In a recent discussion with Thanh Dung of Saigon Investment, Nguyễn Thế Minh, Director of Analysis at Yuanta Vietnam Securities Company, and Nguyễn An Duy, Deputy General Director overseeing Finance at Imexpharm Pharmaceutical Joint Stock Company (IMP), shed light on the industry's current state and future prospects.
JOURNALIST: - As an expert closely monitoring the pharmaceutical sector, could you provide an analysis of its current status in 2024 and the outlook ahead?
Mr. NGUYỄN THẾ MINH: - Firstly, following supply chain disruptions in 2022, the industry rebounded significantly by 2023, registering a growth rate of 10% compared to the preceding year. Secondly, the industry remains heavily reliant on imported raw materials, with nearly 90% sourced externally, predominantly from China (about 70%) and India (over 15%). Thirdly, in terms of manufacturing standards, Vietnam boasts approximately 290 pharmaceutical producers, yet only 228 adhere to WHO criteria. Meeting EU or Japanese standards is even more challenging, with a mere 18 facilities certified, posing constraints for market penetration into more stringent regulatory environments.
I anticipate that the revenue growth rate of the pharmaceutical industry will stabilize at around 5.5%. Although slightly slower than the robust growth witnessed in 2023, this figure remains positive, owing to the solid foundation established in the preceding year. Moreover, the advantageous position of pharmaceutical stocks, characterized by low leverage, suggests a mitigation of risk associated with fluctuating interest rates.
Businesses focusing on the ETC channel (Engage, Trial, and Convert) stand to benefit significantly following the implementation of the bidding law. This regulatory change is poised to create numerous advantages within facilities and hospitals, enhancing market access and fostering growth opportunities.
Notably, companies investing in and aligning their production lines with EU or Japanese standards are positioned for substantial growth. Embracing these rigorous quality benchmarks paves the way for tapping into lucrative markets and capitalizing on evolving consumer preferences.
JOURNALIST: - Dear Mr. Duy, it's widely recognized that IMP is at the forefront of technological investment, particularly in adhering to EU-GMP standards. Could you please elaborate on the accomplishments the company has attained as a result of this strategic direction?
Mr. NGUYỄN AN DUY: - In the intensely competitive landscape of the pharmaceutical sector, prioritizing quality leadership is paramount. This drove our decision to invest in production technology aligned with EU-GMP standards. Currently, IMP boasts three factory clusters—IMP2, IMP3, and IMP4—that meet these stringent criteria, housing a total of 11 state-of-the-art EU-GMP production lines.
Moreover, our IMP1 factory cluster continues to be a significant contributor, generating 50% of total revenue in 2023. Meanwhile, the IMP3 facility, specializing in the production of high-value injectable drugs, accounts for 32% of total revenue. Notably, in its inaugural year, IMP4 made a noteworthy contribution of VND 80 billion to our overall revenue, signaling a promising start.
Our unwavering commitment to quality has enabled us to actively engage in competitive bidding processes, such as Group 1 and Group 2, challenging imported products head-on.
JOURNALIST: - Mr. Minh, one topic that has garnered significant attention among investors is pharmaceutical stocks. Why, despite the industry's potential, do domestic investors still show limited interest in pharmaceutical stocks?
Mr. NGUYỄN THẾ MINH: - Firstly, the pharmaceutical industry group's market capitalization remains relatively low, which has hindered its popularity among investors. Secondly, the number of outstanding shares available in the pharmaceutical sector is still limited. With the exception of institutional investors or major shareholders, there are few shares available for trading in the market. Consequently, investors have limited options within this segment.
Furthermore, the pharmaceutical industry is characterized by a tendency to offer regular dividends, attracting investors who adopt a long-term holding strategy rather than engaging in short-term trading activities. This stability in dividend payments contrasts with the speculative nature of certain other sectors, which may discourage investors seeking quick returns.
JOURNALIST: - Mr. Duy, could you provide further insight into IMP's business performance to instill confidence among investors?
Mr. NGUYỄN AN DUY: - Certainly. In 2023, IMP achieved a net revenue of VND 1,994 billion, marking a notable 19% increase compared to the industry's overall growth of approximately 8%. Concurrently, our pre-tax profit soared to VND 377.3 billion, reflecting a 30% surge and surpassing our projections by 8%. These figures represent record-breaking growth in both revenue and profit.
Additionally, I'd like to highlight the Compound Annual Growth Rates (CAGR) of our pre-tax and after-tax profits for the period spanning 2019 to 2023, which stand at 13.6% and 16.5%, respectively. Furthermore, our EBITDA has seen a robust CAGR of 17.5% over the past five years, underscoring our financial resilience and stability. Moreover, our equity and total assets have demonstrated steady growth, with CAGRs of 7.5% and 6.7%, respectively, over the same period. These indicators collectively illustrate IMP's sustained growth trajectory and solid financial performance.
JOURNALIST: - Sir, there has been a notable influx of foreign investment funds into pharmaceutical enterprises recently. Do you view this trend as an opportunity for businesses?
Mr. NGUYỄN THẾ MINH: - In my perspective, the significant foreign ownership presence in the pharmaceutical sector presents several advantages. Firstly, it facilitates enhanced transparency within domestic businesses. Typically, Vietnamese enterprises tend to grant controlling power to domestic individual investors when they hold the majority ownership stake, thereby elevating associated risks. However, transparency is paramount in the pharmaceutical industry, and foreign investment can contribute to upholding this priority.
JOURNALIST: - Mr. Duy, could you elaborate on the advantages that the presence of major shareholder SK Investment Vina III Pte Ltd has brought to IMP?
Mr. NGUYỄN AN DUY: - Indeed, the entrance of foreign investors heralds several benefits for Vietnamese businesses, including enhanced transparency and access to new technologies and methodologies. At IMP, SK Investment has catalyzed significant management changes, prompting a restructuring of our organizational framework to align with international best practices and standards. Leveraging the SK Investment network, IMP has forged collaborations with prominent foreign partners to elevate the quality of our pharmaceutical products. Notably, we have entered into a cooperation agreement with Genoune (Korea) to manufacture branded medications of superior quality.
JOURNALIST: - Thank you both for your valuable insights.
