Pharmaniaga charts growth path

> Aims to increase contributions from non-concession businesses

PETALING JAYA: Pharmaniaga Bhd is hopeful of increasing the contributions of its nonconcession businesses, in a bid to supersede its concession segment.

“We are looking at organic growth, given the current economic scenario ... at the private sector and overseas operations,” its CFO, Nora’ini Mohamed Ali, told reporters at a press conference after the company’s AGM here yesterday.

“Now the ratio is 51% government and 49% private sector. We can convert it to 49% government and 51% private sector,” she added.

The company is planning to achieve this by expanding its private sector business, catered to general practitioners and private hospitals, by increasing its portfolio with 250 new products lined up for development by 2024. Of this, 17 products will be released this year.

Besides that, it is looking to leverage on its Indonesian operations through subsidiary PT Errita, to penetrate the country’s government and private hospitals.

Overseas operations account for 29% of Pharmaniaga’s non- concessionaire businesses.

The subdued economic backdrop has reduced government orders for its concession and increased operating costs.

Norai’ni attributed higher operating costs to requirements under its concessionaire agreement, which calls for a threemonth stock buffer at all times. This has also partly contributed to an increase in loans and borrowings from RM399 million in 2015 to RM616.6 million.

Pharmaniaga saw its net profit for the financial year ended Dec 31, 2016 drop to RM45.6 million from RM84.6 million in 2015, even as revenue remained flat at RM2.18 billion.

For 2017, capital expenditure of RM60 million has been allocated for manufacturing activities and warehouse upgrading, while 4-5% of manufacturing revenue will be reinvested into research and development annually.

Pharmaniaga is looking to expand into the herbal and halal markets, which it believes will have a competitive edge, with the idea of commercialising Kacip Fatimah.

Another target would be increasing its presence in the European Union (EU) market with more EU-certified products. It already has certified breakthrough injectible products in the market.

On a query from the Minority Shareholder Watchdog Group at the AGM on Pharmaniaga’s ability to turn around and recoup the RM75 million investment in its small-volume injectibles subsidiary based in Puchong, the company responded that it is confident of a turnaround supported by an approved business plan which reflects its plant’s capacity and utilisation, revenue growth and operating costs and margins as well as expectations of market growth.

The plant has been running on losses since its inception in 2001. It has a carrying amount of assets totalling RM147.6 million (2015: RM137.7 million) comprising property, plant and equipment and capitalised development costs of work-in-progress included in intangible assets of RM140.9 million and RM6.7 million (2015: RM132.8 million and RM4.9 million).