Pharmaceutical stocks remain attractive in 2022 on strong medicine demand

A worker operating equipment at a plant of Traphaco. (Photo: traphaco.com.vn)

Hanoi - As the COVID-19 pandemic continues to spread nationwide and is gradually being considered an endemic disease that could be treated at home, demand for drugs has increased sharply.

Pharmaceutical enterprises are expected to benefit from the situation.

SSI Research expects healthcare demand will recover and grow 13 percent year-on-year in 2022.

“We estimate that domestic health spending will return to normal levels in 2022 as social distancing measures are eased,” SSI wrote in a report for the healthcare industry.

The impact from the pandemic will be less severe and even bring some positive benefits for the pharmaceutical enterprises, it added.

With 70 percent of the Vietnamese population already fully vaccinated with two doses, and new coronavirus variants that may be less dangerous with lower hospitalisation rates, the healthcare demand in 2022 is forecast to soon surpass pre-pandemic levels with hospital visits recovering to normal levels. And the pharmaceutical group will have significant additional revenue from fever reducers and vitamins that are used to treat mild COVID-19 symptoms.

Moreover, many Vietnamese pharmaceutical companies have received formulas for the production of COVID-19 medicines which are transferred by Pfizer and MSD, and may soon be commercialised in 2022.

On February 17, Mekophar Chemical Pharmaceutical JSC (MKP) was licensed by the Ministry of Health to circulate COVID-19 treatment medicine Movinavir with a content of 200mg.

The company’s main markets are in HCM City, accounting for 63 percent, and Hanoi (25 percent), while the rest are other provinces and cities.

Mekorphar is one of three companies licensed to circulate medicine to treat the disease. The other two companies are Stellapharm Joint Venture Company Limited and Boston Vietnam Pharmaceutical JSC.

According to SSI’s report, profits for healthcare companies are likely to grow strongly in 2022, with prices for medical services and medicines expected to rise slightly.

“We estimate healthcare companies' profits to grow 15 percent year-on-year, driven by 12 percent revenue growth and an expected 4-6 percent increase in prices for both medicine and medical services,” said SSI.

“The price increase is inevitable as pharmaceutical companies have had to cope with higher prices of raw materials, while hospitals have faced many expensive operating costs in the past two years during the outbreak of COVID-19.”

Traphaco JSC (TRA) is not a manufacturer or distributor of medicine to treat COVID-19 but attracts investors with the advantage of producing product lines to support coronavirus treatment such as saline solution, T-B antibacterial mouthwash and medicine to enhance immunity to protect lungs and nasal drops.

The Phu Hung Securities Corporation believes that Traphaco will continue to maintain its number one position in the traditional medicine industry, focusing on investing in developing traditional medicines as growth momentum in the new period.

The advantage of Traphaco is the extensive distribution system throughout the country and high brand awareness that will help TRA maintain the advantage of traditional medicines on the over the counter (OTC) channel.

Currently, the company has more than 27,000 customers with 28 branches nationwide.

Therefore, pharmaceutical companies are expected to record high growth for the whole of 2022, while the hospital group will achieve high growth in the second half of the year, SSI said.

“For pharmaceutical companies, we believe that business results may be positive in the first half of 2022, as people stockpile medicine for the new Omicron variant of COVID-19, while the group of hospitals must wait for a recovery in the second half of this year, when Vietnam can cope with the new variant and ease travel restrictions,” the securities firm added.

On the stock market, with the positive profit growth prospect, SSI expects stocks of pharmaceutical companies continue to be attractive during the pandemic period.

Le Xuan, a senior trader, said that pharmaceutical stocks are defensive stocks, as they are not affected by macro factors, but by people's demand for health examination and treatment.

"In 2022, the industry's potential is quite good thanks to rising demand for health check and treatment," said Xuan.