Regional pharma producers eye Kingdom

International pharmaceutical companies are increasingly looking to sell their products to Cambodia, although the market is full of obstacles, according to experts.

After several big international players announced sales expansion plans, two companies from Indonesia, a major manufacturing hub in Southeast Asia, are planning to follow.

Kalbe Farma, Indonesia’s largest listed pharmaceutical company, told the Jakarta Globe on Tuesday that it plans to add non-prescription cough and cold medicines to its product range in Cambodia this year. The company is seeking to double its export contribution to 8 per cent of total revenue within six years, Kalbe’s Finance Director Vidjongtius told the newspaper.

Last week, Indonesia’s state-owned pharmaceutical firm Indofarma said it is looking to expand its international network by exporting generic drugs to Cambodia within the next two years, according to the Jakarta Post.

The company is now in the process of acquiring legal permits from the Kingdom’s food and drugs agencies, the newspaper said. “Many pharmaceutical manufacturing hubs, especially for generic drugs, are based in Indonesia.

“Those products are already recognised on the Chinese and Japanese markets. However, producers from this growing sector are increasingly looking for new markets in other ASEAN countries,” Benoit Martineau, head of the pharma working group at the Eurocham and of Sanofi Group’s Cambodia and Laos Operations, told the Post on Wednesday.

Also, German-based manufacturer Bayer has a very big manufacturing hub for pharmaceuticals and over-the-counter products in Indonesia and is now increasing its sales to Cambodia, according to Celina Chew, Bayer’s country group head of the North ASEAN Region.

“The Cambodian pharmaceuticals market is currently growing by 15 per cent a year and we expect that it will continue to grow by 15 to 17 per cent in the next five years,” Khalid Baig, the company’s country group head, added.

“We’re definitely counting on China and India still, but you can see some of the businesses are moving to ASEAN markets, because they offer lower costs at the manufacturing base,” Chew told the Post.

Cambodia’s pharmaceutical market was worth $170 million in 2012, according to the second quarter 2013 pharmaceuticals and healthcare report from Business Monitor International.

However, the lack of official data and the absence of a clear distinction between prescription and non-prescription medicine make market segmentation calculations all but impossible, the report added.

“The fact that Cambodia’s neighbours Malaysia and Thailand have become established as more successful emerging markets over previous decades has stifled the development of foreign interest in Cambodia’s pharmaceutical market and industry.

“Other obstacles have included corruption, poor infrastructure and the lack of funding for healthcare and medicines,” the report said.

“However, Cambodia’s economic, political and demographic developments should combine to improve – to a degree – the operating environment for multinationals, none of which are present in the market through direct manufacturing facilities,” it added.

French pharma giant Sanofi and German-based Bayer told the Post earlier this year that they are planning to expand their sales to all Cambodian provinces.

According to Benoit Martineau, the Cambodian market is too open for medicine distributors, of which Cambodia has about 200. The Eurocham’s pharma working group is “trying to support the authorities to shape the market, to create more rules”, he added.

By Sarah Thust│24 May 2013│The Phnom Penh Post

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Three Japan-funded projects launched

(KPL) The Japan International Cooperation Agency (JICA) and the Ministry of Planning and Investment (MPI) last Friday launched three new Grant Aid Projects to boost power, health and transport sector development in Laos.

The grant agreements for the three projects were signed in Vientiane between Chief Representative of the JICA Laos Office, Mr. Koichi Takei, and Acting Director General of International Cooperation Department of MPI, Mrs. Sisomboun Ounavong, in the witnesses of relevant officials from both sides.

Last Friday’s announcement followed on from the official signing of an Exchange of Notes last week between the Ministry of Foreign Affairs and the Japanese government, in which Japan agreed to provide grant aid of 3.049 billion yen (approx. US$32 million) to fund these projects. The first grant aid will provide 1.775 billion yen to implement the”Mini-Hydropower Development Project in Phongsaly province”.

