CEO Morning Brief

After Vaccines Impairment, Pharmaniaga Makes RM65.2m Provision for ‘stock Obsolescence’

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Publish date: Thu, 30 Nov 2023, 08:42 AM
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TheEdge CEO Morning Brief
After unsold vaccines, Pharmaniaga makes RM65.2m provision for ‘stock obsolescence’

KUALA LUMPUR (Nov 29): Pharmaniaga Bhd, which is making a cash call plus private placement to raise RM654.6 million in fresh equity, announced a net loss of RM49.34 million or 3.67 sen per share for the third quarter ended Sept 30, 2023 (3QFY2023), more than double the RM13.99 million net loss, or 1.07 sen per share, it logged a year earlier.

The wider net loss was due to a one-off provision of RM65.2 million stock obsolescence from its expiring pandemic-related consumables inventory, such as personal protective equipment and needles.

In addition, it also wrote off RM7.6 million of new product development due to the non-commercial viability of the products, plus RM3.1 million on the cessation of non-core businesses.

Prior to this, the generic drug maker, which has been granted a seven-year concession to continue providing medical supplies to public hospitals, notched a massive impairment of RM552.3 million for unsold Covid-19 vaccines in 4QFY2022.

Pharmaniaga’s quarterly revenue was marginally lower at RM885.49 million, against RM894.94 million last year, mainly due to lower sales within its non-concession business, stemming from the loss of a tender exercise for a blood cancer product.

On a quarter-on-quarter basis, it posted a net profit of RM1.96 million in 2QFY2023, while revenue grew 4.33% from RM848.73 million, driven by the elevated non-concession sales to the Ministry of Health (MOH) and increased sales to the private sector.

For the nine months ended Sept 30, 2023 (9MFY2023), the group posted a net loss of RM44.73 million against a net profit of RM14.47 million in the same period last year, while revenue fell marginally to RM2.61 billion from RM2.62 billion.

Fund raising exercise to boost financial position

Pharmaniaga has proposed a regularisation plan that consists of a capital reduction, renounceable rights issue of news shares plus private placement, to raise up to RM654.61 million to pare down debts.

In a bourse filing, the Practice-Note 17 status generic drug maker proposed to undertake a capital reduction that entails the reduction and cancellation of RM180 million of its issued share capital to reduce the accumulated losses of Pharmaniaga and its subsidiaries.

The renounceable rights issue will be on the basis of four rights shares for every five existing shares held. The rights issue will be sweetened by free warrants, which will be issued on the basis of one warrant for every rights share subscribed for entitled shareholders.

In addition, Pharmaniaga will be issuing up to 714.29 million new shares, equivalent to 26.9% of issued share capital of 1.44 billion shares — to third-party investors to be identified later. The issue price will also be determined later.

“Recognising current hurdles, the group is actively engaged in re-evaluating its business operations with a strong focus on fiscal discipline, restructuring of non-performing businesses, strategic optimisation of business activities, resources and assets, and implementing prudent cost management strategies,” it said.

Nonetheless, the group remains optimistic that these ongoing efforts will yield positive outcomes in due course, allowing the group to emerge as a stronger and more resilient organisation.

"With the signing of the concession agreement with the MOH targeted by the end of 2023, Pharmaniaga will continue to uphold its commitment to serving the nation’s evolving healthcare needs," it added.

Pharmaniaga’s shares have fallen over 26% year to date and closed at 40.5 sen on Wednesday for a market capitalisation of RM576.58 million.

Read also:
Pharmaniaga proposes rights issue and private placement to raise up to RM654.6 mil fresh capital

Source: TheEdge - 30 Nov 2023

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