 "We'll be a Rs 10,000-cr revenue firm in six years: Adar Poonawalla")
The Poonawallas have been in the news in the past few weeks. Other than buying Lincoln House in Mumbai for Rs 750 crore, they were scouting for investments in Serum Institute of India. Adar Poonawalla, CEO, Serum Institute of India, in an interview with Shivani Shinde Nadhe, shares his travails over selling vaccines for H1N1, the need for the government to focus on healthcare, and how the tie-up with Cipla is different. Edited excerpts
You have said in the past Serum Institute had to destroy vaccines for H1N1 worth crores of rupees as there were few takers in India. Yet your recent tie-up with US-based Visterra for a dengue vaccines is aimed at the domestic market...
The response we received for H1N1 was lethargic. We had to destroy a couple of crores of rupees worth of vaccines because no one wanted them. In the West this vaccine is worth a couple of billion dollars of business, but governments play a major role in propagating its use. Maybe now we will have to step in to create awareness.
We have paid Visterra $5 mn, we will pay them another $15 mn based on milestones over the next two years. This is part of our research budget.
When will the vaccines be launched in India?
We will start the Indian trials in the next six months. We have just applied for permission to import the clone. With government support we can launch the product in 18 months; without support this may take three years. We are also hoping that the government will accord us fast-track approval as dengue is a serious public health issue. If people are dying we need to relook at the procedure.
How significant is the tie-up with Cipla?
It is a revenue sharing agreement. We will give Cipla 50 per cent of revenue in return for its expenditure on human trials for vaccines in Europe. This is not just a distribution tie-up because they are taking the risk of conducting clinical trials. This strategy is only for Europe and the US. We have a direct presence in around 145 countries.
Any plans to diversify into other areas using the Cipla tie-up?
The acquisition of Orchid Chemicals was in that direction, but we lost money and are in the process of getting out. We also went into the oncology segment in the US, but prices went down and we faced tough competition. These incidents made us realise we should stick to our core competency.
Our undoing was lack of knowledge and too much competition. Unlike in vaccines, in pharmaceuticals there are many players. I do not know how some of these companies are managing. Also a pharmaceutical company will launch 50 products a year and go out of some of these in two or three years. The average product life cycle in vaccines is 15 years.
But vaccines are a limited market and there are big international players. How do you intend to compete?
We have been growing at a compounded annual rate of 30 per cent. Demand for vaccines was not high a couple of years ago and our growth was limited. It was only when the Bill and Melinda Gates Foundation and GAVI started to donate funds to give away vaccines that demand shot up. We could see that happening and invested to capture this demand. Our growth really took off in 2007-8.
The vaccine market is saturated today, until we see some new vaccines coming in we will grow at 10-15 per cent here on.
The tie-up will allow us to create private vaccine markets as in India. So far we have been selling to governments and organisations and we think in some countries we can create private market sales. That is where Cipla comes in. In Europe, along with Cipla, we will be approaching doctors as we do in India.
Besides, we sell at one-tenth or one-twentieth the price of what Glaxo or any other company sells in Europe, hence their revenue is much higher than ours. But we hope to change that soon, as several patents are coming to an end. In several countries patents have blocked us. The Hepatitis B vaccine patent just ended in Europe. Some patent life cycles are getting over and we will enter these markets with our offerings.
Where do you see Serum Institute in the next three years?
In six years we will be a Rs 10,000 crore firm from the current Rs 4,000 crore. Every three or four years we have been investing in capacity. We recently bought another land parcel in Pune and will be building a new special economic zone. We will invest Rs 2,000 crore in its development. That will see us through the next seven years of growth.
We have on an average one vaccine coming up every year. In the next four years we will have new vaccines for meningitis, flu and pneumonia. We invest around Rs 200-300 crore on research every year.
What is your take on Make in India and the Swachh Bharat campaign?
Ease of business has to happen at the bureaucratic level. We have not seen any change so far. Unless officials at the state and municipal levels are empowered and given budgets, these policies will not have much impact. The Swachh Bharat Abhiyan will be effective when corporates spend money and become involved with its administration.
