Health and Pharmaceutical Sector in Malaysia

Title: HOE to gain bigger foothold with franchising
Date: 02-Sep-2004

Extracted from the Star 30 August 2004

BRAND franchising is what skincare specialist HOE Pharmaceuticals Sdn Bhd is banking on in order for the company to effectively compete and make its presence felt internationally.

The company, a Gold IS Bhd subsidiary, currently exports its products to 40 countries, including those in the Middle East, Hong Kong, Taiwan, Indonesia, and the Philippines.

Its managing director B.K. Lee said HOE Pharmaceuticals, already a market leader in medical skincare products locally, was now looking at entering new markets, especially China and Europe, by early next year.

"We hope to penetrate China and at present the company is only waiting for the final approval for registration from the Chinese authorities. Upon approval, the company will launch the ELLGY brand with a joint-venture partner, but still maintains operations and marketing control of its products there.

"By doing this, we can franchise our brand more effectively and thus gain a larger market share abroad. Europe is another market which we are eyeing this year in view of the potential of skincare products.

"The last frontier for HOE Pharmaceuticals to penetrate will be the United States, which we hope to do in 2006 and 2007," he said in an interview.

According to Lee, the company's products under the ELLGY brand name are currently the number one industry seller in countries like Taiwan, Indonesia, the Philippines and Hong Kong.

He added that the company was very happy and satisfied with the response to its products on the international front, as upon launching, they had proven to be a hit among the locals, judging from the effectiveness of ELLGY products.

HOE Pharmaceuticals' products cater to the medical and consumer skincare markets. Products for the former are marketed under the HOE brand name and the latter under ELLGY, NeuCare T3 and BabyShield. At present, the bulk - about 70% - are consumer products and the balance medical products.

Close to 70% of the company's total sales turnover are from exports. In the next few years, he expects the figure to rise steadily.

Turnover for consumer products had also been on the rise, Lee said. In 2001, it was RM100,000, and that figure shot to RM2mil in 2002 and RM18mil last year. This year, it expects sales to hit close to the RM50mil mark due to the increase in demand for the products locally and overseas.

For the skincare medical products, he said, HOE was an established brand name in the medical fraternity but to gain a larger foothold in the overseas market and due to procedural and bureaucratic constraints internationally for such products, the company had in 1998 decided to widen its range to include consumer products.

The latter products are targeted for all groups - baby boomers, teenagers and toddlers.

Lee said by the end of this year, the company would be introducing new products, specifically catering to men.

HOE Pharmaceuticals at present has a factory producing medical and consumer care products located on a 2 acre land in Northport, Klang.

The RM12mil state-of-the-art plant currently is running at between 70% and 80% capacity and is expected to go full steam in the next two years in line with the expansion of the company's business overseas.

On plans to open new factories, he said, the company was looking into the possibility Of setting up manufacturing operations in China and Europe.

Asked on HOE Pharmaceuticals' plans to float its shares on the main board, Lee said it was looking into that direction probably by 2005 or 2006, as it already had the required turnover for listing purposes. The company is forecasting a turnover of RM100mil by the end of the year.

"At the moment, we have not appointed any advisers yet for the proposed initial public offering exercise," he noted.

HOE Pharmaceuticals was established in 1979 to meet dermatologists' requirements in Malaysia and Singapore and its manufacturing operations comply with the strict World Health Organisation standards and European PICS standard.

HOE Pharmaceuticals was later acquired by Diversified Healthcare Services Sdn Bhd in 1997, a wholly-owned subsidiary of Tan & Tan Developments Bhd (now Gold IS Bhd), as part of Tan & Tan's diversification plan into the healthcare industry.

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