MGRC moving towards pathology as core business driver

By MARK RAO

Malaysian Genomics Resource Centre Bhd (MGRC) has received shareholders’ approval for its 100% takeover bid of MPath Sdn Bhd, with the acquisition to establish the pathology business as its key nancial driver in the future.

The life sciences company will pay RM11.5 million to Ajmaks Sdn Bhd for the remaining 50% stake in MPath, which will see 49,000 ordinary shares and 8.99 million redeemable convertible preference shares exchange hands.

Scheduled to be finalised by the end of this month, the acquisition will result in MGRC taking over the management of MPath’s wholly owned subsidiary Clinipath (M) Sdn Bhd, the fourth-largest independent player in the Malaysian pathology sector.

MGRC COO Sasha Nordin said private pathology in the country currently rakes in about RM1 billion in revenue annually, with the top nine out of the 200 pathology laboratories in the industry contributing to half of that figure.

“The top player brings in about RM120 million a year, while the ninth-largest company generating RM11 million — Clinipath sits in between that spectrum,” Nordin told the press after MGRC’s EGM in Kuala Lumpur yesterday.

He said the industry is predicted to grow between 9% and 10% annually, supported by the increasing prevalence of chronic diseases in Malaysia, rising gross national income leading to more disposable income going to healthcare, and a larger working population which will have some form of medical benefits.

The takeover of Clinipath will also see MGRC shift its focus to clinical testing services, a departure from its analytical services or contract research work, which was its core contributor back when listed in 2010.

As a previous 50% shareholder in MPath, the genome and genetics player could only recognise a share of profit from the company, while unable to consolidate its revenue.

Had the acquisition been completed at the start of its financial year ended June 30 last year (FY16), MGRC’s turnover would have jumped 195.6% from RM10.43 million to RM30.83 million.

Nordin said the acquisition is expected to make an immediate impact on its revenue by the first-quarter of FY18, with Clinipath presently operating 19 labs in Malaysia.

The company, he said, is planning to open two new centres in the east coast of Malaysia before the end of the current calendar year, which will be focused on larger urban areas though he did not disclose further details.

In Sarawak where Clinipath already has two centres, the company intends to forge strategic partnerships with other labs and networks in the area, with one such collaboration already secured.

Nordin said the pathology company will remain focused on Malaysia for the remaining year, but will look to markets outside the country where pathology is beginning to grow, with Laos, Vietnam and Myanmar being notable examples.

Meanwhile, the MPath Group saw its revenue and earnings progressively falling from 2014 to 2016.

For FY16, the group recorded 8.7% and 11.9% year-on-year declines in turnover and profit to RM20.39 million and RM6.88 million respectively, attributable to the reduction in contract volume.

Nordin said MGRC is working hard towards securing hospital-based contracts, while Clinipath is posting higher contributions from the general practitioner market segment, both of which should offset any dip in financials.

Currently, Clinipath offers 1,200 medical diagnostic and genetic screening tests, servicing over 1,000 customers per month in pathology services.