1
Page I 22
Growing key markets sales team
70 in-house sales in Taiwan and 299 in-house sales in Korea, covering drug
stores, clinics, general and community hospitals
The best R&D partner
Partner with new drug companies from formulation development, phase I, or
clinical trial, providing critical CDMO or R&D services to new oncology drugs
companies targeting advanced markets such as US, EU and JP
Achieving vertical integration through CRO capabilities in India
Norwich Clinical Service provides biostudy, clinical and pharmacovigilance
services to Lotus & Alvogen Group and 3rd party customers, and holds an
oncology center in Bangalore, India
1
2
3
Page I 23
BEST QUALITY MAKES US THE MOST PREFERRED PARTNER OF OUR CUSTOMERS
Lotus quality record
Page I 23
Korea – Gongju Plant Korea – Hyangnam Plant Taiwan – Nantou Plant
Products
• Tablets
• Coated tablets
• Hard capsules
• Powders, granules
• Tablets
• Coated tablets
• Hard capsules
• Powders, granules
• Tablets
• Coated tablets
• Softgel capsules
• Hard capsules
Capacity• Max capacity at 500mn
units of tablets
• Max capacity at 800mn
units of tablets
• Max capacity at 1.5bn
units of tablets
Accreditation • KGMP compliant • KGMP compliant
• US FDA, EU EMA, Japan
PMDA & TFDA PIC/S
approved
Page I 24Page I 24
VALUE DIFFERENTIATION
• Shortest Time to Market
• High Value Pipeline
• Leader in Special Dosage
Page I 25
Capture global generics growth through Alvogen’s 3 regional platforms
Page I 25
North America
$115-145bn growth
Latin America
$25-35bn growth
Europe
$25-35bn growthAsia
$100-130bn growth
AFME
$15-25bn growth
IMS “Global Spending On Medicines 2014-2020”
49%
44%
7%
9%
61%
30%
33%
50%
30%
37%
46%
30%
26%
59%
15%
35%
52%
13%
Brand Generic Other
Global
$305-335bn growth
LEVERAGE ALVOGEN‘S GLOBAL SALES NETWORK TO CROSS SELL
Page I 26
THEREFORE, LOTUS CAN ACHIEVE SHORTEST TIME TO MARKET
• Ability to leverage customer demand information across the group
• Robust regional supply chain network
✓ Prompt and seamless coordination of complex supply and distribution network
✓ Supported by 5 manufacturing sites across the Lotus and Alvogen group
• Ability to deliver 97% order next-day without major stock-outs
Page I 26
Page I 27
INN/Scope Indication 2H’17 2018 2019 2020
Budesonide ER /US GI
結腸潰瘍
Buprenorphine
Naloxone /US
Addiction
戒毒
Methotrexate /US Chemo
癌症
Gefitinib /EUNon-small-cell lung
cancer; Inhibitor
非小細胞肺癌
LP083 ULD /JP
(CDMO project, strength ext.)
Women health
女性保健
Acarbose /CN Antidiabetic
糖尿病
Vinorelbine
softgel capsule /EU
Breast cancer
乳癌
Lenalidomide /US Multiple Myeloma
血癌
Lenlidomide /ROW Multiple Myeloma
血癌
HIGH VALUE PIPELINE TARGETING EXPORT MARKETS FUELS GROWTH
Export timeline from now – 2020 approval out-license shipment
Page I 27
Page I 28
LOTUS PHARMACEUTICAL IS THE REGIONAL LEADER IN SPECIAL DOSAGE
Soft Gel Manufacturing
• Investment in dedicated manufacturing area starting 2009 and
current capacity at 500mn capsules / year
• State of the Art equipment
✓ Closed melting and mixing Tanks
✓ PharmaGel GKF-072 filling machine
✓ Fully automatic visual inspection
• Extensive soft gel manufacturing experience in
✓ BCS class III & class IV new drug
✓ Generics low melting point molecules
✓ Generics with low stability molecules that are sensitive to
light, heat and humidity
Page I 28
Page I 29Page I 29
GEARED UP FOR THE FUTURE
• Biosimilar Ready
• M&A Mode Always On
• Winning Business Strategies
Page I 30
0.1 0.1 0.2 0.3 0.6 1.5
3.7
6.5
9.1
10.6 11.1
12.1 12.5 12.7
0.4 0.5 0.6 0.7 0.9
1.1
1.5
2.2
2.8
3.4
3.8
4.2
4.9 4.8
0.1 0.1 0.1 0.1 0.2
0.2
0.4
0.6
0.8
1.0
1.2
1.5
1.7 1.9
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
US Europe ROW
BIOSIMILAR READY
Lotus’ Biosimilar Play
Page I 30
• Biosimilars have reached an inflection point and we expect very rapid growth from
2017 onwards
• Secured APAC ex. Japan distribution rights of 2 biosimilar products of Alvotech,
Alvogen’s sister company
US$Bn
Source: PharmaCloud
Page I 31
M&A MODE ALWAYS ON
Pharmaceutical Market Size (US$bn)5yr CAGR (%)
2.1%
9.9%
11.6%
3.7%
9.2%
7.1%
7.3%
5.2%
13.9%
11.5%
9.2%
8.0%
7.6% 0.8
1.6
2.0
2.2
3.3
3.8
4.5
5.5
5.9
15.8
16.7
98.8
107.0
Singapore
Hong Kong
Bangladesh
Malaysia
Vietnam
Philippines
Thailand
Taiwan
Indonesia
Korea
India
China
Japan
Page I 31
Constantly looking for companies that complements our S&M strategy or portfolio
Page I 32
AS THE EXPERT IN ASIA, LOTUS HAS A SET OF WINNING BUSINESS STRATEGIES
Being the expert in APAC pharmaceutical market
• We address APAC market through both local sales team and distribution network
• We fulfill the neglected generic needs of key local markets to bring down healthcare cost
for more people
• We out-license or divest certain portfolio that are better fits of other pharmaceuticals to
extract full value of our assets
Page I 32
Page I 33
The foundation for vision 2020
FUEL FOR GROWTH
We will continue to set a new standard for our
industry outlined in a simple strategic model
BEST IN CLASS CUSTOMER SERVICE
HIGHEST QUALITY
HIGH OPERTIONAL EFFICIENCY
TARGETED PORTFOLIO
ONLY THE BEST PEOPLE