November 15, 2021 On today’s podcast we welcome special guest, Ruben Minski. Ruben is the Founder, Chairman and CEO of Procaps Group, a developer of pharmaceutical and nutraceutical solutions, medicines, and hospital supplies that reach more than 50 countries in all five continents.

On the podcast, Ruben discusses:

  • How Procaps has evolved over the past 44 years since its founding
  • The macro case for Latin American health care as a sector to invest in
  • Procaps growth strategy and approach to M&A
  • Insights into the recent SPAC merger
  • And more

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Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate financial technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: We have Ruben from Procaps on the podcast, all the way from Colombia. I’m sure the weather there is great, certainly better than it is up here. So, Ruben let’s kick things off going through your background. You founded a Procaps 44 years ago. So, you’ve done it for basically your entire career. What exactly does the company do? Can you give us a brief background on the company and how has Procaps evolved over the past four plus decades?

Ruben Minski: Okay, great. Thank you for having me Julian and Mike. I appreciate it. So, we are a pharmaceutical company. One third of our business in the CDMOs side, which is extremely important to us, is a great tool for learning experience. And then the other two thirds are our own pharma business with our own brands and products. In the last four decades, we were of course quite a small player in the world in social gelling capsule, which is our main delivery system, all of the real systems and all the variations are around the gelling manufacturing or gelling capsules manufactured. In the last 44 years, we have gained great strength in growing slowly, but surely of course, one brick at a time, as I always like to say that nobody allows us to use an elevator.

We had to go through stairs one step at a time. Today we are third in the world in terms of volume of substance gelling capsules with five point three billion capsules on a yearly basis. I’m, sorry. 5.3% of the market share, which is about, almost about 12 billion capsules per year. And we are also an important player in the social developing business, in the pharmaceutical side in the region, in the Colombian, in the region, in Colombia, in terms of the CDMO business, we export to more than 50 countries worldwide in the five continents and in the regular pharma manufacturing, pharma branded products, we go to 13 different countries in the region.

Julian Klymochko: Okay, and for those that don’t know what CDMO is, could you provide a brief explanation on how that business works?

Ruben Minski: Absolutely, be glad. So, it’s a contract developer manufacturing organization. What we do is, somebody comes to us or we come to them, we go to them and we say, you have a for portfolio that needs some revamping. Can we offer you some oral delivery systems, which are innovative, which are patented technologies, which are very unique? And then they would say, yes, let’s go ahead. And then their research and developing labs and our labs get together and we start working on a product to be developed for them. So, it just goes beyond just the regular contracting of a manufacturing itself. And it is more into the developing and contract product for the future. We get very much into the value chain of the customer as an ICDMO as we are.

Julian Klymochko: And I heard you mention, you know, technology and being in business 44 years, I’m sure you developed a lot of proprietary intellectual property. You describe Procaps core competency and your competitive advantage within the marketplace?

Ruben Minski: Yes, we are very innovative. We have more than 34 patents of our own, more than 50 coming on board. A lot of efforts and invest. We invest around 4% of our revenues in research and developing on a yearly basis. This side of a business, we have our 300 people just working full time, 24/7 on technologies and product developers from relations and deliver systems. So, what is unique about our company is, of course, the uniqueness of our patented technologies or all of the newer systems that are very well valued by the doctors, by the medical community, by the patients and by the consumers. We feel we have great strength in that side. Our size allows us to be very fast in time to market strategy. And of course, the cost competitive being in Colombia, in the region where of course the costs are much more affordable that in the U.S. or the European countries.

Julian Klymochko: That’s a good point with respect to being located in Colombia and the lower costs from a manufacturing perspective. Now going through 2020, obviously a crazy year for most companies. Now being in the healthcare sector, some companies, this was a big accelerator in terms of their business model. I was wondering from a COVID perspective, how that affected Procaps, because I know personally, I increased my vitamin and capsule intake dramatically. I think I’m up to about like a dozen capsules per day, just in vitamin consumption. I was wondering, you know, was COVID a net benefit or was it negative for Procaps?

