 "After just Rs 18,000 cr profits in a decade, Serum, Bharat Biotech may earn big with Covid")
Even as questions are being raised about vaccine pricing ethics in the face of a devastating coronavirus pandemic, the next few years could see Serum Institute of India (SII) and Bharat Biotech minting hundreds of crores of rupees. Both companies have earned Rs 18,000 crore in profits in the past decade, a fraction of what global pharmaceutical and vaccine companies earns annually.
Of the Rs 18,000 crore in profits, Pune-based SII, one of the world’s biggest vaccine makers, alone earned Rs 17,146 crore between 2010-11 and 2019-20; Bharat Biotech accounted for the rest. Both companies have made steady progress in improving their revenues, exports and profitability over the years on a trajectory that has always gone uphill.
In 2019-20, Adar Poonawalla-led SII earned Rs 2,251 crore in profits on a revenue of Rs 5,900 crore. Over the past decade, it has maintained a profitability of 44 per cent. A contributing factor to its high profitability is that the bulk of its revenues comes from exports; its vaccines can be sold at higher margins in importing nations. Regulatory filings show that it has spent over Rs 900 crore on research & development for new vaccines in the past decade. Serum is licensed to manufacture over 20 types of vaccines in India. These include jabs for polio, measles, diphtheria, tetanus, influenza, mumps, rabies and meningitis, among others. The company claims it is in various phases of development of vaccines for dengue, typhoid, yellow fever, tuberculosis and even bladder cancer.
Unlike a lot of other Indian vaccine makers, SII has over the years expanded its operations globally by setting up four subsidiaries in the Netherlands, two in the US and one in Germany. Two of Poonawalla’s Dutch companies were set up in May 2019. The other two were established earlier with an initial investment of over Rs 1,100 crore. While the Dutch companies make polio and BCG vaccines, the American company has been set up to make inroads into the lucrative vaccine markets of the US, Canada and South America. Serum’s recent expansion has also been aided by government incentives.
A couple of years after Prime Minister Narendra Modi visited its Pune facility in 2016, the Devendra Fadnavis-led Maharashtra government of the time designated the company’s Rs 4,000-crore expanded vaccine production facility as an ultra-mega project. That made it eligible for various tax benefits. In 2015, the company had donated a few lakhs of rupees to two Rashtriya Swayamsevak Sangh (RSS) -affiliated organisations – Dr Hedgwar Smarak Seva Nidhi and the Maharashtra unit of Jankalyan Samiti RSS. This was one of the company’s many corporate social responsibility spends. In 2019-20 alone, it spent Rs 54 crore on CSR activities while paying over Rs 600 crore in corporate taxes.
By comparison, Hyderabad-based Bharat Biotech may be much smaller than SII, but it has displayed a similar financial trajectory. Its revenues, like SII’s, have grown five times over the past decade, and its profitability has grown in an equal measure. But unlike SII, which gets the bulk of its revenues from exports, Bharat Biotech relies more on the Indian market. Two-thirds of the latter’s revenues come from sale of vaccines in India. It also has a much diverse shareholding than SII, which is closely held by members of the Poonawalla family through a holding company. In the past, infrastructure behemoth IL&FS held a six per cent stake in Bharat Biotech. With the collapse of IL&FS, that shareholding has been transferred to other entities. US-based International Finance Corporation and Biotech Consortium Inc have invested big in the company. But much of Bharat Biotech is owned by its founder Dr Krishna Ella and other individuals.
Before starting Bharat Biotech in 1996, Ella, a PhD from Madison-based University of Wisconsin, was an assistant professor at Charleston-based University of South Carolina. Just four years after its incorporation, the company received the patent for a molecule named lysostaphin in India. Lysostaphin could be used to treat anything from hospital-acquired infections to food poisoning and lung and kidney disorders. In 2000, when Bharat Biotech was granted the patent for this molecule, it estimated the global market for lysostaphin to be $1 billion. It was only in 2013 that the company’s patent was approved in the US, Europe and other nations.
Dr Ella, along with others, also invented Streptokinase, a molecule used in a drug used as a first line of treatment against heart attacks. Bharat Biotech filed for a US patent for Streptokinase in 2001 and was granted one five years later. Unlike SII, Bharat Biotech has little experience in the export market, a weakness it has acknowledged in the past in its financial statements. But its export earnings have increased phenomenally since 2015. While less than 10 per cent of its revenues came from exports a decade ago, the proportion has risen to a third in the past five years. In 2019-20, its revenues crossed the Rs 1,000-crore mark for the first time. It manufactures most vaccines that SII does and additionally makes one for Japanese encephalitis.
