Targets being tweaked by prepared pharma
There remains caution over interruption in the ingredient supply chain in Vietnam’s lucrative pharmaceutical industry, but new strategies to intensify growth potential ahead will ensure pharma groups maintain their profitability moving forward.
illustration photo. Source: freepik.com
According to financial statements from Vietnamese pharma titans like DHG Pharmaceutical JSC, Traphaco JSC, and Imexpharm Pharmaceutical JSC (IMP), there were strong rises in both revenues and profit in the first months of 2021.
DHG, the biggest publicly-traded drugmaker, made consolidated revenue of $50 million, up from just over $40 million in the same period last year. Consolidated after-tax profit hit $8.87 million, up 15.24 per cent on-year.
Similarly, Traphaco, the country’s second-largest publicly-traded drugmaker, saw on-year rises of 20.87 per cent and 34.06 per cent in consolidated revenue and consolidated after-tax profit respectively during the period. IMP, Vietnam’s fourth-biggest, witnessed a 23.1 per cent on-year increase in before-tax profit in the first four months, while its net revenue rose 9 per cent.
To adapt to the pandemic and prepare for the long-term future, DHG, Traphaco, and IMP are building new strategies. Traphaco, which now has South Korean leadership, aims to achieve a strong growth rate in 2021-2025 by continuing to increase the market share of the eastern medicine segment, while investing more in development of the western medicine business with support from South Korean shareholders. The drugmaker will intensify cooperation and partnership, especially with South Korean pharma firms, while accelerating tech transfer. Traphaco now boasts three big shareholders – State Capital Investment Corporation (35.67 per cent), Magbi Fund Ltd. (24.99 per cent), and Super Delta Pte., Ltd (15.12 per cent).
In 2021, South Korea’s Daewoong will boost transfer of technology for production of western medicines for Traphaco, with the figure reaching 70 products by 2025, focusing on cardiovascular, diabetes, and digestion drugs which target the ethical drugs channel (ETC), with a vision for future export. Traphaco expects that cooperation with Deawoong will produce revenue from 2022.
Traphaco now has strong advantages in nationwide distribution and rich experience in distribution of over-the-counter products – however, growth in this segment has tended to mature. Meanwhile, the ETC has strong growth potential, although this segment saw a fall in 2020 as COVID-19 decreased the number of patients at hospitals.
Tran Tuc Ma, general director of Traphaco said, “We define that 2021 is the year of standardisation of all processes. We are focusing on upgrading and improving inefficient processes, while strengthening the core advantages”.
Traphaco is not the only group to see high potential of the western medicine channel. DHG is setting the goal of continuing to expand business over the next few years to retain its position as Vietnam’s largest generic pharmaceutical company.
It has equipped two production lines meeting Japan-GMP standards, and certified by the Japan Pharmaceuticals and Medical Devices Agency. Currently, Vietnam has only three enterprises with their production lines meeting the same standards – DHG Pharma, Rohto-Mentholatum, and Mekophar. With these lines, DHG aims to boost domestic sales and exports to 14 international markets, as well as outsource for Japanese pharma partners. The company’s main foreign shareholders are Japan’s Taisho (51.01 per cent) and FTIF - Templeton Frontier Markets Fund (2.83 per cent).
Elsewhere, IMP is seeking EU-GMP recognition for its IMP 4 factory in a move to venture further into the ETC segment. However, the proposal may be delayed till 2023. According to SSI Securities Corporation (SSI), IMP has recently decided to send most of antibiotic products to bids for the hospital channel, while enhancing research and development activities on new functional foods.
SK Investment Vina III Pte., Ltd. is now the biggest foreign stakeholder at IMP with 24.02 per cent, followed by KWE Beteiligungen AG at 15.13 per cent.
Driven by a strong rise in profit in 2020, Traphaco, DHG, and IMP set higher targets for 2021. Industry insiders said that some targets are ambitious in the context that pharma firms in the overall picture have been facing challenges in growth in recent years as shown in statistics from financial database analysts Finn Pro, which has gathering information from 37 of the 61 listed pharma firms, accounting for 50.9 per cent of market capitalisation.
According to SSI, the COVID-19 outbreaks are placing worries on rising prices of active pharmaceutical ingredients (API). At a recent shareholders’ meeting, IMP raised their concerns over rises in API costs in the first quarter due to shortfalls in supply from India, the world’s second-largest API producer.
“IMP’s inventories can be enough for three months of production. The impact from a rise in ingredients costs may happen in the second half of 2021,” said SSI expert Nguyen Ly Thanh Luong.
Nonetheless, growth potential remains high. According to an IBM Market Research forecast, revenues in the Vietnamese pharma market will reach $7.7 billion in 2021 and $16.1 billion in 2026 with a compound annual growth rate of 10.6 per cent.