Pharmaniaga has recently entered into two separate MoUs with two different Thailand-based parties, BIO-INNOVA and Bionet. We are positive on both the collaborations, as it is in line with the Group’s longer term strategy (i) to undertake R&D activities to develop more pharmaceutical products, and (ii) to penetrate into vaccine development and manufacturing, beyond its current capabilities in vaccine fill & finish. The MoU with Bionet would also create a new stream of revenue for Pharmaniaga, as the Group will manufacture and distribute two types of vaccines in Malaysia, upon the successful registration of the said vaccines. Having said that, we do not expect instant revenue contribution from this MoU, as product registration typically takes 18-24 months to complete. We make no changes to our earnings projections, and we maintain our BUY recommendation on Pharmaniaga with an unchanged TP of RM1.13.

NEWSBREAK

Pharmaniaga has entered into two separate Memorandum of Understandings (MoU) with two separate parties – Bio-Innova Co Ltd (BIO-INNOVA) and Bionet-Asia Co Ltd (Bionet). Both of the MoUs will be in force for a period of two years.

BIO-INNOVA is a Thailand-based company that offers services in clinical research, pharmacokinetics, bioavailability and bioequivalence, statistics as well as data management, supporting the pharmaceutical, medical device and biotechnology industry. The MoU inked between Pharmaniaga and BIO-INNOVA will allow collaboration between both parties, with regard to clinical trials and developing capabilities in the space of product development.

Both parties will also work together (i) on bioavailability and bioequivalence studies, (ii) to establish a Centre of Excellence and world-class partner to deliver innovative scientific solutions in the development of pharmaceutical products, as well as (iii) to establish strategic partnership with BIO-INNOVA for technical know-hows and knowledge sharing.

On the other hand, Bionet is a Thailand-based biotech company that emphasizes on bio-innovation and access to genetically designed vaccines to fight infectious diseases. With the MoU, both Bionet and Pharmaniaga aim to work together for the research and development (R&D) of vaccines in Malaysia.

Two vaccine types, namely (i) Boostagen vaccine and (ii) combination vaccine, are the focus of this MoU. We understand that both vaccines have been developed by Bionet, and in the first phase of this collaboration, Pharmaniaga will be working with Bionet to register the vaccines in Malaysia (target initiation in 2022). Upon inclusion of the vaccines in Malaysia’s Expanded Program on Immunisation, Pharmaniaga will begin manufacturing the vaccines locally as part of its long-term vaccine manufacturing project.

Second phase of this collaboration will also encourage the development of combination vaccine, whereby Bionet will provide the relevant antigens, technology for bulk antigens as well as formulation development know-hows for acellular pertussisbased combination vaccine, to create the most optimal formulation and combination.

HLIB’s VIEW

We are positive on both the collaborations announced, as it is aligned with Pharmaniaga’s longer term plan to (i) undergo R&D activities to develop a wider array of pharmaceutical products, and (ii) establish and develop its own vaccine manufacturing business beyond the current vaccine fill & finish services.

Conditional upon the successful registration of the Boostagen vaccine and combination vaccine in Malaysia, the collaboration with Bionet will likely create a new stream of revenue for Pharmaniaga, given that it will be involved in the trading and manufacturing of vaccines in the first phase of the MoU. That said, it is important to note that we do not expect immediate revenue contribution, as product registrations typically take 18-24 months to be approved.

Forecasts. Keeping our forecasts unchanged as the potential revenue contribution arising from its MoU with Bionet should only materialise in FY24.

Maintain BUY. Reiterate BUY on Pharmaniaga, with an unchanged TP of RM1.13. Our TP implies a PE multiple of 18.5x (at +1SD of its 5-year mean), on its FY22f EPS of 6.1sen. We continue to like Pharmaniaga given the established plans it has in place that would help underpin the Group’s growth in both the nearer and longer term.

Source: Hong Leong Investment Bank Research - 28 Feb 2022