Vaccines, the big deal
In a first-of-its-kind
deal in the region Shantha Biotechnics got acquired by
world’s largest vaccine company, Sanofi-Pasteur for $613
million (Rs 3,740 crore). This has opened the possibility of greater
MNC play in the vaccines segment in the region, given that India has
many such likely takeover targets.
In what appears to be the beginning of a new trend, India’s
pioneering vaccine company, Shantha Biotechnics got acquired by
world’s largest vaccine company, Sanofi-Pasteur. The vaccines
division of the Sanofi-Aventis Group, Sanofi-Pasteur, executed the deal
by acquiring Mérieux Alliance’s French subsidiary
ShanH, which owns a majority stake (79 percent) in Hyderabad-based
Shantha Biotechnics for $613 million (Rs 3,740 crore).
At a valuation of over eight-times Shantha’s sales, this is
the first-of-a-kind deal in the region. However, it is not
just the size of the deal that is making the market sit up and take
notice. The buzz is that more such deals are in the offing. Especially,
in the India market. The big pharmas with restructuring on their agenda
are eyeing the Indian market. An acquisition of this nature can quickly
change the complexion of their financials and put them on a fast track
growth path. In that light, Sanofi-Pasteur’s acquisition is
Also significant is the fact that there were many other companies who
were wooing Shantha, including some top Indian vaccine players. Its
founder-promoter KI Varaprasad Reddy, never in his wildest
dream thought that his company one day will be valued at over
eight-times the market valuation. The deal was way beyond his
expectation. Though market experts believe Shantha Biotechnics is a
The love and labor of Varaprasad Reddy’s life, Shantha
Biotechnics, came into existence and shot into prominence with the
altruistic agenda of launching India’s first r-DNA
Hepatitis-B vaccine. The company challenged the monopoly leadership of
SmithKline Beecham with its hepatitis-B vaccine Shanvac-B in 1997.
Today, Shantha’s combination vaccines are sold in
many countries and bought by WHO and UNESCO.
According to Sujay Shetty, associate director, PwC, the deal
will certainly lead to many a boardroom discussions. “The
focus is on India and the India growth story. Besides,
there’s a feeling that the MNC will play a much bigger role
in the vaccine market in India. The MNCs are making up for lost time
when they ignored India by acquiring domestic vaccine makers and grow
relatively quickly,” says Shetty. Another market
analyst adds if such generous valuations are done then more such
vaccine makers in India will be willing to sell-out.
There are very good reasons for the foreign MNC-interest in vaccines,
elaborates Shetty. Firstly, there has been a stagnation in
the R&D pipeline globally. Secondly,
there’s been a rise in some new diseases. Thirdly,
most of the big diseases will become bigger in emerging markets.
“So, the principle is quite simple. Prevention is better than
cure. If you can treat someone cheaply with vaccines, then vaccines
will score high,” he says.
Market research puts the current Indian vaccine industry at $737
million (Rs 3,587 crore) and it is expected to grow at about 20-25
percent over the next few years, while globally, the vaccine
industry is valued at $20.6 billion and is growing faster than the
This fast-paced growth and the deepening of the healthcare industry
will lead to more vaccine use in India and elsewhere. India-based
companies are likely to be front runners in the segment as they are
years ahead of other countries, in vaccine
technology, at least in the region. Indian vaccines are
affordable and companies have ready manufacturing units that supply
globally. This is enticing enough for big vaccine or pharma companies
to look at India.
Cashing on India
Shantha-story is an example of how foreign vaccine makers want to cash
in on Indian vaccine makers. This deal has in fact improved the
fortunes of some of Shantha’s domestic rivals—such
as Serum Institute, Panacea Biotech, Indian Immunologicals and Bharat
Biotech—who also have equally rich vaccine pipeline, research
and manufacturing capabilities.
According to Shantha founder, Varaprasad Reddy, the deal sends a strong
signal that Indian pharma and biotech companies are well respected.
“The high valuation is due to our quality conscious products
at low prices. We have been focusing mainly on good quality and
developing new products for affordable healthcare,” he
says. Vaccines have come to represent why India is being
respected. Most Indian companies have an exciting range of
product pipeline and many are in development stages. And if the
interest in vaccines worldwide is anything to go by, then
Indian companies will be the top sellers of vaccines, even in developed
countries. This is why foreign companies want to look at Indian
For Sanofi-Pasteur, the acquisition of Shantha is a sureshot way of
getting into a very lucrative business, that promises to give returns
for many years.
Footprint in the South
In this context, the single important point is: foreign companies do
not have the full expertise to penetrate the local public markets by
themselves in India as domestic companies have a good reach,
some of which they gained while being in an protected era.
“In order to serve these public markets with Sanofi-Pasteur
products, it is critical to have the right products and to
have the ability to both quickly develop and manufacture these products
at low cost with a solid and recognized local presence: infrastructure
in industrial operations, R&D and commercial
operations,” adds Sanofi-Pasteur spokesperson.
“Shantha is a foot-print in the South and will give
Sanofi-Pasteur the opportunity to produce and deliver
vaccines that conform with international standards of high order and at
affordable prices for the short, mid and long term. Sanofi- Pasteur
will support Shantha’s ongoing development as a platform to
address the need for high quality affordable vaccination in
Shantha has four vaccine products in its pipeline, and intends to
launch a wave of new vaccines in the years to come, so Sanofi-Pasteur
could utilize Shantha’s R&D capability to enhance
time-to-market of its products, for example by performing early stage
Sanofi-Pasteur intends to operate Shantha as a separate business
unit, besides it will also maximize the synergies
while retaining the competitive advantage.