PETALING JAYA: Earnings visibility appears murky beyond 2021 for Pharmaniaga Bhd as it has yet to get an extension for its medical supply contract from the government which expires by year-end.
Pharmaniaga is the largest listed pharmaceutical company in the country by revenue with the government’s drug and medical supply concession in-hand.
However, the contract was extended in 2019 for a five-year period expiring by year end.
Unil now, there is no word of a prolonged extension, but if it manages to secure an extension, its fortunes beyond 2021 will change.
“A prolonged extension will ensure no disruption in medicine and medical supplies to government hospitals and clinics,” said Mercury Securities, which initiated coverage on the stock with a “sell’’ call at a target price of 61 sen a share.
Pharmaniaga shares closed at 90 sen in yesterday’s trading.
Mercury pointed out that earnings stability hinges on the government concession, among other things.
It said the resurgence of Covid-19 through new variants will delay business recovery, especially in Indonesia.
Pharmaniaga’s new vaccine division is facing an efficacy issue on its Sinovac vaccine. To be the world’s first halal vaccine facility takes time to 2024, it adds.The company is the sole and exclusive manufacturer and distributor of the Sinovac vaccine in Malaysia.
It has a production capacity of two million doses per month and is expected to ramp up to fout million doses by August 21.
It should have completed its initial delivery of the government order of 12 million Sinovac vaccine doses by July 21, the house said.
Pharmaniaga has received further orders of seven million doses from state governments and government linked companies, and additional two million doses from the federal government.
But the government unexpectedly stopped administering the Sinovac vaccine once the stocks depleted, opting for the Pfizer-BioNtech vaccine where the order stands at 45 million doses.Mercury said to fill up the production order of 48 million doses per annum will be a tall order for Pharmaniaga especially when the Sinovac vaccine has a lower efficacy against the Delta variant.
Hence, the optimism on the new vaccine division, which hinges solely on the Sinovac vaccine, looks uncertain and makes earnings forecasts difficult.