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Prestige: Active M&A activity in the OTC sector expected to foster additional opportunities

BY Michael Johnsen

TARRYTOWN, N.Y. — These are interesting times to be in the OTC business, Matt Mannelly, Prestige Brands president and CEO, told analysts Thursday. Because of the dynamics of the industry — a healthcare system encouraging greater self-care utilization and the fact that OTC is a cash-flow positive business — the OTC sector has become very attractive for big pharma companies looking for mergers and acquisitions. GlaxoSmithKline’s partnership with Novartis and Bayer’s bid for Merck’s OTC business, not to mention Prestige Brands’ acquisition of Insight Pharmaceuticals, may be just the beginning in what might become a very active M&A period. 

"OTC is becoming increasingly attractive to a number of key players," Mannelly said. "And the reason it’s becoming increasingly attractive, if you step back and you think about the megatrends in terms of health and wellness and you think about self-medication and how important that is going to be moving forward, it has very good long-term trends for the OTC business. Also if you look at the retail landscape and you think about OTC products and their availability in the retail landscape today versus five years ago, it has increased. And I think we’re going to see that happen again over the next five years as well," he said. "[OTC] continues to attract interest from the large pharma companies and the large CPG companies. The reason … is steady, slow predictable growth, very high gross margins, EBITDA margins and very significant free cash flow."

Mannelly fully expects M&A activity in the OTC sector to continue. "If you look at history in the consolidation and the acquisitions that have happened … it has created M&A opportunity," he said, including newly formed companies looking to shed non-core brands from their portfolios. 

Prestige’s acquisition of Insight, which is expected to close later this year, brings to Prestige’s portfolio the company’s first $100 million-plus brand in Monistat. According to IRI data for the 52 weeks ended Dec. 29, Monistat generated more than $135.8 million across total U.S. multi-outlet channels.  

"The keys with that brand and with that portfolio are similar to what we have done in the past with other acquisitions and that is we need to increase the brand support, we need to focus on new product development in order to capture the long-term value of that brand equity of Monistat," Mannelly said. 

Prestige reported fiscal fourth quarter net revenues of $144.3 million, a decrease of 6.6% over the prior year. Reported net revenues for the fiscal year ended March 31 were $601.9 million, a decrease of 3.5% over the prior fiscal year’s revenues of $623.6 million. Behind the decline was an incredibly soft cough-cold season. "If you recall, not this last season, but the season before we had the strongest cough/cold incidences in 10 years," Mannelly said. "This year, as I said, for the first half of the season we had the weakest cough/cold incidents in 15 years and it was weak in the last quarter as well."

 

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Former chairman of Federal Reserve System to address NACDS Total Store Expo

BY Antoinette Alexander

ARLINGTON, Va. — The National Association of Chain Drug Stores announced that Ben Bernanke, chairman of the Federal Reserve System from 2006 to 2014, will address the NACDS Total Store Expo during the morning Business Program on Aug. 24 at the Boston Convention and Exhibition Center in Boston.

“When you think about who’s best to forecast the nation’s economic and business climate, Dr. Bernanke is hands-down the leading authority,” stated NACDS president and CEO Steve Anderson.  “During his time as chairman of the Federal Reserve, Dr. Bernanke’s financial expertise has led the nation through some of its most challenging financial times, and as our industry continues to evolve and change, we look forward to listening to and learning from his experiences.”

Bernanke served two terms as chairman of the Board of Governors of the Federal Reserve System from 2006 to 2014.  Before his appointment as chairman, Bernanke served as chairman of the President’s Council of Economic Advisers. He also served in several other roles within the Federal Reserve System, including a member of the Board of Governors of the Federal Reserve System.  Currently, Bernanke is a Distinguished Fellow in Residence at the Brookings Institution.

 

 

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Walmart: Robust allergy season boosting performance across health and wellness

BY Michael Johnsen

BENTONVILLE, Ark. — A soft cough-cold season has given way to a robust allergy season, Bill Simon, Walmart U.S. president and EVP, told analysts Thursday, which was one contributing factor to improving overall health and wellness by more than 150 basis points. 

Walmart’s prescription business is also on the rise. "Prescriptions delivered a mid-single-digit positive comp, driven by branded drug inflation and a strong increase in script counts," Simon said. "Script counts benefitted from new contracts in our Medicare business."

Health and wellness, which includes pharmacy, optical and OTC, was also up at Sam’s Club, albeit in the low single-digits. "Member awareness and usage of our pharmacy continues to grow, contributing to a high single-digit positive comp," reported Rosalind Brewer, Sam’s Club president and CEO. "Over-the-counter however, pressured the entire category, as we lapped strong prior year performance in diet and nutrition items."

Outside of the positive performance across its health-and-wellness segment, Walmart U.S. comp sales were relatively flat, down 8 basis points for the 13-week period ended May 2, in part because of the severe weather that adversely impacted comp sales by approximately 20 basis points. Comp sales for the Neighborhood Market format rose approximately 5%. "We saw strength across food and health and wellness, and we’re particularly pleased with our overall traffic trend," stated Simon. "April marked the 46th consecutive month of positive comps for Neighborhood Market."

Walmart U.S. net sales increased $1.3 billion, or 2%, for the period to $67.9 billion. Net sales at Sam’s Club were up 0.1% to $13.9 billion. 

 

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