Sanofi gets closer to Vietnam's VinaPharm, seeking growth in Asia-Pacific hot spot

Vietnam has been one of the fastest-growing economies in Asia in recent years, and Sanofi has just cut a deal to give it a stronger position in the country's pharma market.

The French group has agreed to continue and expand a long-running partnership with state-run pharma company VinaPharm, by far the biggest player in Vietnam's domestic drugs market. VinaPharm says the new deal will also serve as a springboard for Sanofi's growth in other Asia-Pacific markets.

As part of the deal VinaPharm will invest in a Sanofi manufacturing facility in Ho Chi Minh City that has been set up with an investment of $75 million and makes prescription, generic and over-the-counter (OTC) drugs.

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The two companies have been working together in Vietnam since 1993, and Sanofi already has a healthy presence in Vietnam's domestic pharma market, which according to BMI Research will grow from $4.2 billion last year to nearly $7.2 billion in 2020.

That represents an annual growth rate of more than 14%, far ahead of the background level of growth in pharma. It comes on the back an economic boom in Vietnam--assisted by sizeable inward investment into the manufacturing sector--that has helped to lift many citizens out of poverty.

The VinaPharm deal consolidates Sanofi's position in a market that can be a challenging for overseas drugmakers, thanks to Vietnamese laws that restrict foreign-based firms from distributing pharmaceuticals directly.

That means the majority of firms have chosen to engage distributors to market their products. However, BMI notes this brings a new set of challenges as companies lose control of their supply chain but still bear ultimate responsibility for their products.

The French drugmaker claims to be the leading foreign drugmaker in Vietnam--ahead of GlaxoSmithKline and Novartis--but is thought to still have a market share below 5% at the moment.

Sanofi was at the forefront of the trend among pharma multinationals to make growth in emerging markets a priority, and makes around 29% of sales from these markets. The importance of emerging markets has only gone up following the approval of dengue fever vaccine Dengvaxia, expected to be one of Sanofi's growth drivers in the coming years. Dengue is endemic in Vietnam and other Southeast Asian countries.

Sanofi is not the only foreign drugmaker eyeing up the Vietnamese market. In July, Japan's Taisho paid $97 million for a minority stake in domestic firm DHG Pharma. Meanwhile, Abbott has just snapped up Vietnamese manufacturer Glomed for an undisclosed sum, adding two local manufacturing facilities.

- See VinaPharm's press release (in Vietnamese)

Related Articles:
Sanofi's Dengvaxia could do more harm than good in certain settings, study says
Japan's Taisho buys nearly 25% stake in Vietnam's DHG Pharma for $97M
Pharma market bets on ASEAN in focus ahead of economic pact
Vietnam drug spending makes it a prime pharma target

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