KUALA LUMPUR (Feb 27): Pharmaniaga Bhd announced its largest ever quarterly net loss of RM664.39 million, or 49.19 sen per share, in the fourth quarter ended Dec 31, 2022 (4QFY2022) as a result of RM552.3 million of impairment of Covid-19 vaccines.

In addition, it has written down the goodwill of the Indonesian manufacturing cash-generating units of RM50.3 million, according to its announcement to Bursa Malaysia.

Meanwhile, its board of directors announced that Pharmaniaga has become an affected listed issuer under Practice Note 17 (PN17) on the basis that Paragraph 2.1(a) of PN17 has been triggered in the company’s audited consolidated financial statements for the period ended Dec 31, 2022.

“In adherence to the requirement of MFRS102 inventories, the group made a provision of slow moving inventories on Covid-19 vaccines of RM552.3 million,” said Pharmaniaga in a bourse filing.

Quarterly revenue, however, grew 21.22% to RM862.72 million from RM711.72 million a year earlier due to “healthy growth” across the group’s concession, non-concession and Indonesian businesses as a result of strong demand from the customers subsequent to the resumption of normal business activities after the Covid-19 pandemic.

The increase in revenue was partially offset by the lower revenue from the sale of Covid-19 vaccine, said the group, citing the reason as “the country is entering into the endemic phase”.

The group’s balance sheet as at Dec 31, 2022, shows that its short-term borrowings, which would be due within six months, ballooned to RM968.27 million from RM570.05 million a year ago. Its long-term borrowings amounted to RM190.6 million versus RM285.17 million.

Notably, the pharmaceutical firm’s receivables increased to RM351.66 million as at end-2022 from RM297.75 million a year ago. Its cash balance was at RM52.84 million, while its inventory dropped to RM767.26 million from RM1.26 billion a year ago after the impairment.

Pharmaniaga's latest results confirm The Edge Weekly's report in the Feb 10-Feb 23, 2023 issue that the group could suffer a massive impairment due to hundreds of millions of ringgit worth of unsold vaccines stored in its warehouse.

The drug maker’s share price fell 15.4% in the past week to close at 44 sen on Monday, giving it a market capitalisation of RM576.49 million.

Addressing the matter at hand, Pharmaniaga, which supplies Covid-19 vaccines and generic drugs to the government, said it is currently in focused talks with various parties, both local and overseas to dispose of the vaccines.

“The group is optimistic of favourable outcomes from the negotiations. Notwithstanding this issue, the group assures all parties that it is committed to work on a regularisation plan, in accordance with Bursa Malaysia’s requirement within the stipulated time. The plan will focus on strengthening the group’s financial standing, as well as assuring that core business activities remain viable with growth prospects,” it explained.

Nevertheless, it said, the aggressive selling efforts on the Covid-19 vaccine stocks are ongoing as the shelf life of the vaccine is still valid.

Amid weaker quarterly earnings, Pharmaniaga sank into the red with a net loss of RM607.32 million for the financial year ended Dec 31, 2022 (FY2022) compared to RM172.15 million in the same period last year as revenue contracted 27% to RM3.51 billion from RM4.81 billion.

Moving forward, Pharmaniaga holds the view that Indonesia will be crucial for its future growth to elevate the group’s business further, adding that it will continue to focus on penetrating the Indonesian market.

“The group’s Indonesia operations continue to become the growth driver as it delivers an impressive performance by closing FY2022 with 10% growth in comparison to the previous year. In addition, the group managed to turn around the Indonesia business from a loss of RM1.4 million in 2021 to a profit of RM6.2 million,” it said.

On the local front, it said the government has extended the date for negotiations for the group’s concession agreement to June 2023. “Business continues to operate as usual while the Group is in the final stages of negotiations,” it said.

“The group also guarantees that its operational activities for both concession business with the Ministry of Health and non-concession business with the private sector will not be disrupted and continue to be intact. The group is committed to service all financial obligations to lenders and other financial institutions, as well as formulating an optimal cash flow plan,” it added.