Shantha as a template?
If Kiran Majumdar-Shaw is betting on Biocon’s innovations and manufacturing skills to become a global biotech player, vaccines maker Shantha Biotechnics has been attracting cash-rich foreign partners to power its innovation and manufacturing skills in vaccines. Sanofi Pasteur’s recent takeover of Shantha once again highlighted India’s attraction: the French giant spends e1 million (Rs 7 crore) a day on research.
Industry analysts are already reading Sanofi Pasteur’s acquisition of Shantha as a validation of the Indian manufacturing prowess in the deal that values Shantha at eight times its revenue. Says Utkarsh Palnitkar, Partner at Ernst & Young India, who until recently was the Partner and Industry Leader, Health Sciences, at E&Y India: “The biotech industry in India is nascent and such a deal signifies global recognition of its promise.’’
Indian companies have achieved considerable strengths in vaccine manufacturing, which has become a focus area for almost all the large pharma players, notes Palnitkar. He says Indian players afford an opportunity both in terms of collaboration and acquisition to rapidly increase their manufacturing base as well as geographic reach.
Was this why Sanofi Pasteur, the vaccines division of the Sanofi-Aventis Group, paid Rs 3,700 crore for a company that is expecting to close this year with revenues of Rs 450 crore?
HOMING IN ON VACCINES |
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| Shantha works with Unicef and others to supply in international markets. |
| It has developed and made India’s first recombinant Hepatitis B vaccine. |
| Its tetanus vaccine comes prequalified by WHO for supplies to UN agencies. |
| Coming up: vaccines for rotavirus, conjugated typhoid and HPV. |
“We paid the right price for a deal considered strategic for Sanofi Pasteur,” says Alain Bernal, VP, Communications, Sanofi Pasteur. “We consider the acquisition of Shantha as a unique opportunity to complement our offer of solutions to public health authorities and international non-governmental organisations (NGOs).
Shantha’s Founder, K.I. Varaprasad Reddy, who has a stake of around 13 per cent in the company, is more to the point: “Shantha needed a global strategic partner like Sanofi to guide and finance its projects.”
The Hyderabad-based company, he says, has always been an innovation-driven player, investing over a quarter of its earnings in research and development, but funding has always been tough.
While Biocon is much bigger in terms of size and in a different product and market space, Shantha also began in the little league, with a meagre investment of Rs 15 crore. But then, Reddy figured out early on that making vaccines involves huge investments. Reddy’s solution: get deeppocketed foreign partners.
First it was the Omanis and some non-resident Indians. When this group moved out in 2006, in came French vaccines major Merieux Alliance , followed by Sanofi now.
The $40 billion (Rs 1,92,00 crore) Sanofi is the world’s leading provider of polio vaccines, largest producer of flu vaccines and is also the world’s largest provider of meningococcal vaccines. Sanofi sold 1.7 billion doses of vaccines last year.
Krishna M. Ella, Founder of Bharat Biotech International, and Shantha’s competitor in the vaccine space, cautions that the global interest in India is for vaccines and not really for biotech. And Indian players have to look for global alliances because vaccines need huge investments. Ella should know: he is investing Rs 500 crore on the development of just one vaccine.
