Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Malaysia Weekly on August 30, 2021 - September 5, 2021

RECENT developments at Malaysian Genomics Resource Centre Bhd (MGRC) have piqued the interest of investors, with its share price hitting an intraday record high of RM2.23 last Thursday.

Shares of MGRC have gained 109% since the start of this year versus the FBM KLCI’s 1% decline during the same period. It closed at RM2.22 on Thursday, giving it a market capitalisation of RM263.09 million.

MGRC CEO Sasha Nordin believes the stock has been piquing market interest since the company — currently involved in the genetic screening services business — decided to diversify into the biopharmaceutical and healthcare business.

“Investor interest in healthcare companies has always been strong, and the Covid-19 pandemic has sharpened this interest even further. The outlook for healthcare companies for the long term is very good,” he says in an email response to questions from The Edge.

“MGRC is among the first to make Chimeric Antigen Receptor T-cell (CAR T-cell) immunotherapy for cancers. Just this sub-type of immunotherapy alone is forecast to be worth more than US$8 billion globally by 2025. We think this is what continues to draw strong interest from investors looking for exposure to high-technology healthcare and the field of genomics,” he adds. MGRC has the rights to provide cancer immunotherapy services to eight markets, namely Malaysia, Singapore, Brunei, Indonesia, Thailand, Vietnam, Cambodia and Laos.

The stock’s price action also followed some interesting changes in key shareholders in the company. MGRC, which was listed on the ACE Market of Bursa Malaysia in October 2010, saw the emergence of private equity Crest Advisory Bhd and an individual by the name of Liw Chai Yuk as substantial shareholders with 28.02% and 9.66% stakes respectively, early last year. Crest Advisory has reduced its holding to 5.94% as at Aug 13, 2021. Liw, meanwhile, ceased to be a substantial shareholder last December.

Their entry coincided with the exit of sovereign wealth fund Khazanah Nasional Bhd in May 2020. Syntamatix Sdn Bhd, Khazanah’s indirect unit and MGRC’s then largest shareholder, previously held a 56.4% stake in MGRC.

Since then, MGRC has attracted two new substantial shareholders — now-largest shareholder I Concept Global Growth Fund and Pixelvest Sdn Bhd — with 8.69% and 5.74% stakes respectively. Companies Commission of Malaysia (SSM) filings show that Pixelvest is wholly owned by Ang Jen Chuen.

On the synergies expected from its new shareholders, Sasha says: “We can’t speak on behalf of our shareholders or speculate on their plans. What is important is the continued strong interest from investors looking for exposure to high-tech healthcare and the field of genomics. The entry of new investors is a vote of confidence in our long-term goals.”

MGRC also saw a slew of changes in its management and board over the past year, including the appointment of former Bank Negara Malaysia governor Tan Sri Ahmad Mohd Don as an independent director in early May last year. The following month, Grace How Pei Yen and Kong June Hon joined the board.

In June last year, MGRC founder and managing director Robert George Hercus @ Abdul Karim Hercus resigned. Replacing Hercus as CEO of MGRC was Sasha, who had been chief operating officer since 2014.

In August last year, non-executive director Datuk Alvin Joseph Nesakumar was redesignated as executive director while Datuk Munirah Abdul Hamid, who is executive director and spouse of Hercus, transitioned to the role of non-executive director.

Early this month, MGRC appointed two more independent directors to its board, namely former ProtectHealth Malaysia chairman Datuk Seri Dr Chen Chaw Min and Datuk Francis Tan Leh Kiah. Chen retired as secretary-general of the Ministry of Health in February this year. During his tenure, he played a pivotal role in spearheading the fight against Covid-19. Tan, meanwhile, was a managing partner of law firm Azman Davidson & Co and a member of the Securities Commission Malaysia from 1999 to 2018.

“Our independent directors play a crucial role in protecting the interests of the company. Aside from sharing the benefit of their experience in related fields, they bring independent judgement and unbiased views to board deliberations and evaluations of the company’s performance and its business strategies,” says Sasha.

