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Last Updated : Jan 09, 2020 08:26 PM IST | Source: Moneycontrol.com

Looking to snap up Integrated Vaccine Complex, Bharat Biotech is on a steady growth path

Bharat Biotech was founded in 1994 by yeast molecular biologist Krishna Ella and his wife Suchitra Ella.

 
 
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Vaccine maker Bharat Biotech, fresh from the acquisition of Chiron Behring Vaccines (Chiron) from GlaxoSmithKline last year, is now looking to take charge of the Rs 600-crore Integrated Vaccine Complex (IVC) located in Chengalpattu, Tamil Nadu.

To be sure these are too early days. The government is still working on modalities of revival plan including a proposal to write-off debt to the tune of Rs 300 crore, before IVC is handed over to any strategic partner.

Still there is no clarity whether the government is looking for an outright sale of IVC or retain a significant minority interest in HLL Biotech Limited (HBL).

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"The Union Cabinet will have to approve the plan, following which the expression of interest has to be made. All this would take at least a year," a person privy to the information said.

Though Bharat Biotech is the frontrunner, other companies are also expected to be in the fray.

Moneycontrol was the first to report that the government is considering bringing in a strategic partner.

Notwithstanding the messy state of affairs at IVC, the assured offtake of 75 percent of production by the government for its Universal Immunization Programme, is what draws Bharat Biotech towards it. In India government is the buyer of vaccines.

According to a report in The Economic Times, the company also plans make rotavirus vaccine, JE, rabies vaccine and hepatitis B vaccine in that facility, and is ready to engage in a dialogue with the government on all aspects of the collaboration, both commercial and technical.

Creating a vaccine empire

Bharat Biotech was founded in 1994, by yeast molecular biologist Krishna Ella and his wife Suchitra Ella. The company came into the limelight when it launched Revac-B, a recombinant Hepatitis-B vaccine, in October 1998. Priced at $1, it was the cheapest Hepatitis-B vaccine in the world at that time. The company later launched oral polio vaccine (OPV).

The two vaccines, prequalified by World Health Organisation (WHO) helped the company survive and reinvest in research and development for developing new vaccines. Ellas also took loans, grants and sold shares to pump more than Rs 1000 crore into research.

The result of those efforts were launch of Rotavirus Vaccine (RV) against childhood diarrhoea, Typhoid Conjugate Vaccine (TCV), Japanese Encephalitis Vaccine, Influenza vaccine and a five-in-one Pentavalent vaccine. The company is also developing inactivated polio vaccine (IPV), as the OPV will be phased out globally by 2023.

Currently along with OPV, Bharat Biotech’s Rotavirus and Typhoid vaccines are WHO prequalified, making it eligible for supplies to UN agencies and participate in public tenders in developing world.

Bharat Biotech, like other Indian vaccine companies, relies on government for its supplies. Bharat Biotech gets almost half of its sales from Indian government. Given the pricing pressure and delayed payments, the company is also looking at the private market. The company had tied-up with Abbott India to market four of its vaccines under the latter's label.

And, the efforts are bearing fruit.

Bharat Biotech ended FY19 with revenues of Rs 774.3 crore, with a profit after tax of Rs 133.3 crore. The operating profit margin stood at 28.7 percent, with negligible debt.

Interestingly for Bharat Biotech, its newer generation vaccines have started to gain traction.

The TCV contributed to 57 percent of the company's revenues during FY19, as against 27 percent FY18. However it is the Rotavirus Vaccine, that’s holding the key for its future growth with supply contracts from both the Indian government as well as UNICEF.

With healthy cash flows, Bharat Biotech is now focusing on inorganic expansion.

The company acquired Chiron from GlaxoSmithKline Asia in February 2019. Chiron is a WHO pre-qualified manufacturer of rabies vaccines with a manufacturing plant in Ankleshwar, Gujarat, eligible for supplies to UN agencies and has product registrations in more than 20 countries.

Bharat Biotech paid Rs 68 crore for the acquisition. The company has infused around Rs 60 crore into Chiron during FY2020 to revive production, and it plans an additional Rs.60 crore investment to enhance the Chiron’s facility in FY21. The entire investment will be made through internal accruals.

"Bharat Biotech performance to remain strong over the next two fiscals, supported by wider usage of RV across the country and ramp up in supplies to UNICEF, in addition to commencement of TCV supplies to the UNICEF. Order visibility for OPV under longterm supply arrangement (LTA) with UNICEF till its cessation (expected in FY2023) is also expected to support revenues," said rating agency ICRA in its report in August.

Bharat Biotech is occasionally in news for an IPO or raising private equity to give exit to ICICI Venture, International Finance Corp, the investment arm of the World Bank, and Subhkam Ventures have invested in Bharat Biotech a decade back.

"Unlike pharmaceuticals, vaccines have much longer product life-cycle with higher entry barriers. Globally the efforts of Bill & Melinda Gates Foundation, through GAVI Alliance has brought billions of dollars of philanthropic and public money to immunize millions of children in developing and poor countries, creating a huge market for vaccines companies. Companies like Bharat Biotech not just benefited from supply contracts, but also got millions of dollars in grants and access to technologies and strains to develop vaccines in India given its technical expertise and cost advantage. The Rotavirus vaccine of Bharat Biotech is an example," said a vaccine executive on condition of anonymity.

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First Published on Jan 9, 2020 08:17 pm
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