SINGAPORE (May 21): The healthcare universe on Singapore Exchange will see the entry of another stock, Hyphens Pharma International.

The company has launched its IPO on Catalist. It is selling 29.6 million shares at 26 cents each. Three million shares were made available to the public. These have been 152 times oversubscribed. The rest of the shares are being privately placed out, with 2.8 million shares reserved for directors and employees of Hyphens Pharma. Separately, three cornerstone investors — Nikko Asset Management Asia, Qilin Asset Management and Maxi-Harvest Group — will subscribe to 30.4 million cornerstone shares. The market capitalisation of Hyphens Pharma after its IPO will be about $78 million, or 13 times its earnings last year.

Hyphens Pharma is seeking to raise $15.6 million, of which $7 million will be earmarked for business expansion, including potential acquisitions, product development and research.

Another $3 million will be set aside for an integrated facility where the company will locate all its business units that are currently sited in different offices.

It has operations in Singapore, Vietnam, the Philippines, Indonesia and Malaysia, and is in three main business segments: specialty pharmaceutical principals, proprietary brands, and medical hypermart and digital.

The specialty pharmaceutical segment involves the selling and marketing of specialty pharmaceutical products from brands such as Guerbet and Bausch+Lomb. These products include contrast media agents for X-rays and eye drops. Hyphens Pharma also develops and sells its own range of dermatological products and health supplements under its proprietary brands segment, under the “Ceradan”, “TDF” and “Ocean Health” labels. These products can be found in local pharmacies. The medical hypermart and digital business segment sells medicine on a wholesale basis to clinics. Hyphens Pharma also runs an e-commerce platform distributing these drugs to clinics in Singapore.

“It is not easy for an SME [small and medium enterprise] to build different streams of income. We are very fortunate to have three,” says Lim See Wah, Hyphens Pharma’s chairman and CEO. “[And] all the three segments are growing, although at a slightly different pace.”

According to Lim, Hyphens Pharma has built up a considerable bank of exclusive, long-term relationships with small and mid-sized pharmaceutical companies based in the US and Europe. That brings with it specialised and proprietary knowledge in making and marketing the products, which in turn allows Hyphens Pharma to distribute or license a portfolio of specialty drugs in Asia.

Importantly, its portfolio does not have socalled blockbuster drugs, which attract copies by generic drug manufacturers once patents expire, hence affecting margins. “The most logical thing for the generics company to do is a big blockbuster drug that is grossing billions of dollars,” Lim explains. “Fortunately, or unfortunately, we don’t have them, [so] the risk of copying and entering in a big way is relatively lower.”

At the same time, Lim says, Hyphens Pharma’s business is somewhat protected by the regulatory requirements for pharmaceuticals that constitute a high barrier to entry. Hyphens Pharma has 16 employees dedicated to dealing with regulators, and the company currently holds over 300 product registrations and notifications for pharmaceutical products, medical devices, dermo-cosmetics and health supplements. Specialty pharmaceuticals contributed more than half, or 53.6%, of Hyphens Pharma’s revenue in 2017. The top three suppliers — Guerbet Group, Biosensors International Group and Sofibel — collectively contribute to more than 30% of total revenue.

While some might see this as an over reliance on a single business segment, Lim argues that the company has worked to diversify its income. “Within the specialty pharmaceutical segment, we have quite a lot of different brands and products. We have 30-odd brands; some are young and some have been with us for a relatively long period of time. We are certainly not overly dependent on a single brand.”

Additionally, Hyphens Pharma has built up its own range of products. “It is an area where we own the entirety of the business, including the brands, which didn’t exist until 2011. Today, it contributes 11.4% of the business,” Lim says. Still, he acknowledges the need to continually expand the company’s range of products, such as through collaborations with existing customers or new partners. Lim is also looking to scale up operations in various markets, given that business in Singapore and Vietnam now generate nearly 90% of total revenue.

Hyphens Pharma is looking to expand its dermo-cosmetics and health supplement brands into new markets. The company recently added Oman as a market, representing its first foray into the Middle East.

It is also working closely with local research institutions, such as with the Agency for Science, Technology and Research, to formulate a new steroid. And it has filed a patent for the next generation of Ceradan products. “We will continue to pursue opportunities with research institutions in order to reduce the risk exposure for R&D,” Lim says.

Hyphens Pharma is also preparing to expand via acquisitions, joint ventures and alliances, a key reason for listing, according to Lim. In addition, listing will help improve the company’s visibility in the fragmented pharmaceutical space in Asia.

“If we can go out to the market, hopefully we could become more visible to prospective collaborators and [obtain] the capital to be able to fund any acquisition that we might be looking at, although we currently do not have a target. “We are looking at product acquisitions [as well]. For example, [in] the acquisition of Ocean Health [in 2016], [it was] because of the products. We are looking to acquire companies’ capabilities and assets in areas where we see value,” he says.

Hyphens Pharma’s financials for the past three years show a steady growth in revenue, rising from $78.2 million in FY2015 to $113.1 million in FY2017. Profit after tax increased, from $5 million to $6 million over the same period.

While there is currently no fixed dividend policy, the board intends to recommend and distribute at least 30% of earnings in FY2018 and FY2019. However, this is not an indication of future dividend policy. Hyphens Pharma was scheduled to trade on Catalist on May 18.

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