Contents:

Contents Scope and Themes What you need to know Definition Data sources Sales data Consumer survey data Abbreviations and terms Abbreviations Terms Executive Summary A steadily growing market Rx switches grow sales Pseudoephedrine products now behind the counter Other decongestants compete for sales Alternative medicines infringe on OTC medicated remedies Tablets top segment Drug stores remain the remedy retailer of choice Sales driven by allergy incidence, population factors, growing self-medication/diagnosis trend Allergy incidence Children/elderly predisposed to allergies Growing Hispanic population signifies opportunity Self-diagnosis/treatment movement suits OTC remedies Johnson & Johnson/McNeil, Schering-Plough lead based on Rx switches Brands reflect quality of life, affordability, natural alternatives Battle of Rx switches Benadryl looks at the bigger picture Alavert leverages the price angle NeilMed’s natural niche Who’s suffering? Side effect concerns may hamper the market Outdoor allergies: Seasonality and treatment Children’s place in the market Market Size and Forecast Key points Sales driven by range of factors Allergy incidence and risk Sheer number of Hispanics cause for marketing focus Self-diagnosis/medication on the rise Sales and forecast of market Figure 1: Total U.S. retail sales of market, at current prices, 2003-13 Figure 2: Total U.S. retail sales of market, at inflation adjusted prices, 2003-13 Wal-Mart sales Competitive Context Rx switches constitute big business PSE products migrate to behind the pharmacy counter Cold/sinus decongestants compete for customers Alternative remedies gain popularity Rx and vaccines draw sufferers away from OTC Segment Performance Key points Tablets grow, provide best platform for Rx switches Liquids face challenges from tablet switches, safety, and efficacy concerns Nasal products increase Sales of cold/allergy/sinus remedies, by segment Figure 3: Sales of cold/allergy/sinus remedies, segmented by type, 2007 and 2008 Segment Performance—Cold/Allergy/Sinus Tablets Key points Tablets simpler, more portable, tasteless Sales and forecast of cold/allergy/sinus tablets Figure 4: Sales of cold/allergy/sinus tablets at FDMx, in current prices, 2003-13 Segment Performance—Cold/Allergy/Sinus Liquids Key points Fallout over children’s remedies challenges Liquid delivery system less convenient, more unpleasant Sales and forecast of cold/allergy/sinus liquids Figure 5: Sales of cold/allergy/sinus liquids at FDMx, at current prices, 2003-13 Segment Performance—Nasal Spray/Drops/Inhaler Key points Nasal products represent valuable alternatives for pediatric sufferers Sales and forecast of nasal spray/drops/inhalers Figure 6: Sales of nasal spray/drops/inhalers at FDMx, at current prices, 2003-13 Retail Channels Key points Drug stores still the best fit for allergy remedies Mass stores increase pharmacies, offer affordable OTC remedies Sales of cold/allergy/sinus remedies, by channel Figure 7: U.S. retail sales of cold/allergy/sinus remedies, by channel, 2006 and 2008 Retail Channels—Drug Stores Key points Drug channel the most trusted remedy retailer Drug store sales of cold/allergy/sinus remedies Figure 8: U.S. drug store sales of cold/allergy/sinus remedies, at current prices, 2003-08 Retail Channels—Supercenters/Discount Department Stores, Warehouse Clubs Key points Mass stores will grow as economy slows Supercenter/discount/warehouse sales of cold/allergy/sinus remedies Figure 9: U.S. supercenter/discount department store, warehouse club sales of cold/allergy/sinus remedies, at current prices, 2003-08 Retail Channels—Other Channels Key points Supermarkets, other channels require early adoption of switches Other channel sales of cold/allergy/sinus remedies Figure 10: U.S. Other channel sales of cold/allergy/sinus remedies, at current prices, 2003-08 Market Drivers Incidence of allergies Figure 11: Types of allergies suffered, November 2008 Figure 12: Change in allergy suffering, November 2008 Figure 13: Population aged 18 or older, 2003-13 Children and elderly are more susceptible Pediatric sufferers Figure 14: Use of OTC children’s allergy remedies, November 2008 Figure 15: Child population by age, 2003-13 Elderly sufferers Figure 16: Types of allergies suffered, by age, November 2008 Figure 17: Usage of allergy remedies, by age, April 2007-June 2008 Growing Hispanic population provides opportunities, represents challenges Figure 18: Types of allergies suffered, by race/Hispanic origin, November 2008 Figure 19: Usage of allergy remedies, by race/Hispanic origin, April 2007-June 2008 Figure 20: U.S. Hispanic population by age, 2003-13 Self-diagnosis/treatment trend aids OTC sales Figure 21: Professional vs. self-diagnosis, November 2008 Leading Companies Key points Johnson & Johnson/McNeil the clear leader with Zyrtec and Benadryl Schering-Plough relies on Claritin Wyeth sells to Pfizer; Alavert sales down Manufacturer sales of cold/allergy/sinus remedies Figure 22: Manufacturer sales of cold/allergy/sinus remedies in the U.S., 2006 and 2008 Brand Share—Cold/Allergy/Sinus Tablets Key points Rx-to-OTC switches cast long shadow Manufacturer and brand sales of cold/allergy/sinus tablets Figure 23: Selected brand sales and market share of cold/allergy/sinus tablets in the U.S., 2006 and 2008 Brand Share—Cold/Allergy/Sinus Liquids Key point Both Zyrtec and Claritin available in liquid children’s versions Manufacturer and brand sales of cold/allergy/sinus liquids Figure 24: Selected brand sales and market share of cold/allergy/sinus liquids in the U.S., 2006 and 2008 Brand