This Republic Day, the nation honoured the vaccine makers –Serum Institute of India’s DrCyrus Poonawalla, and Bharat Biotech’s Dr Krishna Ella and Suchitra Ella – with Padma Bhushans, the third highest civilian award. As we start the third year under the shadow of the COVID-19 pandemic, there is no greater acknowledgement of the importance of the sector, vital to India’s future health, both at the citizen and corporate level. Will this sentiment also be reflected in Budget 2022 allocations? Will the Finance Minister have the fiscal space to do so? We will know this by 1st February, but as I write this on 27th January, it is anyone’s guess.
However, even if Budget 2022 falls short of support, PE and VC players are stepping up to support key parts of the sector, most notably the much neglected API segment.
Most recently, on 24th January, Advent International acquired a controlling stake in Hyderabad-based Avra Labs, a contract manufacturing and research services (CRAMs) and speciality Active Pharmaceutical Ingredients (APIs) manufacturer. The PE player has reportedly invested in over 20 businesses in pharma R&D, production and distribution with the goal of “creating a top five merchant API Platform in India” – a goal, which presumably predates the pandemic by at least three decades. Since 1990, Advent has invested $10.5 billion in 52 companies in the sector worldwide. In addition to Avra Laboratories, recent pharma and healthcare investments by Advent include GS Capsule, BioDuro-Sundia, RxBenefits, RA Chem Pharma, ZCL Chemicals, Bharat Serums and Vaccines, Industria Chimica Emiliana, Vitaldent, Definitive Healthcare, Zentiva, AccentCare and Iodine Software.
Carlyle is another global PE player investing to create a global generics player based out of India. The group made significant investments last June and November in Viyash Life Sciences, which is already a leading manufacturer of APIs and intermediates. Viyash was set up by ex-Mylan veteran Dr Hari Babu in partnership with Dr Srihari Raju Kalidindi, with a strategy to ‘consolidate other pharma intermediates, API and formulation assets to create an integrated offering for large generics customers’, as per a release. With the acquisitions so far, Viyash already has ten manufacturing facilities in India with a combined capacity of ~2000 KL as well as one formulation facility in the US, and CEO Dr Hari Babu has indicated that the next phase will be about integration across these businesses.
In November 2020, Asia-focussed PE firm PAG, with consortium partners CX Partners and Samara Capital, acquired a controlling stake in Chennai-based API manufacturer Anjan Drugs. Again, this was of the consortium’s strategy to ‘create a best-in-class platform for the development and production of bulk drug ingredients.’
Clearly, the lessons of the past – of spiralling API costs, over-dependence on a shrinking list of API makers – have been well learnt. As larger pharma companies look to de-risk their supply chain, API and ingredient makers have seen PEs and VCs lining up to invest in their scale up.
Many pharma companies are implementing various strategies, like the Government of India’s PLI scheme, to de-risk from dependency on China for key raw materials and fill the gaps in India’s pharma manufacturing supply chain. In fact, the pharma segment, and APIs, in particular, could see much more investment as new sectors emerge as contenders for PE/VC investments in the years ahead.
The Drugs Controller General of India’s (DCGI) nod for regular market sales of Covishield and Covaxin for adults, albeit under certain conditions, is another affirmation of the importance of the biopharma sector. Even though the vaccines will still not be available for sale at chemists, hospitals and clinics can now purchase the vaccines. Hospitals and clinics will have to submit vaccination data to DCGI every six months and related data will be updated on CoWIN app, as per news agency reports. As these are still relatively newer vaccines, the government has indicated that adverse events following immunisation will continue to be monitored.
All in all, as we enter the third year of the COVID-19 pandemic, the country seems better placed to ride out the Omicron-driven third wave. Let this year’s Padma Bhushans be a reminder that hard work pays off but let us not wait for a pandemic to invest in pharma and healthcare infrastructure.