A booster for vaccine makers
Producers of India’s two Covid-19 jabs are set to mint money
Even as questions are being raised about vaccine pricing ethics, the next few years could see Serum Institute of India (SII) and Bharat Biotech minting money. Both companies have earned ~8,000 crore in profits in the past decade, a fraction of what global pharmaceutical and vaccine companies earns annually.
Of this amount, Pune-based SII, one of the world’s biggest vaccine makers, alone earned ~17,146 crore between 2010-11 and 2019-20. Both companies have steadily improved revenues, exports and profitability over the years.
Over the past decade, Adar-poonawalla’s SII has maintained a profitability of 44 per cent (see chart). A contributing factor 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 ~900 crore on R&D for new vaccines in the past decade. Serum is licensed to manufacture over 20 types of vaccines in India.
Unlike most 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 ~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 ~4,000-crore expanded vaccine production facility an ultra-mega project. That made it eligible for various tax benefits. In 2015, the company had donated a few lakhs to two Rashtriya Swayamsevak Sangh (Rss)-affiliated organisations — Dr Hedgewar Smarak Seva Nidhi and the Maharashtra unit of Jankalyan Samiti RSS. This was one of the company’s many corporate social responsibility spends. In 201920 alone, it spent ~54 crore on CSR activities, while paying over ~600 crore in corporate taxes.
Hyderabad-based Bharat Biotech may be much smaller than SII, but it has displayed a similar financial trajectory. It manufactures most vaccines that SII does and additionally makes one for Japanese encephalitis. Its revenues have grown five times over the past decade, and its profitability has grown in an equal measure. But unlike SII, Bharat Biotech relies more on the Indian market. Two-thirds of the latter’s revenues come from sale of vaccines in India. 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.
For both SII 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 SII ploughed back its profits without declaring a dividend for its promoters to fund expansion was in 2013-14. Bharat Biotech has intermittently not rewarded its promoters for the same reason.
A back-of-the-envelope calculation shows that both vaccine manufacturers could earn big in the coming few months. 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 ( ~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 could retail in Nepal for as high as $30 (~2,600 in Nepalese currency) per dose. Similarly, in 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.
The Modi government was the sole buyer of vaccines until recent weeks. The vaccines were being sold to the government for ~150 ($2) a dose which was then administered free of cost at state-run hospitals and for ~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 ~400 ($5) and ~600 ($8) by SII. Bharat Biotech has fixed a similar price for state governments, while it is selling to private hospitals for ~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 ~350 crore on clinical trials to develop India’s first and only indigenous Covid-19 vaccine. (SII and Bharat Biotech had not responded to specific queries till the time of publication.)
SII’S Poonawalla has defended his pricing by saying that half his revenues would go as royalty to Astrazeneca and that selling the vaccine at ~150 a dose to the 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.
On May 3, Poonawalla issued a statement saying the company had received orders for 260 million doses from the Indian government. He said: “We have also got a 100 per cent advance of ~1,732.5 crore for the next tranche of 110 million doses in the next few months.” Unlike Bharat Biotech, which spent crores developing an inhouse vaccine, SII has licensed production for two vaccines. Apart from Astrazeneca’s vaccine, Serum has global deals to supply another vaccine developed by American company, Novavax. Even by most conservative estimates, if Indian vaccine makers were to sell to a third of the world’s population at the same rates at which Unicef has reported them to be selling, they would be eyeing revenues of over $10 billion, and make billions of dollars in profits in the months and years to come.