Share—Nasal Spray/Drops/Inhaler Key points Zicam tops nasal sprays, Afrin close behind Asthma inhalers gain but face challenges Sinus rinse growth reflects popularity of natural remedies Manufacturer and brand sales of nasal spray/drops/inhaler Figure 25: Selected brand sales and market share of nasal spray/drops/inhaler in the U.S., 2006 and 2008 Natural channel/SPINS Natural channel sales Figure 26: Natural product supermarket sales of herbal formula and homeopathic allergy remedies, at current prices, 2006-08 Figure 27: Natural product supermarket sales of herbal formula and homeopathic allergy remedies, at inflation-adjusted prices, 2006-08 Implications Consumers reluctant to accept natural remedies Pharmaca Integrative Pharmacy providing high level onsite ‘education’ Brand Qualities Claritin Clear vs. fast-acting Zyrtec Benadryl depresses the pause button Figure 28: J&J/McNeil Benadryl television ad, 2008 Alavert: The affordable Claritin NeilMed builds on natural positioning Innovation and Innovators Number of launches fluctuates year-to-year Figure 29: Number of allergy remedy new products, 2003-08 Children’s remedies dominate product claims Figure 30: Number of allergy remedy new products, by product claim, 2003-08 McNeil introduces the most new products in 2008 Figure 31: Number of allergy remedy new products, by leading company, 2003-08 Natural/homeopathic remedies still gaining popularity Nasal Ease—Allergy Blocker Oasis—Children’s Nasal Spray Zicam—Allergy Relief Gel Swabs Long-lasting relief TopCare Children’s—All Day Allergy Reliever Kroger—24 Hour Allergy Relief Healthy Accents—Children’s All Day Allergy Oral Solution Multi-symptom remedies Rite Aid—Allergy Multi-Symptom Tablets DG—Multi-Symptom Complete Allergy Capsules Member’s Mark—Allergy Multi-Symptom Caplets Advertising and Promotion Overview Schering-Plough Figure 32: Schering-Plough Claritin television ad, 2008 Figure 33: Schering –Plough Claritin television ad, 2008 Figure 34: Schering –Plough Claritin television ad, 2008 Johnson & Johnson/McNeil Figure 35: J&J/McNeil Zyrtec television ad, 2008 Figure 36: J&J/McNeil Zyrtec television ad, 2008 Allergies and Diagnosis Key points Allergy incidence and severity Figure 37: Allergy incidence and severity, by gender, April 2007-June 2008 Figure 38: Allergy incidence and severity, by age, April 2007-June 2008 Females, younger respondents more likely to suffer from all listed allergies Figure 39: Types of allergies experienced, by gender, November 2008 Figure 40: Types of allergies experienced, by age, November 2008 Figure 41: Types of allergies experienced, by presence of children in HH, November 2008 Self-diagnosis rates high across all allergy types Figure 42: Diagnosis of allergies, November 2008 Younger respondents more likely to self-diagnose Figure 43: Doctor and self diagnosis of allergies, by age, November 2008 Medication and Side Effects Key points Over the counter remedies strong Figure 44: Medicine taken for allergies, November 2008 Side effects most pronounced among young allergy sufferers Figure 45: Side effects from allergy medicine, by age, November 2008 Figure 46: Side effects from allergy medicine, by presence of children in HH, November 2008 Spotlight on Outdoor Allergies Key points Allergies getting worse Figure 47: State of outdoor allergy suffering, compared to a year ago, by age, November 2008 The seasonal effect Figure 48: Seasonality of outdoor allergies, by age, November 2008 OTC remedies reign supreme, likely driven by Rx switch Figure 49: Types of medicine taken for outdoor allergies, by gender, November 2008 Figure 50: Types of medicine taken for outdoor allergies, by age, November 2008 Figure 51: How often take medication for outdoor allergies, by age, November 2008 Allergy Medicine Attitudes and Concerns Key points Age Matters Figure 52: Attitudes towards allergy medicine, by age, November 2008 Figure 53: Attitudes towards allergy medicine, by presence of children in HH, November 2008 Children and Allergies Key points Outdoor allergies worse, no matter what your age Figure 54: Allergies children experienced, November 2008 Figure 55: Medicine children take for allergies, November 2008 Concerns and beliefs about allergy medicine and children Figure 56: Concerns about children and allergy medicine, November 2008 Appendix: Other Useful Consumer Tables Figure 71: Types of allergies experienced, by HH income, November 2008 Figure 72: Diagnosis of allergies, by HH income, November 2008 Figure 73: Medicine taken for allergies, by HH income, November 2008 Figure 74: Side effects from allergy medicine, by HH income, November 2008 Figure 75: Seasonality of outdoor allergies, by HH income, November 2008 Appendix: Trade Associations

Companies Mentioned

- Schering-Plough Corporation - McNeil Consumer & Specialty Pharmaceuticals - Johnson & Johnson - Food and Drug Administration - American Academy of Allergy, Asthma & Immunology (AAAAI) - Matrixx Initiatives Inc. - Wal-Mart Stores (USA) - Procter & Gamble USA - Procter & Gamble Company (The) - Pfizer Inc - Novartis Pharmaceuticals Corporation - Airborne Inc - World Health Organization - U.S. Consumer Product Safety Commission - Consumer Healthcare Products Association (CHPA) - American Pharmacists Association (APhA) - Chain Drug Marketing Association - World Self-Medication Industry - American College of Allergy, Asthma & Immunology (ACAAI) - Walgreen Co - Adams Respiratory Therapeutics, Inc. - The Kroger Co. - U.S. Bureau of Labor Statistics - Greenfield Online - Asthma and Allergy Foundation of America (AAFA) - National Institutes of Health