Ground shifts in pharma

A RM281.67mil contract to produce human insulin is shifting the momentum in Malaysia’s pharmaceutical sector and reinforcing the government’s push for stronger local manufacturing.

For Pharmaniaga Bhd, the three-year contract to supply human insulin to government hospitals comes at a pivotal moment, just weeks after its formal exit from the Practice Note 17 (PN17) status.

For Duopharma Biotech Bhd, it means surrendering its lead supplier status in a segment it has long dominated.

However, analysts say the earnings impact remains manageable because insulin contributes only a modest portion of the group’s profit.

The latest arrangement creates a new balance in one of the most strategically sensitive pharmaceutical supply chains in Malaysia.

This is where scale, pricing discipline, supply security and domestic production capacity are increasingly determining who wins.

According to CIMB Securities Research, Pharmaniaga is estimated to have secured about 65% of the latest Health Ministry contract value, leaving Duopharma with roughly 35%. Duopharma was dominant under earlier arrangements.

CIMB Research estimates the total contract value has expanded to about RM433mil from RM375mil previously, reflecting rising public sector insulin demand.

While the market initially viewed Duopharma’s reduced share as a setback, analysts have largely concluded that the impact is contained.

CIMB Research described the development as neutral for Duopharma, noting that human insulin contributed less than 5% of earnings before the latest split.

The research house only marginally reduced earnings forecasts, trimming financial year 2026 (FY26) to FY28 core net profit estimates by between 0.4% and 3%.

TA Research similarly maintained confidence in Duopharma’s earnings trajectory, forecasting FY26 net profit of RM101.4mil after FY25 earnings rose 39.6% to RM87.5mil.

“We expect the group to secure a new three-year contract in the near term, likely under a dual-supplier arrangement between Duopharma and Pharmaniaga,” TA Research says, highlighting that the ministry’s procurement framework typically avoids dependence on a single supplier for critical medicines.

Duopharma still retains a significant position in insulin supply while continuing to benefit from a much broader earnings base anchored by its Approved Products Purchase List (APPL) contract, which supplies around 100 pharmaceutical and non-pharmaceutical products to government healthcare facilities until end-2026.

TA Research expects renewed tenders to exceed the current RM684.2mil contract value.

Nevertheless, the latest insulin award signals a strategic shift.

Azrul Mohd Khalib, founder and chief executive officer of the Galen Centre for Health and Social Policy, believes this reflects a more pragmatic procurement approach rather than a rejection of Duopharma.

“Duopharma’s loss of lead supplier status should be seen more as a sign that the government is prioritising price competitiveness, supply security, and reduced dependence on any single supplier,” he tells StarBiz 7.

That policy direction follows the severe insulin supply disruption of 2024, when Biocon faced production challenges and Novo Nordisk withdrew from the human insulin market to focus on higher-growth insulin analogues and obesity drugs.

The shortage exposed how concentrated Malaysia’s insulin supply chain had become. It also opened the door for Pharmaniaga.

Its Puchong biopharmaceutical facility, launched in late 2024, gave the company immediate manufacturing capability just as the government began reassessing supply security.

The plant is capable of producing up to 30 million doses of human insulin annually, making Pharmaniaga the first local company to manufacture human insulin domestically at commercial scale.

Managing director Datuk Zulkifli Jafar has said the contract will contribute more than RM281mil in revenue over three years, with gross profit margins of between 25% and 29%.

Insulin is only the opening move Pharmaniaga is already targeting the next major tender cycle for insulin analogues in 2028, covering products such as glargine and aspart, while simultaneously moving into glucagon-like peptide-1 therapies such as liraglutide and semaglutide – medicines increasingly central to both diabetes and obesity treatment.

That creates a new manufacturing earnings pillar beyond its traditional logistics-heavy concession business, where margins are structurally lower.

This transition is also occurring at a time when the group’s shareholder structure has changed significantly.

Pharmaniaga’s post-PN17 recovery has seen the emergence of Jakel Medical Sdn Bhd as a substantial shareholder, with a 14.29% stake.

Jakel Medical is a unit owned by Datuk Seri Mohamed Faroz Mohamed Jakel’s textile wholesaler and retailer Jakel Group.

Jakel’s entry followed Pharmaniaga’s recapitalisation exercise, which included a RM520mil capital reduction, rights issue and private placement that helped restore the group’s balance sheet and remove PN17 classification.

The investment is strategically important because it introduces a new private-sector shareholder with strong financial backing at a time when Pharmaniaga is repositioning itself for long-term manufacturing growth.

Jakel joins Boustead Holdings Bhd, which remains the largest shareholder with 24.86%.

The company is already studying export expansion into Central Asia, especially Uzbekistan, where halal-certified insulin and vaccines may find demand.

Insulin manufacturing economics improve significantly once domestic volumes are secured and excess capacity can be directed abroad.

Meanwhile, Duopharma’s defensive strengths remain intact.

UOB Kay Hian (UOBKH) Research highlights that the company has strengthened inventory buffers, raising finished goods coverage from two to three months to four to six months, while increasing active pharmaceutical ingredient (API) reserves to as much as eight months for critical products.

This inventory strategy helps shield margins from geopolitical disruptions and rising raw material costs. Although some API costs such as paracetamol have risen sharply, UOBKH Research notes only a small portion of Duopharma’s product base faces significant inflationary pressure.

Meanwhile, Azrul believes that historical incumbency in public tenders is no longer sufficient.

“Yes, the reshuffle points to intensifying competition in government pharmaceutical tenders, including areas where Duopharma has traditionally been strong.

“It suggests that companies will increasingly have to compete on pricing, delivery performance, reliability, and their ability to support the government’s broader health system needs.”

The backdrop for both companies remains favourable because diabetes demand is still rising.

“The expansion of the insulin contract value reflects the growing burden of diabetes in Malaysia, and that demand is creating wider opportunities across the treatment ecosystem.

“Beyond insulin, this includes medicines, diagnostics, monitoring tools, and therapies related to cardiovascular and kidney complications. This is all part of the rising cardio-renal-metabolic disease crisis facing the country,” Azrul says.

He adds that procurement decisions will increasingly favour local production capability.

“Yes, future procurement is likely to place greater emphasis on local manufacturing capability, especially for critical medicines and strategic supplies.

“Pharmaceutical companies should position themselves by strengthening local production, investing in resilient supply chains, maintaining high-quality standards, and demonstrating their ability to help Malaysia improve medicine security, affordability, and long-term self-reliance,” he emphasises.

Essentially, the latest insulin contract is not simply a tender outcome.

It is an early signal that Malaysia’s pharmaceutical sector is entering a new phase – one where manufacturing depth, strategic investors and supply resilience matter as much as price.