KUALA LUMPUR (July 3): More government insulin supply contract renewals could be in store for Duopharma Biotech Bhd (KL:DPHARMA) after it secured RM225 million worth of contracts from the Ministry of Health (MOH), says CIMB Investment Bank (CIMB IB).
In a note on Friday, the research house said that the contract award for insulin glargine came as a ‘positive surprise’ as it had not previously factored the product into its forecasts and that the latest awards strengthen Duopharma’s position as a long-term supplier to the public healthcare system.
“We are mildly positive on the additional award for insulin glargine, as this marks the first formal contract awarded to Duopharma Biotech for supplying this product to the MOH,” said CIMB IB, noting that the company previously had only supplied insulin glargine on an ad hoc basis.
On Thursday, Duopharma had secured three contracts from the MOH comprising a three-year agreement worth RM155 million to supply recombinant human insulin, alongside two-year contracts valued at RM52.5 million for insulin aspart and RM18 million for insulin glargine.
Following the latest awards, the research house estimates Duopharma will generate between RM75 million and RM80 million in annual insulin supply revenue from the MOH. This would account for about 7% to 8% of its projected revenue for the financial year ending Dec 31, 2027 (FY2027).
Incorporating the insulin glargine contract into its model, CIMB IB raised Duopharma’s earnings forecasts by 0.4% for the calendar year 2026 (CY2026), 0.8% for CY2027, and 0.5% for CY2028.
The research house maintained its ‘buy’ recommendation on Duopharma and raised its target price to RM1.83 from RM1.81, based on an unchanged price-to-earnings valuation of 16 times for CY2027.
The consensus among analysts is bullish, according to Bloomberg data. All six research houses covering Duopharma have ‘buy’ calls. The 12-month average target price is RM1.71.
With the health industry gradually expanding the use of different insulin therapies within the public healthcare sector, the formalisation of Duopharma’s latest wins could net future contract renewals but earnings contributions are expected to be relatively small in the near term, CIMB IB noted.
The research house said recombinant human insulin continues to account for the majority of insulin used by the MOH, estimating it makes up between 80% and 90% of total insulin consumption.
It also expects broader adoption of insulin glargine over time as the ministry diversifies treatment options and could provide another avenue for future recurring revenue for Duopharma.
Beyond the latest contract wins, CIMB IB said Duopharma's longer-term growth prospects remain supported by including ongoing healthcare reforms that are expected to drive greater adoption of generic medicines, a potential increase in the number of products supplied under its concession agreement with the MOH, and the expiry of patents for more originator drugs, which could create opportunities for generic manufacturers.
Shares of Duopharma were up by one sen or 0.8% to RM1.22 at the time of writing on Friday morning, valuing the group at RM1.17 billion.