Ruben Minski: I would say, it was a very balanced profitability system. The portfolio changed dramatically, and you’re right. Some of the products, a consumer home were increased in the amount of volume that the people were consuming them. And some of them in the other side reduced. I must also say to you, Julian, that we have six manufacturing sites.

Julian Klymochko: Right.

Ruben Minski: We have manufacturing sites in Colombia, visited and approved by the FDA. Actually, were the first approved FDA facility for our products in the U.S. was in Colombia. And we also have manufacturing sites in Brazil and in Salvador. So going back to your question, it has been like an equilibrium. We had high demand for our injectable sterile manufactured products for clinics, hospitals, internal, all these ICUs in the U.S., or anywhere in the world. They became very demanding on anesthetic, on anti-equivalents, on corticoids. It became like a very unbalance, but it’s going back to reality. Right now, we see quite a clear trend for this. We balanced out and we do expect it to be in three, four months to be almost to the point pre COVID.

Julian Klymochko: So, it certainly helps to have that balanced business model and be well diversified. So, I want to talk about being based in Colombia and the focus on central and south America in terms of distribution, because many investors of which are listeners are, they tend to have a home country bias as such most of our listeners invest in the U.S. and in Canada from a high level, what’s the case for investing in central and South America? Why did you guys make that your focus?

Ruben Minski: Okay, that’s a great question. In south America, if you go into the pharma businesses as such, the real growth by all means that you measure it, are in the emerging markets, especially South America in today’s world, some of the South Asian countries too. So, you have, for example, when the projected growth of the pharma business in the world actually, the global pharma business is around 6% in the next five years, in the region is about 21%. Just to give you a sense of the potential growth of the pharma business in our region, our total market values are 52 billion dollars for 660 million people. When you go to the U.S. where 330 million people with 520 million dollars volumes in sales, in the U.S. just alone, you can see clearly there is extremely the space for growth in the pharma consumption in this region is fantastic.

Now, in the other side, the governments are more and more pressured to increase the universal coverage of the social medicine system. And it is doing, it is going very fine. Countries like for example; Colombia right now is 93%. It used to be about 75%, just five years ago. So, the countries are investing heavily because governments have clearly that this is a negotiable item, and this has translated into the aging population in growing a much faster pace than you do when you go, for example, countries like the U.S. In today’s world in 2021, we are on 10%, 11% of aging population that is, people over 65 years old and is expected to be in 15 years’ time at almost 20%. So, the increase of this aging population demanding chronic diseases medicines is impressive, and we are looking forward to that. Most of our portfolio, that we have investing money on research and developing, it is indeed chronic diseases for the aging population.

Michael Kesslering: So, you talked about the really favorable top line growth potential for the region. Can you provide a little bit of a comparison of the competitive dynamic that is taking place in South America and Latin America versus North America in the healthcare market?

Ruben Minski: Yes, I can tell you a little bit about the pharmaceutical side. The composition of the market is a mix between the multinational, the big global pharma players and the local ones, the local multi-Latins have increased dramatically over the last few years. we have today. If you’re going to benchmark ourselves, for example, Procaps and Procaps group, we have the highest growth in our 13 countries where we have presence. We have the highest growth and it’s 19% in the last year and a half, almost two years. So, it is growing, the multi-Latin companies are growing a much faster pace than the global players in the region. And that’s where it really becomes very important when we go into the issues of M&A and everything, you will find that it is a very important issue that come to this country’s Greenfield, for global players is much more difficult than anywhere else, you know, to come here. It would take them many, many years for them to grow in this region of the world.

Julian Klymochko: You mentioned M&A, and a common theme that I keep hearing coming up is growth, growth, growth. Now you’re forecasting revenue more than 1 billion, five years out, which represents a fairly attractive double digit revenue compound annual growth rate through a mix of organic growth and M&A, I was wondering, can you discuss Procaps growth strategy, and along with that, the M&A strategy as well?

