Pharma sector urged to tap big growth potential

Le Van Truyen, a former deputy health minister, told a recent seminar in HCM City that the country’s drug market had expanded at 17-20 percent a year in 2010-15, the 17th fastest growth rate in the world.

It is expected to maintain a growth rate of over 17 percent next year, he said.

According to the Vietnam Industry Research and Consultant , per capita drug consumption was worth 4.2 billion USD last year, double the 2010 figure.

“Vietnam is considered an emerging market (Pharmerging). Currently, there is a big difference in p er capita consumption between developed and emerging countries (609 USD versus 91 USD), which means that Vietnam’s pharmaceutical market has more room to grow,” he said.

Domestic production met only 45 percent of demand last year, and the country had to import a large volume of products, he said.

"Local producers import 90 percent of raw materials they need for drug production. But they focus mainly on generic drugs, with very low expenditure on R&D," he said.

Despite challenges, the country’s growing population, heightened health awareness among the middle class, and the Government’s policy to develop the industry provide ample stimulus for growth, according to Truyen.

Besides, with costs increasing in developed countries, many multinational drug companies are looking for cooperation with Vietnamese companies to outsource production, with many eyeing stakes in local companies. 

Dang Tran Hai Dang, deputy director of research at Vietinbank Securities, said pharmaceutical products are an essential item.

He quoted the Business Monitor International as saying the industry would continue to enjoy double-digit growth of 11.8 percent for the next five years.

"The industry’s potential is reflected in pharmaceutical stocks, with the sector always topping growth rates and every listed firm seeing an increase in price," he said. 

All listed firms achieved good growth in terms of both revenue and profit in the first nine months of this year, he said.

For the reasons mentioned above, pharmaceutical stocks have remained attractive to investors though most of the listed firms have run out of room for foreign ownership. 

Of the 15 listed pharmaceutical companies, only Domesco Medical Import Export Corporation (DMC) in September removed its limit on foreign ownership while the others, including DHG Pharmaceutical JSC (DHG) and Traphaco JSC (TRA) are yet to make any decisions. 

Foreign investors now own 51.7 percent of DMC, and less than 49 per cent in the other two firms. 

Foreign investors’ expectations have boosted these companies’ stocks since Decree 60/2015/NĐ-CP was issued in June 2015, allowing the removal of foreign ownership limits in listed companies. The stocks have gone up by 70 percent in the last 12 months.