Will Vietnam’s big pharmacy firm fall into Abbott’s hands?

Analysts said they could see clear signs showing that Domesco and Abbott would ‘become members of the same family’. 

Domesco recently stated that it has fulfilled necessary procedures to pave the way for foreign investors to hold up to 100 percent of stakes in the company. 

Right after the information was released, Abbott, through CRF International SPA (Chile), a subsidiary, registered to buy 2 million DMC shares. If it succeeds with the deal, Abbott will increase its ownership ratio in Domesco to 51.7 percent and turn Domesco into its subsidiary.

There is a high possibility of Domesco becoming a subsidiary of Abbott. Domesco’s members alone have registered to sell 750,000 DMC shares. In September alone, there were trading sessions where 1 million DMC shares were traded through negotiation transactions.

CFR became the strategic shareholder of Domesco in 2011, but it only began having clear impacts on the company in 2014. At that time, Abbott wrapped up the deal of buying CFR Pharmaceuticals, the holding company of CFR International SPA, thus indirectly possessing DMC shares.

Three out of six members of Domesco’s board of directors are from CFR. 

CFR has also become involved deeply in Domesco’s production and business. In the third quarter of 2014, Domesco exported products to Peru and Venezuela. The export to Latin America helped Domesco jump to the second position on a list of Vietnamese pharmacy export companies.

With the presence of CFR, Domesco has redirected its production and business. In 2015, the products made by CFR itself brought 82.4 percent of total revenue. 

The company now focuses on making specific medicine instead of common products. The drug for diabetes, endocrine and cardiovascular diseases bring more than half of revenue.

Analysts commented that Abbott has every reason to expand its business in Vietnam as it can see the great potential in the increasingly high spending by Vietnamese on medicine and healthcare.

The great advantage of Domesco is that its drugs are 30-40% cheaper than import products. Its gross profit margin increased from 25.5% in 2013 to 28.6% in 2014, to 33% in 2015 and 37.5% in the first six months of the year.

Meanwhile, Abbott is a good partner for Domesco. Its support is expected to help Domesco’s investment in Non-Betalactam, which makes drugs in accordance with GMP-EU and PIC/S standards, go smoothly. 

The new plant is expected to obtain FDA-US certificate in the first review, thanks to the experience of one of the world’s biggest pharmaceutical groups.