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Vietnam Drugmaker DHG to Expand as Antibiotic Curbs Bite

DHG Pharmaceutical JSC, Vietnam’s largest drugmaker by market value, plans to boost sales of health supplements, ramp up exports and expand into Myanmar as the industry faces tighter domestic controls on antibiotics.

DHG wants to raise health supplement sales to 15 percent of revenue within the next five years from 8 percent now, Chief Executive Officer Pham Thi Viet Nga said in an interview. The company expects exports to climb 25 percent annually for the next five years.

DHG’s moves come as the Vietnamese government clamps down on the sale of prescription drugs sold over the counter, passing a decree with more controls that took effect Dec. 31. Antibiotic resistance is a serious worldwide threat to public health, the World Health Organization said in April.

“We are preparing for the day when our sales of antibiotics will likely stall due to tighter controls,” said Nga in an interview last week at the company’s headquarters in the Mekong Delta city of Can Tho. “Our strategy in general is to lessen the impact of the trend of antibiotics control.”

Antibiotic Use

DHG shares have climbed 15 percent this year, giving it a market value of 8.6 trillion dong. DHG was unchanged at today’s close at 98,500 dong a share, yesterday’s closing price.

The world may be headed for an era in which common infections and minor injuries can cause fatalities because of resistance to antibiotics, Keiji Fukuda, the WHO’s assistant director-general for health security, said in a statement in April. U.K. Prime Minister David Cameron announced a review last week into the threat of antibiotic resistance and why so few drugmakers are developing new medicines to address the problem.

In Vietnam, access to medication is relatively unrestricted while the government attempts to address insufficient regulation of antibiotic use. Seventy-eight percent of antibiotics in Vietnam are sold from private drug stores without prescription, according to an FPT Securities report in January.

DHG generated 41 percent of its sales from antibiotics last year. It also sells painkillers, nutritional, respiratory, digestive, cardiovascular and skin-care products.

“DHG may be able to improve its margins by moving towards medicine made from natural ingredients, including but not limited to herbal supplements, from which raw materials can be easily sourced domestically,” said Vu Thi Thanh Phuong, an analyst at Ho Chi Minh City Securities Corp.

Myanmar Venture

Exports will rise as the company increases shipments to markets within Southeast Asia and in the former Soviet Union, according to Nga.

In Myanmar, DHG is in talks with a local company on a joint venture in which it may invest as much as 91 billion dong ($4.3 million) to make pharmaceutical products similar to those it sells in Vietnam. Construction of a factory in the country may begin next year if agreements are reached and approved, Nga said.

“Myanmar is like Vietnam was 10 or 15 years ago, but it may develop even faster,” she said. “Myanmar doesn’t have many pharmaceutical makers so it gives some special treatment to pharmaceutical companies, and we have some advantages there in partnering with a local company.”

Myanmar has an estimated 65 million population compared to Vietnam’s 90 million, according to the International Monetary Fund.

In Myanmar, economic growth has averaged 8.7 percent over the last decade, pushing its per-capita gross domestic product to $869 in 2013. Vietnam’s expansion has averaged 6.4 percent over the same period, with per-capita GDP rising to $1,902 in 2013 from $604 in 2004, according to the IMF.

DHG’s revenue rose 20 percent to 3.53 trillion dong last year from 2012, according to data compiled by Bloomberg.

“I would support a policy of tighter control of antibiotics,” said Nga. “It would cause some difficulties for DHG. As someone who has worked in the health industry for a long time, the tightening of the use of antibiotics would benefit people’s health.”

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