South Korean biotech firm brings in McKinsey following profit plunge

14 January 2019 Authored by Consultancy.asia

McKinsey has been brought in to advise South Korean biotech firm Hugel following a period of declining profits, according to a local media report.

Online English-language South Korean business news agency The Investor has reported that locally-based biotech company Hugel has brought in leading strategy and management firm McKinsey & Company to advise on profitability following a period of sharp decline. According to the report’s unnamed source, McKinsey will receive around 1 billion Korean Won for its services – or a cool $900,000.

A producer of botulinum toxin and hyaluronic acid cosmetic products – more commercially recognised as botox and anti-wrinkle fillers – as well as penile enhancement hyaluronic acid filler The Chaeum Shape 10, Hugel was founded in 2001 and received a significant boost in 2017 when Bain Capital picked up a controlling stake in the company for $831 million – sending shares on an upward hike.

Since then, however, share-prices have taken a hit in the shadow of a Chinese crackdown on imported botulinum toxin, with Hugel recording a nearly 80 percent dive in operating profits in the third quarter of last year – its share price closing at a low of approximately 240,000 KRW in late October following highs of  ~ 620,000 KRW in April. The price has since recovered to around 345,000 KRW as of January 11.Hugel brings in McKinsey in South Korea after profit plungeBut with annual sales in excess of 200 billion won and a reported operating profit of 74 billion, Hugel according to The Investor said the McKinsey contract was ‘business as usual’– a spokesperson who confirmed the report telling the media outlet that such a process was standard operating procedure for Bain Capital when it invests in a new company, although no further details were provided on the nature of the engagement.

As cited in the news report, Bain & Company’s venture capital spin-off is said to have also engaged McKinsey for consulting services during the sale of South Korean skin-care company Carver Korea, which Bain Capital and Goldman Sachs offloaded to Unilever for ~ $2.7 billion in 2017 at three times the value of investment from a year prior. The deal reflected the rise of the cosmetics industry in South Korea, today worth an estimated $13 billion in annual global sales – thanks largely in part to booming sales in China.

Currently led by Managing Partner Wonsik Choi, McKinsey’s South Korean branch was once helmed by future and now former Global Managing Partner Dominic Barton (2000 – 2004), with the firm first establishing a permanent office in the country in 1991 (pipped only slightly by Bain) during a period of significant Asia expansion – including further regional offices launched in Taiwan, India, Indonesia and China over the following few years.

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