Govt consolidating drug manufacturers?

UEM World Bhd’s move to take over Pharmaniaga Bhd and Chemical Company of Malaysia Bhd’s (CCM) acquisition of Duopharma Biotech Bhd may be seen as a possible consolidation of a strategic industry under government-linked investment companies (GLICs).
Khazanah Nasional Bhd has a 63% stake in UEM World, which in turn owns 46.2% of Pharmaniaga.
UEM World is undertaking a mandatory general offer (MGO) for the rest of Pharmaniaga comprising 55.10 million shares or 53.8% at RM5.50 per share after it acquired a 16% stake from Raza Sdn Bhd through its unit, Trinity Saga Sdn Bhd, on July 29.
Permodalan Nasional Bhd (PNB) owns 52.67% of CCM, which in turn has acquired a 36% stake or 47.93 million shares in Duopharma. CCM, which is the largest manufacturer of generic drugs in Malaysia, is undertaking an MGO for the remaining 64% or 85.83 million shares in Duopharma at RM2.80 per share.
Industry observers said there was a possibility of a consolidation of drug manufacturers to control the multi-billion ringgit industry.
Both Pharmaniaga and Duopharma are profitable companies and their earnings are expected to pick up with new contracts and new products, according to analysts. The acquisitions of both companies are positive for UEM World and CCM respectively, they said.
Pharmaniaga spearheads UEM World’s pharmaceutical division and it is one of the largest integrated local healthcare companies in Malaysia.
Pharmaniaga manufactures 380 generic drugs. Although concession sales to government hospitals form the bulk of its revenue, it is expanding into the small volume injectables (SVI) market.
Pharmaniaga’s subsidiary has a 15-year concession agreement to make and supply a range of products to all medical institutions under the Health Ministry.
Meanwhile, Duopharma is expected to ink a two-year contract next month with the Health Ministry for the supply of drugs for HIV/AIDS patients.
The government is also expected to decide soon on the awarding of the contract for the supply of methadone in a two-year pilot project to treat drug addicts, and Duopharma is believed to be the frontrunner for the job.
Duopharma is also undertaking a project involving a life-prolonging drug. Fully subsidised, this drug would cost the government between RM15 million and RM20 million, which is only 20% of existing treatment costs.
Industry observers say the government does not want the drug manufacturing industry to be dominated by foreign companies; hence, there could be some synergies between CCM, Pharmaniaga and Duopharma.
source