Pharmaniaga Stocks Plunge After MOH Ends Medicine Concession

The GLC’s stocks fell 11.6%, trading at RM2.21 at 6pm.

KUALA LUMPUR, Oct 31 – Pharmaniaga Berhad suffered a hard blow in stock performance since the government’s noon announcement that it won’t renew the company’s drug procurement concession for Ministry of Health (MOH) facilities.

The government-linked company’s stocks were trading at above RM2.50 until 12pm today, but fell a few cents following the government’s decision.

After lunch break, the stock slipped further to almost RM2.00, but managed to climb halfway up to RM2.25.

According to its website, as of 6pm today, Pharmaniaga’s stocks were trading at RM2.21, recording an 11.6 per cent drop.

With a market capitalization of 569 million, the stocks’ average price target for the day was set at RM2.77.

Earlier today, Health Minister Dzulkefly Ahmad told the press that the government has decided to replace MOH’s concession system of distribution and logistics services for medical supplies with an open tender system.

The announcement came after Finance Minister Lim Guan Eng described Pharmaniaga’s drug procurement concession as a “monopoly” that cost the government over RM1 billion annually.

But local pharmaceutical company Pharmaniaga’s services to MOH will continue — despite the end of its concession on November 30 — pending the Cabinet’s decision on the type of mechanism for the open tender that Dzulkefly hoped would be ready by the first quarter of next year.

Pharmaniaga recorded a profit of RM9.26 million for the second quarter of 2019, almost double from RM5.77 million realised a year before.

Revenue was seen at RM601.89 million for the same quarter, also up from RM582.73 million from second quarter of 2018.

The company announced a diluted share of RM3.55 a unit for the quarter, higher from second quarter of 2018’s RM2.07.

Pharmaniaga is the biggest Bumiputera tender agent in the country with exclusive concession to supply 700 items in the Approved Product Purchase List (APPL) comprising medicines and other medical items, determined by MOH, to government hospitals, institutions, and clinics. This comprises over a third of the government’s drug supply.

The company received sole concession for a quarter of a century since Putrajaya privatised the medicine procurement system in 1994.

Pharmaniaga’s concession provides distribution and logistics services for the products procured under the APPL. According to the Malaysia Competition Commission (MyCC), Pharmaniaga supplied 38.5 per cent of the RM2.3 billion total cost of medicines procured for all MOH hospitals, institutions and clinics in 2015.

The two biggest shareholders in Pharmaniaga are Boustead Holdings Berhad and the Armed Forces Fund Board (LTAT), a statutory body under the Defence Ministry that provides retirement benefits to Malaysian Armed Forces officers.

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