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Malaysian Genomics (MGRC, 0155) eyes specialised therapies as new growth driver

MALAYSIAN Genomics Resource Centre Bhd (MGRC), which recently disposed of its core clinical pathology services business, is looking at expanding into other areas in personalised healthcare to drive new growth at the group.

While the group has new opportunities to expand its existing genetic screening services business, it is investing in immunotherapy, which is an increasingly important part of cancer treatment, says MGRC chief operating officer Sasha Nordin.

“After exploring the clinical pathology business for almost 10 years, we have gained critical knowledge and skills that can be leveraged on, especially in areas of marketing and distribution. We can build on these key takeaways as we work on improving our current and future offerings,” he tells The Edge.

The ACE Market-listed company had, in December 2019, completed the disposal of its pathology business held under MPath Sdn Bhd to Gribbles Pathology (Malaysia) Sdn Bhd for RM42 million. The pathology business was the largest contributor to MGRC’s revenue, but the group decided to exit the market as it was becoming too competitive.

“Clinical pathology is a highly competitive market that offers thin margins. Over the years, we have seen new competitors entering the market, acquiring a significant number of laboratories and hospitals. This included acquisitions of pathology labs such as Gribbles, Lablink (M) Sdn Bhd, Quantum Diagnostics Sdn Bhd and hospital group Columbia Asia Malaysia,” explains Sasha.

The disposal has made MGRC cash-rich, sitting on RM9.5 million cash with zero borrowings and a net book value per share of 12.42 sen as at end-March 2020. Also, the group is now left with its genetic screening services under the brand Dtect and its genome sequencing and analysis services as its core businesses — as when it was listed in 2010. However, the genetics testing business only contributed 2% of overall revenue in the financial year ended June 30, 2019 (FY2019), while genomics services’ contribution was nil for that year.

MGRC is on track to return to profit in FY2020 after two years of losses, on the back of a RM21.92 million gain on the disposal of MPath. In the cumulative nine months ended March 31, 2020, the group posted a net profit of RM22.54 million compared with a net loss of RM2.5 million in the same period a year ago. Revenue was up 12 times at RM5.45 million due to dividend income from MPath.

“We have distributed RM23 million of the proceeds to our shareholders, who have been very loyal to us over the years,” says Sasha.

Still, without MPath, MGRC will have to ensure it can produce sufficiently strong enough earnings going forward.

“We are focused on our strategy for profitability and this involves exploring avenues for MGRC to contribute our expertise in the area of personalised healthcare. In the past few years, our team of scientists have been busy doing extensive research and development (R&D) to further develop our genomics and genetics business and offerings,” says Sasha.

A scientific advisory board, which is being set up, will provide new, independent and external information and perspectives. Members presently include Dr Gabriel P Salgo, a specialist in endocrinology, stem cells and fertility, and Dr Lim Teck Onn, who was formerly a consultant nephrologist and director of the Clinical Research Centre, Ministry of Health. He is also president of the Malaysia Association for Cell Therapy.

“Currently, there are over 100 companies worldwide involved in the research and production of CAR (chimeric antigen receptor) T-cell therapies, and most of these companies are located in the US, Europe and China. Larger players have yet to enter Southeast Asia and MGRC is among the first companies to offer such cutting-edge therapies in the region.

“CAR T-cell therapy is a form of immunotherapy, which uses patients’ own blood to produce T-cells with CAR on their surface. It relies heavily on laboratory testing — both before therapy to evaluate patients’ suitability and after therapy to monitor the treatment’s effectiveness,” Sasha adds.

“We will be spending the next few months developing a network and building the foundation for this business. Our team will be focusing on working with prescribing oncologists and cancer treatment centres in Malaysia, Singapore, Brunei, Indonesia, Thailand, Vietnam, Cambodia, Laos, and other locations that are relevant for medical tourists.”

Down the road, Sasha envisions further expanding CAR T-cell therapies for liquid cancers such as lymphoma and leukaemia. “We might also explore the possibility of developing our own CAR T-cell production lab.”

MGRC has been impacted by the Covid-19 pandemic as some of its customers such as medical centres temporarily closed or diverted their resources towards Covid-19 screening.

“Historically, our quarterly revenue is RM300,000 on average, which is generally derived from genetic screening services. Our risk calculation has shown that the maximum impact that may result from the pandemic is seeing no revenue from (this business),” he says.

Still, the group sees a silver living in the pandemic.

“Part of the world’s response to the pandemic was heavily reliant on genome sequencing, big data and artificial intelligence — to learn about the virus and start developing effective responses, for example. Thus, the industry is brimming with potential and we believe that the full benefits have not yet been reaped.”

Shares in MGRC have tripled from 20 sen on April 24 this year to hit a high of 60 sen on May 12, before trending down to 31.5 sen last Wednesday, giving the company a market capitalisation of RM32.61 million. Year to date, the stock is down 22%. Its price action followed some interesting changes of key shareholders in the group recently.

In March, MGRC saw the emergence of private equity firm Crest Advisory Bhd as its new substantial shareholder with a 28.02% stake. However, businessman Tan Sri Richard Koh Kin Lip ceased to be a substantial shareholder after selling 233,000 MGRC shares on March 16. Koh had been a long-term shareholder since November 2016.

In April, an individual by the name of Liw Chai Yuk emerged as a substantial shareholder of MGRC with a 9.66% stake. But the following month, MGRC saw co-founders Robert George Hercus @ Abdul Karim Hercus and wife Datuk Munirah Abdul Hamid, as well as Khazanah Nasional Bhd, cease to be substantial shareholders via their shareholdings in Synamatix Sdn Bhd and Neuramatix Sdn Bhd. Prior to that, Hercus, Munirah and Khazanah were MGRC’s largest shareholders holding some 60% as at Oct 4, 2019.

It is worth noting that former Bank Negara Malaysia governor Tan Sri Ahmad Mohd Don joined the MGRC board in May.

With a strong cash position, Sasha says the group has no immediate need to raise funds. “A part of this cash (from the sale of MPath) is earmarked for working capital — RM4 million has been allocated for business expansion and future investments, out of which RM1.8 million has been utilised in our latest venture into the immunotherapy product. This will be our main focus areas for the time being.”

For FY2020, genetic screening services will be the major contributor to revenue as the group’s involvement in immunotherapy products and services only started at the beginning of FY2021. “The team is currently busy setting up the distribution networks to be able to generate a strong flow as soon as possible this year (FY2021),” says Sasha.

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