The project will construct a new 450kW mini-hydropower plant in Gnod Ou district, generating a stable electricity supply that will significantly improve the livelihoods of thousands of people across the province.

It will also help the Lao government to reduce its dependence on buying and importing electricity into the region from abroad, as well as bringing the country one step closer to achieving its national electrification rate target of 90 per cent by 2020. The second grant agreement will provide 741 million yen to implement the “Project for Strengthening the Health Service Network in Southern provinces”. The project will construct 70 new health facilities and provide equipment to nine district hospitals in Saravane, Sekong, Champassak and Attapeu provinces.

This direct large-scale investment will significantly raise the quality of healthcare throughout the southern provinces and improve access to these vital services for thousands of people in rural areas where access has been limited.

The third grant agreement will provide 533 million yen to implement the”Project for the Modernization of Equipment for Transition to new CNS/ATM (communication, navigation, surveillance and air traffic management systems) Systems”. This project will upgrade communication, navigation and surveillance, and air traffic management systems in airports across the Lao PDR, in accordance with International Civil Aviation Organisation recommendations.

Introducing these new systems will enable the nation’s airports to handle greater air traffic volume with increase accuracy and efficiency. This will improve travel safety and facilitate commerce, allowing for a greater number of flights carrying business travelers, tourists and cargo, which will boost the Lao national economy. All three projects will contribute significantly to socio-economic development in Laos, helping the country meet its aims of achieving the Millennium Development Goals by 2015 and graduating from the United Nation’s list of Least Development Countries by 2020.

Last update on 30.03.2013 by Lao News Agency

Sanofi to Build $75 Million Vietnam Plant as Demand Rises

Sanofi (SAN), France’s biggest drugmaker, will start building a $75 million plant in Vietnam as rising income and urbanization bolsters demand for health care in Asia.

The company, which has been in the country of nearly 90 million for more than 50 years, will produce at an initial capacity of 90 million units per year at the new facility when it starts operations by the end of 2015 and may later extend to 150 million units, according to an e-mailed statement. It currently runs two plants in Ho Chi Minh City at full capacity, according to Sanofi Chief Executive Officer Chris Viehbacher.

“Asia continues to grow and it seems to be less affected by the European economic difficulty” compared with other regions in the world as there’s “a lot of trading going on among Asian countries,” Viehbacher said in an interview yesterday in Hanoi.

Asia is home to fast-growing populations like Indonesia and nations with strong economic growth, including Vietnam and China, he said. The rise of middle-income families and urbanization in the region will give people more access to health care, he said.

Sales from Vietnam are climbing 25 percent annually and is the fastest-growing in Southeast Asia, according to Cyril Grandchamp-Desraux, Sanofi’s general manager of Vietnam, Cambodia and Laos. Annual sales in Vietnam will exceed 100 million euros ($128 million) this year, he said.

Sanofi currently sells about 80 percent of the products made in Vietnam domestically. The new plant will expand its manufacturing capacity to “meet the fast growing demand of the Vietnamese pharmaceutical market and will serve as an export platform to ASEAN countries,” Sanofi said in the statement, referring to the Association of Southeast Asian Nations.

While Sanofi “is always actively looking” for acquisition opportunities worldwide, the company is focusing more on non- BRIC countries as “valuations are high everywhere,” said Viehbacher, referring to Brazil, Russia, India and China.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

By Diep Ngoc Pham   |   29 March 2013  |   Bloomberg News

TPG Scopes Out ’Emergent’ Vietnam Companies to Invest

TPG Capital, the private-equity firm run by David Bonderman and James Coulter, is seeking its first Vietnam investment in almost four years as the country’s growing middle class offer growth opportunities.

TPG Growth fund, which manages $4 billion, is scouting for “emergent” companies with growth potential that want to leverage the fund’s global expertise, Managing Partner William McGlashan said in an interview in Hanoi. The company previously invested in Masan (MSN) Group Corp. and FPT Corp. (FPT) in Vietnam.