You have said in the past Serum Institute had to destroy vaccines for H1N1 worth crores of rupees as there were few takers in India. Yet your recent tie-up with US-based Visterra for a dengue vaccines is aimed at the domestic market...
The response we received for H1N1 was lethargic. We had to destroy a couple of crores of rupees worth of vaccines because no one wanted them. In the West this vaccine is worth a couple of billion dollars of business, but governments play a major role in propagating its use. Maybe now we will have to step in to create awareness.
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The dengue tie-up has two aspects. One is the vaccine, which will arrive in the market in three years. The more important aspect is that for the first time in India we will have the dengue monoclonal antibody. This antibody in animals has been found to neutralise and reduce the virus in three days. This product will do well because there is no other product. We have an exclusive tie-up with Visterra for India and some other countries. We are yet to finalise the list of countries.
We have paid Visterra $5 mn, we will pay them another $15 mn based on milestones over the next two years. This is part of our research budget.
When will the vaccines be launched in India?
We will start the Indian trials in the next six months. We have just applied for permission to import the clone. With government support we can launch the product in 18 months; without support this may take three years. We are also hoping that the government will accord us fast-track approval as dengue is a serious public health issue. If people are dying we need to relook at the procedure.
How significant is the tie-up with Cipla?
It is a revenue sharing agreement. We will give Cipla 50 per cent of revenue in return for its expenditure on human trials for vaccines in Europe. This is not just a distribution tie-up because they are taking the risk of conducting clinical trials. This strategy is only for Europe and the US. We have a direct presence in around 145 countries.
Any plans to diversify into other areas using the Cipla tie-up?
The acquisition of Orchid Chemicals was in that direction, but we lost money and are in the process of getting out. We also went into the oncology segment in the US, but prices went down and we faced tough competition. These incidents made us realise we should stick to our core competency.
Our undoing was lack of knowledge and too much competition. Unlike in vaccines, in pharmaceuticals there are many players. I do not know how some of these companies are managing. Also a pharmaceutical company will launch 50 products a year and go out of some of these in two or three years. The average product life cycle in vaccines is 15 years.
But vaccines are a limited market and there are big international players. How do you intend to compete?
We have been growing at a compounded annual rate of 30 per cent. Demand for vaccines was not high a couple of years ago and our growth was limited. It was only when the Bill and Melinda Gates Foundation and GAVI started to donate funds to give away vaccines that demand shot up. We could see that happening and invested to capture this demand. Our growth really took off in 2007-8.
The vaccine market is saturated today, until we see some new vaccines coming in we will grow at 10-15 per cent here on.
The tie-up will allow us to create private vaccine markets as in India. So far we have been selling to governments and organisations and we think in some countries we can create private market sales. That is where Cipla comes in. In Europe, along with Cipla, we will be approaching doctors as we do in India.
Besides, we sell at one-tenth or one-twentieth the price of what Glaxo or any other company sells in Europe, hence their revenue is much higher than ours. But we hope to change that soon, as several patents are coming to an end. In several countries patents have blocked us. The Hepatitis B vaccine patent just ended in Europe. Some patent life cycles are getting over and we will enter these markets with our offerings.
Where do you see Serum Institute in the next three years?
In six years we will be a Rs 10,000 crore firm from the current Rs 4,000 crore. Every three or four years we have been investing in capacity. We recently bought another land parcel in Pune and will be building a new special economic zone. We will invest Rs 2,000 crore in its development. That will see us through the next seven years of growth.
We have on an average one vaccine coming up every year. In the next four years we will have new vaccines for meningitis, flu and pneumonia. We invest around Rs 200-300 crore on research every year.
What is your take on Make in India and the Swachh Bharat campaign?
Ease of business has to happen at the bureaucratic level. We have not seen any change so far. Unless officials at the state and municipal levels are empowered and given budgets, these policies will not have much impact. The Swachh Bharat Abhiyan will be effective when corporates spend money and become involved with its administration.