CCM Duopharma expects better results in FY14
Business & Markets 2014
Written by Supriya Surendran of theedgemalaysia.com
Wednesday, 21 May 2014 11:17
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KUALA LUMPUR: CCM Duopharma Biotech Bhd, the healthcare arm of Chemical Co of Malaysia Bhd, expects to turn in better results for the financial year ending Dec 31, 2014 (FY14) as it launches new products.

Its net profit rose 24.2% to RM32.28 million in FY13 from RM26.01 million the previous year, on increased revenue from the government sector coupled with the incorporation of changes in fair value of investment property in the second quarter of the year. Revenue grew 20% to RM162.41 million from RM135.31 million.

“We had a write-off [in FY13]that took away the gain on revaluation [of investment property], so it’s actually an underlying gain on performance, and you will not see a sudden surge [in profitability in FY14],” CCM Duopharma chief executive officer Leonard Ariff Abdul Shatar told reporters after the group’s annual general meeting yesterday.

CCM Duopharma targets to launch about five new products per year in terms of its small molecule product line.

The group currently has 400 products which are registered with the authorities, of which 250 products are active in the marketplace.

CCM Duopharma is also in a 50:50 joint venture with South Korea’s PanGen Biotech Inc to market erthopoietin (EPO), which is a drug to treat anaemia in renal failure patients.

“EPO is currently undergoing clinical III trials in Malaysia and South Korea, which should be completed by 2016,” said Leonard Ariff.


This article first appeared in The Edge Financial Daily, on May 21, 2014.

Biologics to raise CCM Duopharma's profile

by joseph chin
A phamacist monitoring the production of injectable products at the company’s biotech factory.

A phamacist monitoring the production of injectable products at the company’s biotech factory.

AS competition in its traditional businesses intensifies, CCM Duopharma Biotech Bhd (CCMD) is leveraging on a partnership with a South Korean pharmaceutical company to get a new source of revenue.

In a tie-up with PanGen Biotech Inc, CCMD is venturing into biological products, otherwise known as biologics. Clinical trials for a biosimilar erythopoietin (EPO) injectable drug to treat anemia in mainly renal failure patients.

Both parties are investing a total of RM9mil for the Malaysian trials and CCMD has the distribution rights to PanGen’s biosimilar EPO in Malaysia, Singapore and Brunei but CCMD is not precluded from looking at selling the drug elsewhere.

Leonard Ariff Abd Satar
Leonard Ariff: ‘It costs about RM1mil to produce one generic product.’

PanGen is giving CCMD the commercialisation rights to market and distribute the products in Malaysia, Singapore and Brunei which is estimated to be worth more than RM50mil annually.

A biologic medical product is created by biological processes instead of chemical synthesis. Biosimilars – or follow-on biologics – are those whose active drug substance is made by a living organism or derived from a living organism.

“It costs about RM1mil to produce one generic product, assuming you have the plant already – from conception to production of tablet. However, for biologics and biosimilars, it will cost almost 10 times more,” chief executive officer Leonard Ariff Abdul Shatar explains.

The EPO is PanGen’s first commercial biosimilar product and the second to be developed globally. It is produced in cell culture using recombinant DNA technology and used to produce human red blood cells especially for those undergoing chemotherapy.

The trials in South Korea started in June last year while for CCMD, it just commenced in February. The trials cover 200 patients.

“The study will take about 24 months to ensure there is no adverse reaction in patients – a double blind study – to ensure the products will have the same effectiveness,” he says.

CCMD is excited about the arrangement with PanGen. “While the venture into biologicals is not expected to be cheap, it provides us the possibility because there is a higher barrier from other competitors,” he adds.

Leonard Ariff explains CCMD will be reinvesting in its plants, including clean-room facilities, as he expects strong demand for biologics in the future.

CCMD reinvests 2.5% to 3% of its annual revenue in research and development (R&D). It also reinvests 2% to 3% of its revenue annually for capital expenditure to ensure its equipment meets regulatory guidelines. CCMD is looking to invest RM15mil in capital expenditure aside from R&D.

“Now we are looking at biologics and we are talking about RM10mil for each molecule (biologic medical product) which will be spent over 36 months. We also have to look into clinical and capacity expansion,” he says.

“As for the EPO, we are looking at a possibility of a pre-filled syringe line, which will cost about RM10mil. This is because a dedicated and specific production line is needed. Hence, capex investment is high and we were ahead in the injectables.

“Regional companies are hesitant about biosimilars as it is seen as a difficult venture. But the secret is the partner where the technology and facility can meet the requirements across the regional scale,” he adds.

Biologicals are growing at a faster pace than the traditional pharmaceuticals and this was a major reason for CCMD to expand from this segment.

Leonard Ariff sees the strong growth for biological products or biologics is ideal to be part of CCMD’s growing injectables business.

Injectables account for between 30% and 40% of its revenue of RM116.67mil for the nine months ended Sept 30, 2013. The bulk of the revenue is from pharmaceutical products which are orally taken.

According to industry estimates for biologics and biosimilars, the market, which is dominated by global pharmaceutical players, is poised to expand at a compounded average growth rate of 12% in Asia and is projected to be worth RM8bil in South-East Asia by 2020.

“Our strategy is three-pronged. Firstly, we still have to maintain our strength to manufacture good quality pharmaceutical products at an appropriate cost.

“Secondly, we also want to expand our regional footprint. Thirdly, we also want to push into biologics (and biosimilars) as well,” he points out.

Leonard Ariff says CCMD found the market for biologics was sizeable, and in two segments. One is in the production of insulin for diabetics and the second is EPO.

“For these two products, there were no patents in Malaysia and the pool was limited and also there was no one in Malaysia aggressively looking at it,” he says.

CCMD has a strong foothold in injectables and syringes but other players are also venturing into this field.

“However, we have our years of experience in managing sterile facilities and hence we can look at other areas where we can leverage. We see collaboration with the right party as key when moving into new areas,” he adds.

As for oncology products, he says there are only a few generic products made in Malaysia. Growth in Malaysia for oncology products is strong because of the rise in diagnosis segment, he adds.

“We believe we are hitting the tipping point where it will be justifiable to develop some products domestically. We will be looking at tablets, capsules, sterile injectables and also oncology,” he adds.

“We have a strong balance sheet and we can embark on the projects. We are also careful about cash utilisation,” he adds.

As at Sept 30, 2013, CCMD has nearly RM20mil in cash and equivalents. Net cash generated from operating activities was RM2.77mil.

CCMD also rewards its shareholders, paying out 75% of its after-tax profit as dividends, even though this is not an official policy.

Chemical Company of Malaysia Bhd owns 73.4% of CCMD while other large shareholders are local funds and long-term investors such as Permodalan Nasional Bhd, the Employees Provident Fund and Tabung Haji.