KUALA LUMPUR (March 11): Shares of Pharmaniaga Bhd (KL:PHARMA) have come under significant selling pressure, with the stock plunging 40% year-to-date, ahead of its shareholders’ meeting on March 20.

The shareholders' meeting will decide on the in the company's cash call exercise, which is a critical step in its efforts to exit its Practice Note 17 (PN17) status.

Pharmaniaga's revised regularisation plan, set for approval at the extraordinary general meeting next Thursday (March 20), comprises a RM520 million capital reduction, a rights issue to raise up to RM353.52 million, and a RM300 million proposed private placement.

Boustead holds a 47.1% stake in Pharmaniaga while LTAT owns 7.8%, have given undertakings to subscribe to their entitlements to the rights issue. Based on a back-of-envelope calculation, Boustead will need to fork out up to RM166.58 million, while LTAT’s portion amounts to RM27.68 million.

While the price for the rights issue is not yet set, the illustrative issue price according to Pharmaniaga’s circular to shareholders was set at 10 sen, which represents a 52.3% discount from Pharmaniaga’s last closing price of 21 sen on Tuesday.

Meanwhile, the illustrative issue price for the proposed private placement was 14 sen, reflecting a 33.3% discount from the last closing price.

Notably, this revised plan introduces an increased capital reduction of RM520 million compared to RM180 million in the November 2023 proposal, while omitting the free warrants that were previously part of the rights issue.

One market watcher believes that the fundraising exercise could prove challenging given the current difficult market conditions.

Pharmaniaga recently returned to the black in the financial year ended Dec 31, 2024 (FY2024), recording RM131.8 million net profit, compared to a net loss of RM80.2 million in FY2023.

Revenue also increased 10.4% to RM3.76 billion.

Nevertheless, managing director Zulkifli Jafar shared with an English daily that the group’s largest shareholders, Boustead Holdings Bhd and the Armed Forces Fund Board (LTAT), have pledged to inject funds to back the regularisation plan.

Approximately 51.3% of the proceeds from the exercise will be allocated to debt repayment, which is projected to yield annual interest savings of up to RM16.8 million.

Meanwhile, 34% of the funds will be directed towards business expansion, including the acquisition of four new warehouses across Malaysia and the development of vaccines, insulin, and other generic drugs.

Pharmaniaga currently operates four manufacturing plants in Malaysia and one in Indonesia, with export markets spanning the EU, Brunei, Hong Kong, and Singapore.

The group fell into PN17 status in February 2023 amid massive impairment after being unable to sell RM552.3 million worth of Covid-19 vaccines.

Shares of Pharmaniaga closed at 21 sen on Tuesday, a level not seen since the Covid-19 period in March 2020. Its market capitalisation stood at RM302.66 million.