Hyphens Pharma International has reported 97.6% higher y-o-y earnings of $2.7 million for 1QFY2024, nearly double that of the year-earlier period.

 

Revenue in the same three months ended March increased by 44.4% to $48 million.

 

The company attributes the better numbers to all-around improvement in sales of its products, especially that from its so-called speciality pharma principals segment, which has rebounded from supply chain woes in 1HFY2023.

 

In addition, the introduction of new products from the likes of Laboratoires Gilbert in this segment helped drive sales too, the company adds.

 

Hyphens Pharma sells its proprietary products as well. The slight revenue dip for this segment was attributed to its channel partners stocking up in the preceding 4QFY2023.

 

Besides boosting sales, the company plans to build long-term growth with acquisitions.

On Apr 1, Hyphens Pharma International : 1J5 0% non-executive director Tan Kia King acquired 32,000 shares at S$0.275 per share.

 

This increased his total interest in the Catalist-listed company marginally to 28.02 per cent from 28.01 per cent.

 

Dr Tan has more than 25 years of experience as a medical doctor, starting his career as a medical officer in the Ministry of Health. He was also the managing director of Westpoint Family Hospital, where he was responsible for overseeing the day-to-day operations.

 

On Feb 27, Hyphens Pharma reported a net profit of S$8.6 million for FY2023 (ended Dec 31), on the back of record revenue of S$170.6 million. While the group&rsquo s net profit declined 24.8 per cent from FY2022, H2 FY2023 net profit increased by 45.7 per cent from H1 FY2023.

 

The leading speciality pharmaceutical and consumer healthcare group said that it will continue to invest in innovation to develop new and improved products under its respective brands.

 

It has also launched a new line of Ocean Health supplements in gummy form, which is designed for a younger demographic.

 

This is a strategic move to tap growing new markets and diversify its customer base.

 

The company&rsquo s subsidiary, DocMed Technology, is actively pursuing partnerships to enhance its digital healthtech platform to develop an integrated digital healthtech platform that encompasses a diverse range of healthtech solutions.

 

For FY2023, Hyphens Pharma also recommended a final dividend of S$0.0086 per share, which, together with the special interim dividend of S$0.036 per share already paid out, amounts to a total dividend of S$0.0446 per share. Based on the end-FY2023 share price of S$0.285, this represents a dividend yield of 15.6 per cent.

 

The special interim dividend of S$0.036 per share in H1 FY2023 was to reward shareholders, as part of Hyphens Pharma&rsquo s fifth anniversary celebration of its initial public offering.

 

The total dividend of S$0.0446 per share represents 161 per cent of the net profit after tax for FY2023.

 

Hyphens Pharma maintains a market capitalisation of S$85 million, and, as at Apr 4, maintains a return-on-equity ratio of 13 per cent, with a 1.4 times price-to-book ratio versus its five-year average price-to-book ratio of 1.5 times. The stock also maintains a 9.9 times price-to-earnings ratio.

 

Both Phillip Securities and CGS International maintain S$0.35 target prices on Hyphens Pharma as at Apr 4.

 

Pharmaceutical company, Hyphens Pharma, has reported earnings of $8.57 million for its FY2023 ended Dec 31, 2023, down from FY2022&rsquo s earnings of $11.3 million, a 24.5% drop y-o-y.

 

This translates to an earnings per share (EPS) of 2.77 cents, from FY2022&rsquo s 3.66 cents.

 

Meanwhile, the company&rsquo s FY2023 revenue of $170.6 million was a 5.1% growth from FY2022&rsquo s $162.3 million, while its 2HFY2023 revenue of $95.9 million was a 28.4% increase from the previous half&rsquo s $74.7 million.

 

The growth in revenue was attributed to the company&rsquo s revenue increase of 6.8% in its specialty pharma principals segment, as well as increased demand from Malaysia, Indonesia and Philippines and the export sales of its products from Laboratoires Gilbert S.A.S..

 

This helped offset the loss in revenue from the loss incurred by the discontinued Biosensors distributorship in 2022.

 

The company also saw its proprietary brands segment&rsquo s revenue grow by 9.8% due to a higher demand for its Ceradan dermatological products, Ocean Health health supplement products, and Novem nutraceutical products. However, revenue from the medical hypermart and digital segment, dipped slightly by 1.2%.

