Big players heat up Vietnam’s pharmaceutical industry
The local demand for pharmaceutical products has rapidly expanded as a consequence of high economic growth, rising per capita income, and an increasingly large population, which has made it more attractive to potential investors.
The incursion of more big names into the Vietnamese pharmaceutical industry is turning up the heat in the domestic market, which is good news for local consumers.
Lamdong Pharmaceutical JSC has officially become Nguyen Kim’s subsidiary.
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The company has yet to disclose the valuation of the deal, however, previously, Nguyen Kim offered VND25,600 per share, VND6,000 lower than the market value of Ladophar, thus the deal is estimated at VND35 billion (US$1.52 million).
With the successful deal, Ladophar has become Nguyen Kim’s subsidiary, which will pave the way for the large technology retailer to enter the domestic potential pharmaceutical market.
At the previous proposals, Nguyen Kim committed that if the deal succeeded, it would join the management of the core business lines of the pharmaceutical company, including herb medicine production, commercial medicines, medical equipment and importing drugs.
Not only Nguyen Kim, but other big technology retailers are also seeking opportunities in pharmaceuticals, such as Mobile World Group with investment in Phuc An Khang drug chain, FPT Digital Retail Company with in Long Chau Pharmacy, or even giant Vingroup with the establishment of VinFa Pharmacy.
Industry insiders said with strong financial strength, good governance and experiences in applying the store chain management format, the participation of these large retailers, in the local drugs retail market is expected to drive the market forward in the coming time.
Long-term investments
According to experts, the local demand for pharmaceutical products has rapidly expanded as a consequence of high economic growth, rising per capita income, and an increasingly large population, which has made it more attractive to potential investors.
Vo Tan Thanh, vice president of the Vietnam Chamber of Commerce and Industry, said the pharmaceutical industry had seen two-digit growth in recent years and that would continue until 2022.
“The demand for quality health care is growing every year with rising incomes in Vietnam. Moreover, the changing disease patterns with the inexorable increase in the elderly population of over 60 years will also contribute to greater healthcare spending in Vietnam,” Thanh said.
Data from macroeconomic, industry and financial market research firm Business Monitor International (BMI) also showed Vietnam’s health care expenditure was estimated at US$16.1 billion in 2017, representing 7.5 percent of its GDP. The figure is forecast to grow at 12.5 percent a year to US$22.7 billion by 2021.
BMI also predicted double-digit growth in the next few years for the medical equipment and drug markets.
Meanwhile, experts said the local pharmaceutical retail market is large but has yet to see the prevalence of any particular firm. The sector’s distribution is still in the hands of private pharmacies with no one seizing a market share of up to 20 percent. This therefore inspired the retail giants to break into the market.
However, experts said that actual changes in the local drug distribution market are expected to take place over the next 5-10 years as this year is still a period of exploration and evaluating market approach for new players.
According to Phan Van Hieu, chairman of CVI Pharmaceutical and Cosmetics JSC, the pharmaceutical retail market is not an easy sector for even big distributors, explaining that the drug market has a lot of barriers and is different from others.
The pharmaceutical industry is a specific industry, so managers and salespeople need to have strong medical knowledge, he explained, adding that training of sales staff requires 2-3 years.
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