No major impact from vaccine ceiling price
? The government has set a wholesale ceiling price of RM62/dose for private market sales of the Sinovac Covid-19 vaccine, effective from 15 Jan 2022.
? PHRM projects no major impact as the ceiling price is close to its selling prices but we cut FY21-22F core EPS to bake in lower revenue per dose.
? Reiterate Add and TP of RM1.00. PHRM is our top pharmaceutical pick.
Government sets ceiling price for Sinovac Covid-19 vaccine
The government announced yesterday that a ceiling price will be imposed on the sale of the Sinovac (CoronaVac) Covid-19 vaccine to the private market, effective from 15 Jan 2022. The wholesale price for the vaccine will be capped at RM62 per dose while its retail price cap will be RM77 per dose, excluding the cost of services and disposables used in the injection of the vaccine. The new price caps, which were generally determined based on the import price and current market price, will be implemented by the Pharmacy Enforcement Division under the Ministry of Health (MOH), under the Price Control and Anti-Profiteering Act 2011. Health Minister Khairy Jamaluddin and Domestic Trade & Consumer Affairs Minister Alexander Nanta Linggi said this move was undertaken as prices for Covid-19 vaccines in the private market are high and fluctuating, adding that the list and prices of the vaccines will be continuously reviewed and improved or eliminated based on current market conditions and demand.
No major earnings impact but revenue per dose assumptions cut
Pharmaniaga (PHRM) does not forecast any major revenue impact from the implementation of the ceiling price as we gather its current average selling price for the Sinovac vaccine to the private market is close to the new wholesale ceiling price of RM62 per dose. However, we cut FY21F/22F revenue by 3%/6% and core EPS by 7%/12%, as we had previously assumed a higher average selling price of c.RM140 for the sale of the filled-and-finished vaccine to the private sector in 2H21F and FY22F, which we now reduce to RM62 per dose. We keep our projections intact for c.14m/3m doses of the filled-and-finished vaccine to be supplied in FY21F/22F. We now forecast revenue contribution of RM1.73bn/RM186m (35%/5% of total revenue) from the supply of the filled-and-finished vaccine in FY21F/22F (previous: RM1.88bn/RM421m). Nonetheless, we note that our assumptions for revenue per dose and number of doses supplied for the
vaccine remain fluid and may be subject to future revisions, pending updates from PHRM.
Reiterate Add with unchanged TP of RM1.00 (19x FY23F P/E)
As our earnings cuts mainly affect FY21-22F, we reiterate our Add rating on PHRM with unchanged TP of RM1.00, still based on 19x FY23F P/E or 1 s.d. above its 5-year mean, to reflect potentially higher sales volume for the filled-and-finished Sinovac vaccine. Key potential re-rating catalyst: robust vaccine fill-and-finish earnings contribution in 4Q21F and 1H22F. Key downside risks: weaker-than-expected vaccine earnings contribution and concession margins. PHRM is our top Malaysian pharmaceutical pick.