CASE STUDY-Shariah and Science: CCM leading the way in halal-certified pharmaceuticals

Headquartered in Malaysia, CCM Berhad is a public pharmaceutical and chemical manufacturing company. Its three divisions are pharmaceuticals, chemicals and fertilizers, and the company is one of the largest pharmaceutical and chemical manufacturers in Malaysia. A first mover in the halal pharmaceuticals industry in Malaysia, CCM was the first pharmaceutical company to obtain the ‘Halal Malaysia’ certification for its range of health supplements in 1999 and has since gone on to develop its halal range. 

CCM Berhad is a public pharmaceutical and chemical manufacturing company, headquartered in Malaysia. Its three divisions are pharmaceuticals, chemicals and fertilizers, and the company is one of the largest pharmaceutical and chemical manufacturers in Malaysia.

Its extensive product range has helped the company become successful in the region. The company has also encouraged halal initiatives for over 10 years and has become a leader within the regional halal industry.  

It is listed on the Kuala Lumpur Stock Exchange and has authorized share capital of 800 million Maalysian ringgit ($190.4 million). As of March 2016, the company had 5,471 shareholders that account for 457.6 million ringgit ($108.9 million) in issued and paid-up share capital. One of the Group’s pharmaceuticals units, CCM Duopharma Biotech Berhad—manufacturer of tablets, capsules, oral preparations, eye drops, antibiotic powder and dental cartridges—is a Shariah-compliant stock listed on Malaysia’s main stock exchange. Leonard Ariff, who is CCM Berhad’s Group Managing Director, also serves as CEO of CCM Duopharma Biotech.  

CCM Berhad has earned several awards recognizing its Islamic Economy credentials, with notable accomplishments including: PNB Islamic Initiative Award (2014); Halal Excellence Award (2015); Global Islamic Economy Award at Dubai’s Global Islamic Economy Summit (2015)

The company has also been recognized, more broadly, for its robust credentials as a pharmaceutical industry player: Pharmaceutical Company of the Year (Generic Drugs) by Frost & Sullivan (2016); Industry Excellence Award in healthcare by Utusan Business Awards (2016); Best Brand in Malaysia by the International Congress of the Economic Relations’ Development in healthcare with focus on Islamic Countries (2016)

First mover in Malaysia’s halal pharmaceutical industry

CCM Berhad has a halal-certified product range of over 100 over-the-counter (OTC) products and its offerings are currently available in over 30 countries. It was the first pharmaceutical company to obtain the ‘Halal Malaysia’ certification for its range of health supplements in 1999, according to its website.

Outside of pharmaceuticals, in 2004 the company became the first ISO-certified chemical manufacturer to obtain halal certification for a number of its products that are supplied to industries such as water treatment, oleochemicals (including edible oil), and food and beverages. Six years later, in 2010, its calcium nitrate and nitric acid products also received halal certification from Malaysia’s national halal certifier JAKIM.

Leonard Ariff, CCM Berhad Group Managing Director, told Salaam Gateway, “With the increasing demand for halal pharmaceuticals, CCM believes that it would spur the R&D of new drugs to be founded on halal-based ingredients such as from plants, minerals and chemically synthesized materials. Moreover, as the pharmaceuticals industry is growing towards large molecules/biologics, it would be less complicated to produce pharmaceutical products that can meet halal requirements across its whole value chain.”

“CCM has increased its range of halal-certified products from vitamins and health supplements to over-the-counter (OTC) medicines such as painkillers/analgesics, eye drops, cough mixtures, ointments for wounds/cuts/bruises, creams for rash/itchings etc., offering these products domestically and regionally,” said Ariff.

CCM Berhad does not apply a pricing mark-up on its halal products, as it has incorporated halal into its production process. “In our opinion, halal should be at “No Cost” since halal should be “Built-In” into the management and operational systems, i.e. halal compliance is incorporated and implemented right from the start and not “Tested For” at the end when the finished products are ready for the market,” explained Ariff.

”The concept of “Halal Built-In, Not Tested For” has been incorporated into CCM’s workflow as demonstrated through our “Halal Assurance Management System,” he added.