 

The majority of the group&rsquo s losses stemmed from the 9.2% increase to $109.7 million in cost of sales for the FY2023, from $99.5 million the year before.

 

While the FY2023 gross profit saw a decline of 1.4% to $61.9 million from the previous year&rsquo s $62.8 million, the 2HFY2023 gross profit saw an increase of 6.8% to $33.9 million from the previous half&rsquo s $31.7 million.

 

Following this, Hyphens Pharma&rsquo s board of directors is proposing a final dividend of 0.86 cents, subject to shareholders&rsquo approval at the upcoming annual general meeting. If approved, once combined with the special interim dividend of 3.60 cents paid out in 2023, the total dividend for FY2023 will amount to 4.46 cents.

 

Moving forward, the company is focused on continuing to unlock the brand value of its proprietary brands, and in 2024, will continue the effort to reach out to a wider group of consumers and provide them with a rich selection of products.

 

Hyphens Pharma&rsquo s specialty pharma portfolio will also see an addition of new products that were in the commercialisation stage in FY2023. More specifically, the company is currently working towards the commercialisation of Plinest in other regional countries.

 

The company&rsquo s subsidiary, DocMed, has also launched its business in Vietnam and Malaysia in 2023, and will continue to proactively seek strategic collaboration opportunities with like-minded partners in the region, aiming to develop an integrated digital healthtech platform.

 

The company will also continue to seek out partnership opportunities to enter new markets, widen its product offerings and bring innovation into the business.

 

&ldquo Even with challenging macroeconomic conditions and supply chain disruptions, we have achieved a creditable set of financial results for FY2023. This is especially so with regards to the strong recovery we have been able to achieve in the second half of the year. I would like to credit this to a determined and diligent management team who fought and delivered against the backdrop of the challenging environment. While staying focused on delivering the near term result, we continued to pursue strategic action and invest in long term business development,&rdquo says Lim See Wah, executive chairman and CEO of Hyphens Pharma.

 

CGS-CIMB Research analyst Tay Wee Kuang is keeping his &ldquo add&rdquo call on Hyphens Pharma International 1J5 0.00% at a lowered target price of 32 cents from 34 cents previously, following the company&rsquo s 3QFY2023 ended Sept 30 results.

 

In his Nov 27 report, Tay notes that Hyphens' revenue grew 0.1% y-o-y in the quarter, taking its 9MFY2023 revenue to $117.5 million, which was &ldquo in-line&rdquo at 74.2% of his FY2023 estimate.

 

The analyst adds: &ldquo Although a detailed revenue breakdown was not provided, Hyphens said sales from its specialty pharma principal segment and medical hypermart and digital segment had grown 0.6% y-o-y and 1.9% y-o-y, respectively, to offset the 4.2% decline in sales of its proprietary brands segment.&rdquo

 

Supply disruptions which led to an inventory stock-out in the company&rsquo s Vietnam market in 1HFY2023 had eased in 3QFY2023, and the company expects further improvements in the supply situation by end-FY2023. 

 

&ldquo This should signal better revenue momentum, in our view, especially with new products added to its portfolio in 1HFY2023 that should see sales slowly pick up as they gain traction in the market,&rdquo writes Tay.

 

Meanwhile, the company&rsquo s gross profit margin showed a 4.8% y-o-y decline to 35.4% in the quarter, which Hyphens attributes to inflationary cost pressures.

 

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On this, the analyst writes: &ldquo We think the discontinuation of Hyphens&rsquo distributorship of Biosensors products in Vietnam, which led to a gross profit margin compression of 1.4% in 1HFY2023, had a similar impact on 3QFY2023&rsquo s gross profit margin, given that the distributorship only ceased in 4QFY2022.&rdquo

 

Tay also understands that the y-o-y decline in sales of Hyphens&rsquo proprietary brands segment in 3QFY2023 likely led to a poorer sales mix, contributing to the company&rsquo s gross profit margin. 

 

Despite easing supply constraints pointing to an improvement in revenue momentum, Tay notes that &ldquo margins could remain compressed&rdquo , as it could &ldquo take time&rdquo for Hyphens to pass on the higher costs from brand principals to hospitals with &ldquo superior bargaining power&rdquo , as well as from its proprietary brands that consist of more discretionary consumer healthcare products.

