Pharmaniaga has entered into a MOU with SERUM to purchase Pneumococcal Vaccine and will perform the filling and finishing process as well. The product will be marketed, distributed and sold exclusively in Malaysia by Pharmaniaga. We are positive on the news as we feel this is a good start for its fill and finish business as well as enhancing Pharmaniaga’s vaccine operations. Furthermore, we expect the collaboration to contribute positively to Pharmaniaga’s profitability in the future. We maintain our forecasts, pending more update on the start of the process of fill and finish business. Maintain BUY with unchanged TP of RM5.94 (PE multiple of 21.5x of mid FY21 EPS).

NEWSBREAK

Pharmaniaga has entered into a Memorandum of Understanding (MOU) with Serum Institute of India Private Limited (SERUM).

SERUM is a leading pharmaceutical company, ranked as India's No. 1 biotechnology company, manufacturing highly specialized vaccines using cutting edge genetic and cell-based technologies, antisera and other medical specialties.

The MOU enables Pharmaniaga to purchase Pneumococcal Vaccine from SERUM and subsequently, by using the technology and knowhow licensed by SERUM for filling and finishing. The fill & finish product will be marketed, distributed and sold exclusively in Malaysia by Pharmaniaga.

Pharmaniaga is expected to produce the product once license has been granted by SERUM, following some technological transfer from SERUM.

HLIB’s VIEW

Positive. We are positive on the news; we feel the MOU and collaboration with SERUM will serve as a good first step on Pharmaniaga’s fill and finish business and acts as a platform for the latter to further strengthen its vaccine operations. The long-term partnership which includes the technological transfer that would aid to grow the sector in Malaysia. Moreover, we expect the collaboration to contribute positively to Pharmaniaga’s future profitability.

Pneumococcal vaccine. In Malaysia, pneumococcal disease is one of the most widespread vaccine preventable diseases. As we understand, each child needs to be given 3 doses; with 500k new birth in Malaysia, the estimated requirement will be c. 1.5m per year. To recap, Budget 2020 has included RM60m to kick start the Pneumococcal vaccination for children. This shows that the government is taking seriously the usage of this vaccine, hence we can expect the usage of this vaccine to increase in the coming years.

No clear timeline. While management did not indicate when the fill and finish process for the Pneumococcal Vaccine can begin, we optimistically expect it to commence sometime in 2022.

Forecast. We keep our forecasts at this juncture, pending further updates on the actual start date for the fill and finish process.

Maintain BUY, TP: RM5.94. Maintain BUY with unchanged TP of RM5.94. Our TP is based on mid FY21 earnings pegged to P/E multiple of 21.5x (+2SD of 5 year mean).

Source: Hong Leong Investment Bank Research - 27 Oct 2020