Ruben Minski: Great, okay. So, we do expect to be at 1 billion dollars in five years’ time, we are absolutely convinced that’s totally attainable. Of course, our organic growth is been by launches. We have more than 600 hundred products to be launched in all the region in the next two years. And then we have also the role of our successful products to these 13 different countries and to opening new geographies for ourselves. It is extremely important in this organic growth. We have increased capacity in our social factory side. Our CDMO business is growing at a mid-teen growth rate on a yearly basis. And we do expect to be very significant in the world today. Once again, we are number three in the world in terms of volume of capsules.

And when we go to the M&A strategy, where are we going? In the CDMO business we see clearly opportunities in increasing our capacity of CDMO in Brazil. We see also a very important market in Mexico. We like very much in Mexico; we are not there yet. Of course, as you all know, is the second largest in South America. And then when you go to the U.S., it is very difficult with a market, which is more than 40% of the total world marketing pharma business, not to be there in the city and off side. So as far as M&A and investment strategies in the CDMO business, that’s where we want to go. Regarding our own brands, the other 70% of our market, the other two thirds. We expect to grow in much stronger way in the region, in the 13 countries, or once again in the geographies. And of course, M&A to us in Mexico is high priority. We do want to be in that market. It’s 110 million people. Once again, it’s the second largest in South America. We are in Brazil and we’re growing very nicely in Brazil, too. So, we have great expectations. We are absolutely convinced that this $1 billion dollar target for five years’ time is totally attainable.

Julian Klymochko: And to frame that growth and that projection for investors, what’s like your current run rate revenue? And do you expect to fund that growth just from free cash flow?

Ruben Minski: Today, we’re on $450 million revenue company with a revenue of over a hundred five million. And we do expect to be a 1 billion with 25, 26% percentage.

Julian Klymochko: Right, that makes sense. So, it’s not necessarily that much of a stretch. You built a business for the past 44 years growing to nearly a half billion dollars in sales, very profitable too, as well. So, with respect to this growth rate, one part of it is inorganic on the M&A side, but combined with organic growth as well. How does research and development play into that? Are you guys spending a lot on R&D? Is that a major source of your growth?

Ruben Minski: Absolutely, and this is a hugely important question because what we are doing here is, we’re always looking to differentiate ourselves through our oral delivery technologies, where we are doing all the time is bringing products, which are valued by the medical community, by the patients, by then consumers. These are differentiated products with our own technologies, our oral delivery systems, as you know, the oral delivery systems for medicines are the highest growth, have the highest growth in the world today and soft gel capsules and soft related technologies are the most preferable oral delivery system in the world today, too. How do we see the world? Where do we see our growth? Yes, absolutely. Our products, our formulations, our delivery systems will bring differentiation, will allow us to charge premium prices to the consumers and will allow us our customers in the CDMO business to do the same. So, we do expect very high growth coming from research and development to all these new technologies and new patents and the new areas of research and development, we are in market ground.

Michael Kesslering: You mentioned earlier that you have the first FDA approved manufacturing facility in South America, I believe it was your Colombian facility. And can you talk a little bit about what that process was like to get that approval with the FDA?

Ruben Minski: Well, it was, it was quite complicated Michael and I must say that we suffered a lot. It was about five years in the making. It was the first one to be approved for Rx products in the us. There have other facilities that have been approved for other type of OTC products, I think it was Rx. We got approval for two products, progesterone, [Inaudible 00:17:55]. And it was a very lengthy process, especially the FDA didn’t want to come to Colombia at that time. And we have come a long way since then. That was a 2010, 2012, and we were very lucky at one time that we got all the help and they finally came, but it was five years in the making from the moment we submitted to the FDA until we are approved. So, a lot of suffering, a lot of [Inaudible 00:18:26], but thank God we are there now. We’re very lucky. We have been doing very nicely. We have been exporting to the U.S. and probably what some of your families have taken our medicine, hopefully.

