We attended Pharmaniaga’s 4Q21 results briefing and remain upbeat over its prospects, given the established plans that should help support growth for both the nearer and longer term. Near term growth would be supported by its vaccine sales to the private sector as well as export market, while its longer term growth would be underpinned by the potential renewal of concession agreement as well as its venture into the manufacturing of halal vaccine and insulin. We maintain our BUY recommendation on Pharmaniaga, with an unchanged TP of RM1.13, valued at a 18.5x PE (at +1SD of its 5-year mean) on its FY22f EPS of 5.6 sen

New concession agreement. Recall that Pharmaniaga previously received a conditional letter for continuation of medical supplies to Ministry of Health’s (MOH) facilities for a period of 10 years and the extension would only begin after the terms have been mutually agreed. We gathered that Pharmaniaga has recently completed an engagement session with MoH to look into the overall agreement and the feedback has been positive thus far. Management targets to conclude discussions with MoH by April and have the new concession agreement signed before May.

Sinovac vaccine. Pharmaniaga has delivered c.2.5m doses of vaccine to the private sector and export market in 4Q21. Going forward in FY22, Pharmaniaga targets to supply another 10m doses of Sinovac vaccine to the private sector and export market (particularly countries with low vaccination rate). The Group targets delivery of vaccine to be in 2H22, as negotiations for vaccine supplies are currently underway between Pharmaniaga and other ASEAN and African countries. Pertaining to the study on the use of Sinovac vaccine for children, Pharmaniaga has submitted all the relevant documents to the National Pharmaceutical Regulatory Agency (NPRA) for evaluation and we understand that the Drug Control Authority will be having a meeting in early March for this matter. However, there is no indicative timeline as to when the decision would be made.

R&D to fuel sustainable growth. R&D is critical for Pharmaniaga to continue expanding its current product offerings. The Group has plans in place for the commercialisation of products that are coming off patent in the next 10 years. We highlight that commercialisation of products takes approximately 5 years to materialise (2-3 years in R&D + 18-24 months to register the said product), therefore this renewed strategy of Pharmaniaga’s would help to ensure timely introduction of off-patent products to the market.

More certificates to strengthen international foothold. Pharmaniaga has ventured out of the region and has presence in the European and Middle Eastern/North African (MENA) market. With Malaysia being part of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S), it allows for better acceptance of Malaysian products in Europe and MENA regions, but the manufacturing facilities are required to be EU GMP certified. Note that Pharmaniaga’s Puchong plant is EU GMP certified and the Group is committed to ensure all of its remaining plants achieve the EU GMP status as well. The relevant certifications will no doubt open more doors for Pharmaniaga when the Group decides to strengthen its foothold overseas.

Forecast. Unchanged.

Maintain BUY, TP: RM1.13. We maintain our TP of RM1.13, based on a PE multiple of 18.5x (at +1SD of its 5-year mean) on its FY22f EPS of 6.1 sen. Maintain BUY on Pharmaniaga.

Source: Hong Leong Investment Bank Research - 22 Feb 2022