The Malaysian pharmaceutical market is a serious business, with significant growth in the last decade at between 8% and 10% annually.
Increasingly too, emphasis has been placed by local manufacturers on research and development, particularly in product innovation, bio-pharmaceutics and natural resources that have resulted in patents.
The local pharmaceutical market is now worth RM3.8bil. Independent research firm Espicom expects this to grow at an average of 8.2% per annum.
One important area is biotechnology, which the Government is hoping to develop seriously.
Recently, the Government put in place several incentives to encourage the local production of drugs, particularly in the field of biotechnology, and the manufacture of off-patent drugs. These include tax exemptions for biotech companies that are awarded Bionexus status.
By the end of 2008, there were 92 companies with Bionexus status, of which 36 focusing on healthcare.
This was a rise of 119% over the 2007 total of 42 companies; the number of healthcare biotech companies rose 89.5% over the same period from just 19 previously.
Espicom estimates the Malaysian biopharmaceutical market at US$75mil in 2008 and forecasts that it will rise to US$132mil by 2013.Growth over 2008 up to 2013 is expected to average at 12%, in which time Malaysia’s share of the regional biopharmaceutical market is expected to show a marginal increase from 4% to 4.2%.Espicom says that Malaysia’s biotech initiative has begun to attract a growing number of multinational companies to invest in the country.
“Local manufacturers almost exclusively produce generics and other off-patent medicaments, both ethical and over-the-counter (OTC) products, but imported medicines by multinational manufacturers still command the lion’s share of the market, at over 70% in value,” it said.
Malaysian pharmaceutical sector has been on an expansion trail. Pharmaniaga Bhd, the country’s largest integrated pharmaceutical company, plans to buy a controlling stake in an Indonesian counterpart next year to strengthen its presence there and subsequently the global healthcare sector.
In December 2004, Pharmaniaga bought 55% of PT Millennium Pharmacon International for RM13mil. Pharmaniaga already has a strong presence in Indonesia with 27 distribution centres.
Presently, about 80% of Pharmaniaga’s revenue are derived through Government contracts. It has the exclusive right to distribute pharmaceutical and medical products to the Health Ministry through a 15-year concession.
Another player is CCM Duopharma Biotech Bhd, which recently secured two contracts from the Government worth RM20mil for over a two-year period.
Through its parent Chemical Company of Malaysia Bhd (CCM), Duopharma is looking to complete an acquisition in Indonesia or Vietnam within the year.CCM has about 22% market share of the generics business worth some RM1bil. Of that, Duopharma holds about 12% share. Duopharma has 450 registered products.
Kotra Industries Bhd is perhaps most famous for its Appeton brand. After having invested substantially in building the Appeton brand over the past eight years, it has carved its own product and market niche in children’s health supplements. To date, Kotra Pharma has 151 registered products.
For its quarter to Dec 31, 2008, revenue increased 23.48% to RM26.17mil while net profit was maintained at RM2.98mil.
Another player, YSP South East Asia Bhd, manufactures over 230 products, offering pharmaceutical, OTC, veterinary and aquatic products. It has offices globally.
YSP is setting up a plant in Vietnam. In March, it proposed a rights issue, hoping to raise RM12mil for this purpose. The rights issue is expected to be completed in the third quarter.For the quarter to March, YSP recorded a 9.2% increase in revenue to RM31.14mil while net profit dropped marginally to RM3.63mil from RM3.9mil previously.
For the year ended Dec 31, 2008, Duopharma is the clear outperformer, netting clean margins of 22.3%. Pharmaniaga managed 4.6% while YSP Southeast Asia Holdings Bhd and Kotra Industries Bhd both achieved about 10% margins