Covid Vaccines Turn Pharmaniaga Into Deep Losses

On 26 February, Pharmaniaga Bhd announced its largest ever quarterly net loss of RM664.39 million. This is for the fourth quarter ended Dec 31, 2022 (4QFY2022). This is primarily due to RM552.3 million of impairment of Covid-19 vaccines. In addition, it has written down the goodwill of the Indonesian manufacturing cash-generating units of RM50.3 million. Pharmaniaga has now become an affected listed issuer under Practice Note 17 (PN17). 

Quarterly revenue, however, grew 21.22% to RM862.72 million from RM711.72 million a year earlier due to “healthy growth” across the group’s concession, non-concession and Indonesian businesses as a result of strong demand from the customers subsequent to the resumption of normal business activities after the Covid-19 pandemic. The increase in revenue was partially offset by the lower revenue from the sale of Covid-19 vaccine. 

The group’s balance sheet as at Dec 31, 2022, shows that its short-term borrowings, which would be due within six months, ballooned to RM968.27 million from RM570.05 million a year ago. Its long-term borrowings amounted to RM190.6 million versus RM285.17 million. The pharmaceutical firm’s receivables increased to RM351.66 million as at end-2022 from RM297.75 million a year ago. Its cash balance was at RM52.84 million, while its inventory dropped to RM767.26 million from RM1.26 billion a year ago after the impairment.

It is currently in focused talks with various parties, both local and overseas to dispose of the vaccines. The majority of which is Sinovac. Aggressive selling efforts on the Covid-19 vaccine stocks are ongoing as the shelf life of the vaccine is still valid.

This is a tragic outcome of a political decision to buy more than sufficient stocks for the pandemic. If the company’s financials deteriorates further, there will be disruption of supply of medicines and drugs to the public health system. Politicians don’t pay the cost of a mistake – it is management, employees and other stakeholders. Pharmaniaga should have insisted a “take or pay” clause with the Government for any inventory of six months or more. It is too late now and only hope is for disposing inventory below cost.  The alternative of course is the Government does a bailout of RM700-900 million or provide a 10-year concession.

Reference:

Massive RM552.3 million vaccine provision pulls Pharmaniaga into deep losses, trigger PN17, Syafiqah Salim, theedgemarkets.com, 27 Feb 2023