Biostime’s Partnership with Swisse Wellness
Swisse Wellness – Transformational Partnership for Biostime International Acquired 83% stake in Swisse Wellness, the leading Australian VHMS player Enables Biostime to emerge as a nutrition specialist for the complete family Potential for significant value creation for shareholders – highly accretive to Biostime’s growth & margins Transaction represents an Enterprise Value (“EV”) of AUD1,670m (RMB7.5bn) 1 Transaction multiples: 2015 EV/Sales – 3.65x 2 ; 2015 EV/EBITDA: 10.2x 2 Transaction to be financed by a mix of Biostime’s internal cash, debt financing by HSBC & ANZ and Swisse management stake roll-over 1. AUD-RMB: 4.5123 2. LTM Aug 15 Gross Sales: AUD457m; LTM Aug 15 EBITDA: AUD164m 3
Highly Synergistic Partnership – We Share Similar DNA Strong organization strongly positioned in rapidly growing consumer segments Focus on providing premium high quality products with innovation at the core Similar development history International mindset Young, energetic, proactive and professional team with strong knowledge of local markets and global trends Consumer / market driven approach Similar customer positioning and synergistic customer base 4
Partnership Highly Complementary to Biostime’s Strategic Objectives Multi-pronged strategy aimed towards strengthening and expanding its portfolio and markets and maintaining its strong financial track record Geographic expansion with access to profit Entry into a new high growth category Strengthen growth and margin profile pools 2015 Pro-forma revenue breakdown Growth accretive Baby food (67%) Probiotic supplements (8%) Margin accretive Baby care (4%) Adult VHMS (21%) Revenue diversification by entering high Immediate scale-up of operations with Transaction accretive to both growth and growth consumer categories access multiple markets across globe margins “Establish a global footprint while “Emerge as an all round nutrition and care “Enables long -term value creation by maintaining a strong base in China” expert for the entire family” strengthening financial profile” 5
Impact on Biostime’s Financials Strengthens financial profile – highly accretive to growth and margins Accretive to EPS – create significant value for shareholders Potential for further margin uplift resulting from synergies in supply chain and best practice sharing across R&D Significant revenue synergies resulting from cross selling opportunities across markets Strong potential for significant value creation 6 6
About Swisse Wellness
Leading Australian VHMS Player #1 Australian VHMS brand 1 2 Market leader with extensive portfolio Displayed strong growth and profitability Gross Sales (AUD m) / EBITDA margin (0.3%) 29.7% 17.9% 27.7% 390 239 2013 2015 17.7% More than 200 products in vitamins, sports Demonstrated strong growth and profitability nutrition, superfood and skin care segment resulting from volume growth and cost sold under Swisse Brand rationalization Poised to be a global brand – PGT 3 Strong brand recognition from extensive 4 12.0% marketing campaigns partnership Brand awareness 88% 86% 85% 9.0% 80% Blackmores Swisse Nature's Nature's Own Way Licensing partnership with PGT – PGT to ramp 6.0% High brand awareness and highest net up Swisse’s presence to 20+ countries by 2018 promoter score amongst peers resulting from unique and sophisticated marketing model and provide go-to-market expertise Source: Bain, Company data 8
Large and Differentiated Product Range Swisse Vitamins & Supplements (c.88% gross sales) Ultivites launched 25 years ago, Ultiboost launched 7 years ago Swisse Superfoods (c.8% gross sales) Swisse Skincare (c.2% gross sales) Swisse Active (c.2% gross sales) Launched 5 years ago Launched 3 years ago Launched 3 years ago Source: Company data 9
Robust Track Record of New Product Development Market leading speed to market – 8-16 weeks vs. c.12 months for competitors Defining plans & Discovery Phase Selecting domain Exploring opportunities Deliver & grow development Identify growth Select domain / business Plan timeline and resource Integrate NPD, regulatory, Drive growth though opportunity domain opportunities to pursue an opportunity technical, marketing & sales effective sales & marketing Swisse SKU growth 263 260 258 246 236 194 166 101 93 76 58 45 37 28 Aug-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 10
