CGS-CIMB Research retains Add for Duopharma Biotech


  • Analyst Reports
  • Friday, 18 Oct 2019

Duopharma expects the supply of insulin to the MOH to continue after contract expiry in December 2019.

KUALA LUMPUR: CGS-CIMB Equities Research is maintaining its Add call for Duopharma Biotech with an unchanged target price of RM1.56, which is pegged to its five-year historical mean of 16 times 2020F P/E).

It said on Friday Duopharma is optimistic the Ministry of Health (MOH) drug procurement contract will be extended beyond 2019F, thus ensuring steady public sector contribution.

“This, coupled with continued growth in the private sector and its success in moving into niche and higher-value segments, will be a boon for the group, ” it said.

CGS-CIMB Research were among eight buy-side fund managers/analysts who recently visited the company at its manufacturing plant in Bangi.

Key takeaways include the group’s expectations that the supply of insulin to the MOH will continue, along with an extension of the APPL tender cycle. The group also reiterated its interest in venturing into biosimilars.

Duopharma expects the supply of insulin to the MOH to continue after contract expiry in December 2019.

To recap, Duopharma Marketing Sdn. Bhd. (formerly CCM Pharmaceuticals Sdn Bhd) was appointed as the authorised reseller of human insulin in Malaysia by Indian biopharmaceutical company, Biocon Limited in April 2017.

The supply of insulin is for three years from 2017, with an option to extend for another two years.

This follows the award of a RM300m contract from the MOH for the supply of recombinant human insulin and reusable insulin pens to government hospitals/clinics.

Duopharma remains optimistic that the APPL tender cycle will be extended by another 12 months as the contract is usually valid for three years.

“The current tender cycle would otherwise fall short of three years as the bids were only solicited in January 2017 (contract award would have been 6 months later). We also note that there has yet to be any new bids called for, for the next cycle, ” it said.

Separately, the government recently announced in Budget 2020 that it intends to centralise the tender and procurement of RM500mil worth of medicines across the MOH, Ministry of Defence and University hospitals. This makes up less than 20% of MOH’s expenditure for pharmaceuticals and may not affect the APPL channel.

Duopharma also believes that Pharmaniaga’s role under the concession is crucial as it ensures the continuity in the supply of drugs given its accessibility to remote areas. Its wide network also helps fulfill end-mile delivery.

“While the group continues to grow and expand its range of prescription and over-the-counter products, it emphasised again its interest in diversifying into niche and higher-value segments.

“This is illustrated by its partnership and collaboration with foreign players in various therapeutic areas. We continue to like the stock given its reasonable dividend yield of 3.2%-4.2% during CY19-21F, and its strategic position to capture the growing demand in the public and private sectors, ” it said.


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