For both Serum and Bharat Biotech, the coronavirus pandemic presents a once-in-a-lifetime opportunity to earn hundreds of crores of rupees that could be ploughed back to fund further research and capacity expansion. The last time Serum ploughed back its profits without declaring a dividend for its promoters in order to fund expansion was in 2013-14. Bharat Biotech has intermittently not rewarded its promoters for the same reason.
An off-the-cuff calculation shows that both vaccine manufacturers could earn big in the coming few months as vaccine sales and commercial exports gather steam. According to Unicef, Indian vaccine manufacturers have deals for more than a billion doses of their vaccines with various nations, as well as Covax, a global UN-led initiative to get Covid-19 vaccines to poorer nations. Unicef’s figures show that these deals, even conservatively, would be worth more than $3 billion (Rs 22,000 crore). While vaccines are being bought by Covax and various countries at price ranging between $3 and $5 per dose, private markets are picking these up from India’s vaccine manufacturers at a much higher rate.
For instance, the UN body says that Bharat Biotech’s vaccine has been picked up for sale in Nepal’s private markets and could retail for as high as $30 (Rs 2,600 in Nepalese currency) per dose. Similarly, in neighbouring Bangladesh, SII’s vaccine is being bought for $8 a dose by a private pharma company and will be sold in open markets for $13.
This could just be the tip of the iceberg. UN chief António Guterres has in the past claimed that 130 nations across the world haven’t yet administered even a single dose of any vaccine. As nations gradually open up their vaccination drives, India’s vaccine manufacturers could see a manifold rise in global orders, and a windfall in export earnings thereby. At least 84 per cent of India’s 66 million dispatches to other nations have been in the form of commercial deals as of the time of writing of this report. But as the Indian government has opened up private sale of vaccines, a much more lucrative opportunity could arise domestically.
The Modi government at the Centre was the sole buyer of vaccines until recent weeks. The vaccines were being sold to the government for Rs 150 ($2) a dose which was then administered free of cost at state-run hospitals and at an enhanced price of Rs 250 ($3) to Indians who wished to get themselves inoculated at private hospitals. After the government’s move to enable private purchase, the price for state governments and private hospitals has been set between Rs 400 ($5) and Rs 600 ($8) by SII. Bharat Biotech has fixed a similar price for state governments, while it is selling to private hospitals for Rs 1,200 ($16) a dose. Reports suggest that it will export vaccines at a much higher price. Bharat Biotech has justified its pricing by saying that it spent Rs 350 crore on clinical trials to develop India’s first and only indigenous Covid-19 vaccine.
SII’s Poonawalla has defended his pricing in the past by saying that half his revenues would go as royalty to AstraZeneca and that selling the vaccine at Rs 150 a dose to the Indian government was a loss-making proposition. AstraZeneca, meanwhile, has said that it is not making any money in its agreement with Oxford University, which has developed the vaccine. In its 2020 regulatory filings, AstraZeneca noted: “Our response to the pandemic was led by science and included our landmark agreement with the University of Oxford for the global development, production and supply of the Covid-19 vaccine. We are committed to doing this at no profit during the pandemic and to providing the broad and equitable supply of billions of vaccine doses around the world.”
On May 3, SII CEO Adar Poonawalla issued a statement saying that the company had received orders for 260 million doses from the Indian government. He said: “We have also got 100 per cent advance of Rs 1,732.5 crore for the next tranche of 110 million doses in the next few months.” Unlike Bharat Biotech, which spent crores on developing an in-house vaccine, SII has licensed production for two vaccines. While AstraZeneca’s vaccine is already being supplied in India and globally, Serum has global deals in place to supply another vaccine developed by American company Novavax. Even by most conservative estimates, if Indian vaccine makers were to sell vaccines to a third of the world’s population or around three billion people at the same rates at which Unicef has reported them to be selling, they would be eyeing revenues of over $10 billion, and makes billions of dollars in profits in the months and years to come.
Serum Institute of India and Bharat Biotech had not responded to specific queries till the time of publication.
