Q: The first quarter of 2015 brought an unexpected GDP increase of over 4% compared to Q1 2014, exceeding the most optimistic estimates made by analysts and authorities. Do you think that is a trend that may continue for the rest of the year? Give us your personal opinion on the evolution of the Romanian economy in 2015.
Silviu Toader: Indeed, we have witnessed a spectacular economic revival, registered by the statistical indicators. This also impacted us, the players on the pharmaceutical market, especially in relation to our clients, the pharmacies which became more courageous regarding the business approach and more open to innovation, but also taking into consideration the consumption trend, having registered growth in the dietary supplements segment and the OTC segment.
I am an optimist by nature; still, realistically speaking, based on the figures we have seen so far, there are no reasons to believe that we cannot continue this trend. I am not a financial analyst but, knowing the industry in which we activate and which is showing growth year after year – not only regarding drugs, but especially in the area of prevention through education – by extension, I see high chances of maintaining the pace in 2015.
Q: Which are the main engines that could sustain a more important growth this year and beyond?
Silviu Toader: Just to name a few, I believe that macro-stability, internal production stimulation, a fiscal policy adapted to the real life stage of our economy would be the first important steps.
Q: How have you perceived (if so) this positive evolution in your business? Have you noticed any positive developments / trends? Or, on the contrary? Please, detail.
Silviu Toader: The pharmaceutical industry – and by this I am referring strictly to the self-medication area (OTC and dietary supplements) – registered in the first trimester a growth of 27% (according to Cegedim Romania). It is true that a substantial part of this growth was generated by sales of cold season products, but there are also significant increases in the vitamin market, as well as in the prevention and lifestyle products markets. The trend of the first trimester actually continues the positive evolution of the market in the last 12 months, with a 20% growth compared to the previous period of time. Of course, this is connected to the economic growth, especially based on the increase in the spending power of the population. As a consequence, we are able to offer our customers modern innovative solutions and also facilitate greater access to the latest discoveries and innovations in the industry.
Q: Which were the main events and trends that have marked your industry and, in particular, your activity last year? How has the market changed? Which were the main drivers of your activity?
Silviu Toader: Although I am part of a company activating exclusively on the OTC and dietary supplements market, we are impacted by every move and evolution that take place on the prescription drugs market. Considering the hectic movements in establishing the prices of ethical drugs, the price decreases and the portfolio restructurings of some top pharma companies – the portfolios of OTC and dietary supplements are becoming very interesting for many distributors (wholesalers) and even for pharmacy managers, taking into consideration shelf rotation and cash generation.
That is why there are many mergers & acquisitions of OTC portfolios on the European market, as well. American companies enter the European market and, implicitly, the Romanian market, especially due to its attractiveness. Although, as a country, we are monitored and controlled by the authorities in the drug field quite a lot (even more than in some strongly developed European countries), we still remain attractive to the American investors and companies. A distinct element of the Romanian market as a European market is the fact that it is driven by brands, not by private labels. A significant investment level backing these brands is not easy to be sustained by companies, but it assures medium and long-term success. It is worth mentioning here that, when it comes to communication, the pharma market is driven by TV, taking into account the legislative restrictions of OTC communication in the digital environment.
Q: Which are your expectations / plans for 2015? Which are the main opportunities and risks in your industry?
Silviu Toader: In the past years, in Romania, Omega Pharma has had a very good evolution of the turnover, as last year we registered a 5% growth. For this year, we have even more ambitious plans and we aim to reach an increase of almost 10% while, for the next years, our ambition is to become one of the Top 10 OTC producers in Romania.
In our vision, the opportunities come from innovations, educating consumers – especially in the prevention area – and harnessing the naturist trend, which has already developed at the consumer level. If we consider the customer level, although the predominant model in pharma is through wholesalers, we still have a direct contact with pharmacies, which are our indirect customers. Thus, the winning way in the long term would be approaching the relationships with the pharmacies by making long-term partnerships with them and developing joint efforts to educate the consumers. From a risk perspective, we should take into consideration the possibility of some drug wholesalers and pharma networks becoming insolvent.
Q: How do you assess the current business climate (in every respect)? What has changed in the recent years? What are the main problems which you are facing?
Silviu Toader: The most important change in the past years has been an increase in the number of producers on the market, especially local producers. Nevertheless, at the same time, the market remains polarized by strong brands with heritage and investments. The number of pharmacies is on the rise compared to 5-6 years ago, reaching 7,000. This number has been showing a slight decrease in the past 1-2 years generated by a strong phenomenon of specialization and polarization – therefore 3,000 pharmacies represent today 85% of the OTC and dietary supplements market in Romania.
We, OTC companies, are also affected by the changes and evolutions taking place in the drug field, namely the clawback tax, the price decreases following the reduction of the VAT for dietary supplements, as well as the deficiencies of the sanitary system, which make the survival of independent pharmacies very difficult.
At the same time, pharma distributors and retailers might develop financial problems because their turnover will decrease proportionally with the prices, namely with 15-20% following the new price lists for drugs, which changed on July 1st 2015.