Moving upstream for growth

Pharmaceutical manufacturing and trading enterprises encountered many difficulties during 2023, including falling consumption, fluctuations in energy and input material prices, competition between businesses in the industry, and pressure from rising exchange rates, among others. Imexpharm (IMP), meanwhile, went upstream and achieved many impressive results. As of the end of the year, its total gross revenue had reached VND2.11 trillion ($85.61 million) and growth stood at 26 per cent compared to the market average of about 8 per cent. Net revenue came in at VND1.99 trillion ($81 million), up 21 per cent against 2022.

According to General Director of Imexpharm, Dr. Tran Thi Dao, Vietnam’s pharmaceutical market has seen stable growth since the Covid-19 pandemic. Momentum has been maintained despite certain industries showing signs of slowdown. “IMP’s sound business results are thanks to in-depth investments in product quality and reasonable prices for customers,” Dr. Dao said. “In particular, the company has promoted its advantages by maintaining a production system that meets international standards, concentrating its resources and systematically investing in manufacturing factories that meet EU-GMP standards and other advanced international standards.”

IMP still leads the antibiotic market and it has maintained its advantages to achieve these impressive results. The EU-GMP IMP4 factory was put into operation and in its first year earned revenue of nearly VND80 billion ($3.24 million). The company had eleven EU MAs (European Product Registration Numbers) issued in 2023 on six products, including high-standard products such as Ampicillin/Sulbactam. The company has also posted positive results from its restructuring strategy to a professional management model. This also brought IMP some notable awards, such as Top 50 best listed companies, Top 50 most effective companies, and Top 5 best workplaces in Vietnam in the pharmaceutical, medical equipment, and healthcare industries, etc.

Its success shows the transformation of Vietnamese pharmaceutical companies in the pharmaceutical market, which is considered to have seen good growth and hold potential in the region. However, at the beginning of 2024, many forecasts are for the pharmaceutical industry in general and IMP in particular to face challenges, with heavy pressure coming from slow economic growth and low consumption demand. The OTC (over-the-counter medicine) channel is expected to face many barriers in maintaining growth because economic recovery is still slow and cannot improve in the short term.

In addition, despite the fiscal space for development, obstacles in terms of limited research and development (R&D) capacity and new technology transfer are barriers for pharmaceutical enterprises to expand their scale in the domestic market. The competition between foreign investors and domestic businesses in the medical and pharmaceutical fields in Vietnam will also continue to be fierce as 2024 unfolds.

Domestic pharmaceutical companies still exhibit chronic weaknesses, such as fragmented market share, small production scale, and low financial potential, and compete with each other in small segments of the market. The ability to increase investment in research and equipment for production technology remains limited. Businesses also face difficulties in investing in large-scale projects and in purchasing pharmaceutical inventions, while there is a shortage of high-quality human resources to help the industry with product R&D.

“I think difficulties and challenges still lie ahead in 2024 and require us to continuously innovate and adapt promptly,” said Dr. Dao. “With an orientation towards sustainable development for the year, sales branches need to pay attention to legal compliance issues, strengthen customer capacity appraisals, and not take risks in sales that may lead to debt risks. At the same time, it is necessary to have strict financial management, especially in the current difficult economic situation.”

Boost in 2024

Pharmaceutical companies like IMP expect the government’s strategy in Decision No. 376/QD-TTg to prioritize development in order to reach a ratio in domestic / imported drugs of 75/25. With policies to no longer simply choose the cheapest drugs, this is a golden opportunity for local manufacturers in Groups 2 & 3 to have high-quality products at reasonable prices.

Therefore, in recent years, the race to meet standards, especially EU-GMP standards, has been fierce among domestic pharmaceutical companies, especially as Vietnam is becoming an attractive destination for foreign investors in the pharmaceutical field. Most leading enterprises have foreign strategic shareholders, such as Hau Giang Pharmaceutical (DHG-Taisho), Domesco (DMC-Abbott), Traphaco (TRA-Daewoong), Imexpharm (IMP-SK), and Pymepharco (PME- Stada).

Among them, IMP has eleven drug production lines meeting EU-GMP standards, putting it among the top 8 per cent of domestic drug manufacturers meeting bidding standards for Groups 1 & 2 in the ETC channel in Vietnam.

IMP has large fiscal space in both revenue and profit in the 2023-2028 period. In particular, with the participation of major shareholder SK Investment Vina III Pte Ltd, IMP will have significant support in modern technology, finance, and R&D, thereby completing product lines for infusions, pills, and liquids, etc. to meet a variety of treatment needs.

Witnessing a major change in disease patterns as well as a rapid increase in Vietnam’s middle class, the Mirae Asset Securities Company has forecast that the pharmaceutical industry will continue to maintain a CAGR of 6 per cent in the 2023-2028 period. The forecast value of the pharmaceutical industry in 2023 is $7.24 billion (up 3.4 per cent against 2022) and $7.89 billion in 2024 (up 9.1 per cent against 2023). In particular, the ETC channel will grow stronger than the OTC channel thanks to universal insurance coverage reaching 93 per cent. The specific provisions of the Pharmaceutical Law, amended in 2024, on the application of new mechanisms that are suitable for the Vietnamese context will also help speed up the process of approving new drugs so that people can access new and effective treatment.

Furthermore, modern medical technology is now on par with other countries in the region. Notably, investment in modern technology is creating a firm foundation for domestic pharmaceutical companies to confidently set foot in global pharmaceutical supply chains. Potential major export markets for Vietnamese pharmaceutical companies will be neighboring countries such as Cambodia, Laos, and Myanmar, and other countries in ASEAN.

For example, IMP is promoting export activities, such as having booths at the CPhI exhibitions in Thailand and Barcelona, and conducting surveys of potential export markets such as Cambodia and Myanmar, etc. It successfully exported its first batch of goods to Mongolia by air last year.

Regarding the 2024 plan, Dr. Dao said it will continue to invest and implement initiatives to increase the productivity of existing lines and factories. The company is also researching and evaluating the feasibility of a number of investment projects in new factories and production lines to increasingly meet domestic and foreign needs. Expanding production capacity with international standards and enhancing the ability to produce new generics with difficulties in technology will promote the competitiveness of domestic drugs with imported products of the same type. In particular, the company has built a global cooperation development team to exploit foreign markets.

IMP also researches and makes proposals for outsourcing manufacturing (CMO) for multinational pharmaceutical companies. To strengthen this activity, it will expand the market with new therapeutic areas by cooperating with South Korean and international partners in technology transfer and cooperation in imports, production and distribution. The company is now negotiating with some of the world’s leading partners and plans to sign an MoU this year.

According to IMP leaders, completing the management model, improving the level of professionalism, and optimizing operations helped its EBITDA margin in 2023 improve from 22 per cent to 23 per cent thanks to strong revenue growth, leading to a better economic boost, higher operating leverage, and cost-saving initiatives. Such trends and actions will continue to be promoted in 2024. Right from the beginning of the year, IMP has proactively implemented procurement-related initiatives to control purchasing activities more easily, reduce purchasing prices, and cut the number of suppliers. It is expected to control input costs from the second quarter onwards, helping them save 15 per cent or more compared to the previous purchase price.

The general assessment shows that pharmaceutical companies like IMP are capable of ensuring stable and sustainable drug supply at reasonable prices and quality, creating a developed pharmaceutical market and creating motivation for businesses constantly bringing innovative new drugs to the market.