Wide portfolio drives performance at Huons Global

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Wide portfolio drives performance at Huons Global

Published: 14 Mar. 2021, 18:00

Huons Global Vice Chair and CEO Yoon Sung-tae poses in front of the company's logo after an interview with the Korea JoongAng Daily in Bundang, Gyeonggi, on March 3. [PARK SANG-MOON]

Last year was one of the best for pharmaceutical company Huons Global in its 65-year history. Net profit jumped 58 percent on year to reach 91 billion won ($80 million) while revenue increased 16 percent to 523 billion won.

That performance was notable for a mid-sized pharmaceutical company. Many small and mid-sized companies in the industry suffered last year as people stopped visiting hospitals for fear of catching Covid-19.

Huons Global's Vice Chairman and CEO Yoon Sung-tae attributed the results to a wide product portfolio.

"If you look at the companies that overcame the Covid-19 crisis last year, what they have in common is a pretty diverse product portfolio that's not solely dependent on generic drugs," Yoon said.

"When investing, they say you shouldn't put all your eggs in one basket. That applies to pharmaceutical companies as well. We no longer live in a world where one generic drug ensures success."

Half of Huons Global's revenue comes from prescription drugs. The main drivers of last year's growth were botulinum toxin products, known as "Botox," the brand name of the product made by Dublin-based Allergan, and health supplements. It also exported Covid-19 test kits and quarantine products like masks and sanitizers.

When Yoon took over his father's business in 1997, the pharmaceutical company only produced prescription drugs and was generating yearly sales of 6 billion won. Through successful acquisitions, Huons now has 10 affiliates, nine of which were profitable last year. Three are listed on the Kosdaq exchange. A small company of 78 people in 1997 now has more than 1,500 employees.

Below are edited excerpts of Yoon's interview with the Korea JoongAng Daily at Huons Global's headquarters in Bundang, Gyeonggi, on March 3.

Q. As a second-generation leader, you managed to completely transform a company you inherited.

The company was in jeopardy by the time my father passed away. He took a lot of loans for facilities investment. In late 1997 came the Asian financial crisis, and just as things seemed to get a little better, a big fire broke out in our factory. At first, I thought that was the end. But it turns out, we had insurance coverage, so we used that money to practically start from scratch.

Our breakthrough product was injections in plastic containers. Originally, the company produced injections in small glass ampoules. But they caused inconveniences like glass powder getting mixed in the substance. I was on a business trip to Yemen when I first saw plastic containers and thought it would be a good idea to produce them back home.

Huons' plastic containers for injection drugs. [HUONS GLOBAL]

We had to develop production facilities because buying them was so expensive. But those plastic injections represented a big turnaround for us. It helped us go public on the Kosdaq in 2006, expand facilities -- and from there, the business really started to pick up speed.

Q. From 1997 to last year, annual revenues grew nearly 90 times. What was your strategy?

It's not that I had a long-term plan in my head. Looking back, it was constant decision-making to survive, to find the next item that would help us continue growth -- whether it was an acquisition, a new product or a new business. I think that trained us to react faster to changing trends.

We merged with more than 10 companies so far. M&As came as a natural solution while searching for ways to fill in our blank spots, fields we're not good at.

But not every deal was a jackpot. Some took as long as 10 years to put right. But last year, we finally saw all of our affiliates generate profits, except the one that mainly engages in R&D. The nine that sell products were all in the black.

Q. How do you revive a failing company?

You start with a thorough inspection to find the problem. Sales networks, R&D issues, staff, production efficiency –- it could be anything. The essence is to accurately pinpoint a weakness and find the best way to fill up that crack. Once we find it, we back up the company with full support.

Q. Do you have principles for a successful M&A?

First, I wouldn't look for anything too far from what you're already doing. Our focus was always on healthcare and within that boundary, we looked for companies that could complement our business or supply to one another. Another question is size. An acquired company should not require financial investment to the point of hurting an existing business.

Q. You seem to be keen on picking new trends.

As you know, pharmaceuticals is a heavily regulated industry. Our business is very exposed to new regulations and policies. Every time something comes up, the first thing we do is analyze how it will affect our company and set plans to prepare for that change.

I think now it's become a strength for us. When the pandemic came last year, we sourced personal protection equipment (PPE) like gloves, masks and sanitizers and sold them for around $8 million to the Washington state government. We're still exporting test kits. Now, the trend has slightly shifted to vaccine syringes, so we sourced them as well to start exports to the United States from March.

