Aventis Pharma: Beneficial move

Exiting from Novartis joint venture paves way for marketing of Aventis-Sanofi’s anti-rabies vaccines besides monetary gains.

Aventis Pharma has decided to sell its 49 per cent stake in vaccine manufacturing unit, Chiron Behring Vaccines, to its joint venture partner Novartis Vaccines and Diagnostics for $22.4 million. The deal puts to an end to a two-year-old battle in India over rights to India's largest selling anti-rabies vaccine, Rabipur, which had sales of around Rs 118 crore for Aventis two years ago with a market share of about 70 per cent.

Until February 2009, Aventis marketed the anti-rabies product manufactured at Ankleshwar plant in Gujarat by Chiron Behring Vaccines Private Limited (51:49 joint venture between Novartis and Aventis). Novartis had objected to the renewal of a 10-year marketing licence to Aventis Pharma then and got a favourable court verdict.

Aventis, while gaining on cash after its exit from joint venture, can now also market Aventis-Sanofi’s anti-rabies brand (Verorab) in the estimated Rs 250 crore anti-rabies market in India. Besides this, the company plans to launch low-price anti-infective and anti-inflammatory products and is also actively increasing its field force through the Prayas project. Analysts estimate incremental revenues to the tune of Rs 500 crore over the next five years from these initiatives.

The acquisition of Shantha Biotech in CY09 is expected pave way for more launches, especially in the cardiovascular segment and vaccines going ahead. The cash received from this stake sale in the joint venture will further strengthen its balance sheet that had cash of Rs 585.95 crore at the end of CY09 (January – December financial year), which can be used for future inorganic growth opportunities as well as good dividend payouts, analysts say.

Analysts at Angel Broking estimate 14 per cent compounded annual growth (CAGR) growth in revenues over CY2010-12 to Rs 1390 crore looking at various initiatives being undertaken. The stock at Rs 1,747 trades 20xCY11E and 18xCY12E earnings as per estimates.