Pharmaniaga has entered into an Agreement with Sinovac for the purchase of ready-to-fill bulk product for the supply of 14m doses of Covid-19 vaccine in Malaysia. We are positive on this news as we believe it will enhance Pharmaniaga’s vaccine business as well as aid in forming long-term partnerships. It expects to distribute the vaccines by end of Mar 2021. We retain our forecasts, pending the finer details. Maintain HOLD with unchanged TP of RM5.70 (PE multiple of 21.5x of mid FY21 EPS).

NEWSBREAK

Pharmaniaga has entered into a Binding Term Sheet Agreement with Sinovac Life Sciences Co. Ltd (subsidiary of Sinovac Biotech Ltd) for the purchase of ready -to-fill bulk product for the supply of 14m doses of Covid-19 vaccine in Malaysia.

Sinovac is a China-based biopharmaceutical company that focuses on the research development, manufacturing and commercialization of vaccines that protect against human infectious diseases.

The Agreement would enable Pharmaniaga to carry out fill-and-finish process of Covid19 vaccine in Malaysia. Also, Sinovac will enter into a Local Manufacturing Agreement and a Technology and Know-How License Agreement.

The Agreement shall be effective from 12 January 2021 and shall remain in force for a period of 1 year.

HLIB’s VIEW

Positive. We are positive on the news; we feel the Agreement would serve as a platform for Pharmaniaga to further strengthen its vaccine business. Apart from that, it will also aid in its long-term partnerships, including technology transfer to grow the sector in Malaysia. Moreover, we expect this Agreement would allow for a new income stream contribution to Pharmaniaga.

Covid-19 vaccine from Sinovac. Sinovac has completed its Phase 3 trials in Brazil and Turkey. The vaccine has to be stored at 2-8 degree Celsius which can be catered by Pharmaniaga’s existing facilities. This project will be executed in Pharmaniaga’s small volume injectable (SVI) high-tech plant in Puchong. Pharmaniaga expects to receive the vaccine in Mar 2021, and hopes to distribute the vaccines by end of that month.

Forecast. We keep our forecasts at this juncture, pending finer details on price point, cost structure and stock supply timeline.

Maintain HOLD, TP: RM5.70. Maintain HOLD with unchanged TP of RM5.70. 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 - 13 Jan 2021