Cuu Long Pharmaceutical swimming upstream

Cuu Long Pharmaceutical goes upstream via decreasing the FOL

Remaining faithful to RAM

Vietnam Securities Depository (VSD) issued the announcement permitting Pharimexco to decrease the FOL from 49 to 32.57 per cent. This shows Pharimexco’s commitment to be faithful to Rhinos Asset Management (RAM).

Earlier in February this year, Pharimexco completed the $20-million sale of convertible bonds in a private placement to an investment fund managed by Rhinos Asset Management (RAM) from South Korea. The convertible bonds have an interest rate of 1 per cent per year with a five year maturity and conversion price of VND25,000 ($1.10) per share. Besides, the bond volume will be converted into shares after one year.

As per the agreement, after one year, if all convertible bonds were converted into ordinary shares, which would mean RAM will hold approximately 18 million shares worth VND25,000 ($1.10) each, around 24 per cent, to become a large shareholder of the company.

Along with the convertible bond sale, early this year Pharimexco permitted a representative of RAM to join its board of directors. Furthermore, the pharmaceutical has offered RAM to purchase over 25 per cent of voting shares. The deal would take place without a public tender.

According to Nguyen Van Sang, chairman of the Board of Directors of Pharimexco, since the firm became a member of F.I.T Group, the company has been working to become the leading pharmaceutical firm in Vietnam. In order to realise this target, Pharimexco is currently focusing on developing large-scale projects, including the third hollow capsule manufacturing factory, which will be the largest such facility in Vietnam with the capacity to cover 40 per cent of domestic market demand.

Another large project is a cancer treatment medicine factory, which is a co-operation with State Capital Investment Corporation (SCIC). The factory will pioneer producing cancer treatment medicine in Vietnam. The construction of the factory was started in 2017 with the total investment capital of VND1 trillion ($44.1 million).

Pharimexco’s financial potential

Pharimexco’s long-term development plan shows its determination to become the leading pharmaceutical firm in Vietnam. Also, the firm seems to have stable finances to pursue this plan.

In 2017, Pharimexco reported VND775.8 billion ($30.08 million) in revenue and VND74.9 billion ($3.29 million) in after-tax profit, signifying a slight on-year increase in revenue and decrease in after-tax profit.

The acquisition of Euvipharm, a pharmaceutical company owning one of the most modern factories in Vietnam, is the reason of the decrease in after-tax profit.

Notably, the deal was completed in early 2017, however, until June the same year, Euvipharm maintained operations, meaning Pharimexco could not write down any profit from the firm in the first six months of the year. Furthermore, in 2017, Pharimexco went into great expenses to rebuild Euvipharm’s sales channel.

Last year, the firm’s assets soared from VND845 billion ($37.1 million) to VND1.22 trillion ($53.59 million), up 44.5 per cent on-year, while equity increased by 20.6 per cent to VND791.8 billion ($34.78 million) from VND656.6 billion ($28.84 million).

However, the firm had been carrying a debt of VND429 billion ($18.84 million) as of December 31, 2017.

At present, F.I.T Group owns 71.72 per cent of Pharimexco, after completing the purchase of an additional 1 million shares in late March 2017.