Vietnam is set to become a target for deals as investors look to Southeast Asia as a primary destination and branch out beyond Singapore and Thailand, according to Ernst & Young LLP’s 2013 outlook report on Asia-Pacific region released in January.

“There are a lot of very exciting, developing companies that may not be on the radar because they don’t have the scale of Masan and FPT yet,” he said in the March 21 interview. “We want to find those kinds of opportunities: emergent, interesting scale companies that may not be pristine today.”

A fifth of private-equity investors surveyed in a Collier Capital December report said they are turning to emerging Asian markets such Vietnam and Indonesia amid concerns that rewards in China are getting smaller with higher risks. The pivot toward Vietnam underscores foreign investors’ attraction to its growing middle class and a population where more than half of the nation’s 90 million people are under the age of 35.

“The beauty of this market is there’s so much opportunity here for growth,” said McGlashan, who was in Hanoi for the fund’s first annual investor meeting outside of the U.S. “You have a consumer-driven economy with one of the youngest demographics in the world. You’ve got an opportunity to participate in a coming-out party here in Vietnam of biblical proportions.”

Deals’ Target

Vietnam is set to become a target for deals as investors look to Southeast Asia as a primary destination and branch out beyond Singapore and Thailand, according to Ernst & Young LLP’s 2013 outlook report on Asia-Pacific region released in January.

“Right now, Vietnam is looking for capital, as the financial sector is doing quite poorly,” Kelvin Lee, Ernst & Young’s transactions leader for Vietnam, said in the report. “In the Southeast Asia region, this is one place that needs private equity more than anywhere else.”

Vietnam is “desperate” for foreign investment as economic growth slows, and the cost of entering the market has dropped, according to Ralf Matthaes, a regional managing director at market research firm TNS. The company has seen a “mild but serious” increase in interest from foreign investors this year after a drop in the last two years, he said.

McGlashan says he’s not concerned that Vietnam’s government is struggling to revive economic growth, which has lagged to its slowest in 13 years amid a credit slump.

Masan’s Growth

TPG invested $35 million in Masan, a food and soy sauce maker, in 2009. That year, Vietnam’s growth shrunk to 5.3 percent, then the slowest expansion in a decade. Masan’s sales have more than doubled to 10.4 trillion dong ($497 million) last year, while net income more than tripled to 1.3 trillion dong.

KKR & Co. (KKR), the private equity run by Henry Kravis and George Roberts, also invested in Masan in 2011 and doubled its investment this year with an additional $200 million.

In 2006, TPG also made a $21.5 million investment in FPT, Vietnam’s largest listed telecommunications company, which it has since exited.

TPG is more interested in the performance and management of specific companies rather than the broader economy, McGlashan said.

“Vietnam right now is not a particularly popular place to invest for lots of reasons,” said McGlashan, who will be based in Mumbai starting next month. “Since it’s more about the micro than the macro, it represents a more attractive time for us to come looking for companies that we can partner with.”

Asian Opportunities

The fund is interested in pursuing investments in Asia in consumer, technology, financial services and health-care sectors, he said. He declined to say which industries the company is looking at in Vietnam.

The nation’s economy is forecast to expand 5.5 percent this year, from an average of 7.3 percent annually in the decade starting in 2000.

The benchmark VN Index (VNINDEX) climbed 22 percent in the past three months, making it the best-performing Asian stock market in U.S. dollar terms.

TPG and investors met last week with Deputy Prime Minister Hoang Trung Hai, McGlashan said. The company would like to see more “business rights” in Vietnam, including broader intellectual property protection.

“Ultimately, Vietnam is going to have to reform a lot of these controls if they want a robust capital market, liquidity and if they want the kind of partners that we represent to come in and help their companies mature and grow to global scale and quality,” he said. “I’m optimistic they’ll get there.”

By  K. Oanh Ha  |   25 March 2013  |   Bloomberg News