KUALA LUMPUR: Pharmaniaga Manufacturing Bhd (PMB), a wholly owned unit of Pharmaniaga Bhd, has had its manufacturing licence revoked following a routine audit by the pharmaceutical services division of the health ministry.

Pharmaniaga announced the revocation of the licence in a statement released to Bursa Malaysia Securities yesterday, but did not reveal the reason.

“The company is taking all the necessary steps to ensure that the issues raised are addressed expeditiously for the re-issuance of licence to enable the plant to resume production as soon as possible,” it said, without saying what the “issues” are.

It said the cessation of production would not have a significant financial impact on the group as the other business lines were not affected.

Pharmaniaga said it is a diversified healthcare group with business in logistics, distribution and medical equipping. According to its FY09 financial results, manufacturing contributed about 10.8% to its full-year turnover of RM1.3 billion.

“The bulk of their income comes from running government hospitals and clinics. So the revoking of their manufacturing licence would not have a big impact on their numbers,” an analyst told The Edge Financial Daily.

It is uncertain if the revocation of its manufacturing licence would affect Pharmaniaga’s 10-year concession to handle the supply of medicine to government hospitals. Citing sources, The Edge weekly in its latest issue reported that Pharmaniaga had secured the concession.

“The company believes it will be able to address the audit issues of PMB within a relatively short time,” Pharmaniaga said in the announcement.

The analyst said Pharmaniaga, being a government-linked company (GLC), should be able to get its act together promptly. However, the analyst noted that this development shows a lack of competency, especially for a GLC. “There is still obviously a lot to be done for KPIs,” the analyst said.

While Pharmaniaga has indicated that the revocation of the licence may not weigh heavily on the company, it would certainly hurt shareholders’ plans to sell down stakes in the pharmaceuticals producer.

The Edge weekly reported that its major shareholder, UEM Group Bhd, is in negotiations with several parties to dispose of its entire 86.81% equity stake in Pharmaniaga. The counter shed two sen to RM4.46 yesterday, which could fetch a whopping RM414 million for UEM’s stake.

In a separate statement, Pharmaniaga said UEM “is evaluating its options with regards to meeting the public spread requirement for Pharmaniaga by March 29, 2010”.

However, given the turn of events, the sale of any stake may yet materialise but at a huge discount, the analyst said. UEM had held about 30% of Pharmaniaga before purchasing an additional 16% stake for RM90 million and another 40.81% stake at RM5.50 per share.

It was reported that among parties that may be interested to purchase UEM’s stake in Pharmaniaga were Tan Sri Rozali Ismail, executive chairman of Puncak Niaga Holdings Bhd, and Equiti Nasional Bhd (Equinas).

Pharmaniaga used to be a darling stock up till 2006 when the counter became illiquid but trading volume picked up somewhat at the end of last month.

This article appeared in The Edge Financial Daily, March 4, 2010.