Online Extra: Hexal

Germany. Rank: 16. Sales: ¬1.11 billion

Just a year ago, the great majority of German consumers didn't recognize the name of the country's No. 2 generic-drug maker, Hexal. That's changing thanks to a 180-degree switch in advertising strategy. And if Hexal's growth pace keeps up, customers as far away as Brazil and Canada may soon be just as familiar as Germans with the Hexal logo.

Started less than 20 years ago by twin brothers in the city of Holzkirchen, near Munich, Hexal's sales grew by more than 65% from 2000 to 2003, when they reached €1.1 billion. With sales divided roughly evenly between foreign and domestic markets, co-owner Thomas Strüngmann says most of the recent growth has come in foreign countries, from Brazil to Mexico to Canada. Hexal is also active in Asia, Africa, and Australia, and works with a strategic partner, Eon Labs, in the U.S.

"You'd be hard-pressed to find another generic-drug maker that's as well-positioned as Hexal," says David Maris, a health-care and pharmaceuticals analyst with Banc of America Securities in New York. "Not only are they big and getting bigger in Europe, they're wildly successful in Latin America."

The hard push into foreign markets fits in with a corporate culture that views risk through the lens of opportunity and prizes innovation. Thomas and his brother, Andreas, understood from the very beginning that it wouldn't be enough to simply make cheaper copies of drugs whose patents had run out. Their first success came with a kidney medication, for which Hexal offered lower dosages.

"PEOPLE OF TRUST."

  From there, they went on to focus on new ways of delivering medicines, particularly through timed release under the skin and implants. Now, Hexal is working on projects in biotechnology and genetic research.

What gives management the confidence to tackle the kind of high-tech research that until now has been dominated by the major pharmaceutical companies? One answer lies in the freedom that Hexal gives employees and the absence of cumbersome hierarchies.

It has also set up its own version of union representatives, or "people of trust," who are elected by their peers, cannot be fired, and who meet once a month with Andreas Strüngmann. Earlier this year, Hexal was recognized by the Great Place to Work Institute in Denmark as one of the 100 best companies to work for in Europe.

STAYING PRIVATE.

  A streamlined structure is vital to Hexal's survival in an industry where a merger wave is under way, cost-cutting pressures in national health-care systems are squeezing profits, and pharmaceutical giants are looking for a piece of the generic market. "Our strength is speed and flexibility," says Thomas Strüngmann. "While the big elephants are making their decisions, we have already taken action."

One hitch could be coming up, warns Günter Neubauer, a professor at Munich's University of the Bundeswehr and health-care expert: "The weak point is in financing. At the latest, when the company wants to grow by buying companies abroad, they will not be able to avoid going public."

Maris disagrees, adding that while Hexal would be a very attractive asset to outside investors, it doesn't need them. And Thomas Strüngmann values the independence that comes with staying private, especially the ability to put the lion's share of profits back into the company.

"You have to find your own way," says Thomas Strüngmann -- speaking like a true pioneer.

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