A test tube in three continents
By José Miguel Encarnação
When people walk past the walls of a former fireworks plant on Taipa Island, few know that it is home to one of the world’s most respected pharmaceutical companies – Hovione. The firm has grown from a basement in Lisbon to a global company, with operations in Europe, Asia and the United States.
It was in 1984 that Ivan Villax, chairman of Hovione, started construction of the factory in Macao.
Jorge Pastilha, the managing director of the firm in Macao, said that, after the Chinese market opened up to the world in 1979, Mr Villax decided to visit China. “He went to a fair in Guangzhou and was impressed with the industrial development of south China. At the same time, regulations in Portugal were negatively affecting national companies, which were forced to pay high taxes on manufactured products. So Mr Villax started to look for other locations for a new factory. He considered Singapore and Australia, but finally chose Macao, for several reasons: the territory was at the time under Portuguese administration, Portuguese was spoken there and the law was very similar to that of Portugal.”
In 1984, Hovione had a factory in Portugal, an office in Switzerland it had opened in 1983 and a representative office in Hong Kong opened in 1979.
What does Hovione do?
Hovione manufactures Active Pharmaceutical Ingredients (APIs).
“We make the medication, the part that actually cures the diseases,” said Pastilha. “After that, it is up to the pharmaceutical industry to produce syrups, creams, pills, capsules and inhaleable products, to be administered to patients.”
In Macao, Hovione produces three antibiotics - doxycycline, roxithromycin and ivermectin - as well as other products ordered by specific customers.
Doxycycline is recommended to combat the effects of biological warfare; nearly all armies keep a reserve of it. In the last year and a half, sales of doxycycline have also increased due to the A/ H1N1 flu virus. “As doxycycline is a broad-based antibiotic, when in doubt, doctors tend to prescribe it,” the director said.
Roxithromycin and ivermectin are two veterinary antibiotics. Hovione is one supplier of ivermectin for the United Nations (UN) programme to fight river blindness in Africa. Although it is a veterinary antibiotic, in this case it is also administered to humans.
Hovione also produces APIs for independent research laboratories or those belonging to pharmaceutical multinationals.
Presence in Macao
All the production of Hovione’s factories in Macao and Portugal is exported, which explains why few people know of its business.
“We do not sell one pataca in Macao, just as we don’t sell a single euro in Portugal,” Pastilha said. “Our marketing is directed at companies. Thus, Hovione is very well known in the pharmaceutical sector, but little known within the communities in which it is produced. In Macao, for the last few years we have invited personalities to Magusto (traditional Portuguese festival), we have supported the Lusophone Festival and organised open days for schools, people and private and public entities that want to visit us. We also sponsor private projects which we find interesting.”
More recently, Hovione launched a programme to hire people with links to Macao who are studying or working abroad and want to return to the territory or work in mainland China.
“Around two years ago, Hovione launched the Welcome Back to Portugal programme. Due to its success, we decided to do something similar in Macao. We have a rule of hiring: for technical and management positions, Macao residents who have studied in Australia, England, the United States or a European country [are preferred]. Most of our customers are in those countries and it is very important for our staff to know them.” The official language of the company is English. “If people have lived for four or eight years abroad, it is likely that they will speak better English than if they had studied or worked in Taiwan or a university in China. There is also the advantage that many have a Portuguese passport, which allows them to travel easily through Asia,” he added.
After 26 years in Macao, Hovione wants to remain in the territory.
It is an important element for the diversification of the Macao economy, as it is the only company that trains pharmaceutical industry technicians.
“When people who have studied chemical engineering abroad return home, they have two options - enter the casinos or work at Hovione. In the last few years, we have trained staff who have ended up going to the Government and now work in public laboratories,” he said.
“At the moment, we are focused on the China market. The growth of Hovione Macao depends upon supporting our business in mainland China.”
The future lies in China
By acquiring 75 percent of China’s Hisyn in 2008, Hovione took its first step into the mainland Chinese market, in Zhejiang province, which borders Shanghai.
“The future of the pharmaceutical industry lies in China. We cannot grow in China with staff from Lisbon, New Jersey or Ireland. With Hisyn, we have been successful because we rely on people from Macao who speak Cantonese, Mandarin, and English and have studied in English-speaking countries. Otherwise, it would be very difficult to manage 250 workers who have another culture and speak no English,” Pastilha said.
According to him, the partnership with Hisyn makes it possible to “learn how everything works in China, from market rules to the local authorities and environmental and safety issues.”
“We are now at a stage of learning and consolidating the investment. In Zhejiang, in two and a half years, we have tripled the size of the factory and increased sales, almost ten-fold. In the future, we will take new steps in China,” he said.
Hysin was founded in 1998 and was formerly called Xinhua Pharmaceutical. It manufactures Contrast Media APIs, specifically iohexol and iopamidol. The factory site has a total area of 100,000 square metres, of which 25 per cent is dedicated to workshops; the total investment is about RMB 110 million.
PLPs and BRIC: The challenge
In an increasingly globalised world, Hovione has sought to position itself within the new world economy, in search of new markets and business opportunities.
Amongst Portuguese-speaking countries (PLPs), Brazil is the company’s main focus. “Of these countries, Brazil is the only one with a pharmaceu-tical industry. In Africa, for example, Angola and Mozambique have no drugs factories. Companies sell to these countries, but their production units are in Portugal, Germany or China. That is why we are focusing on China,” Pastilha said.
“BRIC [Brazil, Russia, India and China] are markets with higher growth rates and almost all manufacturers of Active Pharmaceutical Ingredients have moved from Europe and the United States to China and India. The only problem in these countries is finding the best balance between cost and quality. For higher positions, Hovione has been contracting many staff from the automotive industry, because they know how to produce large amounts of high-quality goods at a low cost. Forty years ago, the automotive industry also went through this challenge and managed to succeed. The pharmaceutical industry has to adopt the same model of management,” he said.
Pastilha also said that the centres of decision-making were changing: “many Chinese and Indian companies are buying factories in the United States and Europe. If the suppliers of those factories cannot establish a direct relationship with the decision-making centres, they will stop selling. It is what is already happening in the automotive industry, information technology, mining and other sectors. Our export strategy should be global.”
From Lisbon to the world
Hovione was founded in 1959 by chemical engineer Ivan Villax – a Hungarian refugee in Portugal – and his wife, Diane de Lancastre du Boulay. At the time, the pharmaceutical industry was like the Internet in the 1980s: companies were family-owned and set up in the homes of their owners.
It was in the basement of his home in Lisbon that Ivan Villax started manufacturing Hovione’s first products. The success of sales and a successful partnership in Italy made it possible to open the first factory in 1969, in Loures in Portugal, with Japan as its main market.
In 1986, Hovione launched production at its factory in Macao; in 2002, it set up a centre for technology transfer in New Jersey in the U.S.; in 2008, it set up a joint venture with China’s Hisyn and, in 2009 it bought a factory in Cork, Ireland from Pfizer.
Hovione also has two representative offices in Lucerne, Switzerland and Hong Kong.
Hovione Group: Around 1,000 workers
Hovione Macao: 125 staff
Worldwide revenue: US$125 million (2009);
US$145 million (projection for 2010)
Sales: United States and Canada (45%);
European Union (25%);
Procurement: China (almost 60%);
European Union (30%);
India and others (10%)