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M&A – The Healthcare Sector in Vietnam

posted 6 months ago

In 2023, healthcare was one of the most active sectors in M&A activities, including: investment in medical device manufacturing, pharmaceuticals; drug distribution and healthcare services.

1. Drug manufacturing

An updated report on the pharmaceutical industry by SSI Research shows that healthcare spending has skyrocketed by 25% compared to the previous year and most businesses record growth in both revenue and net profit at a double-digit rate. Typical examples are Hau Giang Pharmaceuticals, Traphaco, Binh Dinh Pharmaceuticals, Imexpharm…

2. Drug distribution

In the distribution segment, retail is facing fierce competition. After a hot growth phase, An Khang stopped opening new ones, Pharmacity restructured its store chain, while Long Chau rose to lead in terms of pharmacy scale.

3. Clinics and hospitals

Previously, M&A activities in the healthcare sector mainly revolved around the transfer of private hospitals and clinics. This trend is expected to continue thanks to favorable market conditions. The aging population, heightened health awareness, and increased income have created a demand for high-quality healthcare services that are not yet fully met.

In terms of supply, the overload situation at first-line public hospitals in big cities has not been resolved. According to the General Statistics Office, the number of beds per 1,000 people in Vietnam in 2021 only reached 3.1 beds, below the recommendation of the World Health Organization (5 beds/1,000 people).

This imbalance between supply and demand shows the potential for the development of private healthcare systems in Vietnam, supported by government incentive policies, such as Resolution No. 20/NQ-TW (2017) setting a goal for private hospital beds to account for 10% and 15% of the total number of beds by 2025 and 2030. Therefore, private hospitals and clinics will continue to attract investor attention, especially as the number of patients is recovering to pre-pandemic levels; complex medical surgeries and procedures and expensive medical services have been resumed.

Here are some notable trends:

Multidisciplinary hospitals attract the highest interest: The largest deal in the healthcare services sector in recent years is GIC’s investment of more than $203 million in Vinmec in 2020. Other notable deals include VinaCapital’s investment in Thu Cuc Healthcare System in 2020, Quadria Capital’s investment in FV Hospital in 2017, Navis Capital’s investment in Hanoi French Hospital in 2016.

In 2020, VinaCapital’s Vietnam Opportunity Fund (VOF) invested $26.7 million to own 30% of Thu Cuc Medical and Cosmetic JSC – owner of the same-named international general hospital. Thu Cuc chose VinaCapital because it is an investor with long experience in the healthcare sector, favorable for strategic decisions related to this special industry.

Partnership with VinaCapital Investment Fund is expected to accelerate the development of Thu Cuc healthcare system in both breadth and depth, and lay a good foundation for foreign investors to enter the Vietnamese market.

The rapid growth opportunities of emerging industries

  1. Healthtech becomes a new investment focus as demand for online healthcare services increases, especially since the Covid-19 outbreak has reduced direct contact. Telehealth and digitization of medical records are among the priorities of the Vietnamese Government. In the private sector, healthtech startups serving various market segments such as telehealth (JioHealth, Med247, eDoctor), support services for medical insurance compensation (Insmart, South Asia Services) and online pharmacies (Medici, POC Pharma) have recently successfully mobilized capital from foreign investors, highlighting the prospects of the youthful healthtech sector in Vietnam.
  2. Testing services are also very potential, as currently, the testing services market in Vietnam is still very fragmented, most providers are labs with small scale, low sample size, and outdated technology. Companies can create testing service networks with potential for scale expansion, modern equipment, and high technology to gain market share, thereby attracting investors and becoming an important link in the process of building regional-scale testing service networks, similar to markets in India, China… In addition to clinical testing, genetic testing also attracts a lot of investor attention, with some notable recent deals, such as Genetica and Gene Solutions completing their first funding rounds, Gentis being acquired by Eurofins…
  3. There is much room for medical equipment when very few domestic manufacturers meet international standards. According to the Ministry of Health’s statistics, more than 90% of medical equipment in Vietnam still has to be imported. However, EastBridge Partners’ $30 million investment in USM Healthcare, a domestic stent (artery support tube) manufacturer at the beginning of 2022, has shown that high-quality domestic manufacturers are receiving great attention. In the future, this field will continue to attract many investors, especially in the medical consumables segment (such as stents, sutures…), which has many potential and popular names domestically.

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