“We have the right individuals to make an effective board and to ensure strong corporate governance. Together with professional management, the board will continue to guide MGRC on its path of continued growth.”

Still, MGRC remains categorised as an affected listed corporation pursuant to Rule 8.03A of the ACE Market Listing Requirements following the disposal of MPath Group, which provides pathological and medical laboratory services, in December 2019 for RM42 million.  The company has about four months until Dec 23 this year to submit a regularisation plan to the relevant authorities for approval.

It does not help that the pandemic has also affected the group’s business and the economic environment since the beginning of 2020. In the notes to its financial statement for the fourth quarter ended June 30, 2020 (4QFY2020), MGRC estimates that the maximum impact of Covid-19 is about RM300,000 on its revenue per quarter.

“We still maintain that the biopharma and healthcare business will potentially contribute 25% or more of the group’s net profit. We expect to see movement in our biopharma segment in the first quarter of FY2022,” says Sasha.

The setting up of a biopharma and healthcare cell laboratory in Selangor, which would enable it to produce CAR T-cells locally, has been completed, he says.

“Our initial plans to have this laboratory approved for operations by the National Pharmaceutical Regulatory Agency (NPRA) were affected by the Full Movement Control Order imposed in June. We now expect that the required Current Good Manufacturing Practice certification can be obtained from the NPRA before the end of 1QFY2022.

“The unavoidable delays have been unfortunate as there is a pool of patients who have been identified as potentially suitable for treatment with CAR T-cell immunotherapy. Fortunately, the rapid rate of Covid-19 vaccinations, especially in the Klang Valley, has given us hope that disruptions from lockdowns will be reduced, allowing normal operations to resume,” he notes.

“Once our specialised cell laboratory is commissioned and fully certified, we can offer CAR T-cell immunotherapy at one-eighth of the current typical cost. In the US and Europe, CAR T-cell immunotherapy is currently priced upwards of US$400,000 per treatment. We are looking at a price of about US$50,000 for patients in Southeast Asia — a significant 87.5% savings in typical costs,” says Sasha.

Once its biopharma services commence, Sasha says the group is confident of long-term, sustainable growth.

“In the meantime, the widened income stream from the Covid-19 vaccination collaboration with Pharmaniaga Lifescience Sdn Bhd, ongoing genome sequencing and analysis projects, and the revenue growth in genetic screening services, will keep us moving forward on our turnaround plan,” he adds.

While the company has not been paying a dividend for a long time, it paid out a special dividend of 22 sen for FY2020 using proceeds from its sale of MPath Group.

 It is worth noting that the group is debt-free, sitting on a cash pile of RM13.54 million or 11.43 sen per share, with net book value per share of 0.19 sen as of end-March 2021.

MGRC has raised RM12.23 million from the first tranche of a recent private placement of up to 20% of its enlarged issued shares. According to Sasha, the company plans to issue the remaining placement shares by mid-September. The entire placement exercise is expected to raise about RM22.77 million.

It returned to the black for the first time in FY2020 after two consecutive years of losses, mainly due to the gain from the disposal of MPath Group. FY2021 will be MGRC’s first year without contribution from MPath Group.

For the cumulative nine-month period ended March 31, 2021 (9MFY2021), the group registered a net loss of RM2.19 million compared with a net profit of RM22.54 million a year ago, mainly due to the absence of gains arising from the disposal of subsidiaries and dividend income from MPath Group. Revenue fell 66% year on year to RM1.85 million.

However, it managed to post a marginal net profit of RM200,000 for 3QFY2021 compared with a net loss of RM1.66 million for the same quarter last year, on higher orders from genetic screening services. MGRC had yet to release its financial results for 4QFY2021 and FY2021 as at press time.

It remains to be seen if the diversification into the biopharma and healthcare business will actually help fill the income gap left by MPath Group and lift it from the affected listed corporation status.

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

      Print
      Text Size
      Share