SII, Bharat Biotech to get bulk of Rs 15K-crore profit pool: Report

With India expected to spend Rs 75,000 crore (Centre, states and private sector) in calendar year 2021 on vaccines, including Rs 3,200 crore spent till April-end to combat Covid, Serum Institute of India (SII) and Bharat Biotech would be the key beneficiaries. According to an analyst report by Investec, Serum Institute and Bharat Biotech will control over 67 per cent (Serum Institute 43 per cent and Bharat Biotech 24 per cent) of the value market share and 73 per cent in terms of volumes. Sputnik V, the Russian Covid vaccine, will be the third player with a 14 per cent share.

Based on an assumed net margin of 30 per cent, the report says that bulk of the profit pool of Rs 15,000 crore would go to Serum Institute, Bharat Biotech as well as Sputnik V (marketed by Dr Reddy’s in India) and Cadila Healthcare (whose vaccine is expected in June-July and projected to have 2 per cent of the value share).

The Investec analysts estimate that by October this year, India is likely to have supplies of 1.2 billion doses to vaccinate 75 per cent of the above 18 population. Supplies would touch over 250 million doses per month by then. SII, Bharat Biotech, Sputnik V (local) and Johnson and Johnson (J&J) together will contribute 75-85 per cent of this monthly capacity.

At present, SII sells its vaccine Covishield to the Centre for Rs 150 per dose, to state governments for Rs 300 and to private hospitals for Rs 600. Sale to private hospitals is part of institutional sales. When the vaccine is available at the retail level, the prices and, in turn, the margins are likely to be higher.

Bharat Biotech, on the other hand, sells Covaxin, for Rs 150 per dose to the Centre, Rs 400 to state governments and Rs 1,200 to private hospitals. In the international market, however, Bharat Biotech has claimed it fetches around $15-20 per dose. Vaccine industry sources have maintained that at Rs 150 per dose, the companies do not stand to make any profit.

The Investec report also says that the payback period for these companies will also be short. And, this is without counting the possibility of a multi-year opportunity in India and the export market. However, it expects that because of the pandemic scenario and the large profit pool, it is possible that the government may renegotiate prices. Investec, however, points out that while Dr Reddy’s (which will distribute Sputnik V) will have a value share of 10 per cent to 15 per cent, it will have a limited share from vaccines in its own profitability as it will only be a distributor. Sputnik V will be manufactured by various companies, which include Panacea and Hetero, among others.

The analyst report says that while Dr Reddy’s is expected to supply 120 million doses by December- end and generate sales of over $500 million, one should expect not more than 8-10 per cent addition to FY22 estimated EBITDA.

The report also expects Cadila to launch its three-dose shot, becoming the fourth player in the country. It is expected that it will be able to generate revenues of Rs 10 billion this calendar year. But the launch of a two-dosage shot could change the bottom line. When the under 18-year-old vaccination is allowed, it could give a fillip to sales.