SINGAPORE (June 24): Hyphens Pharma International is pursuing a multipronged growth plan. Even as it signs new distribution agreements with other brands, it is developing a steady pipeline of its own products as well. The company’s proprietary product business currently contributes the smallest proportion of revenue. Analysts believe, however, that it still has substantial growth potential.
Hyphens Pharma introduced four new dermocosmetics products in 2017 and added five in 2018. These products are sold under its own brands, Ceradan and TDF. The company is poised to launch new products this year as well.
Hyphens Pharma has been working with the Agency for Science, Technology and Research (A*Star), the government department tasked with leading Singapore’s science and technological research, as well as an entity-called A*ccelerate, which helps A*Star researchers and industry partners commercialise the results of their R&D.
Hyphens Pharma has just signed a memorandum of understanding with A*ccelerate to work together to develop dermatological products. “Eczema, acne, hyperpigmentation and atopic dermatitis are growing markets we wish to tap with our product and innovation capabilities,” Lim See Wah, the company’s chairman and CEO, tells The Edge Singapore.
This year, the company is focused on launching new and improved products. It recently launched Ceradan Advanced, a patent-pending product with a pH-balancing mechanism. The range contains ceramide — an active ingredient that forms a barrier on the skin and helps it retain moisture. A survey by healthcare research company IQVIA in 2018 showed that Ceradan was the top brand chosen by the 31 private dermatologist respondents. Another recent launch is its TDF Fairence range, which also has an improved formula that lightens pigmentation, supposedly in three months.
A recent Reuters survey on the global outlook and forecast for skin-lightening products shows that the demand for such skincare products is expected to grow exponentially between 2018 and 2023. This is driven by the emergence of a young, urban population and a rising per capita disposable income, which in turn results in a greater desire to look good. Hyphens Pharma intends to tap this growing market with its well-developed, more effective skincare products.
Besides capturing the young and affluent segment, the company has its eye on the ageing population too. To this end, the company is putting more effort into the branding of its Ocean Health supplement range by offering a wider range of supplements as a preventive measure to more chronic illnesses. Lim believes the rebranding efforts will help the company reach out to more individuals.
Distribution and wholesale
Hyphens Pharma, which was listed in June 2018, is headquartered in Singapore but has an extensive distribution network across the Asean region as well, with Vietnam being an especially important revenue contributor.
The company’s in-house skincare products and health supplements are consolidated under its proprietary brands division. Revenue for this segment for 1QFY2019 was up 1.4% y-o-y to $3.4 million, accounting for 12.7% of the company’s total revenue.
Besides this division, Hyphens Pharma groups its business activities into two other segments, both of which are the main revenue generators for the company.
The first, and largest segment, is the distribution of products on behalf of other brands such as Bausch+Lomb. The existing distribution portfolio spans about 30 types, with products used in areas such as dermatology, pediatrics and neonatology, orthopaedics and rheumatology, radiology, cardiology, ophthalmology and family medicine. For 1QFY2019 ended March 31, this division generated revenue of $13.8 million, making up 51% of its total revenue. This amount was 21.7% less than the year-earlier period, as customers in Vietnam had placed more orders ahead of a licensing renewal then.
The other division, its second-largest revenue generator, is in the wholesaling of medicine to clinics and other pharmacies across Southeast Asia, through a medical hypermart and e-commerce platform. In 1QFY2019, this unit generated $9.7 million in sales, up 1.7% y-o-y. It accounts for 36.3% of the company’s overall revenue.
As for its proprietary products division, revenue in 1QFY2019 was up 1.4% y-o-y to $3.4 million, accounting for 12.7% of Hyphens Pharma’s total revenue.
As a whole, the company’s revenue for 1QFY2019 was down 11.8% y-o-y from $30.6 million to $27 million. Earnings fell 20.3% y-o-y to $1.4 million, as the company had to bear higher finance, administrative and depreciation costs.
Lim is unfazed by the earnings drop in the most recent quarter and points out that, while earnings vary from quarter to quarter, the full-year numbers will continue to show growth momentum. “We used [the last quarter] to strengthen the organisation in terms of our capabilities,” he says.
Year to date, Hyphens Pharma’s shares have gained just over 1% to close at 19.7 cents on June 19. At this level, its shares are trading at a historical price-to-earnings ratio of 10.1 times, giving the company a valuation of $59.3 million.
For the year ended Dec 31, 2018, Hyphens Pharma announced a dividend payout of 0.55 cents a share, or a payout ratio of 30.5% based on the earnings per share of 1.8 cents. The company plans to maintain its payout ratio at a similar level this year.
New distribution deals
Having its in-house proprietary products is insufficient. Hyphens Pharma is tapping its existing distribution network to deepen and widen both its product offerings and geographical reach. Its distribution business, the largest among all three segments in terms of revenue, is “important and growing”, says Lim.
Even so, the company is always on the lookout for more partners to reach a bigger market. On June 17, the company announced that it would be introducing the MAGNEZIX magnesium alloy metallic implant in Vietnam, under an exclusive distribution agreement with a German company called Syntellix. The implants are used to hold broken pieces of bones together for healing and growth, such that it is eventually dissolved and absorbed into the body.
The company has identified mental health as another growing market, particularly in developing markets such as Vietnam, a country where the pheonomenon is “widespread” and “increasing”, according to a February 2018 study by the United Nations Children’s Fund.
To this end, Hyphens Pharma signed another exclusive distribution agreement last month with Lundbeck for the marketing and distribution of drugs for mental health conditions in Vietnam. Lundbeck is a Danish pharmaceutical company focused on this field. The collaboration is in line with the company’s vision to “provide a better quality of life for the masses”, says Lim.
While Lim says he cannot predict how Hyphens Pharma will perform in FY2019 based solely on 1Q results, he asserts that the enhancement of current products and extension of networks through new partnerships show the company’s commitment to invest for the future.
