AMIDST the global race by pharmaceutical companies to develop vaccines for the coronavirus (Covid-19) pandemic, a few local players were thrust into the limelight.
The share prices of local pharmaceutical companies Duopharma Biotech Bhd and Pharmaniga Bhd recently soared to hit their all-time highs.
This came after Science, Technology and Innovation Minister Khairy Jamaluddin said these companies would be involved in the fill-and-finish processes for Covid-19 vaccines, once they are available.
However, Khairy later clarified that the packaging for these vaccines would not be exclusively managed by these two firms, leading to a slight selldown of their shares.
Duopharma Biotech Bhd managing director Leonard Ariff Abdul Shatar says the company is currently in discussions with the Science, Technology and Innovation Ministry and the Health Ministry on its capability to take on the potential fill-and-finish processes for Covid-19 vaccines.
“Right now, we don’t have anything concrete. But in Duopharma, we have a ready capacity to take on the fill-and-finish of human vaccines that could produce six million vials or about 60 million doses per year, ” he tells StarBizWeek.
According to news reports quoting US infectious diseases official Dr Anthony Fauci, Covid-19 vaccines could be ready as soon as early next year. Other reports indicate that it could be by the end of this year.
Fauci expects vaccine production to ramp up to a billion doses by the end of 2021.
The Covid-19 pandemic has claimed more than 700,000 lives worldwide so far.
To expedite the acquisition of potential Covid-19 vaccines, Leonard says the Malaysian government will identify the vaccines, buy them in bulk and bottle them in Malaysia by appointed pharmaceutical companies.
“It depends on the type of Covid-19 vaccines that become available. The line has first to be validated with a new vaccine prior to full scale production, which typically takes 12 to 18 months to complete, ” he says.
Leonard says the fill-and-finish process would need to meet certain accreditation and that Duopharma has already obtained Good Manufacturing Practice (GMP) accreditation and is approved by the National Pharmaceutical Regulatory Agency (NPRA).
It was reported that the US government has spent almost US$9.4bil on developing Covid-19 vaccines.
“Never in the history of mankind have we seen a huge amount of money being pumped into vaccine development.
“By looking into the speed and the investment, the development of Covid-19 vaccine could be (ready) as early as next year, ” Leonard says.
Duopharma’s largest shareholder, with a 50.9% stake, is the country’s largest fund management house Permodalan Nasional Bhd.
Meanwhile, Leonard points out that Duopharma has seen a surge in the sales of some of its consumer healthcare products, especially its Vitamin C range. This is due to consumers rushing to boost their immunity amidst the pandemic.
Its best-selling consumer healthcare products include Flavettes and Champs for Vitamin C, Uphamol and Eye Glo.
However, Leonard says Duopharma still faces an overall decline in sales as a result of the movement control order (MCO) as people avoid hospitals and clinics.
“We expect the sales to normalise in the second half of this year as people start to seek treatments, ” he says.
Share price overdoses
In mid-July, Duopharma’s share price surged more than 95% to RM3.19, a record high after news that the company will be packaging potential vaccines for Covid-19. It later corrected slightly after the government said it won’t be an exclusive deal for the company, and closed yesterday at RM2.88 apiece.
Analysts, however, reckon that Duopharma’s share price has run ahead of fundamentals. This is especially so as the commercial terms for a role in the fill-and-finish process for any Covid-19 vaccines are yet to be known.
CGD-CIMB says assuming that the fill-and-finish work begins by 2021 and total production is shared equally between Pharmaniaga and other players, potential earnings accretion to Duopharma’s financial year 2021 earnings is only about 0.3% higher.
“For our conservative case, we assumed 10 million vials to be produced, or approximately one dose for every three people in Malaysia, ” it says in a recent report.
RHB Research says although Duopharma is fundamentally strong, its share price has run up “purely on speculation”.
It expects no positive surprises for the second quarter of this year and for the overall 2020 earnings by the company.
“Duopharma’s share price has surged 76% in the past one month with no change in the company’s fundamentals. At RM2.82 a share, Duopharma is trading at a forward price-earnings (PE) ratio of 30.5 times, much higher than its two-year average forward PE of 17 times.
“Although it is fundamentally strong, we believe the huge premium is not justified in the absence of an immediate catalyst which will improve earnings significantly in the near term, ” RHB Research says.
Leonard remains optimistic and expects Duopharma to perform better than last year, boosted by public sector demand and increased sales of specialty pharmaceutical products.
About 55% of Duopharma sales are to the public sector, 35% to the private sector and 10% for export market.
Its concession to supply pharmaceutical and non-pharmaceutical products to hospitals, clinics and others under the government have been extended for 25 months, commencing Dec 1,2019 until Dec 31,2021.
The group is currently ramping up its plant capacity in Klang that will increase total capacity by 50%. At the moment, Duopharma’s plants are running at a 60% capacity rate.
He says Duopharma is targeting to launch two or three products per year for its specialty items that make about 20% of its current sales.
“We want to be among the top five pharmaceutical companies in Asean, ” Leonard says, adding that the company invests about RM4mil every year in research and development activities.
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