 

Outlook

 

As a result, Tay has reduced his discounted cash flow-based (DCF) target price after lowering his FY2023, FY2024 and FY2025 earnings per share (EPS) estimates by 12.9%, 5.3% and 5.1% respectively, to account for gross profit margin deterioration, even though his revenue estimates are &ldquo higher&rdquo as he expects Hyphens&rsquo sales to benefit from the increase in products within its portfolio.

 

Noted re-rating catalysts by Tay include the earlier commercialisation of new products in Hyphens&rsquo portfolio, as well as more accretive acquisitions of proprietary brands or businesses. Conversely, downside risks include slower proprietary brand sales, further margin compression and depreciation of the Vietnamese dong (VND) against the US dollar (US$) and Euro (EUR) where Hyphens&rsquo brand principals originates.

 

Hyphens Pharma International 1J5 0.00% has reported earnings of $2.1 million for its 3QFY2023 ended Sept 30, a 47.2% drop from its earnings of $4.0 million in the corresponding period the year before.

 

The company says this was the result of lower gross profit and increased foreign exchange losses due to unfavourable local currency exchange rate movements against the US Dollar and Euro, which are the major currencies for supplies. 

 

This brings the group&rsquo s earnings for the nine months ended September to $5.7 million, 45.0% lower y-o-y.

 

Hyphens Pharma&rsquo s 3QFY2023 revenue stayed stable at $42.8 million, a marginal dip of 0.1% compared to 3QFY2022.

 

However, the company&rsquo s gross profit decreased by 11.9% or S$2.0 million from $17.2 million in 3QFY2023 to $15.2 million in 3QFY2023. Gross profit margin also fell 4.8 percentage points to 35.4% for the period as the result of inflationary cost pressures. 

 

Year-to-date, revenue from the company&rsquo s specialty pharma principals segment decreased by 8.3%. This was due to the cessation of Biosensors products distributorship at the end of 2022 and the disruption in shipments of certain key products in 2023, and partially offset by sales from a new distributorship with Laboratoires Gilbert S.A.S.

Revenue from Hyphens Pharma&rsquo s medical hypermart and digital segment also declined by 1.7%, although revenue from proprietary brands segment improved by 3.9%, contributed by the overall higher demand for Ceradan dermatological products and Ocean Health health supplements.

 

The company says it is &ldquo delighted&rdquo to observe the continuous growth of our proprietary brands, Ceradan and Ocean Health. &ldquo This sustained growth underscores the inherent value of our brand equity and reinforces our commitment to strengthening our presence in existing markets.&rdquo  

 

&ldquo Our unwavering dedication to this strategy will persist, complemented by our proactive pursuit of new international partnerships to explore untapped markets. Additionally, we will continue to channel our investments into innovations, aiming to provide more products and better products to our customers,&rdquo it adds.

 

Hyphens Pharma also announced the acquisition of the remaining stake in Ardence Pharma in October, noting it believes inorganic growth through strategic acquisition will continue to serve as a strong growth engine for the business. &ldquo We are experienced in post-acquisition integration, and we believe that greater value will be released from the synergy between Hyphens and Ardence Pharma.&rdquo

 

In its outlook, the company highlighted the challenges it has faced in a volatile global economic landscape, with supply chain disruptions significantly impacting product availability. However, it notes that it has observed a gradual recovery in product supplies in 3QFY2023, and expects further improvements by the end of the year.

 

&ldquo The group&rsquo s strong financial position provides a solid foundation, enabling it to withstand challenges and capitalize on relevant opportunities aligned with its business strategy,&rdquo says Hyphens Pharma.

 

Analysts at CGS-CIMB Research and SAC Capital are keeping their &ldquo add&rdquo and &ldquo buy&rdquo calls on Hyphens Pharma as they view the company&rsquo s acquisition of the remaining 58% stake in Ardence Pharma as favourable. 

 

In his Oct 20 report, CGS-CIMB analyst Tay Wee Kwang describes Ardence as a strategic asset in growing Hyphens Pharma&rsquo s medical aesthetics business. 

