Digital transformation kicks M&A in healthcare into higher gear

M&A deals in healthcare are on the upswing, with the latest name on the stage being ASKA from Japan

As the digital transformation is all the rage in the sector, more and more tech companies are setting eyes on healthcare, raising the prospect of future M&A deals.

Alexander Feldman, chairman of US-ASEAN Business Council said that healthcare equipment, medical care, and pharmaceuticals are the most appealing sectors for companies. Many Silicon Valley-based technology firms are planning to set foot in Vietnam by either direct investment or M&A.

In March, 45 US science and technology companies through the US-ASEAN Business Council came to Vietnam to discover investment and expansion opportunities.

In the global market, Microsoft in March launched the AI for Health project specialised in using AI to prevent diseases. The Gates Foundation invested about $40 million in the first phase of the project to begin testing.

Since last year, Apple has accelerated investment in healthcare by integrating related applications to the iPhone and iWatch to keep track of users’ state of health.

The local healthcare market will spike at 9-10 per cent in 2020, driven by the ageing population, resulting in a hike in healthcare expenses, according to SSI Securities Corporation.

SSI also lays great store on the local M&A prospects in healthcare. Specifically, the trend will keep growing as some deals will materialse once the local government reduces its ownership in pharmaceutical companies.

The latest name joining the M&A bandwagon in healthcare, a 100-year-old, Japan-based pharmaceutical company ASKA has just finished the purchase of more than 6.5 million stocks of local firm Ha Tay Pharmaceutical JSC (HNX: DHT – Hataphar), equalling 24.9 per cent of the shares.

Hataphar previously planned to issue more than 5.2 million stocks for its strategic investors at VND70,000 ($3.04) per share. DHT is currently on trade at around VND60,000 ($2.61) per share.

Along with welcoming the new investor, Hataphar is implementing a high-tech pharmaceutical manufacturing facility with a total investment of VND1.35 trillion ($58.7 million) at Hoa Lac Hi-tech Park. Its estimated production capacity is about 2 billion medicine items and the factory will be put into operation in the second quarter of 2023.

The local healthcare industry has long included US giant Abbott which entered through acquisitions of 51.7 per cent of Domesco and the entirety of Glomed.

The market is also an M&A playground for other overseas investors. Poland-based Adamed Group spent $50 million on 70 per cent of Davipharm, while Pymepharco has raised the foreign ownership limit to 100 per cent and allowed Stada Service Holding to increase its ownership to 72 per cent.

In the coming time, Imexpharm and Traphaco are the most promising names for M&A. Currently, their foreign ownership rates are 47.8 and 47.1 per cent, respectively.