Nguyen Kim acquires Ladophar

A manufacturing line in the factory of Ladophar

Nguyen Kim has published the information about the purchase of an additional 1.36 million shares at Ladophar from existing 2.6 million shares to increase the holding in Ladophar to 51.15 per cent.

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 listed value of Ladophar, thus the deal is estimated at VND35 billion ($1.52 million).

Ladophar is an affiliate of Nguyen Kim, which already holds 24 per cent of the drug company’s charter capital. Nguyen Kim started investing in pharmaceuticals in 2014 after purchasing a 10 per cent stake in Ladophar. After that, it increased its capital in the company to 24 per cent.

Starting in 2017, Nguyen Kim proposed buying more Ladophar shares to turn it into a subsidiary, however, its previous bids for the State Capital Investment Corporation’s portion of the pharmaceutical firm were unsuccessful.

In order for this latest deal to succeed, the company has repeatedly tried raising its ownership in Ladophar to above 51.14 per cent.

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 oriental medicine production, commercial medicines, medical equipment and importing drugs.

During its time as a subsidiary of Nguyen Kim, Ladophar reported bleak business results in 2018 and the first quarter of this year. Notably, in 2018 the company acquired VND435 billion ($18.9 million) in revenue, down 18 per cent on-year while its gross profit also decreased from VND76 billion ($3.3 million) to VND58 billion ($2.5 million). Meanwhile, sales expenditures soared.

This year, the company targets to earn VND460 billion ($20 million) in revenue and VND5 billion ($217,391) in pre-tax profit, however, at the end of the first quarter of this year, Ladophar reports a loss of VND2.4 billion ($104,347).

In addition to Ladophar, Nguyen Kim also poured dozens of billions of dong into FT Pharma.

According to Business Monitor International (BMI), the 2017 revenue of the Vietnamese pharmaceuticals sector was $5.2 billion (VND117.52 trillion), which it forecasts will rise to $7.7 billion (VND174.02 trillion) in 2021.

The demand for pharmaceutical products rapidly expanded as a consequence of high economic growth, rising per capita income, and a higher population. However, domestic companies satisfy only 50 per cent of the market demand, while the rest of the pharmaceuticals have to be imported.

The Vietnamese pharmaceutical market continues to turn heads across the globe and will turn up the heat in the market, which is good news for investors.

In recent years, many electronics companies have moved into the distribution of drugs, including Mobile World Group’s investment in the Phuc An Khang drug chain or FPT Digital Retail Company’s investment in Long Chau Pharmacy.

This promising market has many retail chains, such as Mobile World (1,065 stores), FPT (519), and Nguyen Kim (58). These technology retailers may apply their store chain management format for the pharmaceutical business, which could help them take large market shares.