- DBD is a generic pharmaceutical company in Vietnam with a market share of ~1% in 2020, per our estimate based on data from IQVIA — a US market research company. The company is also the leading Vietnamese company in anti-cancer medicines (12% of DBD’s 2020 in-house product revenue) with a ~2% category share in the 12-month period ending June 2020.

- DBD is awaiting approval of the EU Good Manufacturing Practice (EU-GMP) standard — the top-tier manufacturing standard — for a new anti-cancer factory whose revenue at max capacity could reach VND1.5tn (USD65m) vs DBD’s 2020 in-house product revenue of VND1.1tn (USD46mn). 

- If approved, the new EU-GMP factory should bolster DBD to gain market share in the hospital channel, in which Government policies favor high-quality, locally produced drugs. However, given the strict requirements of the EU-GMP standard and this being the first time DBD has applied for this standard, it is uncertain whether DBD can secure approval soon, in our view.

- At the same time, DBD is restructuring its distribution strategy for the pharmacy channel — where its presence currently lags peers — which could further add to growth.

- DBD is trading at a TTM PER of 17.6x, which looks full compared to its average of 17.7x since its listing in 2018 and the three-year peer average of 17.1x. 

- Potential catalysts: Successful obtainment of EU-GMP for the anti-cancer medicine factory; pharmacy distribution restructuring bearing fruit; potential investment of a strategic investor similar to those of DHG, IMP and TRA that were done at favorable valuations for existing shareholders.

- Risks: Stiffening competition; failure to obtain EU-GMP approval.

DBD is investing in EU-GMP factories in order to capitalize on favorable regulations for local companies with strong technology in hospitals. Per Circular 15/2019/TTBTY, drug procurement of public hospitals must go through a tender process that is stratified by quality standards in which the top two tiers (~50%-60% of generic drug tender value) are limited to EU-GMP or equivalent drugs. Vietnam’s regulations also prioritize local drugs once they can fully replace imported alternatives. In addition to the anti-cancer medicine factory, DBD plans to start constructing an EU-GMP non-beta-lactam factory in 2021 and an EU-GMP sterile medicine factory in 2022.

DBD’s presence lags peers in the pharmacy channel (35% of 2020 in-house product revenue). DBD’s current ~8,000 active pharmacy customers trail ~30,000/27,000/12,000 of DHG/TRA/IMP, respectively. Similarly, per our estimates, DBD’s sales per pharmacy customer of VND46mn (USD2,000) in 2020 trailed VND105mn/61mn/63mn (USD4,600/2,650/2,740) of DHG/TRA/IMP, respectively. To unlock the value of its diverse product portfolio that slightly trails the top companies in the pharmacy channel (e.g., DHG and DMC) in terms of SKUs, DBD has pivoted its pharmacy distribution strategy to expanding coverage instead of pushing sales through a few big accounts as it did in the past. DBD is also strengthening its sales capabilities by expanding its salesforce, tightening standard operating procedures and increasing data usa