KUALA LUMPUR, March 8 — Pharmaniaga Bhd’s descent into Practice Note 17 (PN17) territory signifying financial distress was just an accounting procedure, Defence Minister Datuk Seri Mohamad Hasan claimed today.

He insisted that Pharmaniaga, with an annual turnover of RM2.3 billion, was still a profitable business.

"It’s just the vaccines, which made it (Pharmaniaga) do a depreciation on all the vaccines that is had in store.

"It is merely an accounting procedure, the rest of its businesses are operating smoothly and making profit,” Mohamad told Parliament during his winding-up speech on Budget 2023.

It was reported on February 28 that Pharmaniaga had been classified as an affected listed issuer under PN17 of the Main Market Listing Requirements of Bursa Malaysia.

In a filing with the stock exchange on February 27, the pharmaceutical company said it had triggered the PN17 criteria pursuant to its audited consolidated financial statements for the period ended December 31, 2022.

A company that is listed under the PN17 category is a listed company that does not have a core business or has failed to meet the minimum capital or equity and companies’ shareholders’ funds.

Today, the minister also known as Tok Mat said the firm was paying the price for previous administrations’ choices about the country’s Covid-19 vaccine strategy.

Pharmaniaga was the exclusive distributor as well fill-and-finish manufacturer for Sinovac’s Covid-19 vaccine — CoronaVac — in Malaysia.

"Pharmaniaga (at the time) took a position to purchase vaccines, on whose orders, I don’t know, but it’s purely a business decision, they bought a lot of vaccines in anticipation that the government needed vaccine urgently — there was the national vaccine programme (National Covid-19 Immunisation Programme) and boosters — which was running smoothly and excellent.

"Unfortunately, the government was indecisive with its decision and decided to finish up Pfizer. This led to the (balance stock), what people say, what can they do?” Mohamad said today.

He further explained that Pharmaniaga, as a listed company, must abide by accounting practices as prescribed by the Securities Commission, and was directed by PricewaterhouseCoopers (PwC) to make a provision for the slow uptake of the vaccine.

"Its shareholders fund was over RM300 million, but it has to make a payment of over RM500 million, meaning there was a negative RM100 million.

"When it becomes negative RM100 million, automatically the company is placed under PN17 category and Pharmaniaga is in the midst of preparing a business recovery plan as I have ordered and I am monitoring the development closely so that we are able to recover Pharmaniaga’s business in the soonest,” Mohamad said.

The minister was responding to Lim Lip Eng (Pakatan Harapan – Kepong) who asked for a clarification on the matter.

Lim had last week urged the government not to use government funds to "save” the pharmaceutical company from its current situation.