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Hyphens Pharma enjoys lift from broader product range and wider distribution channels

Amala Balakrishner
Amala Balakrishner9/11/2020 07:00 AM GMT+08  • 9 min read
Hyphens Pharma enjoys lift from broader product range and wider distribution channels
Hyphens’ CFO Fang Lee Wei sayS the counter was “under-recognised and severely undervalued” in its first 18 months since listing.
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Over two years ago, on May 18, 2018, Hyphens Pharma International made its Catalist debut on the Singapore Exchange at 30 cents. In the subsequent 18 months, its share price barely moved a needle, leading CFO Fang Lee Wei to say the counter was “under-recognised and severely undervalued”.

“Even though retail investors may have been using our products, not many of them know our brand since Hyphens focuses mainly on business-to-business distribution,” she tells The Edge Singapore in a recent interview.

Things have been changing course for the pharmaceutical distributor which has been bringing the Hyphens brand to retail investors through roadshows, events and social media engagements. These have helped push the counter to gain some 8.5 cents or 28.8% to close at 38.5 cents on Sept 10. More recently, its share price has been on the uptrend, with a notable surge on July 15 when it finished at 48 cents, some 50% or 16 cents higher than the previous day’s 32-cent close. In the process, some 55.8 million shares changed hands.

The demand for the stock followed news that it had been granted a patent for its Ceradan Advanced cream in the UK. The company is now awaiting approval for a patent in 13 other countries/regions such as Singapore, Malaysia, Vietnam, China, Europe and the US. Ceradan Advanced is used to treat the skin condition atopic dermatitis, or what is commonly known as eczema. It contains ceramide and a pH-balancing ingredient which forms a barrier on the skin to help it retain moisture.

Launched in 2019, the product is an update to Hyphens’ Ceradan range and is a product of re-formulations done to better suit patient’s needs. “With all our products, we constantly ask ourselves how it can do better,” explains Lim See Wah, Hyphens Pharma’s chairman and CEO.

The answer to this question is often obtained through conversations with medical professionals and clinical trials. For instance, the company got the thumbs up on its Ceradan Advanced cream in a blind study conducted by the KK Women’s and Children’s Hospital earlier this year. In the study, 42 respondents with eczema or broken skin on symmetrical regions were asked to compare Ceradan to standard creams used in hospitals and polyclinics. A vast majority found Ceradan preferable to the other creams.

While these responses spell good news, Lim is not resting on his laurels. “We are not finished with developing our products. We want to make good, better by constantly improving our products and staying relevant to our consumers,” he says.

One way he is doing so is through a collaboration with the Agency for Science, Technology and Research (A*Star) — the government agency tasked with leading Singapore’s science and technological research — to create a cream catering to individuals with hand eczema. This cream is formulated with Hyphens’ patented technology which serves to soothe dry skin without aggravating it.

Aside from this, the craze over hand sanitisers that began at the onset of the Covid-19 pandemic has pushed Lim to create a hand lotion sanitiser. While there are already many hand sanitisers in the market, Lim believes his product can make a difference. “Many of the hand sanitisers in the market are alcohol-based. They can effectively neutralise the virus in 30 seconds, but are also very drying,” he says. Lim’s lotion-cum-sanitiser contains alcohol but has a mildly acidic pH value of 5.5, unlike most over-the-counter hand eczema treatments which have a neutral pH value. The slightly acidic formulation is better suited to soothe our skin texture which is mildly acidic, Lim explains.

Hair-raising foray

Given its expertise in eczema through Ceradan and hyperpigmentation through its TDF Derma Formula range, the move appears an unconventional choice. However, Lim says it is part of a bigger plan to broaden Hyphens’ dermatological offerings. Hair loss became a natural area to look into given its prevalence amongst individuals across age groups.

“Hair goes through three phases: growth, maturity and decline. Hair loss happens because the hair drops too fast, not because there is not enough growth,” explains Lim. Through CG 210 and CG4S’s products, he believes that the maturity phase of the life cycle can be extended. His optimism stems from the sales of over 2 million units of the products globally and positive results reflected in 10 clinical studies involving nearly 800 subjects.

