The Hindu Business Line : Shantha Biotechnics sees healthy prospects

IN just over a decade, Shantha Biotechnics, the home-grown biotechnology company, is set to emerge as a significant biotechnology player. Driven by an impressive export performance, the company is on track to reach a turnover of Rs 65 crore this fiscal. Essentially a vaccine producing company, it is betting strongly, on vaccines, monoclonal antibodies and therapeutic proteins to break into the big league in the country by 2007.

Launched in 1993, as a start-up and helped during the `incubation' phase by the Centre for Cellular and Molecular Biology (CCMB), Hyderabad, Shantha brought the first indigenous, recombinant hepatitis B vaccine into the Indian market in 1997. Now, there are nearly a score others producing competing brands in the country.

Mr K.I. Varaprasada Reddy, the electronics engineer turned biotech entrepreneur, discusses the struggles, risky phases the company went through and expresses confidence that Shantha is now in the consolidation mode to emerge as one of the country's strong biotech enterprises. In an interview with Business Line, he shared the achievements and the future roadmap of the company as well as the issues confronting the fledgling biotech industry in the country. Excerpts:

Unlike information technology, biotechnology is a high investment and more risky area. What has been your experience. What kind of financials have you faced?

With a dozen years experience as an entrepreneur, I can say with conviction that biotechnology demands higher investments and also high quality research scientists and globally recognised manufacturing to survive and grow. Since 1997, when we brought hepatitis B into the market, the cumulative investments have been Rs 150 crore. The cumulative turnover has been Rs 184 crore. Of this, Rs 85 crore has been ploughed back into research and development.

Your company faced the risk of being a one-product company for long. How did it affect your bottomline and how have you grown?

Yes, from 1997 to 2001, we just had hepatitis B. The first to the market advantage showed up in our sales, which rose to Rs 24 crore in 18 months and Rs 32 crore by end of fiscal 1999-2000. Thereafter, with many competitors in the fray and no new product, the turnover stagnated for at least three years.

With the launch of Shanferon (human interferon), Shantikane (Streptokinase) and Shanpoietin (Erythropoietin), and buoyed by the export market, Shantha has got out of the `revenue stagnation' and is logging impressive sales turnover.

With an increasing product range also we are on the road to consolidation now. Anyway, not many Indian biotech companies have indigenously developed products and brought them to the market.

What are the factors that you think would fuel your company's growth and emergence as an important biotech player?

As for sales turnover, we have logged Rs 48 crore in the 9 months of the current fiscal ending December and expect to reach Rs 65 crore. Exports would be contributing Rs 55 crore of this. Shantha's products now reach 25 countries. A major driver for this growth has been the World Health Organisation pre-qualification, which has made both hepatitis B and Interferon globally acceptable and procured by UNICEF, Bill Gates Foundation etc and distributed to several countries, including India. Ninety million doses have been exported so far.

Simultaneously, expanding the manufacturing facilities, including those for a set of combination vaccines, which include DPT & hepatitis B (four in one) has increased the scope for broadening the product profile as well as market.

We have a pipeline of 20 promising molecules. Vaccines, monoclonal antibodies and therapeutic proteins are areas where we are making rapid progress. Similarly, were on the verge of coming up with a single dose hepatitis B, instead of the current 3 doses. Finding new and easier ways of delivering insulin is another promising field for us.

What is the near time outlook for the company?

In fiscal 2005-06, we hope to reach a turnover of Rs 120 crore. This is again based on the combination of order book and the products in the pipeline. We expect to launch DPT, tetanus, and erythropoietin during the year. Research is on to develop MMR and Hib vaccine as well.The company plans to create three new facilities in the areas of viral vaccine, mammalian cell and fill and finish (quality control, labelling and vials) with good manufacturing practices (GMP) during the next two years. For this, an investment of Rs 100 crore is needed.

How do you propose to raise these resources?

The company is open to taking the private placement route. We are also scouting for a strategic investor, who can bring in technology, marketing and equity. The other options being explored are finance through part loan, or debt and finally an IPO.

One model we want to replicate is what we did for the Rs 40 crore facility for combination vaccines. We got soft loans of Rs 18 crore from Exim Bank, Rs 9 crore from the Technology Development Board and the balance Rs 13 crore from internal accruals.

What are your views on the new patent regime vis-à-vis biotech?

I feel the new Intellectual Property Rights regime (IPR) will put a brake to the mushrooming of pharma companies. Similarly, entrepreneurship in biotech will be the arena for the serious players.

However, the future for these two industries is bright and consumers can expect a lot of new products and benefits.

Biopharma and agri-biotechnology also will see growth.

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