Working closely with halal ecosystem stakeholders

CCM Berhad is a well-recognized thought leader, paving the way for the halal industry’s oversight of pharmaceutical products manufacturers. It collaborates closely with a number of halal regulatory organizations such as JAKIM (Department of Islamic Development Malaysia), HDC (Halal Industry Development Corporation), the Department of Standards Malaysia, SIRIM, World Halal Forum (WHF) and International Halal Integrity (IHI) Alliance.

“We plan to continue to lead in getting halal certification for all our products. We are now preparing to have our ethical/prescriptive medicines to be certified halal once the Malaysian halal certifying body – JAKIM, opens up the halal application for this range of products sometime this year,” said Ariff.

Shariah + Science

“Also, we are currently working to be the first to offer halal-certified biologics, Highly Active Pharmaceutical Ingredient (HAPI) and Vaccines Fill and Finish. We are also advocating for a more solid convergence of Shariah and Science as we move forward into the larger molecules of pharmaceutical products such as biologics,” he added.

Shariah-compliant financing

In accessing the halal market opportunity, CCM has also sought to use Shariah-compliant financing, although noting its challenges. “CCM subscribes to Shariah-compliant finance such as sukuk musharakah and Islamic-based term loans, bankers’ acceptances, revolving credits and trade facilities,” said Ariff.

”The challenge is in obtaining a competitive rate versus the conventional offerings,” he stressed.

Increasing awareness of halal pharma driving demand

As awareness of non-halal ingredients in pharmaceutical products increases, Muslim demand for halal-certified pharmaceuticals will continue to grow. In 2015, Muslims spent an estimated $78 billion on pharmaceutical products and this is expected to grow by 9.3 percent CAGR to reach $132 billion in 2021. New lines have emerged such as halal vaccines and halal nutraceuticals to address the increasing Muslim demand.

In Malaysia, Muslim spend on pharmaceutical products is estimated at $1.1 billion. This is expected to grow by 9.5 percent CAGR to reach $1.9 billion in 2021. This is significant and will continue to grow if more halal-certified options become available. Muslims need alternatives to medicines and vaccines that contain non-halal ingredients, including gelatin.

New products

There are major opportunities for CCM Berhad in broadening its halal market exposure through extending the number of its halal-certified products. In particular, the Group is well-poised to take advantage of new product opportunities, with an estimated $178 billion worth of drugs coming off patent by 2018, as estimated by market analyst IMS Health Malaysia.

”Selective products with patent expiration by 2018, in line with our production capacity and capability, will be made available to the market in due course,” said Ariff.

New markets

There are also substantial growth opportunities in key Organisation of Islamic Cooperation (OIC) markets, including in Indonesia, where, by law, all halal products will have to be certified as such by the end of 2019.

“CCM believes there will be growth potential from Indonesia’s halal law, which will be enforced on the pharmaceutical industry from Oct 2019 in line with the growing awareness and demand for halal pharmaceuticals from the Muslims in Indonesia and worldwide,” said Ariff.

However, he stressed on a key challenge, “Nevertheless, the requirement imposed on manufacturers to set up manufacturing plants in the targeted countries is something worthwhile to be reconsidered by the authorities of such countries so that halal pharmaceutical products can be accessible by all without constraints,” he stressed.

Ingredients

A major challenge is being practical in the halal requirements, with the industry still in its nascency.

“There’s yet to be any noticeable developments/breakthroughs in the global halal ingredients industry thus far, especially for pharmaceutical products, as the demand for halal pharmaceuticals is still in the infancy stage with only a few players pursuing this new horizon, like CCM,” said Ariff.

Capital costs

“For that reason, most producers are still reluctant to venture into supplying halal ingredients to the pharmaceutical industry, especially Halal Active Pharmaceutical Ingredients (APIs), since there are no significant economies of scale being substantiated,” he added.

One key enabler for the industry will be to help make the supply of halal ingredients more robust, something that would fit private equity.

“The challenge is the current high price of halal-certified ingredients that is caused by low supply as the demand for halal pharmaceuticals is still in its infancy stage but we opine that it won’t be long for the ingredients’ prices to be more competitive with increasing ingredient producers/suppliers being sensitized towards the need for halal pharmaceuticals worldwide,” said Ariff.

“CCM opines that both public and private equities, especially Muslim-led, should be acquiring the manufacturers of critical halal ingredients to ensure the sustainability of supply at competitive prices. The ecosystem of the halal ingredient industry should preferably be controlled by competent Muslims to preserve the integrity of the whole value chain,” he added.

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