KLANG: CCM Duopharma Biotech Bhd (CCMD), a 73.37%-owned subsidiary of Chemical Co of Malaysia Bhd (CCM), is targeting contribution from exports of generic medicine to double to 20% of the company’s revenue by 2020 from 10% currently, following its acquisition of six pharmaceutical units from parent CCM.

“It (exports) needs to grow,” CCMD chief executive officer Leonard Ariff Abdul Shatar told reporters after the company’s extraordinary general meeting (EGM) yesterday.

He added that there is limited growth for the company within the domestic market for generic drugs.

“That’s why we are acquiring the six subsidiaries from our parent company as it will allow us to bid for larger contracts,” said Leonard Ariff.

Currently, the government sector accounts for about 50% to 55% of CCMD’s revenue, while another 35% to 40% are generated from the private sector. The balance comes from its exports, primarily to Southeast Asia.

As for the six companies that CCMD is acquiring, 70% of their revenue is currently derived from the private sector, 20% from the government sector and the rest from exports.

Apart from increasing manufacturing capacity, Leonard Ariff said the company is also exploring biotherapy technology to tap into other possible markets and at the same time serve as a backbone in its future prospects.

“We will ensure our plants are compliant with the US, Japan and European standards,” he added.

Earlier at the EGM, CCMD shareholders unanimously passed all the three resolutions, which include the acquisition of CCM Pharmaceuticals Sdn Bhd, CCM Pharma Sdn Bhd, Innovax Sdn Bhd, Upha Pharmaceutical Manufacturing (M) Sdn Bhd, CCM International (Philippines) Inc and CCM Pharmaceuticals (S) Pte Ltd from CCM (fundamental: 0.35; valuation: 1.2) for RM133.33 million.

Leonard Ariff said the target companies’ accounts are expected to consolidate into CCMD’s earnings by the third quarter of this year.

Post-consolidation, he said, the enlarged company’s revenue is projected to grow to RM320 million from RM172 million currently.

He also noted that contribution from the government sector is expected to drop to between 40% and 45% of CCMD’s revenue, although exports will remain at 10%.

On whether there will be changes in the company’s management line-up post-acquisition, Leonard said all senior executives will remain.

CCMD will fund the acquisitions by undertaking a renounceable rights issue of 139.48 million new shares at RM1.40 each, to raise as much as RM195.27 million.

CCM shares closed unchanged at RM1 yesterday, bringing a market capitalisation of RM454.63 million.

This article first appeared in The Edge Financial Daily, on March 12, 2015.