CCMDBIO (7148) - Duopharma sees faster growth post-acquisitions
CCMDBIO 马化学药业 7148 CCM DUOPHARMA BIOTECH BHD
February 24, 2015
CCM Duopharma Biotech Bhd is confident of growing faster than the industry's projected growth of 8% with the proposed purchase of Chemical Co of Malaysia Bhd's (CCM) entire equity interest in six pharmaceutical companies.
The purchases would give Duopharma additional capacity to cater to the growing demand for generic medicines, both from the public and private sectors, said CCM group MD and Duopharma CEO Leonard Ariff Abdul Shatar.
He said the pharmaceutical company has been awarded public and private sectors' projects for production and supply of generics, but capacity to deliver is one of its major issue.
“The licences provided by the Health Ministry is very rigid in terms. We are not allowed to outsource production. In this case, we will need immediate capacities to cater to orders.
“Previously, Duopharma had the licence but not enough capacity. If the six companies are placed under Duopharma, we will have more capacity that will allow us to take in more production orders,” he told The Malaysian Reserve last week.
Duopharma is 73.7% owned by CCM. The six subsidiaries proposed to be sold are CCM Pharmaceuticals Sdn Bhd, CCM Pharma Sdn Bhd, Innovax Sdn Bhd, Upha Pharmaceutical Manufacturing (M) Sdn Bhd, CCM International (Philippines) Inc and CCM Pharmaceuticals (S) Pte Ltd.
The total deal is valued at about RM230 million with the inclusion of intercompany loans.
Public Investment Bank Bhd, acting as an independent advisor to non-interested shareholders, said the proposed acquisitions were fair and reasonable and advised these shareholders to vote in favour of the deal at the upcoming EGM.
To pay for the acquisition, Duopharma will undertake a renounceable rights issue of 139.48 million new shares at RM1.40 each to raise as much as RM195.27 million.
CCM’s subscription portion will amount to about RM140 million. About RM50 million from the proceeds from the rights issue would be channelled to Duopharma to expand the group’s pharmaceutical manufacturing operations.
The sale, if approved by CCM’s shareholders, will add some RM100 million to CCM’s existing cash position of RM200 million, including retained earnings of RM314 million as of the third-quarter ended Sept 30, 2014.
Leonard said the rationalisation of the pharmaceutical business under Duopharma is expected to improve the flexibility and scale of the combined production facilities.
He said Duopharma plans to go into the “less-crowded” segments within the pharmaceutical industry to gain market share as well as maintain quality and margins.
“That is why we went into biotheraphy and biologics. That gives the company the margin it needs to do healthy business. We were the most profitable pharmaceutical manufacturer in Malaysia last year,” he added.
Leonard said the market for biologics is attractive particularly in two segments, production of insulin for diabetics and biosimilar erythopoietin injectable drugs to treat anemia in mainly renal failure patients.
On dividends, he said Duopharma has been rewarding its shareholders, paying out 75% of its net profit as dividends even though this is not an official policy yet.
“That (dividend offering) will continue as we grow,” he stressed.
Besides CCM, other large shareholders of Duopharma include Permodalan Nasional Bhd (PNB), the Employees Provident Fund and Tabung Haji. CCM’s controlling shareholder is PNB.
The purchases would give Duopharma additional capacity to cater to the growing demand for generic medicines, both from the public and private sectors, said CCM group MD and Duopharma CEO Leonard Ariff Abdul Shatar.
He said the pharmaceutical company has been awarded public and private sectors' projects for production and supply of generics, but capacity to deliver is one of its major issue.
“The licences provided by the Health Ministry is very rigid in terms. We are not allowed to outsource production. In this case, we will need immediate capacities to cater to orders.
“Previously, Duopharma had the licence but not enough capacity. If the six companies are placed under Duopharma, we will have more capacity that will allow us to take in more production orders,” he told The Malaysian Reserve last week.
Duopharma is 73.7% owned by CCM. The six subsidiaries proposed to be sold are CCM Pharmaceuticals Sdn Bhd, CCM Pharma Sdn Bhd, Innovax Sdn Bhd, Upha Pharmaceutical Manufacturing (M) Sdn Bhd, CCM International (Philippines) Inc and CCM Pharmaceuticals (S) Pte Ltd.
The total deal is valued at about RM230 million with the inclusion of intercompany loans.
Public Investment Bank Bhd, acting as an independent advisor to non-interested shareholders, said the proposed acquisitions were fair and reasonable and advised these shareholders to vote in favour of the deal at the upcoming EGM.
To pay for the acquisition, Duopharma will undertake a renounceable rights issue of 139.48 million new shares at RM1.40 each to raise as much as RM195.27 million.
CCM’s subscription portion will amount to about RM140 million. About RM50 million from the proceeds from the rights issue would be channelled to Duopharma to expand the group’s pharmaceutical manufacturing operations.
The sale, if approved by CCM’s shareholders, will add some RM100 million to CCM’s existing cash position of RM200 million, including retained earnings of RM314 million as of the third-quarter ended Sept 30, 2014.
Leonard said the rationalisation of the pharmaceutical business under Duopharma is expected to improve the flexibility and scale of the combined production facilities.
He said Duopharma plans to go into the “less-crowded” segments within the pharmaceutical industry to gain market share as well as maintain quality and margins.
“That is why we went into biotheraphy and biologics. That gives the company the margin it needs to do healthy business. We were the most profitable pharmaceutical manufacturer in Malaysia last year,” he added.
Leonard said the market for biologics is attractive particularly in two segments, production of insulin for diabetics and biosimilar erythopoietin injectable drugs to treat anemia in mainly renal failure patients.
On dividends, he said Duopharma has been rewarding its shareholders, paying out 75% of its net profit as dividends even though this is not an official policy yet.
“That (dividend offering) will continue as we grow,” he stressed.
Besides CCM, other large shareholders of Duopharma include Permodalan Nasional Bhd (PNB), the Employees Provident Fund and Tabung Haji. CCM’s controlling shareholder is PNB.
http://themalaysianreserve.com
