BF Biosciences to launch IPO to raise Rs1.37b

BF Biosciences Limited (BFBL) has applied for listing on the main board of the Pakistan Stock Exchange (PSX), seeking to raise a minimum of Rs1.37 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 plant and machinery, expand its product range, introduce new medicines, improve working capital, and boost exports.

The shares are being offered at a minimum price of Rs55 per share, with the potential to rise by up to 40% to Rs77 per share during a two-day Dutch auction (book building) process. The final strike 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 stakeholders to comment via email by August 15, 2024. According to the prospectus, the company aims to raise Rs1.37 billion to meet the growing demand for pharmaceutical products. The IPO proceeds will be used to finance the purchase of plant and machinery to expand the product range and improve efficiency, acquire export certifications such as PIC/S and SRA, develop new products including Glucagon-like Peptide (GLP1), and finance working capital requirements for purchasing raw and packing materials.

The company plans to target PIC/S certification soon after commencing Line II operations and will "aggressively" explore export markets. BFBL is actively pursuing new registrations and plans to initiate exports to non-PIC/S countries.

BFBL reported net revenue of Rs2.91 billion for the first three quarters (July 2023 to March 2024) of its current fiscal year, compared to Rs1.80 billion for the entire previous year (2022-23). Profit after tax was Rs314 million for the nine months, compared to Rs149 million for the previous year.

The prospectus highlights several risks to the business, including macroeconomic factors such as exchange rate fluctuations, interest rates, inflation, and energy price hikes, which cannot be directly passed on to consumers. Exchange rate volatility impacts raw material costs, high interest rates increase finance costs, and inflation raises factory overheads, administrative expenses, and selling costs. Energy price hikes also affect overheads, though the plant has access to 1 MW of solar generation capacity 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 hamper product launches. The prevalence of counterfeit pharmaceutical products is also a significant threat to the industry and public health.

The entire issue of 25 million shares will be offered through the book building method, with bidders allowed to place bids 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 allotted 75% of the issue size (18.75 million shares), with the remaining 25% (6.25 million shares) offered to retail investors through a general public portion.