DMC runs with bid to raise foreign ownership cap

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Removing the cap will likely benefit the US-based Abbott Laboratories – one of the largest diversified healthcare companies in the world. Abbott, which is Domestic’s (DMC) only foreign strategic partner, currently holds a 45.94 per cent stake in the local company via its subsidiary CFR International SPA.

Removing the limit on foreign ownership would also offer a chance for other investors to buy into DMC, which is the second-largest drug exporter among Vietnamese pharma firms.

“Lifting the foreign ownership ceiling in the pharmaceutical industry would send a positive signal to foreign investors. A clear path to converting partnerships into majority ownership would provide companies with much stronger arguments to convince their global headquarters to invest in Vietnam,” Tran Thi Hong Tuoi, analyst at BIDV Securities, told VIR.

“In addition, DMC’s move might prompt other listed pharma firms to remove their foreign ownership ratio ceiling to attract foreign partners,” she said, adding that DMC would have to seek permission from the Ministry of Health and the Ministry of Planning and Investment to lift the cap.

In addition to lifting the foreign ownership ceiling, DMC shareholders have also agreed to establish two new lines of business – a drug warehouse and a herbal medicine factory.

Industry insiders believe that DMC would be a good springboard for Abbott to boost its presence in Vietnam. Since entering the market in 1995, Abbott has gained a foothold in all 63 cities and provinces after acquiring local health food distributor 3A Nutrition.

According to industry insiders, because large drugstore chains are a growing trend in the pharmaceutical industry, international drug makers are increasingly using mergers and acquisitions (M&As) to develop their distribution chains. Vietnam is a destination of choice for such companies.

These foreign enterprises are hoping to capitalise on the nationwide distribution networks and advanced drug production assembly lines of the Vietnamese drug makers, using M&A deals to penetrate the market and expand their operations locally.