Two thumbs up for Pharmaniaga-Sinovac deal
KUALA LUMPUR: Analysts are positive on the development of the agreement between Pharmaniaga Bhd (Pharmaniaga) and Sinovac, given that it will further strengthen the group’s vaccine business and also provide an alternative revenue stream and enhances its pharmaceutical product manufacturing capability going forward.
In a filing on Bursa Malaysia, Pharmaniagaannounced that its wholly owned subsidiary Pharmaniaga Lifescience Sdn Bhd (PLS) has entered into a binding term sheet agreement with Sinovac Life Sciences Co Ltd (Sinovac LS), a subsidiary of the Sinovac Biotech Ltd,(Sinovac) for the purchase of ready-to-fill bulk product of Covid-19 vaccine and the licensing of Sinovac LS’s technology and Knowhow by Sinovac LS, for the purpose of manufacturing the Covid-19 vaccine by PLS in Malaysia.
The filing also revealed that the duly executed agreement is to enable PLS to carry out fill-and-finish process of Covid-19 vaccine in Malaysia.
“We are positive on the news; we feel the agreement would serve as a platform for Pharmaniaga to further strengthen its vaccine business,” the research arm of Hong Leong Investment Bank Bhd (HLIB Research) said.
“Apart from that, it will also aid in its long-term partnerships, including technology transfer to grow the sector in Malaysia. Moreover, we expect this agreement would allow for a new income stream contribution to Pharmaniaga.”
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) is also positive on this agreement which will provide an alternative revenue stream for Pharmaniaga and enhances its pharmaceutical product manufacturing capability going forward.
“The signing of the agreement with Sinovac will effectively translate to the procurement of 14 million doses of Covid-19 vaccine which is expected to inoculate 22 per cent of the total Malaysian population,” MIDF Research noted.
In addition to being a more economical alternative to its peers, the research arm opined that the Sinovac vaccine was chosen given that it requires only four degrees Celsius of cold storage which is within Pharmaniaga’s current capacity of two degrees Celsius to eight degrees Celsius.
“The fact that it does not require an ultracooler-box for storage and transportation will ultimately reduce the overall cost of the vaccine. Meanwhile, the final bottling process and enddistribution will be handled by Pharmaniaga via its small volume injectable (SVI) plant located in Puchong, Selangor.
“The plant, which will undergo a month of retrofitting exercise at the cost of RM2 million; will have the capacity to produce two million doses per month.”
MIDF Research gathered that in-line with its growth strategy going forward, Pharmaniaga is also expected to enter into two other agreements with Sinovac for a locally manufactured Covid-19 vaccine in the near future.
As per the announcement, SINOVAC LS and PLS will subsequently enter into a local manufacturing agreement and a technology and know-how license agreement.
“What the agreements would entail among others is, the right to manufacture and distribute Sinovac’s Covid-19 vaccine in Malaysia.
“Furthermore, the subsequent agreements would also include technology and know-how license agreements which would allow the aforementioned activities to be conducted by PLS in Malaysia.”
MIDF Research viewed this development positively given that not only it will contribute positively to Pharmaniaga’s bottomline but as the vaccine’s technology is a proven method and with a reliable history which the research arm opined that it will bode well as part of the the group’s future product mix.
“We understand that these subsequent agreements and the execution of the terms of the agreements could be in effect as early as March 2021 - due to the urgent nature of the pandemic.
“This however, will be subjected to the Phase Three trial results which are currently taking place in Brazil (circa 78 per cent effective), Turkey (circa 91 per cent effective) and Indonesia (circa 65 per cent effective) as well as; the approval by National Pharmaceutical Regulatory Agency (NPRA) before the mass production of the vaccine can be done by PLS.”
The research arm estimated that the registration and approval process could take about 90 to 120 days to be well-concluded from the point when the companies receive the positive trial results - bearing any unforeseen circumstances.
Overall, MIDF Research opined that the announcement on the potential manufacturing of the Covid-19 vaccine has somehow or rather helped to partially alleviate the volatility in Pharmaniaga’s earnings outlook.