Pharmaniaga plans private placement to raise RM44.5m for recovery and expansion

Practice Note 17 (PN17) company, Pharmaniaga Bhd, is planning to undertake a private placement of up to 131.02 million new shares, representing 10% of its total issued shares, to raise approximately RM44.55 million in funds for working capital.

It told the bourse in filing today that the issue price of the shares will be determined at a later stage.

As of June 12 2023, Pharmaniaga’s issued share capital stands at RM154.18 million comprising 1.31 million shares. Therefore, the proposed private placement involves the issuance of up to 131 million new shares, which accounts for 10% of the total issued shares.

The indicative issue price for the placement shares is 34 sen per share, representing a discount of 3.72 sen or 9.86% to the 5-day volume-weighted average market price (VWAMP) of Pharmaniaga shares as of the latest practicable date.

The placement shares will be offered to third-party investors who qualify under the Capital Markets and Services Act, 2007.

The proceeds from the private placement, estimated at RM44.55 million, will be utilised for working capital and expenses related to the proposal.

Pharmaniaga aims to allocate RM44.21 million for working capital within 12 months and RM336,000 for estimated expenses within one month of receiving the placement funds.

The company’s trade payables as of March 31, 2023, amounted to approximately RM722.3 million, while its cash and bank balances stood at approximately RM56.6 million.

The decision to pursue a private placement stems from Pharmaniaga’s classification as a PN17 company.

On Feb 27 2023, the company triggered the prescribed criteria of PN17 of the Malaysian Main Market Listing Requirements (MMLR). Subsequently, on May 2 2023, Pharmaniaga triggered an additional prescribed criteria under PN17.

Pharmaniaga said the private placement will enable the company to raise funds while formulating a plan to regularise its financial condition, which must be submitted to Bursa Securities within 12 months from February 27, 2023.

After considering various fundraising methods, such as rights issue and bank borrowings, Pharmaniaga believes that the proposed private placement is the most suitable option at this time. 

It said the exercise offers an expeditious and cost-effective way of raising capital from the market, compared to a pro-rata issuance like a rights issue.

Additionally, the private placement allows the company to raise funds without incurring interest costs associated with bank borrowings or debt instrument issuance.

It added that this approach helps preserve the company’s cash flow for reinvestment and operational needs, while also strengthening its capital base and financial position.

Although the private placement may result in dilution for existing shareholders, Pharmaniaga expects the raised funds to contribute positively to its future earnings.

Looking ahead, Pharmaniaga remains optimistic about its prospects and future plans.

The company said it is actively working on a strategic plan to recover from the PN17 classification and formulate regularisation plans with its appointed advisors.

It anticipates concluding negotiations with the Ministry of Health (MOH) for concession renewal by the end of June 2023, which would further strengthen its presence in the public sector.

Pharmaniaga is also focused on expanding its capabilities in the field of biopharmaceuticals.

It is establishing manufacturing facilities for vaccines and insulin to address the increasing demand in these therapeutic areas, primarily targeting vaccines under the National Immunisation Programme.

The company aims to commercialise vaccines by 2025 and insulin by 2026. 

This strategic move aligns with the company’s commitment to meeting the healthcare needs of the population and ensuring the timely delivery of essential drugs and non-drug products to government facilities across the country.

To facilitate technology transfer and enhance its global reach, Pharmaniaga plans to collaborate with strategic partners from Europe, India, South Korea, and China. 

These partnerships will enable the company to leverage their expertise and expand its biopharmaceutical capabilities further.

In addition to biopharmaceuticals, Pharmaniaga intends to intensify its research and development (R&D) activities to develop new high-value pharmaceutical products. 

With 101 new products in its five year product development pipeline, the company aims to introduce a range of offerings in therapeutic areas such as cardiovascular systems, anti-diabetic treatments, and supplements.

By focusing on off-patent originator products, Pharmaniaga aims to become a market leader, gaining early market share and expanding its product portfolio.

Pharmaniaga said its sales and marketing team will play a pivotal role in promoting its extensive array of healthcare products across medical and non-medical channels.

With a significant market share in Malaysia’s private generic market, the company is well-positioned for further growth.

The anticipated growth in the local private market, driven by the introduction of new drug launches and the success of existing market-leading brands, presents promising opportunities for Pharmaniaga to expand its market presence and increase its revenue.

Moreover, Pharmaniaga is actively pursuing expansion in Indonesia.

Through its subsidiary PT Millennium Pharmacon International (MPI), the company is establishing new branches to strengthen its logistics and distribution capabilities in the country.

With a central warehouse in Jakarta and 33 branches throughout Indonesia, Pharmaniaga’s operations are steadily gaining ground in both the pharmaceutical and over-the-counter product markets.

Pharmaniaga shares slid 1 sen or 2.56% to close at 38 sen today, while its market capitalisation stood at RM498 million.