While Merieux is expected to make use of Shantha’s existing line of products, sources at Shantha say the revenue mix will change. “When we launched Hep B, profit margins were between 20-25 per cent. But it gradually fell,” says Shantha’s founder and managing director, K.I. Varaprasad Reddy. Given falling profit margins, he believes combination vaccines will prove to be the winners.
For instance, a dose of DPT vaccine is priced at 10 cents (Rs 4.40), while a dose of Hep B costs 27 cents (Rs 11.88). A combo vaccine including Hep B and DPT will cost 87 cents (Rs 38.28) per dose. “It’s priced higher because we put in more on R&D to bring out the product,” says Reddy. Over the next three years, he believes the company will see a revenue mix of 50:50 from combo vaccines and individual products. “Indian players are strongly into combination vaccines,” says Mahesh Sawant, programme manager (healthcare practice), Frost & Sullivan, Mumbai.
Merieux stands to gain, too. Though Shantha has an installed capacity of 200 million doses of Hep B vaccine, it utilised less than 33.58 per cent in 2006. Merieux will now try and use these facilities. “We can even make contract manufacturing a lucrative area,” says Hibon. The partners have found more synergies. While Merieux is strong in therapeutics, Shantha’s forte is prophylactic vaccines. But Shantha needs funds quickly to generate more revenues. “We hope to get around Rs 100 crore by doing R&D for group companies of Merieux over the next three years,” says Khalil Ahmed, executive director, Shantha.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.