Spotlight

New faces in the making

GenX seems to be becoming a norm rather than the exception in the lifecsiences business. Serum Institute's Adar Poonawalla is the next young gun on the block. He cites the growth story of the company. A profile by Arshiya Khan

Like father, like son: the adage will not be an overstatement if applied to Cyrus Poonawalla's son, Adar, Executive Director-Operations, Serum Institute of India Ltd (Serum). In his late 20s, he seems to share some of his father's trademark witticisms and is on the same wavelength as well. "I was always interested in doing business with my father, there is no other satisfaction than working with him," he says candidly. "I almost know what he is going to say before he has said it. Now I am able to know very clearly if there is any proposal, that is going to be worthwhile pursuing or not," he says with a beam.

As head of the company, he has people reporting to him who have been associated with Serum even before he was born, but his knowledge of the business is close to perfect. Not content to inherit Serum, he also owes his workaholic nature to his father as well as the good rapport and confidence in his father's trusted lieutenants. "There have been times when Adar has asked me to shoulder the responsibilities given to him," says Dr S S Jadhav, Executive Director, Serum.

The year that was …

Serum was founded in 1967. Its founding charter was defined by conditions prevailing at the time: an acute shortage of tetanus antitoxin in the country, and the practice of importing and retailing vaccines at high prices. Serum aimed at total indigenisation to make India self-sufficient in life-saving drugs. The company today is the fifth largest global vaccine maker by volume, the top four being GlaxoSmithKline (GSK), sanofi-aventis, Merck and Novartis. Commenting on what imparts Serum a top rank among global players, Supratim Majumdar, Industry Analyst, Healthcare Practice, Frost & Sullivan, South Asia and Middle East says, "Serum's continuous focus on development has actually made it capable of competing with global giants." He points out that Serum is one of the largest exporter of vaccine and numero uno in India.

There are others vaccine makers in India, but their approach is different, informs Jadhav. "We use conventional technology used by global players, whereas they use a normal approach," reveals Jadhav. According to some estimates, two out of three children immunised globally get vaccines manufactured by Serum.

Behind the making

“Most pivotal factor for the company's growth is that it's HR and infrastructure has grown and we were motivated financially as well. The profits were re infused, so we never faced a problem” - Dr Rajeev M Dhere Senior Director-Vaccines, Serum

Serum did not attain the position overnight. Until the early 90s the company was mainly focussing on domestic markets. It was only post 1994 after it got the accreditation from the World Health Organization (WHO) for its measles vaccine and started exporting to the world. Today majority of its revenues are from exports. Informs Poonawalla junior, "The annual turnover of the company for 2008-09 is Rs 1106 crore compared to Rs 986 crore of the last year and our revenues from exports are at Rs 871 crore. Whereas our domestic turnover is Rs 100-120 crore."

The company is the world's largest maker of measles and DTP (diphtheria, pertussis and tetanus) vaccines, producing a billion doses a year and selling in more than 130 countries regularly. "We sell to 140 countries but at times there may be some countries that may be excluded due to various reasons," says Poonawalla.

Getting back to numbers, growing at a Compounded Annual Growth Rate (CAGR) of 24.38 percent, the company followed a strategy of sticking to doing what they were best at, instead of diversifying into various other segments as well. "We have stuck to what we started with," exclaims Poonawalla heir. Agrees Majumdar, "There is no doubt that the strategy of focusing on development of vaccines has paid off. Serum Institute's name is considered along with big giants." Of course there were disciplinary issues when I joined, which has now been streamlined. There is faster execution of plans, says Poonawalla.

While sceptics say that most of the company's revenues are through selling vaccines at a lower cost to the WHO and other government agencies, Poonawalla adds a different view saying, "We also supply to 50-60 countries on our own and have plans for entering private markets in certain countries. Generally, we are trying in South America, Russia, China, Korea and Middle East."

At present, the company's product range includes bacterial vaccines, recombinant and combination vaccines, viral vaccines, anti-cancer products and anti-sera, plasma and hormonal products. Today counted as the world's largest manufacturer of measles vaccine and DTP group of vaccines, Poonawalla is not one to rest on his laurels. Avers Poonawalla, "There are still new vaccines to look at. And we want to stick to developing vaccines because there will be a global demand for the same. Our strategy behind selecting which vaccine to develop is different. We always take up vaccines that have regular immunisation schedules like the DPT, hepatitis, meningitis etc."

