How Adar Poonawalla’s Serum Institute shot to fame after Covid vaccine rush

How Adar Poonawalla’s Serum Institute shot to fame after Covid vaccine rush

Pune-based Serum Institute of India (SII), the world’s largest vaccine manufacturer, is likely to witness a record surge in profit as demand for Covid-19 vaccines grows rapidly in India and other parts of the world.

SII, which obtained a license to manufacture and supply Oxford and AstraZeneca’s vaccine under the name Covishield, has received an overwhelming number of orders as the second wave of Covid-19 wrecks havoc in India.

In view of the rising demand for Covid-19 vaccines, the company’s profit is expected to rise sharply in FY21 in comparison to 2019-20. The trend is likely to improve further in FY22.

SLOW BUT STEADY RISE BEFORE COVID

Serum Institute of India has been growing steadily for the past decade, but its net income surpassed Rs 5,000 crore only in FY19 and marginally improved in FY20.

Data from corporate database Capitaline suggests that 418 Indian companies posted revenues above Rs 5,000 crore in 2019-20 including Serum Institute. The data, cited in a BusinessToday.in report, suggests that Serum earned the maximum net profit for every rupee of revenue in the financial year.

(Credit: BusinessToday.in)

As per the data, Serum Institute reported a net income of Rs 5,926 crore and a net profit of Rs 2,251 crore in FY20.

It may be noted that the company’s income and net profit have been rising since 2013-14. In FY14, it reported a profit of Rs 1,741.33 crore; Rs 1,963.89 crore in FY15; Rs 2,179 crore in FY16; Rs 2,057 crore in FY17; Rs 1,912 crore in FY18; Rs 2,252 crore in FY19 and Rs 2,251 crore in FY20.

While SII’s revenues, exports and profitability increased over the past decade, the total earnings — just over Rs 17,000 crore — are a fraction of what global pharmaceutical companies and vaccines companies earn annually, reported Business Standard.

One of the factors why Adar Poonawalla-led SII has been able to grow steadily is due to vaccine exports to importing nations at higher margins. It may be noted that the company is licensed to manufacture 20 different types of vaccines in India.

RISE TO FAME

While SII was growing steadily till 2019-20, the Covid-19 pandemic has accelerated its rise sharply since FY21. The company not only found widespread recognition in India and the world, but it has got a once-in-a-lifetime opportunity to boost income and profits.

The sudden demand for Covid-19 vaccines in India, the world’s second-most populous country, and several other nations have led to an acute crunch in supplies. SII has said that it is working overtime to deliver the large amount of Covid-19 vaccines required just in India.

In India, the company is supplying doses to the central government at Rs 150 per dose, state governments at the rate of Rs 300 per dose and Rs 600 per dose to private hospitals.

Read | Serum Institute plans to start vaccine production outside India: Report

While it is difficult to calculate how much it will actually make by selling Covid-19 vaccines in India, even the base rate of Rs 150 would fetch profit given the large volume of doses required.

Regarding the Rs 150 per dose pricing for central government procurement, Poonawalla had said: “It is not that we’re not making profits… but we are not making super profits, which is key to re-investing.”

For instance, even if the states buy around 50 crore doses from SII at Rs 300, it will earn Rs 15,000 crore — nearly three times its total revenue in FY20. This gives a tentative idea about how much Serum’s profit will increase in FY21 and FY22.

PROFITS TO INCREASE WITH IMPORTS

Considering that SII will start importing vaccines to other nations after India’s demands are fulfilled, it will be earning higher margins on them.

Also Read | India’s Covid-19 vaccine shortage will continue till July: Serum Institute’s Adar Poonawalla

It is worth mentioning SII is also manufacturing billions of doses for the world, including under the Covax agreement — the global UN-led initiative to help supply vaccines to lower-income economies.

Even if SII makes conservative income by supplying these vaccines, Unicef’s figure shows that it would be more than Rs 22,000 crore.

Poonawalla has said that the company aims to scale up the manufacturing capacity of Covishield doses from 1.5 billion to 2.5 billion in the next six months and to 3 billion by October 2021 to meet growing demand.

As a result, SII earnings are likely to rise sharply when private markets around the globe start picking up vaccines directly from it at a much higher rate. Furthermore, SII also has global deals in place to supply another vaccine developed by American company Novavax. Its launch has now been delayed to September 2021.

Analysts are certain that both Serum Institute will see a sharp rise in profits in FY21 and FY22, based on the FY21 earnings of US-based vaccine maker Pfizer Inc, whose revenue in FY21 grew over 200 per cent on a year-on-year basis.

STILL A LONG WAY TO GO

Even if India’s largest vaccine manufacturer sees record profit in FY21 and FY22, it still has a lot of catching up to do with global pharma biggies like UK-based AstraZeneca and US-based Moderna.

In the past three years, AstraZeneca has earned average revenues of $24 billion and profits of $4 billion per year. That is at least 10 times more than Serum’s annual profit, reported Business Standard.

The report, citing Moderna’s regulatory filings, suggests that it has confirmed orders for 520 million doses of its in-house vaccine in 2021, and these contracts are worth $11.7 billion.

As big as the figure looks, Moderna’s total revenues in 2018 and 2019 were just about $200 million. However, due to grants for Covid-19 vaccine development, its revenues jumped to over $800 in 2020. In 2021, the sale of its vaccine worth $11.7 billion could be more than what it has earned in an entire decade and the next year could be even better.

The same could be the case of Serum Institute. Though the price for SII’s Covishield is lower than Moderna, the volume of Covshield’s sales are expected to be much higher. Whatever the scenario, it is certain that all vaccine manufacturers and developers will be much richer after the pandemic subsides.

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