KUALA LUMPUR (June 6): Pharmaceutical company Duopharma Biotech Bhd (KL:DPHARMA) announced on Thursday that it is eyeing up to a 10% revenue contribution over the next two years from a recently-secured contract with Pharmaniaga Bhd (KL:PHARMA).

In addition to the Approved Product Purchase List (APPL) contract with Pharmaniaga, the company is still awaiting confirmation on several other contracts that are currently under negotiation, managing director Leonard Ariff Abdul Shatar told reporters, following Duopharma’s annual general meeting.

“APPL is not awarded at one point, as they determine the price in a competitive process,” Leonard Ariff said. “I expect the new APPL [contract] to contribute positively to the group’s [annual] revenue.”

Duopharma secured the APPL contract, valued at RM578.09 million from Pharmaniaga in April, which involves supplying 86 pharmaceutical and non-pharmaceutical products.

The contract is based on an exchange rate of RM4.70 against the US dollar, compared to the RM4.20-RM4.25 range in 2017, while the range of products is expected to surpass the current 50 stock-keeping units (SKUs), according to Leonard Ariff.

He said that the APPL contract will enable the company to pass on the higher costs of active pharmaceutical ingredients to the government.

When asked how this would affect the company’s profit margins, he explained that “some of the product prices are definitely better, while others improve but do not fully cover the entire cost increase”.

He also flagged that “some of our cost bases have risen and will not be decreasing”.

Duopharma in aggressive bidding mode amid rising operational costs

Prior to the latest contract, Duopharma had received multiple extensions for the APPL contract, secured from Pharmaniaga in 2017 to supply pharmaceutical and non-pharmaceutical products to government hospitals and clinics.

The contract initially covered a three-year period from Dec 1, 2017, to Nov 30, 2019, and was subsequently extended four times, ultimately lasting until Dec 31, 2023.

Duopharma is getting “more aggressive” in bidding for several tenders, amid rising operational costs, said Leonard Ariff.

“We need to be more aggressive,” he continued, “because we need the topline to offset the inflationary pressures we are facing”.

Rising operational costs, which included increased electricity tariffs, higher finance costs, incremental expenses from the commencement of production at the new K3 facility, and unfavourable exchange rates, have weighed on Duopharma’s earnings last year, he noted.

Duopharma’s net profit for the first quarter ended March 31, 2024 (1QFY2024) dropped by 32.5% year-on-year to RM15.28 million. The net profit margin for the quarter narrowed to 7.91%, compared to 11.3% in 1QFY2023.