"At the moment the largest selling vaccines are DPT and MMR. The pentavalent vaccines will increase in sales in the next six-seven months once taken up by the WHO and other countries. At present, we are not supplying pentavalent vaccines to any of these countries. We are only supplying DPT and MMR (mumps, measles, rubella) to other countries. We have finished our trials on meningitis vaccines as well. We have invested almost Rs 100 crore in meningitis vaccine in the filling lines, bulk lines etc., informs Poonawalla. As said quite often, experimenting with new things leads to new discoveries and hence growth. And this is quite real as far as Poonawalla is concerned. "I have also tried to look at new vaccines as opposed to traditional ones and we are now expanding in the private markets, which is what I always wanted to do."

He is now looking at developing a rotavirus vaccine as he feels, "Just staying in the traditional areas won't help the company grow in the long term. Of course the major cash flow driver for what we are today, are still those vaccines, and looking onto the future these vaccines would definitely be required." The company produces pandemic flu vaccines, Poonawalla explains that, "Seasonal flu is something that we have stayed out of because it is not one of the things that we want to dedicate our facility to. We would like to concentrate on our other major vaccines."

Some of the vaccines under development are Meningococcal A Conjugate vaccine which has completed phase III trials and is awaiting license which is expected to be launched by the end of this year, informs Jadhav. Others in the pipeline are Meningococcal Pentavalent Conjugate vaccine (ACYW135X), Pneumococcal, Rotavirus and Seasonal/Pandemic influenza vaccines which the company is banking on. Once this is in the market, it can double the turnover of the company, feels Jadhav.

Serum's Bio Pharma SEZ Park, Hadapsar, Pune.

A plant facility at Serum

Standing out from the crowd

Besides the number game the big thing that happened to Serum is that it is the only institute to be chosen by the WHO, to develop swine flu (H1N1) vaccines. "The WHO has contacted and shortlisted us as one of the people mainly because of our ability to manufacture large volumes. Today we are making eight-nine hundred million doses of other vaccines," says Poonawalla. However, the WHO project is still awaiting strains from Centre for Disease Control (CDC), Atlanta in the US. The WHO had provided a grant of $2.2 million in 2007-08 to the company to develop avian flu (H5N1) vaccines, but now with the outbreak of the swine flu scare, it has asked us to use that amount ($1.7 million) for swine flu vaccine development and put the avian flu vaccine on hold, informs Dr Rajeev M Dhere, Senior Director- Vaccines, Serum.

The company is also into developing formulation of oncology and other injectable drug products. They have got US FDA approval for their anti cancer products, so that now they can also sell in regulated markets. Poonawalla continues, however in the regulated markets of EU and US, we will be selling only anti cancer products for which we qualified a month ago. Serum will manufacture these products and their partner in US (Akorn) will sell the products. The company has various facilities where they can manufacture vaccines in case of an emergency in India or any other country. The company's BioPharma Park, India's first biotech Special Economic Zone (SEZ) is spread across 55 acres in Hadapsar, Pune. So far, an amount of Rs 500 crore has been invested in the unit. "As we acquire more land, we may get a few more companies that will come in. However, at present it is only occupied by Serum," says Poonawalla.

Growth despite recession

Speaking about recession, Poonawalla strikes a chord similar to most in the pharma and biotech industries. Poonawalla is affirmative about the market as he feels that meltdown has not really impacted the life sciences sector to a large extent. However, since there were no new products launched last year, growth came from existing products (ie DPT & MMR), he informs. Elaborating he says, "The other major thing that my father did was to protect Forex earnings against the dollar, which I think is far better than most Indian companies and therefore we did not have much mark to market losses."

Road ahead

"The company should leverage on its strength of development to achieve success in future," feels Majumdar. The company so far has been growing organically. Though they had plans of acquiring companies in India and abroad, it did not come through due to recession. "We have permanently shelved our plans of acquisitions, because one or two acquisitions that we wanted to make both in India and abroad did not come through. The company has had an organic growth so far and we plan to stick to that. Of course we have used borrowings for our company's expenditure but mainly it is debt free and if there are one or two more acquisitions in the future then we may look at doing a PE placement which will obviously have to followed by an IPO," informs Poonawalla.

The company has grown not only in terms of sales and profits but also employees (79 in 1984 to almost 3000 today) and standards. We have been given a free hand to put forth our view, says Dhere. Associating with both father and son has been extremely comfortable. Though it is challenging, at the same time it is also motivating to work in the company, both of them are very closely and emotionally involved and everyday is like an assessment. Most pivotal factor for the company's growth is that it's HR and infrastructure has grown and we were motivated financially as well. The profits were re infused, so we never faced a problem, signs off Dhere. And agreeing Poonawalla Junior highlights, "To take the decisions that we take in this company and to build on the advantage of new opportunities that come in, one has to be very dynamic with the resources, space and planning that you have, one has to come out with the right choice." All said and done, we wait to see whether the new choices that he makes (in terms of vaccines) will make or break the company.

arshiya.khan@expressindia.com