Ratings of Duopharma, Pharmaniaga upgraded

KUALA LUMPUR: RHB Investment Bank Bhd (RHB IB) has upgraded Duopharma Biotech Bhd’s rating from “sell” to “buy” with a new target price (TP) of RM4.00 per share following increased clarity on the company’s participation in Malaysia’s Covid-19 vaccination programme.

The TP is an 18 per cent increase from RM3.30 previously.

In its research note, RHB IB said Duopharma and Pharmaniaga Bhd had been recognised by the government as potential companies to undertake the filland-finish process for vaccines.

“As Duopharma has the filland-finish capacity of six million vials or 60 million doses per year, we believe that there is a high chance of it participating in Malaysia’s Covid-19 vaccination programme,” it said.

Separately, the upgrade by RHB IB was also following the government’s recent extension of Duopharma’s human insulin supply contract for one year effective Dec 2, 2020, to Dec 1, 2021.

The company also has a stable earnings outlook, as 50 per cent of its revenue is from the government.

“Duopharma also disclosed that the remaining value of products, yet to be drawn down by the government, stood at RM69.1 million.

“We are positive on this due to the higher financial year (FY) 2021 revenue visibility although we have already imputed this into our earnings forecasts previously,” said the investment bank.

On a separate note, integrated financial service provider CGSCIMB

has raised Pharmaniaga’s rating to “hold” with a TP of RM5.41 from a “reduce” rating of RM4.15 previously.

Pharmaniaga on Jan 12, 2021, signed an agreement with Sinovac Biotech Ltd to purchase the Covid-19 vaccine.

The agreement also stipulated the execution of a technology and know-how license agreement, which will be needed for the relevant final approvals with the National Pharmaceutical Regulatory Agency (NPRA).

“The premium (TP) is to reflect potentially stronger earnings prospects from vaccine manufacturing in the longer term, which we think is already priced in at current valuations,” said CGS-CIMB in its note.

The vaccine is to be purchased in ready-to-fill bulk form, and the fill-and-finish process will be carried out by Pharmaniaga domestically at its’s existing small-volume injectables (SVI) plant in Puchong.

“Pharmaniaga shares that the additional investment to retrofit the plant for the process is small at about RM3 million and estimates that the SVI plant will have a fill-and-finish capacity of two million doses a month at full capacity.

“In terms of logistics, we gather that the Sinovac vaccine requires normal refrigeration of two to eight degrees celsius, which is well within Pharmaniaga’s logistic and distribution capabilities,” CGS-CIMB noted.

Pharmaniaga is already distributing various forms of vaccines to government hospitals and clinics that require cold chain temperatures of two to eight degrees celsius. — Bernama

As Duopharma has the fill-and-finish capacity of six million vials or 60 million doses per year, we believe that there is a high chance of it participating in Malaysia’s Covid-19 vaccination programme.

RHB IB