Serum Institute acquires biopharma company Nanotherapeutics in Czech Republic

Serum Institute of India acquires a biopharma company Nanotherapeutics based in Czech Republic. This acquisition size is 72 million euros with the further investment required over the next two-three years for another 30-40 million euros.

In an interview to CNBC-TV18, Adar Poonawalla, CEO of the company spoke about the latest happenings in his company and sector.

The objective of buying this plant from Nanotherapeutics of Czech Republic is to make it the largest injectables polio vaccine unit by 2020 in the world. “By 2020, we are expecting this plant to have the largest injectables polio capacity in the world”, he said.

Below is the verbatim transcript of the interview.

Ekta: If you could just start with how much you paid for this particular acquisition. We do understand that it propels you in the injectable polio vaccine space quite significantly. Take us through the rationale.

A: The acquisition is for 72 million euros with a further investment required over the next 2-3 years for another 30-40 million euros. What this will do is convert this old Baxter flu plant that we have bought from Nanotherapeutics in the Czech Republic to the largest injectables polio vaccine plant in the world in two and a half years' time. That was the objective of making this acquisition.

The acquisition size itself is 72 million euros with a down payment of 45 million euros today and the rest over the next 7-8 months. So, the acquisition is complete and we should have -- in about 2.5-3 years' time -- the vaccine being churned out and licenced from this plant. So, by 2020, we are expecting this plant to have the largest injectables polio capacity in the world.

Ekta: This is your first overseas acquisitions after 2012. Can we see maybe the pace pick up? What are your plans when it comes to inorganic?

A: We generally like to grow organically. The only reason why we acquire companies overseas is only if there is a technology or certain regulatory requirements that require us to operate these companies and products and these hazardous viruses like polio and tomorrow, some other things like Ebola or Zika. If we do it, we need biosafety level (BSL)-4 containment facilities which we do not have in India.

It is a different gambit doing this sort of activity in India, so we have acquired these companies abroad only for these strategic reasons. We find it much easier to invest in India and make all our products in India. We have got more than 5,000 people and huge capacities in India, 1.2 billion doses a year, which we do not see ourselves expanding and doing overseas because it is very hard to run facilities and plants overseas. We only employ about 500 people overseas in Europe.

Prashant: This plant that you said will be the largest injectable polio vaccine plant, right?

A: Yes.

Prashant: How does the market break up between oral administration of vaccine and the injectables variety? In India, for example, it is mostly oral.

A: The oral vaccine goes into billions of doses which is being taken today by the world because the oral vaccine, when you take it, it sheds the wild type virus. The world decided that it should go for injectable polio vaccine which is an inactivated vaccine which does not allow shedding from the stools and from people who take the vaccine. So, it is a very safe vaccine.

That is why there is a shift that has now been recommended by the global health leaders, World Health Organisation (WHO) and all the experts that injectable polio vaccine should be taken and that demand is going to go between 200-300 million doses a year as and when the supply is available. Right now there is a huge shortage due to lack of supply and that is where we found this opportunity to take and make a plant which will cover more than 200 million doses of capacity.

Ekta: You had alliance with Cipla to market paediatric vaccines in Europe and that was signed in 2014. Post that, Cipla has undergone a lot of restructuring in terms of its Europeans operations. So, can you just apprise us of where exactly that particular tie-up stands?

A: Yes, now the tie-up is limited to some vaccines in India and in South Africa. What happened was that Cipla decided for its own reasons to shut down their European front end marketing and sales distribution setup. In that, we also took a hit where the tie-up was for them to market and sell our vaccines there. They decided to shut that down. So, now we have had to fund alternatives to sell our vaccines in Europe which should start in the next one or two years' time.

Ekta: Any other front end partners you would be in discussions with?

A: No, not at the moment. We are still exploring different proposals which have been put forward and then we will choose whatever makes the most sense.

Ekta: You join us on a day which is actually World Malaria Day. So I am going to ask you about where exactly maybe a dengue vaccine would stand from Serum's side. There are a lot of companies currently which are undergoing phases in terms of probably discovering that, but from your end, can we see something?

A: We have got a dengue programme, both on the monoclonals which is a cure. So, if you get dengue, within 2-3 days time, one or two injections from our monoclonals will cure you and bring down the virus. That has already been proven and we have made a huge investment for this technology and it will be the only kind in the world.

We hope to launch that over the next 2-3 years based on how fast the Indian regulatory approvals come. Regards to the vaccine, that will take a bit longer because you have to undergo a lot of safety and efficacy trials which should take another 3-4 years. So, that is a little further away and the dengue monoclonals should be available over the next 2-2.5 years hopefully.

Prashant: On April 3, as part of the market disclosures, it was disclosed that Serum Institute had bought about 15 lakh shares in a company called Delta Corp. The company operates casinos.

A: That was just something for fun, my father did, just as an investment. I do not think there is anything major in that.

Prashant: So that was something like a one-off thing?

A: Just a one-off investment. I did not even know about it. I was out of the country making the acquisition at the time. I think it is amounting to about Rs 30-40 crore or something like that. It was just an investment he made. Maybe he felt that it is a good long-term view that he is taking or something like that.