Meanwhile, Hyphens has also been making waves with its Ocean Health supplement range. Since the onset of the pandemic, Lim says there has been a surge in demand for these supplements, presumably as consumers become more health-conscious and gain more awareness about vitamin supplements. This has motivated the company to grant Hong Kong-based SUTL distribution rights for its supplements in Hong Kong, Macau and the Duty-Free Channels in China. With the demand for healthcare products at an all-time high, Lim is confident that the Ocean Health products will be well received.

For now, he is kept busy with formulating new products for the brand. His decision on what supplement to formulate hinges on whether there is demand and a gap. This mindset led to Lim to launch Vitamin D tablets, as he realised that eight in 10 Singaporeans lack this specific nutrient. He also launched an iron supplement upon realising that 20–30% of women in the reproductive age group are deficient in it. “Our products must serve a need because there is no point in just developing a product if they do not address a gap,” stresses Lim.

Digital strategy

Hyphens’ foray into innovation and development is not just restricted to its products. Having transformed its traditional wholesale business into an online medical hypermart two decades ago, the company has been reaping the benefits of its digital strategy especially since the Covid-19 pandemic broke out.

Particularly, the company has been tapping on its online B2B portal which offers over 4,000 items. These are sought by more than 3,000 customers including private clinics, pharmacies, polyclinics, and nursing homes. “In the past, you relied quite heavily on medical representatives going to talk to the doctors and explaining all our products. Having everything online has been helpful to medical professionals as they can clearly see all our products,” says Fang. The company is looking at ways to use technology to provide better support to medical professionals.

Riding on the success of this platform, Hyphens is offering its proprietary brands on e-commerce platforms such as Shopee, Lazada, Qoo10, and RedMart. These platforms have been helpful in giving Hyphens’ products visibility amongst consumers, says Lim. With a plethora of options available on these platforms, he is now looking to connect and educate customers as they are ultimately “buying a solution, not just a product”.

The company’s bottom line has proven this strategy right. For the most recent 2QFY20, its earnings surged 32% y-o-y to $2.2 million. On a fully diluted basis, earnings per share stood at 0.72 cents for the quarter, up from 0.52 cents in the corresponding period a year ago. This follows a 4.1% y-o-y increase in its revenue to $30.2 million for the three months, thanks to a 24% increase in the sales of its proprietary brands segment which record the take-up for its dermatological products under the Ceradan brand as well as nutritional supplements offered by Ocean Health. The heightened demand for these products came from Hyphens’ move towards online sales channels in late FY2019.

For the six months to June 30, the company reported a 39.8% year-on-year growth in its earnings for 1H2020. This follows a 10.1% increase in revenue to $56.0 million due to increased contribution from all three of the company’s business segments. The strong revenue in 1H20 was also held up by a robust 1Q20 performance, as well as a 24% growth year-on-year in revenue in Hyphens Pharma’s proprietary brands in 2Q20. A further lift also came from its specialty pharma principals segment and the medical hypermart and digital segment, which saw growth of 7% and 8% y-o-y in 1H20 respectively, as Hyphens’ supplies remained essential.

Analysts covering this stock are positive about its prospects. PhillipCapital analyst Tay Wee Kuang has a “buy” call and price target of 49.5 cents. Lim Li Jun Tracy and Lam Wang Kwan from SAC Capital are more bullish, with a 54 cents target.

Tay has revised his earnings estimate for Hyphens’ upwards by 25% to “reflect strong topline growth and income recognised from the Job Support Scheme in Singapore”. “We also adjusted terminal growth rate from 1.5% to 2.0% to represent the plentiful organic and inorganic growth opportunities in the long term within the fragmented industry,” he adds.

Even as things look up, Hyphens’ Lim is keen for the firm to remain steadfast yet nimble enough to navigate opportunities. “Many of the things we are reaping today are not fruits from the last two quarters — it has been in the works for a long time,” he says. This slow yet steady pace may well be Hyphens’ ticket to a stronger business.

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