Impressive as it may look, both SII and Bharat Biotech still have a long way to go before they can match the financial muscle of other vaccine and pharma behemoths. AstraZeneca has clocked average revenues of $24 billion and profits of $4 billion a year in the past three years. That’s more than hundred times Bharat Biotech’s annual profit and 10 times Serum’s. But comparing AstraZeneca with Indian vaccine manufacturers would be an anomaly, since AstraZeneca is also in the lucrative business of non-vaccine essential drugs. A more apposite comparison would be with Moderna, which, like its Indian counterparts, is a more focused vaccine developer and is known for its path-breaking innovations in mnRNA (messenger ribonucleic acid) vaccines.
Regulatory filings show that Moderna has confirmed orders for 520 million doses of its two-dose vaccine in 2021. These contracts are worth $11.7 billion. To put that in perspective, Moderna’s total revenues in 2018 and 2019 were just about $200 million. In 2020, due to grants for Covid-19 vaccine development, its revenues jumped to over $800 million. In 2021, the sale of its indigenous Covid-19 vaccines with a deal value of almost $12 billion could surpass its total decadal earnings. The next year could be even better. In its regulatory filings, Moderna noted: “We are continuing to invest and add staff as we meet production at the high end of this range. We are also working on increasing our potential supply to up to 1.4 billion doses for 2022 based on the current 100 microgram dose.”
Moderna’s vaccines are priced between $15 and $37 per dose and will be mostly sold to developed nations of the European Union, the US, UK, South Korea, Israel and Switzerland. While Serum’s vaccines are priced much lower, its sales will be more than twice as much as Moderna’s. Bharat Biotech, like Moderna, has developed its own in-house vaccine. This probably explains why its vaccines meant for exports or for that matter for sale in India are priced much higher than other candidates in the market. Moderna has reportedly received almost $1 billion from the US government to develop its vaccine. Bharat Biotech conducted five extensive trials while developing its vaccines on volunteers across various hospitals in India. It funded all its trials except one where it received unknown monetary support from the Indian Council of Medical Research (ICMR).
Sujay Shetty of PricewaterhouseCoopers said: “Covid-19 will lead to a permanent addition in vaccine manufacturing capacity in India and across the world. Once Covid-19 requirements are taken care of, the enhanced capacity can be used to manufacture vaccines for other diseases. We could see production of more vaccines for other diseases like cancer on the mnRNA platform.”
Of the Rs 18,000 crore in profits, Pune-based SII, one of the world’s biggest vaccine makers, alone earned Rs 17,146 crore between 2010-11 and 2019-20; Bharat Biotech accounted for the rest. Both companies have made steady progress in improving their revenues, exports and profitability over the years on a trajectory that has always gone uphill.
In 2019-20, Adar Poonawalla-led SII earned Rs 2,251 crore in profits on a revenue of Rs 5,900 crore. Over the past decade, it has maintained a profitability of 44 per cent. A contributing factor to its high profitability is that the bulk of its revenues comes from exports; its vaccines can be sold at higher margins in importing nations. Regulatory filings show that it has spent over Rs 900 crore on research & development for new vaccines in the past decade. Serum is licensed to manufacture over 20 types of vaccines in India. These include jabs for polio, measles, diphtheria, tetanus, influenza, mumps, rabies and meningitis, among others. The company claims it is in various phases of development of vaccines for dengue, typhoid, yellow fever, tuberculosis and even bladder cancer.
Unlike a lot of other Indian vaccine makers, SII has over the years expanded its operations globally by setting up four subsidiaries in the Netherlands, two in the US and one in Germany. Two of Poonawalla’s Dutch companies were set up in May 2019. The other two were established earlier with an initial investment of over Rs 1,100 crore. While the Dutch companies make polio and BCG vaccines, the American company has been set up to make inroads into the lucrative vaccine markets of the US, Canada and South America. Serum’s recent expansion has also been aided by government incentives.
A couple of years after Prime Minister Narendra Modi visited its Pune facility in 2016, the Devendra Fadnavis-led Maharashtra government of the time designated the company’s Rs 4,000-crore expanded vaccine production facility as an ultra-mega project. That made it eligible for various tax benefits. In 2015, the company had donated a few lakhs of rupees to two Rashtriya Swayamsevak Sangh (RSS) -affiliated organisations – Dr Hedgwar Smarak Seva Nidhi and the Maharashtra unit of Jankalyan Samiti RSS. This was one of the company’s many corporate social responsibility spends. In 2019-20 alone, it spent Rs 54 crore on CSR activities while paying over Rs 600 crore in corporate taxes.
