Dongwha Pharma, boasting a remarkable 126-year legacy, has embarked on its inaugural foray into global investment, drawing significant attention. This move is significant, not only as Dongwha Pharm’s second Merger and Acquisition (M&A) endeavor, following the acquisition of South Korean medical device firm Medyssey in 2020, but also due to its substantial scale.

On August 3rd, Dongwha Pharm disclosed the signing of an agreement to secure a 51% ownership stake in Trung Son Pharma, a Vietnamese pharmacy chain operator. The acquisition amount tallies to approximately $29.8 million (39.1 billion won). Simultaneously, the company unveiled its decision to procure a 51% stake in TS Care Joint Stock Company through shares and investment securities. Dongwha Pharm retains the option to acquire up to 80% of the stake from existing shareholders of TS Care Joint Stock Company. The transaction’s conclusion is stated for October 31st.

Established in 1997, Trung Son Pharma operates an extensive network of over 140 pharmacies in Vietnam’s southern region. By 2022, it achieved sales of approximately $56 million (74 billion won). Beyong specialized pharmaceuticals and general medicines, the company also encompasses products in the health and beauty (H&B) sector, including health functional foods, cosmetics, and medical devices.

As per the disclosure, Trung Son Pharma achieved sales of around $52.4 million (69 billion won) in 2021, marking a remarkable surge of over 70% from the $30.6 million (40.3 billion won) achieved in 2020. The growth led to a reduction in net loss, from around $684 thousand (900 million won) in 2020 to about $228 thousand (300 million won) in 2021. While 2022 figures were not provided, considering the reference sales figure of around $56.2 million (74 billion won), the sales escalation seems moderate. The possibility of achieving profitability remains uncertain. Notably, the debt ratio, which exceeded 500% in 2020, improved to the 200% range in 2021, indicating an positive financial stability trend.

The acquisition of Trung Son Pharma signfies Dongwha Pharm’s first outbound deal in terms of overseas acquisitions and investments. This investment is particularly noteworthy due to its extensive scale, giving rise to speculations that it represents a pivotal M&A event shaping the company’s future. Remarkably, this also marks the first instance of M&A activities targeting a Vietnamese company within the pharmaceutical and biotech sector.

Unlike South Korea, where pharmacies are restricted to individual pharmacists, Vietnam permits the establishment of pharmacies as corporate entities. This distinction holds significant implication, hinting at the potential for developing a diversified drugstore portfolio.

Following the acquisition of Trung Son Pharma, Dongwha Pharm plans to initiate its entry into the Vietnamese market with its core pharmaceutical products, such as Whal Myung Su (digestive drink), Each paste (gum medicine), and Pancold (cold medicine). The company’s strategy goes beyond conventional pharmaceuticals, extending to meet the growing demand in Vietnam for health functional foods and cosmetics, thereby broadening its product range.

A representative from Dongwha Pharm highlighted, “This acquisition of Trung Son Pharma holds significant importance as it is a stepping stone for future expansion into the rapidly growing pharmaceutical and beauty markets in Southeast Asia”.

In the preceding fiscal year, Dongwha Pharm achieved a historic milestone with consolidated sales totaling $258.5 million (340.4 billion won). However, approximately 95% of these sales came from South Korea, while international sales contributed a mere 5%. Despite its extensive 126-year history, the company predominantly focused on the South Korean market, adhering to the archetype of a typical ‘domestic-oriented enterprise’. The overseas sales for 2021 and 2022 were $11 million (14.5 billion won) and  $14 million (18.5 billion won).

The acquisition of Medyssey, Dongwha Pharm’s first M&A deal, has been pivotal in securing momentum for expanding international sales. Following this acquisition, the company reported exports of orthopedic implants worth $1.7 million (2.2 billion won) in the fourth quarter of 2020. Subsequently, it achieved export figures of $8.2 million (10.8 billion won) in 2021 and $10.5 million (13.8 billion won) in 2022. The majority of Dongwha Pharm’s overseas sales can be attributed to exports from Medyssey.

In contrast, the exports of Whal Myung Su, Each paste, and Pancold were approximately $836 thousand (1.1 billion won), $76 thousand (100 million won), and $16 thousand (21 million won) in 2022. The potential of leveraging the Trung Son Pharma acquisition as an additional catalyst for expanding international sales has garnered significant attention.