Five years ago Paul Taaffe left his job as global head of comms at Groupon to become chief executive of Huntsworth and lead the process of changing the business from a traditional PR group to a multifaceted healthcare specialist.
The progress made in the years since has brought Taaffe to the brink of a £542m deal where the group will be sold to private equity firm Clayton, Dubilier and Rice (CD&R), subject to the approval of its shareholders and competition authorities.
On the up
In its preliminary results for the 12 months to 31 December 2019, which were released last week, Huntsworth’s overall pre-tax profit was up 27 per cent to £39.1m on revenue up 18 per cent to £264.9m.
Healthcare now accounts for 72 per cent of revenue and 85 per cent of its profits, up from 51 per cent and 77 per cent respectively in 2016.
Huntsworth encompasses marketing services, medical consultancy and comms. It is divided into four divisions: comms, medical (specialising in medical affairs and communications), marketing (focused on prescription drugs) and immersive (events and other forms of engagement).
Operating profit in this part of the business grew from £6m to £8.3m last year. It returned to like-for-like revenue growth for the first time in several years, with revenue up 3.3 per cent to £73.6m. And operating margin rose from 8.2 per cent to 11.3 per cent.
The turnaround has not come overnight, says Taaffe, a former global chairman and chief executive of Hill+Knowlton.
He tells PRWeek: “These things take several years – it’s not just a one-year exercise, and it’s a case of organising yourself for success.”
This has meant “finding better people” and “incentivising them”, as well as parting ways with clients that were costing money to hold onto.
Previously, says Taaffe, agencies in the comms division were very focused on revenue and on what clients were spending, but not worrying about cost.
"I said: 'Why don't we get more profit so you can pay your people and incentivise them more and hire better people; isn't that a better thing to do?' Ultimately, we got to that point.”
The big picture in the healthcare sector is of an ageing population in need of treatment, and this reflects why healthcare and prescription drugs will grow at or above global GDP, according to Taaffe.
He says: “The largest single driver, and certainly the largest correlation for our growth, is the number of new drugs coming to market. We really are at an unprecedented time of technology innovation in the creation of medicine."
In 2018 a record 59 new drugs were approved by the US Food and Drug Administration (FDA).
The Huntsworth boss belives the increasing complexity of reaching patient groups is another driver of growth.
He says: “Most of the pharmaceutical companies are talking about 'patientricity', and that makes how they go to market far more complex, given that it's a regulated market on what they can say and do – even in the US, where you can market directly to consumers.”
Taaffe thinks “genetic profiling, testing and genomic sequencing means that the new drugs that are coming are addressing smaller and smaller patient populations”.
These drugs are not cheap, however, and he says pricing is “a social and an economic problem for all healthcare producers”.
Huntsworth has capitalised on this problem by having an economics consultancy in its medical division which looks at the global drugs pricing.
Another way in which the firm has strengthened its offering to clients has been through acquisitions, such as last year’s purchases of market-access consultancy Creativ-Ceutical, and global health comms specialist Kyne.
“If you are a client who wants to get a healthcare professional solution, a PR solution and a media solution, you can just go to one place. That has led to superior growth and more client demand,” Taaffe says.
Bumps in the road
The regulatory aspect of healthcare marketing is not a real risk to growth, but does act as a barrier to entry for firms that might seek to operate in that space without investing in the expertise needed to navigate regulatory frameworks, according to Taaffe.
Volatility in the sector, rather than any regulatory restrictions, is a significant risk, he says, with new medicines swiftly replacing existing ones.
“You can lose a client very quickly through no fault of your own, because there’s a better drug in the system. That tends to happen more quickly in the pharma landscape than in almost any other category, so that’s a major impediment to growth.”
Another challenge is the consolidation by pharma companies who are buying up other firms. These are the two biggest areas “that put speed bumps or accelerators into the mix”, he says.
Scanning the immediate horizon, you don’t need to look much further than the COVID-19 outbreak to find one of the biggest concerns facing business.
But Taaffe is not phased, yet.
He says: “We’re working for a number of the companies looking for vaccines, providing support, so that represents an opportunity. But the threat is that the medical world has always been very dependent on physical meetings of scientists and doctors, and obviously a thing like this interrupts that.”
The coronavirus outbreak has not affected Huntsworth in any significant way at present.
“It depends on how long it goes on for. We haven't seen much of an impact so far. March and April will be the two big months that we are monitoring and we will see what it looks like.”
Traditional PR firms dealing with clients in sectors such as retail and tourism are more at risk of taking a hit due to the knock-on effect from the wider economy, Taaffe says.
“They are going to face a tough quarter and I am sure that some of them will see some spending downsized during that quarter.
“It’s obvious that some clients are going to cut budgets for traditional PR firms over the next couple of months.”
He predicts this could mean at least a third of clients cutting their budget by more than 10 per cent or more.
As to whether Huntsworth has reached the end of the journey it set out on five years ago, Taaffe says: "I think that we have still got more to go. You have to continue to stay relevant and ahead of that, so you’re never really done.”
As to his own future, he says: “This deal will take another couple of months to complete and, right now, I am invested in moving this company to new ownership.”
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