KUALA LUMPUR: CCM Duopharma Biotech Bhd (CCMD) is looking to acquire potential strategic investments, specifically for stem cell technology, of between RM10 million and RM30 million per investment, and expects to make an acquisition within six months.
Its group managing director Leonard Ariff Abdul Shatar said the pharmaceutical company had identified “a few potential investment targets” involved in stem cell technology in Malaysia and overseas, particularly in China, Japan and South Korea.
Nevertheless, Leonard reiterated Indonesia and the Philippines remain CCMD’s target for acquisitions.
“We’re looking very closely at potential strategic investments in regenerative medicines as well as stem cells,” Leonard told The Edge Financial Daily in a recent interview, adding that the funding may be via borrowings.
This is in line with its strategy to enter niche areas, such as effervescent, oncology and EPO (Erythropoietin) drugs, which will enable the company improve its export figures. Currently, imports only make up about 10% of CCMD’s total revenue, while government contracts and the private sector contribute about 55% and 35% respectively.
Leonard added that CCMD does not intend to have a controlling stake in the investments, but it is looking to gain early access to the technology.
While he noted stem cell is not a big market yet in Malaysia, Leonard highlighted CCMD had started to evaluate the technology and market in stem cells “very carefully” as he sees potential in the mid to longer term.
As stem cells are currently unregulated in Malaysia, the company will only look at the product development “seriously” after the guidelines are to be in force in 2020. “In the meantime, while it’s unregulated, we may take equity investments depending on opportunities,” said Leonard, adding CCMD is not venturing into stem cell banking but that it is looking into applications using stem cell technology.
Leonard explained that these potential investments are somewhat similar to its strategic investment in South Korea-based PanGen BioTech where it took up only a small stake.
On April 13, CCMD announced it is buying an 8.39% stake in PanGen Biotech for 16.35 billion won (RM59.16 million) from its sister company Chemical Company of Malaysia Bhd (CCM), to gain the rights to market biosimilar products developed by PanGen Malaysia, Brunei and Singapore, with the first right of refusal to extend it to other Asean countries.
Leonard also maintained he is “reasonably bullish” on the outlook for the company and the pharmaceutical industry, amid a weakening ringgit.
He noted a weakening ringgit at the level of 4.1 against the greenback is still “better” than the exchange rate at 4.2 in September last year, adding that a weakening ringgit would, on the other hand, still help its export market.
“If the year averages out at 4.00 ringgit against the US dollar, then it’s a strengthening of the ringgit, relative to last year. So, it will be better for the industry and CCMD, in terms of raw materials,” said Leonard, noting 80% of its raw materials are imported.
While Bank Negara Malaysia has relaxed some of the rules on the conversion of foreign currency proceeds by exporters, Leonard urged for a total liberalisation for them to better manage a weaker ringgit.
CCMD is 50.8%-owned by Permodalan Nasional Bhd. Its counter offered a yield of 5.33% based on its closing price of RM1.22 last Tuesday and CCMD’s dividend per share of 6.5 sen for the financial year ended Dec 31, 2017.
CCMD has a market capitalisation of RM807.5 million and over the past year, the stock rose 42.36% from 85.7 sen.