Pharmaceutical market forecast to increase 10 percent in 2020

Illustrative image (Photo: VietnamPlus)

Hanoi, (VNA) – A report on growth trends of pharmaceutical shares by the securities company SSI forecast that the pharmaceutical market value will grow at 9-10 percent in 2020.

It attributed the growth to the aging population, rising health care expenditures, expanding health insurance coverage and higher life expectancy.

Analysing the development in the stock market in 2019, the report found the capitalization of pharmaceutical shares rose 4 percent, which was lower than the 7.7 percent increase of the VN-Index. It pointed to the obvious division among shares of pharmaceutical companies. While DHG was up 18 percent, DBD 40 percent and DHT 34 percent, other codes showed decreases such as DVN was down 34 percent, PME and TRA 10 percent, and IMP 18 percent.

The Health Ministry revealed that it aims to raise the ratio of domestically-made medicines used in centrally-run hospitals to 22 percent and in facilities at provincial and district levels to 50 – 75 percent in 2020.

Besides, the regulations on open bidding have given an advantage to domestic medicine makers which meet high standards in production in the competition against imported counterparts.

According to reports of the pharmaceutical industry, as of November 30, 2019, among 203 drug factories of 170 domestic and multinational pharmaceutical companies,  there were 19 meeting EU-GMP, Japan-GMP or PIC/s standards.

DHG (Hau Giang Pharmaceutical Company) has earned both Japan-GMP and PIC/s certificates, while IMP (Imexpharm Corp.) got EU-GMP certificates for its two production chains.

An obvious difference could be seen in the business performance of companies meeting high standards and those not in the first nine months of 2019. Those which failed to meet high standards saw their after-tax profits decrease, for example DBD recorded an annual drop of 15 percent. This is the outcome of a fierce competition in drug distribution at hospitals.

Many driving forces for growth

Projecting the growth prospect for the sector in 2020, Pham Huyen Trang, head of the SSI’s analysis and investment consultation section, pointed to factors that can drive the sector’s growth such as an aging population, increasing expenditure on health care, and higher health insurance coverage and life expectancy.

The General Statistics Office forecast that the over-65 population in Vietnam is expected to reach 7.4 million, accounting for 7.9 percent of the overall population, in 2020. The share is expected to rise to 18.1 percent in 2049.

According to reports of the Vietnam Social Security (VSS), health insurance coverage increased from 60 percent of the population in 2010 to 90 percent in 2019, and is heading towards 90.7 percent this year. Besides, along with the rapid urbanization process, the urban population in the country is also soaring to reach an estimated 36.2 million in 2020.

Improved per capita income and a bigger middle-income class are also driving forces for the expansion of the pharmaceutical industry in the time ahead.

Previously, the Drug Administration of Vietnam estimated that the industry’s value will reach 7.7 billion USD in 2021.

In addition, the trend of merge and acquisition in the industry is opening up development potential for domestic firms with the investment of foreign players. Japan’s Taisho Pharmaceutical purchased the DHG Pharmaceutical JSC (coded DHG on the stock market) in 2019, and now held a 51 percent stake of DHG.

Several M&A transactions are planned this year, including a plan of KT Kimia Farma (Indonesia) to acquire a drug store chain in Vietnam.

Considering the potential of the Vietnamese market, foreign pharmaceutical companies tend towards M&A to take advantage of the available resources, thus reducing costs and shortening the time for market participation, Trang said, adding that she expected more M&A deals in several years as the Government plans to reduce its ownership in pharmaceutical companies./.