DHG's profit falls in first quarter, challenges posed by FOL removal

12:20 | 30/04/2018
Despite having Taisho Pharmaceutical Holdings, one of the five biggest pharmaceuticals in Japan, as a big foreign shareholder, Vietnam’s biggest publicly-traded drug maker Hau Giang Pharmaceutical JSC (DHG) saw a 4.4 per cent fall on-year in its gross profit in the first quarter of 2018.

DHG made a net revenue of VND908.4 billion ($40.37 million) during the period, up 3 per cent on-year and meeting 25.67 per cent of the company's annual target.

The drug maker also reported a gross profit of VND378.4 billion ($16.8 million), down 4.4 per cent on-year, thus meeting 22.3 per cent of the company's yearly target. DHG blamed the fall on a rise in the cost of goods sold during the period.

DHG is planning to lift the foreign ownership limit (FOL) to 100 per cent before July 2018, meaning that it will lose the distribution rights of pharmaceuticals produced by other companies.

As the FOL will be removed, from 2018, DHG no longer sells the products of other companies, thus its sales revenue is set to decrease by 49 per cent. The company will neither receive revenue from services this year.

Raising FOL in the pharmaceutical industry has been a controversial issue for years. Under the current rules, if a Vietnamese pharma firm’s foreign partners hold a 51 per cent stake, this could cause the firm to be labelled as a foreign-invested enterprise, depriving them of the profitable right to distribute medicines. With the trend towards co-operating with multinational corporations (MNCs), this fear seems less of a problem now.

In a recent interview with VIR, a DHG official said that the firm will focus on its advantages in sales systems and storage systems, meeting good distribution practice standards to expand the distribution of products to MNCs while co-operating with them in production stages.

This year, DHG aims to make a net revenue of VND4.017 trillion ($178.53 million), equal to 2017, while its pre-tax profit is set to rise by 6.7 per cent on-year to VND768 billion ($34.13 million).

DHG now has Taisho Pharmaceutical Holdings as a big foreign shareholder with 24.5 per cent, followed by FTIF Templeton Frontier Markets Fund. State Capital Investment Corporation (SCIC) is the biggest stakeholder with 43.3 per cent.

In late March 2018, DHG partnered up with Vinamilk in R&D and the marketing and distribution of functional products and foods items.

dhgs profit falls in first quarter challenges posed by fol removal
DHG signs cooperation deal with Vinamilk

According to DHG, it is likely to be granted a PIC/S license from Malaysia in the near future, allowing it to export Hapacol to this country. DHG also aims to secure PMDA standards from Japan for some of its products. Remarkably, the company will build some production assembly lines for its key products meeting EU standards, thus enabling it to obtain its export revenue target of $5 million by 2020.

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By Bich Thuy

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