Duopharma Biotech Bhd (Duopharma) will likely see no impact from the termination of seller supply agreement with RDIF effective on March 24, 2023, which will not incur any contractual penalties.

To recap, Duopharma signed a term sheet agreement with RDIF in January 2021 to secure 6.4 million doses of Sputnik V vaccine. RDIF is the appointed marketing agent for Russia’s Gamaleya National Research Institute of Epidemiology and Microbiology (Gamaleya), which developed the vaccine for the Covid-19 virus.

On the same day, the group also entered into a term sheet agreement with the Ministry of Health to supply 6.4mil doses of vaccines 3.2mil Malaysians for a year. Both term sheet agreements would later become definitive supply agreements.

In June 2021, Duopharma entered into seller supply agreement with RDIF and government supply agreement with MoH.

Sputnik V have not been approved by Malaysia’s Drug Control Authority (DCA) since June 2021, the period when the group entered into supply agreements with Russian Direct Investment Fund (RDIF) and the Ministry of Health (MoH).

Notably, Sputnik V vaccines had to be approved by Malaysia’s DCA by November 23, 2021, for both agreements to be fully enforceable. In late November 2021, the government supply agreement would have been null and void because DCA clearance was not obtained by the stated date.

However, the seller supply agreement had not been officially terminated given that neither party received written notice until last Friday.

AmInvestment Bank Bhd (AmInvestment Bank) continued to like Duopharma, being the largest local pharmaceutical manufacturer in Malaysia.

“Its rosy prospects are underpinned by the rising takeup of generic drugs in Malaysia; expiration of global industry’s patents from 2023 to 2026; booming bio-similar market; and the growing Vitamin C market, which will benefit the Champs and Flavettes brands.

“We reiterate our buy call on Duopharma with an unchanged fair value of RM2.06 per share. This is based on a FY23 target price earnings of 17 times, at parity to its five-year average. There is no adjustment to our neutral three-star ESG rating.

“Our FY23-FY25 earnings are maintained as we did not account for the distribution of Sputnik V vaccine in our sales assumptions, nor has the company purchased any in its inventory.”