Julian Klymochko: Sounds like it was worthwhile. And speaking of a long road, 44 years in business, and finally tapping the public market. Recently went public through a merger with Union Acquisition Corp II. What made you choose the SPAC route to go public in the U.S.?

Ruben Minski: Well, we had an opportunity. We felt that at the moment, I was telling the board, our shareholders all the time. We were in a very unique moment in our lifetime. After 44 years, we had the great amount of talent. We have a fantastic pipeline. We have technologies to differentiate us from the rest of the crowd. We really felt that we had the process on time, the maturity of organizations to confront and think big. And finally, we were looking for a SPAC that was specialized in the Latin business. We understood quite well, how exotic to sell a stock from a South American origin company, moreover from Colombia into the U.S. market. So, we felt that we had to really find a partner that will go [Inaudible 00:19:57] hand with us, that will know the lot uniqueness, the opportunities there, the fantastic space for growth in the region. And that’s where we found the Union Acquisition Corp.

Julian Klymochko: No, the SPAC market is fairly competitive. There’s lots of them out there. I was wondering what made Union Acquisition Corp II, the right SPAC partner for you? Of course, they were focused on the Latin America, that market is, was that the key differentiating factor that specialization, or were there other factors that as well?

Ruben Minski: Well, they had very capable leaders in the organization in the SPAC. We felt very comfortable with them, but I should also mention that the SPAC itself gave us a great opportunity. Since the beginning, we were thinking that we were probably going for an IPO in 2023, 2024, but SPACs was so hot at that moment. And we found that the SPAC gave us the opportunity of doing an IPO in a much faster way, but also in addition to that, to be able to produce and show information of our company that would not be able to do when a regular IPO process, so we felt that it was a very unique opportunity because for companies like us, we had to show much more than a regular or IPO of a U.S. or European, the origin company in the U.S. So the SPAC itself was a great opportunity, but also of course, Union Acquisition was a great partner for that.

Julian Klymochko: And giving you recently completed that going public process through a SPAC, what are some key strategies to successfully managing that deSPAC process as the deal closes? I know there’s a lot of focus on getting your ducks in a row. How did you manage that successfully?

Ruben Minski: Well, we just focused ourselves in bringing the results to the table to bring in good numbers. Our revenue growth was fantastic in the first half of the year. We have been doing very well ever since. And we foresee at end of the year situation that will do the same. So, we were working hand by hand doing presentations to all the SPAC holders and making sure that everybody stays on board, that we will be able to bring them and be partners of our endeavor. I think that it was a great opportunity for them to capitalize on a very high growth area and our company being such a mature company, but also young in spirit, the entrepreneur spirit was a great opportunity for them to invest.

Julian Klymochko: Yeah, and for investors, it’s pretty unique opportunity in terms of what you’re getting access to, which is that emerging market growth combined with, you know, growth in the healthcare pharmaceutical space. So, it’s an interesting story. It’s currently trading under the ticker symbol PROC, new to the public markets, but the business has been around for well over 40 years. So, a really cool story. You mentioned 5.3% market share in capsules, number three in the world. So, it is a sizeable business, trying to get to more than $1 billion in sales, five years out. And you’re almost at a half billion run rate today. So, Ruben thanks for sharing your story with us today. The Procaps story, it’s really cool if someone wants that exposure to Latin American growth and perhaps Mike and I could line up a due diligence trip to come visit Colombia [laugh].

Ruben Minski: Please do. You will be more than welcome. We would love to have you here.

Julian Klymochko: All right.

Ruben Minski: Thank you so much Julian. Thank you, Mike so much for this opportunity.

Julian Klymochko: Perfect. Thank you as well. Wish you the best of luck. Bye everybody.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.