Foreign capital flows to Vietnam’s pharmacy sector
Attracting foreign capital will allow Vietnamese pharmacy firms improve their competitiveness and develop the national pharmacy industry. However, analysts warn that the market may fall into foreign hands.
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A survey conducted by Grant Thornton earlier this year found that the healthcare & pharmacy market is among the three business fields that attract foreign investors most. The two others are food & beverages and retail.
Foreign investors have been increasing their presence in Vietnam by buying stake in Vietnamese pharmacy firms.
Abbott acquired a 51.69% stake in Domesco JSC, one of the largest deals made recently.
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Analysts said SCIC (the State Capital Investment Corporation) plans to sell all of Domesco’s shares, 34.7% of charter capital in 2017. Abbott won’t miss the opportunity to acquire all of Domesco.
In another affair, Taisho, one of the top 4 Japanese pharmaceutical conglomerates, has become a large shareholder in Hau Giang Pharmacy, holding a 24.4% stake.
In July 2017, the company’s management board unexpectedly submitted to the shareholders’ meeting a plan to lift the foreign ownership ratio ceiling to 100%.
At Traphaco JSC, two foreign shareholders Mekong Capital and Vietnam Holding, are finalizing divestment procedures. The divestment by the two funds would bring a golden opportunity to other foreign investors who want Traphaco shares.
Sources said a large pharmacy conglomerate from the Republic of Korea will buy a stake to be sold by the two funds at a price which is 35% higher than the market price.
Phan Huu Thang, former director of the Foreign Investment Agency, commented that by acquiring a stake in Vietnamese pharmacy firms, foreign investors won’t have to spend time on administrative procedures. Therefore, making M&A deals is believed a wise move, even if foreign investors accept share prices higher than market prices.
Buying a stake in Vietnamese pharmacy firms is seen as ‘killing two birds with one stone’ which not only allows investors to make money with shares, but also helps them enter the domestic market.
Under Vietnam’s FTA commitments, foreign pharmacy firms are not allowed to distribute drugs directly in the Vietnamese market. However, once holding a controlling stake in Vietnamese firms, they have opportunities to distribute their products in Vietnam.
An analyst commented that, when buying pharmacy shares, foreign investors are not targeting production lines of pharmacy firms or their staff, but the potential market.
Therefore, he said, while foreign capital flow into the pharmacy sector will help Vietnamese manufacturers improve their competitiveness, it will also bring risks: Vietnamese firms may fall into foreign hands.
