PN17 firm Biosis eyes production ramp-up

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KUALA LUMPUR: Biosis Group Bhd, which slipped into Practice Note 17 (PN17) status in June last year, plans to ramp up production of generic drugs at its pharmaceutical factory in Sungai Bakap, Penang, to more than 60% within the next three years from less than 50% now, as it expands to new export markets in Europe, India and the Middle East.

“The generic drug market is growing faster abroad and there are many patented drugs in the market ... that are nearing [their] 10-year exclusivity period,” managing director Shahfie Ahmad told The Edge Financial Daily in an interview.

“There are foreign drug makers in the Middle East, [and] one company in Europe that is currently operating in 16 countries, all looking to work with us to produce their products [after their patent expires],” he said.

Shahfie declined to name the companies as they are still in the early stages of negotiations.

Biosis currently produces some 30 generic drugs at its Sungai Bakap plant. Although the company is still awaiting approval of its proposed regularisation plan that was submitted on Sept 30, Shahfie is optimistic that with the new partners in tow, Biosis will be able to double contribution from the foreign markets to its pharmaceutical business to 60% from 30% now.

Biosis is proposing a capital reduction that will give rise to a credit of RM47.25 million, which will be used to partly offset the accumulated losses of the company, which amounted to RM78.13 million as at March 31 this year.

The company also proposes to utilise RM3 million of the proceeds from a proposed rights issue with warrants to conduct research and development.

Biosis, which returned to the black in its first quarter ended June 30, 2014 (1QFY15), recently saw businessman Erwan Azizi, 32, emerge as a substantial shareholder after he bought 10.21 million shares in the company at 13 sen each or RM1.3 million on Oct 1 via an off-market transaction.

With the latest acquisition, Erwan raised his stake to 19.05% or 20 million shares in Biosis as at Oct 3.

Shahfie said the company has yet to receive any request from Erwan, when asked whether the latter has any influence on the direction of the company.

The second largest shareholder of Biosis is Lembaga Tabung Haji, with a 8.69% stake.

Despite the company’s lacklustre financial performance in the past, Shahfie, who was appointed to the board on April 25, 2013 to head the reorganisation of Biosis, is optimistic that it will stay profitable in 2Q.

Biosis returned to the black in 1QFY15 after suffering losses since 2008, with a net profit of RM354,000 compared to a net loss of RM3.24 million in 1QFY14.

Shahfie, who is also managing director and founder of Chulia Facilities Management Sdn Bhd (CFMSB), said Biosis had paid CFMSB management fees including rental from June 2013 to August this year totalling RM526,000.

“For the time being, we (CFMSB) have the management agreement and mandate from Biosis shareholders to run the day-to-day operations,” he said, declining to say whether he intends to inject CFMSB into Biosis in the future.

Biosis shares closed up 29.17% at 15.5 sen last Friday, bringing a market capitalisation of RM16.28 million.

 

This article first appeared in The Edge Financial Daily, on October 20, 2014.