Chairmans/CEO AGM Address

CHAIRMAN’S ADDRESS
At the time of the last Annual Meeting the focus of the company was
three fold:
• Set up distribution arrangements for Arthrem in Australia and
launch the product
• Complete product development of Artevite and launch it in New
Zealand
• Build on New Zealand sales of Arthrem

Launch of Arthrem in Australia
The launch into Australia, particularly New South Wales, took much
longer and was much more difficult to implement that expected. A
number of parties were approached to represent Arthrem in that market
but, despite initial expressions of willingness to do the job, it was
extremely difficult to secure a commitment.

It was only through the sustained efforts of Tom Brankin in his role of
acting chief executive that the company was able to secure the services
of Pharmabroker in Australia. Warehousing and distribution
arrangements also took significant time to conclude. The impact of
these delays are noted in the Annual Report.

Development and Launch of Artevite
This project was also delayed due to difficulties in finalising a formula to
raise the level of acceptability from 70% to over 95% of dogs taking
product samples. As noted in the Annual Report the efforts of the in
house scientific team led by Dr. Sheena Hunt finally resolved the
problem. Packaging and manufacturing delays conspired to push the
launch of Artevite out until early 2018.

New Zealand Sales
The operating environment in New Zealand changed significantly in
early 2017.

Several competing products appeared on the market, often claiming to
be ‘exactly the same as Arthrem’ but as a single double dose at a
cheaper price. Interestingly, our clinical trial, which was referred to by
some of these competitors, demonstrated that the optimum dose was
one 150 mg capsule twice a day.

At the end of 2016 the company appointed a new marketing agent as
the increase in cost of the previous representative could not be justified.
Regrettably, the new marketing agent did not perform to expectations
and the relationship was terminated at the end of the year.

The combination of these factors resulted in total sales of $2,293 million,
significantly lower than budgeted, and a loss for the year rather than a
breakeven outcome.


Acting CEO
On behalf of all shareholders and the directors I wish to acknowledge
the contribution made by Tom Brankin by stepping in as Acting Chief
Executive for a period of several months. Tom’s objectives were to lead
implementation of the three primary objectives set for 2017 while a new
CEO was recruited. This he achieved without remuneration other than
his standard directors’ fee and reimbursement of expenses. Thank you
Tom.

Appointment of new CEO
In early October 2017 the company welcomed Rene de Wit as the new
Chief Executive. Rene brings considerable commercial experience and
in mid-February all of that experience was required to weather the storm
resulting from the Medsafe Alert.
An early recommendation from Rene was that the company terminate its
arrangements with its Arthrem marketing agent and establish an in-

house capability. This process was underway early in the New Year and
included travelling representatives and telemarketing. Rene will expand
on this initiative and our experience since the Medsafe Alert.

Medsafe Alert
The Medsafe Alert in February this year was a bolt from the blue and
has had a significant impact on the company. I will handover to Rene to
outline what happened and the company’s response to this event.

I wish to thank my co-directors for their considerable personal
commitment to the company during the year and to our management
team for their continued commitment and achievement of key results.

CEO Address
Medsafe Alert 15
th
February 2018
• The Alert was a complete surprise to Promisia
• There was no prewarning from CARM of the 14 adverse reactions
• The Alert was distributed widely and published in NZ and Australia
• Main stream media quickly published very negative articles both
online and in print
• Featured on TV news

• No context was given by Medsafe or the media – reaction rate less
than 1 in 14,000 users - considered to be very rare by World
Health Organisation guidelines. (reaction rates for Analgesics and
Non Steroidal Anti-inflamatories are greater than 1 in 1000)
• Sales of Arthrem literally stopped
• Impact on Arthrem launch in Australia (TV, POS and instore
campaign)
• Impact on launch of Artevite in NZ (TV, POS and instore
campaign)
• Sales of Arthrem to pharmacies reduced to 10% of expected levels
although pharmacies were carrying higher stocks than usual
following a recent promotion
• Pharmacies reacted with great caution and a small number
stopped selling Arthrem
• Negative coverage significantly affected retail demand
• Refer to handout which gives some context on adverse reactions
to other over the counter products
What did Promisia do?
• Worked with PR company to ensure readiness for potential
negative media
• Notified all pharmacies, proving context and information to assist
staff when talking to Arthrem customers

• This included:
• Safety information – clinical data
• Changes to bottle labelling
• Changes to website information
• Update point of sale (POS) material
• Advice for customers - potential Q&As
• 24/7 0800 call centre providing answers to customer
questions
• Complied with Medsafe requests
• Included Natural Products NZ in discussions with Medsafe as this
was an industry issue, not just an Arthrem issue
• Ceased TV advertising and other expensive media to conserve
cash resources
• Used Promisia telesales team to contact every pharmacy in NZ on
a regular basis to assist and support education and sales
Results to date
• Sales began to recover in April on the back of a large marketing
and education effort with pharmacies
• Sales in May continued to strengthen and represent approximately
40% of previous levels
• Strong positive support from pharmacies
• Customers who had stopped taking Arthrem are now returning

• Dedicated marketing resources are delivering results and better
education to our Arthrem users


Marketing plan
• Incentive to buy Arthrem at a small discount (May)
• Continue to call all pharmacies each month (Telesales team)
• Focus on sales rep visits to train and support pharmacies
• Positive media campaign to boost online profile
• SEO audit and plan to drive positive web search results
• Introduction of the “Arthrem Health Check” to POS and online/web
• Tile in Green Cross (Unichem and Life Pharmacies) Mailer
promoting Arthrem (June)
• Promotion through Green Cross Health Gondola ends and counter
stand promotion (July)
• Buy 2 Get one Free with Green Cross promotion (July)
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Arthrem Sales and Forecast
Sales UnitsForecast Units

• Staff training to support the “Arthrem Health Check” initiative (Prize
for pharmacy staff)
• Counter top sales unit promotion (August)
• Similar promotion with independent pharmacies
• Possible production of a new TV ad and subsequent airing
(dependent on funds)
Marketing Challenges
• Early in 2016 there were changes in legislation in the way a dietary
supplement could be marketed.
• Testimonials that claimed an improvement to any condition were
no longer permitted.
• Claims can no longer be made. Words like “arthritis” and “pain”
cannot be used in advertising.
• Positive reviews on platforms like Facebook breach Advertising
Standards Authority (ASA), rules if they claim to treat to a condition
e.g. arthritis
• International Arthrem websites and Facebook where claims can be
made must be geo-blocked for NZ web searches
The path forward
• New approach to marketing is underway
• Any statement written or implied, must be approved by TAPS and
the Advertising Standards Authority

• Ensuring that pharmacies have the required tools to educate
customers and promote Arthrem
• Providing information to pharmacies so that they can assist
potential customers evaluate if Arthrem is right for them e.g. the
Arthrem Health Check
• Continue with SEO to drive negative media off the first search
pages on Google
Staff Changes
• Sheena Hunt resigned in December 2017 to pursue a more
clinical focused role. Promisia was not planning further
clinical trials or research in the short – medium term. Two
scientists remain in the company (Rene de Wit MSc., Liam
Harker MSc.)
• Sales and Marketing
• Contract with sales brokerage company was ended in
December 2017 so that an in-house sales and marketing
team could be employed
• 2 part time telesales staff were employed in Dec/Jan
• Marketing Manager employed in February (1-2 days per
week on the road)
• Sales rep for Central North Island employed in April

• Auckland north and South Island sales reps on hold until
funds allow
(END)