Drug company Domesco to lift foreign ownership cap

Hanoi (VNA) - The State Securities Commission (SSC) has allowed Domesco Medical Import Export Joint Stock Corporation (Domesco) to increase its foreign ownership to 100 percent, a move that shows Vietnam’s willingness to open up to more foreign capital.

This information was confirmed by the company.

Foreign stakes in Domesco are at the current limit of 49 percent, of which Chile’s CFR International SpA holds 45.9 percent.

Domesco is the third-largest listed drug company, with a market capitalisation valued at nearly 3.3 trillion VND (148 million USD) as of September 5.

This is the third company which the SSC has allowed to lift the foreign holding limit, after Vietnam Dairy Product JSC (Vinamilk), the largest listed company, and Everpia Vietnam.

The pharmaceutical industry is one of the fast-growing sectors in Vietnam, appealing to foreign investors as a rising middle class in the country spends more on healthcare.

Offshore ownership of many local drug makers is already at or near the limit, creating pent-up demand from foreign investors.

Foreign holdings in DHG Pharmaceutical and Imexpharm Pharmaceutical have also reached the limit. The current foreign holdings ratio in Traphaco is around 46 percent.

According to a report by BMI Research, Vietnam’s pharmaceutical market is expected to rise from 4.2 billion USD in 2015 to 7.2 billion USD by 2020 and to maintain double-digit annual growth through 2025.

Investments in local healthcare companies have returned 46 percent in 2016, the best performance among 10 industry groups on the HCM Stock Exchange, data on Bloomberg showed.

Prices of Domesco’s shares tripled this year to a record high of 96,000 VND a share on September 1.

The biggest listed pharmaceutical company, DHG, has risen 53 percent. Imexpharm, Traphaco and Cuu Long Pharmaceutical, which round out the five biggest drug companies on the HCM Stock Exchange, are up between 80 and 147 percent.

These companies performed well this year. DHG Pharmaceutical posted a net profit of 300 billion VND in the first half of this year, up 15 percent year-on-year. Domesco earned 81 billion VND in net profit, up 21 percent. Profits of Traphaco and Cuu Long Pharmaceutical were up 27 percent and 37 percent, respectively.

In the pharmaceutical market, only Domesco plans to scrap its foreign ownership limit.

Market insiders expect other local drug companies to follow Domesco and allow more foreign ownership. If this happens, merger and acquisition (M&A) activities in the pharmaceutical industry will likely be more vibrant.-VNA