By comparison, Hyderabad-based Bharat Biotech may be much smaller than SII, but it has displayed a similar financial trajectory. Its revenues, like SII’s, have grown five times over the past decade, and its profitability has grown in an equal measure. But unlike SII, which gets the bulk of its revenues from exports, Bharat Biotech relies more on the Indian market. Two-thirds of the latter’s revenues come from sale of vaccines in India. It also has a much diverse shareholding than SII, which is closely held by members of the Poonawalla family through a holding company. In the past, infrastructure behemoth IL&FS held a six per cent stake in Bharat Biotech. With the collapse of IL&FS, that shareholding has been transferred to other entities. US-based International Finance Corporation and Biotech Consortium Inc have invested big in the company. But much of Bharat Biotech is owned by its founder Dr Krishna Ella and other individuals.
Before starting Bharat Biotech in 1996, Ella, a PhD from Madison-based University of Wisconsin, was an assistant professor at Charleston-based University of South Carolina. Just four years after its incorporation, the company received the patent for a molecule named lysostaphin in India. Lysostaphin could be used to treat anything from hospital-acquired infections to food poisoning and lung and kidney disorders. In 2000, when Bharat Biotech was granted the patent for this molecule, it estimated the global market for lysostaphin to be $1 billion. It was only in 2013 that the company’s patent was approved in the US, Europe and other nations.
Dr Ella, along with others, also invented Streptokinase, a molecule used in a drug used as a first line of treatment against heart attacks. Bharat Biotech filed for a US patent for Streptokinase in 2001 and was granted one five years later. Unlike SII, Bharat Biotech has little experience in the export market, a weakness it has acknowledged in the past in its financial statements. But its export earnings have increased phenomenally since 2015. While less than 10 per cent of its revenues came from exports a decade ago, the proportion has risen to a third in the past five years. In 2019-20, its revenues crossed the Rs 1,000-crore mark for the first time. It manufactures most vaccines that SII does and additionally makes one for Japanese encephalitis.
For both Serum and Bharat Biotech, the coronavirus pandemic presents a once-in-a-lifetime opportunity to earn hundreds of crores of rupees that could be ploughed back to fund further research and capacity expansion. The last time Serum ploughed back its profits without declaring a dividend for its promoters in order to fund expansion was in 2013-14. Bharat Biotech has intermittently not rewarded its promoters for the same reason.
An off-the-cuff calculation shows that both vaccine manufacturers could earn big in the coming few months as vaccine sales and commercial exports gather steam. According to Unicef, Indian vaccine manufacturers have deals for more than a billion doses of their vaccines with various nations, as well as Covax, a global UN-led initiative to get Covid-19 vaccines to poorer nations. Unicef’s figures show that these deals, even conservatively, would be worth more than $3 billion (Rs 22,000 crore). While vaccines are being bought by Covax and various countries at price ranging between $3 and $5 per dose, private markets are picking these up from India’s vaccine manufacturers at a much higher rate.
For instance, the UN body says that Bharat Biotech’s vaccine has been picked up for sale in Nepal’s private markets and could retail for as high as $30 (Rs 2,600 in Nepalese currency) per dose. Similarly, in neighbouring Bangladesh, SII’s vaccine is being bought for $8 a dose by a private pharma company and will be sold in open markets for $13.
This could just be the tip of the iceberg. UN chief António Guterres has in the past claimed that 130 nations across the world haven’t yet administered even a single dose of any vaccine. As nations gradually open up their vaccination drives, India’s vaccine manufacturers could see a manifold rise in global orders, and a windfall in export earnings thereby. At least 84 per cent of India’s 66 million dispatches to other nations have been in the form of commercial deals as of the time of writing of this report. But as the Indian government has opened up private sale of vaccines, a much more lucrative opportunity could arise domestically.
