Serum Institute of India Ltd to sell off overseas buys

Serum Institute, the over Rs. 1,000 crore privately held vaccine maker, has learned its lesson after picking up minority stakes in vaccine and pharma companies in India and abroad. It will stick to its core business, vaccines and immuno-biologicals, to emerge as a major global player in these businesses, a senior company official said.

"We have learned that we should stick with what we know best, vaccine making. We will soon offload our stakes in Lipoxen Plc of the UK and Akorn Inc of the US since the objectives (in the stake acquisition) were not achieved. We will be happy to get our costs since we invested Rs. 100 crore in each of the two companies," Adar C Poonawalla, executive director, operations, Serum Institute, and son of the founder chairman and managing director Cyrus Poonawalla, said.

Lipoxen is a bio-pharma company while Akorn is a maker of sterile specialty pharmaceuticals.

In India, Serum Institute of India Ltd holds stakes in Orchid Chemicals and Pharmaceuticals which it bought as a white knight investor and currently holds a 10.1% stake in it. Poonawalla explained, "It was a diversification for our group since we are not in that business. At one time, we thought we could even hike our stake but right now, we see it as a long term holding."

About the other investment, in the Delhi-based Panacea Biotech, which is also in the vaccines business, Poonawalla said they see it as a long term strategic investment. "We know what they do, hence we invested in it. We also believe the company is hugely under-valued," Poonawalla noted. As for Lyka Labs, in which the group invested, that is a dormant investment.

Serum Institute is now considered the fifth largest vaccine maker by volume globally, making 900 million doses annually. It plans to add capacity in the next couple of years for another 200 million doses, taking the total to 1.1 billion doses.

A major portion of its revenues come from exports which are mainly to emerging economies. It has been eyeing an entry into the high value regulated markets of Western Europe and North America, for which Poonawalla said they are building up a Rs. 1,000 crore "war chest."

"We will need a war chest over the next two-three years to enter the regulated markets. We want to enter these markets for the prestige and of course the turnover because their volumes are not very high: vaccine volumes for these markets would amount to about a week's production for us. The war chest will be needed because we will have to do at least one human clinical trial, which will take around US $200 million and be prepared to fight legal battles, hire lawyers. We've got funds and cash reserves already of Rs. 800-900 crore, after investing Rs. 150-200 crore annually in capacity expansion," he said.

Spelling out his long term goals, Poonawalla said, "My long term dream is to be the largest vaccine maker, by volume not value, enter the regulated markets and launch newer vaccines."

Among new vaccines that SIIL plans to launch are pneumococcal and rota virus vaccines, both of which are at least three years away. It is looking at the HPV vaccine, to address cervical cancer in women for which it is exploring off patent technologies in the US. This, too, is at least three years away, Poonawalla said.