Biological E looks to raise up to $60 million2 min read . Updated: 30 Aug 2013, 12:04 AM IST
Investor interest in the vaccine maker has peaked after WHO approved the company’s liquid pentavalent vaccine
Mumbai: Vaccine maker Biological E Ltd is looking to raise $50-60 million by selling a minority stake in the company and at least half a dozen private equity (PE) funds are considering the investment opportunity, according to two people close to the development, who did not wish to be identified.
Hyderabad-based Biological E, which was established over 50 years ago, supplies essential drugs to central and state government hospitals, Indian armed forces, state-owned companies and local medicine shops.
Investor interest in the unlisted company has peaked after the World Health Organization (WHO) approved the company’s liquid pentavalent vaccine, a combination paediatric vaccine that immunizes children against diphtheria, pertussis, tetanus, hepatitis-B and HiB (Haemophilus influenzae type B), in 2012. The vaccine is currently being exported by Biological E to Japan, South Korea, Taiwan, Indonesia, Malaysia and countries belonging to the erstwhile Soviet Union.
“With WHO approval for its vaccine on its side, Biological (Biological E) has become a very interesting investment opportunity for investors," said an investment banker who did not wish to be identified.
“The idea is to raise capital for minority stake, which could be either from PE funds or a strategic investor," said another investment banker, who spoke on condition of anonymity.
Biological E’s spokesperson declined to comment on the stake sale. The company’s managing director Mahima Datla did not respond to e-mails seeking comment.
In June, Biological E had entered into a 10-year supply agreement worth $200 million with Vacsera, an Egyptian state-owned vaccine company, to supply eight million doses of liquid pentavalent vaccine each year. The company has also entered into a five-year supply arrangement with Global Alliance for Vaccination and Immunization for its inactivated polio virus containing hexavalent vaccine under development with GlaxoSmithKline Plc. In September 2012, the company launched the county’s first indigenously developed vaccine, JEEV, to prevent Japanese encephalitis. Biological E has formed a partnership with Austrian biotech company Intercell AG to develop, manufacture and sell the vaccine in South Asia. The company will also supply this vaccine to other Asian countries where it will be marketed by Novartis AG, which owns 14.9% of Intercell.
The company’s revenue rose 66.66% to ₹ 400 crore in the year ended 31 March 2013, according to the company.
Experts say approvals are usually a trigger for investors. For example, the stock price of Natco Pharma Ltd has risen 66% in the last one year, outpacing the BSE’s benchmark Sensex 5.25% gain, after the company received approval from the US Food and Drug Administration for its abbreviated new drug application for an anti-ulcer drug. Natco has also obtained approval for selling migraine treatment tablets in the US and received a favourable ruling from a US court, paving the way for the launch of generic Copaxone used for treating multiple sclerosis in May 2014. The WHO approval is “a big positive trigger for the company’s prospect", says Sunil Parnami, director at Lodha and Co., who also heads the financial consultant healthcare practice.
“However, while factoring the upside of such triggers, investors should conduct a thorough and a periodic evaluation throughout their investment period, in order to avoid any potential setbacks which some of the other leading players in the industry have faced in the past, subsequent to initial pre-qualification or approval", he said. Last year, Ranbaxy Laboratories Ltd had recalled its generic version of Pfizer Inc.’s Lipitor (a cholesterol-lowering drug) in the US after a few batches were found to contain glass particles.