Attractive Positioning across all Key Product Categories Sales / Market share of Top 20 VHMS categories Total = AUD1,100m 16 11 187 82 17 1818 127 55 40 37 22 78 79 62 48 59 26 26 15 Other Other Other Other Other Other Other Other Other Other Natures Way Other Other Swisse Swisse Other Cenovis Other Cenovis Blockmores Natures Other BM Natures Other BM Way Healthy Other Healthy Biogian Way Care Swisse Centrum Cenovis Care Other Swisse BM Other Other Healthy BM Natures Swisse Swisse Natures Way Way Care Blockmores Healthy Care Elevit Healthy Swisse Cenovis Bio Care Orgs Natures Cenovis Bioglan BM Way Bio Swisse Blockmores Swisse Orgs Swisse Swisse Ostelin Berocca Inner Swisse BM Swisse Health Natures Blockmores BM Ferro Swisse Swisse BM BM Way BM BM BM Swisse BM Multi Krill Oil H/S/N Milk Thistle Valerian Fish Oil Magnesium Vitamin C Glucosamine Glucosamine & Chondr Vitamin B Probiotics Vitamin D Other Herbal Iron Calcium+vit D Co Q10 Calc + Cit D + Mag Cranberry Calcium Swisse market 29% 29% 90%53%35% 7% 13% 3% 5% - 4% 5% 9% 3% 6% 11%15%1%6% share Source: Bain 11 11
Premium Ingredients, Manufacturing and Testing Standards World-class ingredients from high quality suppliers Quality ingredients Swisse’s strict commitment to quality enhances product efficacy and secures best-in-class product safety All Swisse products are manufactured in pharmaceutical certified facilities ‒ Comply with Good Manufacturing Practices Manufacturing ‒ TGA Approved A key differentiator versus other global brands Each Swisse product passes up to ~100 quality assurance test Testing ‒ PGT conducted technical due diligence on Swisse and found them to be industry leading Source: Company data 12
Strong Distribution Network in Core Markets Key Distribution Partners Has strong presence across the pharmacy and grocery channels - products sold across all key pharmacies & supermarket chains Pharmacy Pharmacy accounts for major share in distribution (c.79%) being a higher margin channel Grocery Grocery (24%) Pharmacy (79%) Health, foods & Diverse range of other health food others Health Foods & other (3%) stores across Australia Source: Company data 13
Top-notch Marketing Model Unique 360 degree marketing model Strong brand recognition supported by star endorsement value “Strategic partnership with aspirational people who can engage and excite and “Integrated marketing model which is repeatable inspire them to live a healthier & happier lives” across products & geographic” Event/TV Catalogue Sponsorship & partnerships Point Ambassadors of sale Nicole Kidman Global ambassador PR campaign Advertising Retailer promotion Source: Company data 14
Global partnership with Procter & Gamble Teva (“PGT”) PGT is a joint venture between: - Procter & Gamble, World’s leading consumer brand with operations in 80 countries - Teva, a leading global pharmaceutical company with direct presence in over 60 countries Global reach – PGT to expand Swisse’s brand presence to 20+ countries in next 3 to 5 years Benefit PGT go-to market knowledge & experience, access Core market (ANZ) to its R&D and regulatory expertise China (Passive Sales) International market visibility and North America supply chain scale gain PGT Licensed territories PGT Healthcare brings its deep consume understanding, unrivalled marketing scale advantages and global regulatory & go- to market expertise to the partnership Source: Company data 15
Successful Rollout of Swisse Products in Singapore with PGT PGT launched the Swisse brand in Singapore in Mar 2015 Swisse share of Singapore VHMS market Carefully planned A&M strategy to support launch - Optimal retail footprint and distribution channel (270+ stores) 5.0% - Superior in-store positioning - Digital-led media support (Yahoo, Facebook & Google) 1.7% - New customer trial activities and cisits from dedicated Singapore ambassador Rebecca Lim 0.0% Feb 2015 May 2015 Feb 2016 - Launch of Swisse into new e-commerce platform Redmart Successful launch in Singapore in March 2015 with Swisse securing a market share of c.2% in just 2 months of launch Source: Company data 16
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