BF Biosciences to launch IPO to raise Rs 1.37 billion

KARACHI:

BF Biosciences Limited (BFBL) has applied for listing on the main board of the Pakistan Stock Exchange (PSX), seeking to raise at least Rs 1.37 billion by selling 25 million shares to institutional, high net worth and individual investors, pending regulatory approval. The pharmaceutical company plans to use the funds to purchase new facilities and machinery, expand its product range, introduce new drugs, improve working capital and boost exports.

The shares are being offered at a minimum price of Rs 55 per share, with an option to increase by up to 40% to Rs 77 per share during a two-day Dutch auction (book building) process. The final exercise price will be determined during the auction, with dates to be announced later. Arif Habib Limited is the lead manager for the offer.

The company has uploaded its draft prospectus on the PSX website, inviting interested parties to comment via email till August 15, 2024. According to the prospectus, the company aims to raise Rs 1.37 billion to meet growing demand for pharmaceutical products. The proceeds from the IPO will be used to finance the purchase of plant and machinery to expand the product range and improve efficiency, obtain export certificates such as PIC/S and SRA, develop new products such as Glucagon-like Peptide ( GLP1) and working capital financing requirements for the purchase of raw materials and packaging materials.

The company plans to target PIC/S certification soon after Line II goes live and will “aggressively” explore export markets. BFBL is actively pursuing new registrations and plans to start exporting to non-PIC/S countries.

BFBL reported a net income of Rs 2.91 billion for the first three quarters (July 2023 to March 2024) of its current financial year, compared with Rs 1.80 billion for the entire previous year (2022-23). Profit after tax was Rs314 million for the nine months, compared with Rs149 million for the previous year.

The prospectus highlights several risks to the business, including macroeconomic factors such as currency fluctuations, interest rates, inflation and energy price increases, which cannot be passed on directly to consumers. Exchange rate volatility affects the cost of raw materials, high interest rates increase financing costs, and inflation increases factory overhead, administrative expenses, and selling costs. Energy price increases also affect overheads, although the plant has access to 1MW of solar power from its parent company, in addition to the national grid and backup diesel generators.

Other risks include potential delays in registering new products with the Drug Regulatory Authority of Pakistan (DRAP), which could prevent product launches. The prevalence of falsified pharmaceuticals is also a major threat to industry and public health.

The entire issue of 25 million shares will be offered through the book-building method, with bidders allowed to bid for 100% of the issue size. The strike price will be the price at which 100% of the issue is subscribed. Successful bidders will be provisionally allocated 75% of the issue size (18.75 million shares), with the remaining 25% (6.25 million shares) offered to private investors through a portion of the general public.