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ShareWhen Shantha Biotechnics, a small Hyderabad-based company with near zero visibility, dared SmithKline Beecham Pharma with its homegrown version of hepatitis-B vaccine Shanvac-B in 1997, the British drug maker was forced to reckon with strong competition emerging from the most unexpected territory.
The introduction of Shantha's vaccine to fight the dreaded liver disease forced SmithKline Beecham to slash prices of its vaccine brand Engerix-B, after enjoying a monopoly market in India. That initial success set the stage for Shantha's forward journey into the world of pharmaceuticals as it continued to develop new combination vaccines in its laboratories.
Led by scientist-entrepreneur and an extremely humble person, Varaprasad Reddy, Shantha ventured into discovering ways to manufacture many other biological products such as monoclonal antibodies for cancer treatments.
Credit to Reddy, who is fired by unmatched will power, that he kept his people motivated to move into a segment long believed to be extremely risky and difficult to survive in. That perception of strong entry barriers kept many large Indian companies away from entering biologics or even vaccines, but Shantha had little to lose and no baggage of the past.
Though Shantha has been a creation of government-funded biotechnology research projects from the early nineties, it faced many bureaucratic hurdles in getting financial support or product approvals in the later part of its life.
But, Shantha's success in the international arena as a dependable supplier to WHO and a host of other health agencies created an enviable brand name for itself. The company came out with erythropoietin, worked on insulin together with Biocon and dug deeper into making anti-cancer products. A large number of scientists from reputed US biotechs joined the company to realise the goal of cheaper options to life-saving drugs.
Shantha's product portfolio of pentavalent vaccines, conjugate typhoid vaccines and the vaccine in research for cervical cancer became great attraction points for larger international players. The timing matched well for the initial investors from the Middle-
East to exit with hefty returns. French firm Biomerieux entered the company in 2006 with an idea of maximising returns from Shantha's line-up of future products.
But, the global chase for growth by large pharmaceutical companies started getting hotter. Pfizer snapped up Wyeth primarily for its vaccine portfolio and Merck took control of Schering Plough. GSK on the other hand stayed away from very large deals but sure-footedly increased its basket of research products by acquiring smaller emerging biotech and technology platform firms.
Sanofi-Aventis, like Daiichi Sankyo which bagged Ranbaxy last year, took shots at growth in the generic drug industry. It bought out Brazil's Medley and Mexico's Kendrick but also had an eye on India. Fiercely battling GSK for control of Shantha, Sanofi's French connection seems to have worked when it clinched the deal with Merieux Alliance. But the deal is anything but cheap. Shantha's valuation goes beyond Rs 3,500, a figure that was unthinkable for an Indian vaccines company even three years ago.
Having paid that much to Merieux, Sanofi will now in all probability extract everything that it can from Shantha. It will bid more aggressively for the WHO vaccine supplies, take Shantha's vaccines to emerging markets and least developed markets, grow the portfolio of products that Shantha has and if possible also look at moving some parts of its high-cost manufacturing into India. Sanofi may also put more might behind the monoclonal antibodies that Shantha has lined up. The company made a great gesture by retaining Varaprasad as the managing director of the company.
Reddy has been an enthusiastic and ambitious leader and always wanted to go international with his brands. Johns Hopkins University has collaborated with the company for development of the human papiloma virus vaccine. There is already a great demand being seen for Merck's Gardasil and GSK's Cerverix and if Sanofi can make a dent in these markets in the coming few years, Shantha's value for the French drug maker will be much more enriched.
From an industry perspective, vaccines have rightfully come to occupy a priority status for drug firms with huge populations waiting for basic healthcare facilities, and much as vaccines work, they also now realise that prevention is better than cure.
Pillman is an executive closely linked to the global pharma industry
