Supply challenges mount for pharmaceutical groups

The appropriate pharmaceutical ingredient inventory strategy helped Imexpharm (IMP), Vietnam’s fourth-biggest publicly traded drugmaker, to keep stable production and profit margin in 2021. While pharmaceutical ingredient factories in the world have resumed operations, the challenge is rising for IMP and other local top drugmakers in the Southeast Asian nation partly because fuel prices are growing day-by-day due to the Russia-Ukraine conflict.

A source from IMP told VIR, “Making orders for pharmaceutical ingredients is still challenging and the price keeps rising aligned with increases in global fuel prices. IMP will keep close eyes on the situation to make an appropriate pharmaceutical ingredient inventory strategy for 2022 to adapt, especially for key ingredients.”

Petrol has hit a record high in many countries because of the Russia-Ukraine situation. In Vietnam, it set an all-time record high when, on March 11, each litre of E5 RON costs VND28,985 ($1.26), while RON 95 hits VND29,824 ($1.23) per litre. In addition, according to experts, this year the price of raw ingredients is forecast to keep rising due to continuing pandemic impacts, thus affecting the global supply chain.

The country’s three largest publicly-traded drugmakers – DHG, Traphaco, and Domesco – are not an exception. DHG is predicted to face a lack of pharmaceutical ingredients this year and a source from the company said that logistics issues are also hindering transportation to Vietnam.

The drugmakers are focusing on diversifying their portfolio of products to gain competitiveness in tenders, thus ensuring sufficient pharmaceutical ingredients.

IMP is giving priority to the profitable hospital channel to develop products from its EU-GMP factories. It recently announced a new Cephalexin 500mg product made at the Binh Duong high-tech factory, which was granted market authorisation in Spain. The group is also seeking EU-GMP recognition for its IMP4 factory in a move to venture further into this segment, which is expected this year.

Similarly, DHG made a breakthrough with over 100 new products from two production assemblies meeting Japan-GMP standards, thus assisting revenue growth. Meanwhile, Traphaco is now strengthening tech transfer with a South Korean partner to expand in the western medicine segment.

In 2021, Vietnam’s pharma firms faced interruption in the global supply chain, thus increasing ingredient costs. Despite the challenges, the top pharma firms performed better in 2021 thanks to changes in their business strategies, and set higher targets for 2022.

In particular, DHG aims to make net revenues of VND4.22 trillion ($183.5 million) and pre-tax profit of VND853 billion ($37 million) in 2022, up 6 per cent and 4 per cent respectively, compared to 2021 targets.

Elsewhere, Traphaco targets to achieve consolidated revenue of VND2.35 trillion ($102.2 million) and a consolidated profit of VND286 billion ($12.4 million) this year, slightly higher than last year.

According to a Vietnam Report survey, 62.5 per cent of experts and businesses said that the industry’s growth in 2022 will be better than in 2021 and 12.5 per cent believe in its strong growth, while only 6.25 per cent said it will be worse.