Restrictions curbing success of pharma groups of all sizes

AstraZeneca and many other international pharmaceuticals are stepping up investments in Vietnam, photo Le Toan

According to a VIR source, a number of domestic leaders in the pharmaceutical market are facing standstills in their operation and insufficient numbers of pharmaceutical ingredients, thus making their path to fulfil 2020 targets more difficult.

Nguyen Vu Cuong, an analyst at FPT Securities told VIR, “Those focusing on international cooperation and doing new business, while expanding by building new factories and exporting, are suffering some delays due to COVID-19.”

Domestic players in silence

Cuong cited Imexpharm Pharmaceutical JSC (IMP) and Pymepharco JSC as examples. Pymepharco, one of the key players in the local market, is building a new factory but is still waiting for international experts for appraisal. Similarly IMP, Vietnam’s fourth-biggest pharmaceutical firm, is also in a period of waiting for international experts to appraise its new high-tech factory. The experts cannot yet enter Vietnam due to pandemic restrictions.

IMP is seeking the Ministry of Health’s approval of EU-GMP recognition for the facility. However, the postponement might delay the plan entirely. IMP aims to export the products and increase tenders in the ethical drugs channel or the hospital channel in order to profit.

Currently, IMP’s foreign investors hold a total of 47.34 per cent stake, with the company yet to attain a strategic foreign partner.

Binh Dinh Pharmaceutical Company is also in a similar situation. Its plan to build a new factory is being delayed, as it waits for imported equipment and machines.

Elsewhere, Traphaco JSC – the country’s second-largest publicly-traded drugmaker – is finding it a challenge to meet its early-set plan to have 10-15 new products transferred from foreign partners for trading and for manufacturing this year because of the pandemic.

“The facts show that no products transferred are produced at Traphaco factories. We have only seen some products transferred for trading so far,” Cuong elaborated.

Boosting international cooperation in technology transfer is considered as among the key solutions that Traphaco is betting on to fulfil targets amid mounting competition. The company is working with South Korean partner Daewoong in a tech transfer project for its strategic products at a new factory in the northern province of Hung Yen.

It also has Mirae Asset as an indirect investor which helps it to work with capable partners in tech transfer to shorten research and development times, as well as the manufacturing of new high-quality products, thus enabling it to meet the requirements to join the ethical channel.

Traphaco’s major foreign shareholders are Magbi Fund Ltd., (24.99 per cent) and Super Delta Pte., Ltd (15.12 per cent).

Other domestic pharmaceutical giants like Hau Giang Pharmaceutical JSC (DHG), and Domesco Medical Import-Export are not an exception during the uncertain period.

DHG, the biggest publicly-traded drugmaker in Vietnam, is one of the local pharma groups still suffering from faults in the global supply chain due to health crisis. DHG’s reliance on 90-per-cent ingredient imports is causing a big problem due to price fluctuations and it has yet to find a solution.

DHG, which boasts Taisho Pharmaceutical Holdings, one of the five biggest pharmaceuticals in Japan, as a major foreign shareholder with a stake of over 50 per cent, is said to have plans to boost exports to the EU. Therefore, it needs high-quality medicinal ingredients from countries like the UK and France. However, COVID-19 has caused a fall in the amount of cargo flights, thus increasing costs.

Moreover, DHG is struggling partly due to the prevailing regulations on tenders and approval for circulation of its drugs. “Many of our drugs have not received proper circulation for months. As a result, our business activities have been seriously hit,” said a source from DHG.

DHG is also over-dependent on antibiotics amid the government’s stricter control over their sales in the over-the-counter market. For the time being, the channel is seeing stiffening competition among domestic drugmakers in terms of prices and product segments.

DHG’s concerns are increasing in policy risks as its PIC/S Malaysia factory has fewer competitive advantages in tenders of high-end Group II categories of pain and fever drugs under Circular No.15/2019/TT-BYT dated July 2019 regulating drug tenders at public hospitals.

According to Cuong of FPT Securities, the companies which have the business on tenders are being affected because medical units offered for the majority of them in the first and second quarters have needed to stockpile for fears of COVID-19 developments, thus resulting in a significant decrease in the third quarter.

Le Duc Khanh, director of the Market Strategy Department at PetroVietnam Securities, said that this is a challenging time for domestic pharma businesses. This year, they may do no new businesses or expand, but can only try to maintain normal operations.

Pharmacy is one of the sectors said to have fewer negative impacts due to COVID-19. While DHG reported slight falls in revenues and profits in the first six months of 2020, Traphaco and IMP obtained good business performance during the period.

According to Cuong, local players are concentrating on cutting costs during 2020. They may not fulfil 2020 revenue targets, but could possibly reach profit goals through cost cuts.

Traphaco aims to make consolidated revenue of VND2 trillion ($87 million) and consolidated after-tax profit of VND180 billion ($7.8 million) this year, up 16 and 9 per cent on-year, respectively. Meanwhile, DHG aims to increase its pre-tax profit by a percentage point. IMP even set 25 and 28 per cent on-year rises in net revenue and pre-tax profit, respectively.

Foreign players move ahead

Even multinational corporations (MNCs) are suffering this year – however they benefit from strong financial capacity, experience, and technology expertise, while making changes in strategies to stand firm in the storm of the pandemic.

Now they are gaining further advantages in the lucrative local pharmaceutical market on the back of the EU-Vietnam Free Trade Agreement (EVFTA). The landmark deal now opens the Vietnamese market in fields that EU businesses have been seeking particular solutions to for years, such as intellectual property rights, direct pharmaceuticals import, tenders, and more.

With this, MNCs are taking the chance to expand business and investment in Vietnam. For instance, AstraZeneca last year announced investment of VND5 trillion ($217.4 million) in Vietnam.

The company in July then signed a distribution partnership with National Phytopharma JSC, one of the first such agreements between a Vietnamese pharma distribution company and an MNC, marking the next step to expedite its innovative solutions to address local healthcare needs and create value for patients and society.

In addition to the benefits from the EVFTA, MNCs like Novartis, AstraZeneca, Sanofi, and GSK are investing in digital health in Vietnam to take advantage of the country’s new digital transformation in the healthcare sector to obtain sustainable gains.

According to Swiss drug manufacturing company F. Hoffmann-La Roche, it is preparing to launch its personalised information platform for healthcare professionals in Vietnam within the year.

Girish Mulye, chief representative of the Hoffmann-La Roche Representative Office in Vietnam told VIR, “By driving new digital channels, this multichannel interaction will create value for healthcare professionals by integrating trustworthy, globally updated, relevant information, and knowledge to one channel, saving time for healthcare professionals and helping them get better treatment outcomes for patients.”

Similarly, AstraZeneca Vietnam is investing in digital technology and innovation to improve health services for Vietnamese patients and enhance the healthcare ecosystem. The company plans to complete building 60 Smart Neb rooms for children’s hospitals in Vietnam by the end of this year.

Since 2019, Novartis has prepared for this transformation journey in Vietnam by adjusting its business and customer-facing model to adapt with new requirements, enhancing capabilities for its staff, and helping customers move forward with new engagement models.