Q. Do you feel a change in attitude toward Korea's medical equipment after the Covid-19 pandemic?

Of course. I think one reason Korea was able to rise as a strong player in PPE was the U.S.-China trade war. U.S. sanctions on China also applied to quarantine products and that, combined with trust in our test kits, raised the credibility of Korea-made PPE.

Syringes, for example, could have been a dead industry in Korea if not for the pandemic. Korea has syringe makers of its own but their price competitiveness was weak compared to Chinese companies. But the trade dispute [between Washington and Beijing] created opportunities. After all, the United States alone is a huge market.

Q. Do you think Covid-19 will leave permanent changes in the pharmaceutical industry? How does Huons plan to adjust to such changes?

The coronavirus pandemic won't be over until the world's entire population is vaccinated. I read in one news article that this won't happen within the next seven years. Minimizing face-to-face contact will become a norm in the post-coronavirus era.

For us, that means the way we market our products will have to change. In the past, we announced trial results and publicized products in academic events. Now, we communicate with doctors on webinars. E-commerce will become an important retail point for health supplements as well.

Q. Huons is developing Covid-19 treatments. What other new drugs is the company working on?

We currently have two candidates for Covid-19 treatments. They're both regenerated drugs that were sold in the market to treat other diseases. One is raloxifene, which we sell as an osteoporosis drug. It's under animal testing at the moment and we're preparing to seek approval for clinical trials next month.

Zephirus is an asthma treatment from Belgium that we hold exclusive distribution rights to in Korea. We're conducting animal tests for that too and if nothing goes wrong, we're going to submit papers for Phase 2 clinical trials.

It's not early but at the moment, there's no killer drug like Tamiflu was during the swine flu pandemic. Hospitals still lack Covid-19 treatments. So we're giving our best, doing what we can.

As for new drugs, we're developing four at the moment: two for dry eye syndrome and one each for heart and lung diseases. Our plan is to raise cash from health supplements and medical equipment, then invest in new drugs. It's not easy. New drug projects could crash anytime whether it's during animal testing or Phase 3 clinical trials. But for a pharmaceutical firm like us, it's a must.

Q. Huons already has a stable business with half of its revenue coming from prescription drugs and forty percent from beauty and healthcare products. Developing new drugs is risky. Does Huons really need this?

Honestly, I can't say all of our investments go to new drug projects. But still it's a big goal because regardless of the possibilities of failing, once you do develop a new drug, the values it could create are immense. No matter how many health supplements you sell, it's incomparable to the gains a single new drug can bring. It's natural for a pharmaceutical company to pursue that goal.

Q. There were cases recently in which new drug projects fluctuated stock prices.

Compared to bio firms, pharmaceutical companies' stock prices are generally low. The bio segment has events that buoy prices, like announcements of the start of clinical trials or R&D in the United States. But pharmaceutical companies like us, we're not as visible. A low stock price is a big concern. So this year, we're going to actively communicate to externally share the company's achievements.

Q. What are your plans for expanding business overseas?

Around 15 percent of our sales come from overseas, so we have a long way to go. My aim is 30 percent but I think we'd first have to expand our product portfolio to realize that. When it comes to generics, or copied drugs, we can't compete with China or India because their prices are so low. We need to make products that they can't and only technology can do that -- like developing new formats for drugs.

Q. What sectors do you see as Huons' next growth engine?

Medical equipment for quarantine and health supplements for the immune system.

We're also pushing for "open innovation" to invest in and partner with bio ventures. A lot of local bio pharmaceutical firms are using this model. Doing business relying on generic drugs is reaching a limit and venture investment can be a new breakthrough. Larger firms could license a new technology, or obtain license for distribution. Bio startups can profit from licensing out their technology. It's a win-win.

At the moment, we're investing in between one to four bio ventures per quarter.

One of the ventures we invested in was Eoflow, which went public last year. It develops insulin patches that can automatically react when blood sugar is low. We now own shares in the company and local distribution rights for its product.

That's the kind of open innovation we're looking for — one that could give us gains in technology and financials.

Q. What would you count as your core value when it comes to managing a company?

Some of the big opportunities we grabbed last year — exporting PPE or the deal to assembly Covid-19 test kits — they all came from connections and recommendations.

In marketing, the most effective tool is word-of-mouth. I think it's the same in business. In the end it's about trust. You won't get what you want if you abruptly knock on the door of someone you don't really know.

I see it as a butterfly effect: Relationships can be very subtle but those small details later turn out to be big business events. That's why you need to build trust on an everyday basis.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]