 

In FY2022, Ardence generated sales of $2.8 million and net profit of $817,000 as per Hyphens Pharma&rsquo s announcement. The acquisition of the remaining stake in Ardence is to take place across three tranches, with the last tranche expected to complete by FY2027. 

 

The first tranche will see Hyphen Pharma&rsquo s stake increase from 42% to 65% for a consideration of about $1.9 million &mdash valuing Ardence at $8.1 million or an implied FY2022 P/E of 9.9x. This is expected to be completed by end-FY2023. 

 

Tay thinks that the valuations are attractive, given Ardence&rsquo s superior net profit margin of 29.4% to Hyphen Pharma&rsquo s 7% in FY2022. Additionally, Ardence has stronger growth potential, in which its revenue and net profit doubled y-o-y from FY2021 to FY2022, as mentioned at an analyst briefing. 

 

Ardence was founded in 2018 as a boutique pharmaceutical company serving more than 250 medical aesthetics clinics in Malaysia. It is the exclusive distributor of anti-aging injectables Plinest and Newest within Southeast Asia. This, coupled with a licensing model that removes the need for further drug testing presents opportunities for rapid geographical expansion, highlights SAC analyst Nicole Lim Qiuni.

 

Although the incremental net profit contribution from the additional 23% stake in Ardence is likely negligible in the near term, Tay is positive on the deal due to the cross-selling opportunities.

 

Lim concurs, adding that the acquisition would provide access to new distribution lists and diversify product lines within a market poised for exponential growth, cementing its position as a major player. As Hyphens Pharma has ventured into aesthetic medicine with brands TDF and Nabota, acquiring Ardence allows for horizontal integration which often leads to economies of scale. 

 

Tay and Lim have maintained their target prices at 34 cents and 33 cents respectively. 

Hyphens Pharma has entered into two sale and purchase agreements (SPAs) with IREG Solution and Lee Pak Hsiung, to acquire the remaining 58% of the share capital of Ardence Pharma, according to a release dated Oct 17. 

 

At present, the Singaporean speciality pharmaceutical and consumer healthcare group has a 42% stake in Ardence Pharma after it completed its acquisition of Novem Sciences on Dec 3, 2021. At the time, Novem Sciences had a 42% stake in Ardence Pharma.

 

Following the proposed acquisition, Ardence Pharma will become a wholly-owned subsidiary of Hyphens Pharma.

 

Under the proposed terms of the SPAs, the sale and purchase of the 58% stake, comprising 116,000 shares, will be completed in three tranches. 

 

The first tranche representing 23% of the share capital of Ardence Pharma for a total consideration of RM6,422,634.32 ($1.86 million) is to be completed by the third business day following the date of the SPAs. 

 

The second tranche of 34,000 sale shares representing 17% of the share capital of Ardence Pharma is to be completed on the tenth business day following the expiry of 45 days from the issuance of the audited accounts of Ardence Pharma for the financial year ending Dec 31, 2024. 

 

The final and third tranche of 36,000 shares representing 18% of share capital of Ardence Pharma is to be completed on the tenth business day following the expiry of 45 days from the issuance of the audited accounts of Ardence Pharma for FY2025, or where deferred by IREG in exercise of its rights in the event that the ebitda for FY2025 is lower than the ebitda for FY2024, the audited accounts of Ardence Pharma for FY2026.

 

Following the completion of the first tranche, the group&rsquo s stake in Ardence Pharma will be increased to 65% from 42%.

 

According to the group, this proposed acquisition presents a strategic opportunity to acquire a portfolio of businesses with a good management team which is financially attractive from a revenue scale and earnings accretion perspective. 

It will also provide access to new brand principals, products and customers that will enhance and enlarge the group&rsquo s revenue and profit, as well as strengthen its presence in the Malaysia market. The group says that this will   accelerate its growth in the medical aesthetics sector.  

 

Lim See Wah, executive chairman and CEO of Hyphens Pharma, says: &ldquo With the proposed acquisition, Ardence Pharma will become a wholly-owned subsidiary of the group and will help to grow our revenue and profit while strengthening our presence in Malaysia. More importantly, it will help to boost and grow our medical aesthetics business with its regional expansion plans and robust pipeline of quality clinically-proven aesthetic products. Continuing to invest and growing our medical aesthetics business will help bolster our leadership position in skin health for Southeast Asia.&rdquo