PETALING JAYA: Duopharma Biotech Bhd’s recent win for the supply of Insugen will contribute positively to the group’s earnings over the next three years.
Assuming a profit after tax margin of 5%, the contract is estimated to contribute about RM6.25mil (previously about RM4mil) per annum in net earnings.
TA Securities Research reduced the company’s financial year 2021 (FY21) earnings estimates by 2.4% after making some minor changes to its earnings model.
However, it increased FY22-FY23 earnings estimates by 3.0% and 2.7% respectively, after factoring in bigger contributions from the new insulin contract.
Going into FY22, the research house projected Duopharma to record an earnings growth of 18.9% mainly due to higher vaccine contribution.
Last Friday, Duopharma said the government has accepted the tender offer from Duopharma to supply Insugen, a human insulin formulation to all Health Ministry’s (MoH) hospitals, district health offices and clinics. The supply contract is worth RM375.17mil for a period of three years starting Dec 17, 2021 to Dec 16, 2024.
With an estimated 3.9 million diabetics in Malaysia, of which about 420,000 patients are treated using human insulin in government hospitals and clinics,
Duopharma hopes to improve diabetes management in the country by providing high quality and cost-effective biosimilar insulin, it said.
It said Duopharma’s previous insulin contract with MoH, worth about RM80mil sales per annum, had expired on Dec 1, 2021.
As such, this is a contract renewal with a contract value estimated at RM125.1mil sales per annum for Duopharma in FY22-FY24.
In addition, this is also the largest insulin contract the company secured from the government so far, which is about 56% bigger than the previous contract.
The research house raised Duopharma’s target price to RM2 per share from RM1.95 per share previously based on an unchanged price earnings multiple of 24.0 times current year 2022 earnings per share.
It has retained a “buy” call on the stock.