The Modi government at the Centre was the sole buyer of vaccines until recent weeks. The vaccines were being sold to the government for Rs 150 ($2) a dose which was then administered free of cost at state-run hospitals and at an enhanced price of Rs 250 ($3) to Indians who wished to get themselves inoculated at private hospitals. After the government’s move to enable private purchase, the price for state governments and private hospitals has been set between Rs 400 ($5) and Rs 600 ($8) by SII. Bharat Biotech has fixed a similar price for state governments, while it is selling to private hospitals for Rs 1,200 ($16) a dose. Reports suggest that it will export vaccines at a much higher price. Bharat Biotech has justified its pricing by saying that it spent Rs 350 crore on clinical trials to develop India’s first and only indigenous Covid-19 vaccine.
SII’s Poonawalla has defended his pricing in the past by saying that half his revenues would go as royalty to AstraZeneca and that selling the vaccine at Rs 150 a dose to the Indian government was a loss-making proposition. AstraZeneca, meanwhile, has said that it is not making any money in its agreement with Oxford University, which has developed the vaccine. In its 2020 regulatory filings, AstraZeneca noted: “Our response to the pandemic was led by science and included our landmark agreement with the University of Oxford for the global development, production and supply of the Covid-19 vaccine. We are committed to doing this at no profit during the pandemic and to providing the broad and equitable supply of billions of vaccine doses around the world.”
On May 3, SII CEO Adar Poonawalla issued a statement saying that the company had received orders for 260 million doses from the Indian government. He said: “We have also got 100 per cent advance of Rs 1,732.5 crore for the next tranche of 110 million doses in the next few months.” Unlike Bharat Biotech, which spent crores on developing an in-house vaccine, SII has licensed production for two vaccines. While AstraZeneca’s vaccine is already being supplied in India and globally, Serum has global deals in place to supply another vaccine developed by American company Novavax. Even by most conservative estimates, if Indian vaccine makers were to sell vaccines to a third of the world’s population or around three billion people at the same rates at which Unicef has reported them to be selling, they would be eyeing revenues of over $10 billion, and makes billions of dollars in profits in the months and years to come.
Serum Institute of India and Bharat Biotech had not responded to specific queries till the time of publication.
Impressive as it may look, both SII and Bharat Biotech still have a long way to go before they can match the financial muscle of other vaccine and pharma behemoths. AstraZeneca has clocked average revenues of $24 billion and profits of $4 billion a year in the past three years. That’s more than hundred times Bharat Biotech’s annual profit and 10 times Serum’s. But comparing AstraZeneca with Indian vaccine manufacturers would be an anomaly, since AstraZeneca is also in the lucrative business of non-vaccine essential drugs. A more apposite comparison would be with Moderna, which, like its Indian counterparts, is a more focused vaccine developer and is known for its path-breaking innovations in mnRNA (messenger ribonucleic acid) vaccines.
Regulatory filings show that Moderna has confirmed orders for 520 million doses of its two-dose vaccine in 2021. These contracts are worth $11.7 billion. To put that in perspective, Moderna’s total revenues in 2018 and 2019 were just about $200 million. In 2020, due to grants for Covid-19 vaccine development, its revenues jumped to over $800 million. In 2021, the sale of its indigenous Covid-19 vaccines with a deal value of almost $12 billion could surpass its total decadal earnings. The next year could be even better. In its regulatory filings, Moderna noted: “We are continuing to invest and add staff as we meet production at the high end of this range. We are also working on increasing our potential supply to up to 1.4 billion doses for 2022 based on the current 100 microgram dose.”
Moderna’s vaccines are priced between $15 and $37 per dose and will be mostly sold to developed nations of the European Union, the US, UK, South Korea, Israel and Switzerland. While Serum’s vaccines are priced much lower, its sales will be more than twice as much as Moderna’s. Bharat Biotech, like Moderna, has developed its own in-house vaccine. This probably explains why its vaccines meant for exports or for that matter for sale in India are priced much higher than other candidates in the market. Moderna has reportedly received almost $1 billion from the US government to develop its vaccine. Bharat Biotech conducted five extensive trials while developing its vaccines on volunteers across various hospitals in India. It funded all its trials except one where it received unknown monetary support from the Indian Council of Medical Research (ICMR).
Sujay Shetty of PricewaterhouseCoopers said: “Covid-19 will lead to a permanent addition in vaccine manufacturing capacity in India and across the world. Once Covid-19 requirements are taken care of, the enhanced capacity can be used to manufacture vaccines for other diseases. We could see production of more vaccines for other diseases like cancer on the mnRNA platform.”
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