Hester has signed a drug substance production agreement with Bharat Biotech: Rajiv Gandhi, CEO & MD

Rajiv Gandhi, CEO & Managing Director, Hester Biotech Limited, talks about March quarter performance, Covaxin and tie-up with Bharat Biotech, the international business among others during a chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Your performance has been good in the March quarter. What are the key highlights and is the performance is sustainable in FY22?

A: If you will have a look at the fourth quarter compared on a quarter-on-quarter basis then last year was a very bad year for us plus the onset of COVID also had its impact. So, if we look at it, we have been able to recover quite a bit and we made the full recovery of this year and also achieved our targets. We displayed growth of around 52% in the quarter on a quarter-on-quarter basis. We were determined that the exports shrunk a lot because the international flights were not running and our vaccines go by air transport, so, we put a lot of pressure and by putting the pressure we were able to increase our domestic sales in the third and fourth quarter.

See Zee Business Live TV Streaming Below:

Q: Let’s also talk about the big development at the company. You will be making the Covaxin vaccine at your Gujarat Plant. What production is happening there and when it will be ramped up? Also, tell us about the kind of CpaEx that has been planned for it?

A: Hester Biosciences is a part of a consortium and the Government of Gujarat is also present in it and we have made an agreement with Bharat Biotech that we will manufacture the drug substance at our plant, which will be provided to Bharat Biotech and then they will make final vaccine Covaxin with those drug substance. The approximate investment cost has been estimated at around Rs 40 crore and will establish a complete facility in three to six months. For this purpose, we will renovate one of our facilities and make the drug substance there. In fact, this will not have any impact on the ongoing manufacturing and marketing of our animal vaccines. Whatever will happen with it, whether it is sales or production, it will be over and above what we have forecasted about the manufacturing of our animal vaccine and health products. In fact, we are not alone in this, Bharat Biotech has also made such agreements with two government entities that they will provide drug substance. With the availability of these drug substances, Bharat Biotech will be able to produce more Covaxin and will fulfil the shortage and the requirement of the country. So, this is our plan for the drug substance for the Covaxin vaccine.

हेस्टर बायोटेक इस साल गुजरात में शुरू करेगी मल्टीपर्पज फैसिलिटी...
कंपनी के MD & CEO राजीव गांधी ने एक्सपोर्ट में 100 परसेंट ग्रोथ का भरोसा जताया #CorporateRadar #HesterBiosciences @SwatiKJain @Hesterindia pic.twitter.com/2PCeoxrxcl

— Zee Business (@ZeeBusiness) June 17, 2021

Q: How will you fund it? Also, the production agreement is between you and three other entities. What are the revenue sharing terms and how much will Covaxin contribute to your top line and profitability once the production starts?

A: First of all, we should see that this activity is of national importance and a national emergency. We are a private entity, so we will definitely look forward to profitability and will do everything. Today, we are at a stage where we are calculating all these aspects, like how much will be made, what will be the transfer price due to which they will be able to manufacture the vaccine and sell, with the Bharat Biotech. So, I will be able to say that we will be able to recover the cost that we have put in it but how profitable it will be than at this point of time, I will not be able to say what exactly or precisely it can be because it is a process and the current situation is quite fluid and the end price of the vaccines are changing, demand is changing, i.e. it increases and decreases, but as a national emergency we are embarking on it and are committed that we will be able to recover all our cost. If you see, in this we will be able to recover our full cost. Going forward, if the Covaxin drug substance will continue then we will continue to manufacture it in the facility and supply it to them by making a good margin out of it. And, if it is not there then we have created this facility in a way, the BSL Phase-III facility, that we will use this facility for animal facility. There are many animal diseases on which R&D is not happening and the vaccine is not being made. Even, we haven’t this BSL-III to date. So, by setting up this, either the Covaxin will continue to be produced or going forward the facility will be used in manufacturing the animal vaccines. It is a multi-purpose facility that is being created. So, profitability, as I told you that at this point of time, we commit to recovering the money, I am not so much sure on the bottom line from whole this project as this is of national emergency. 

Q: The government has also asked Bharat Biotech to reduce the prices of the vaccine. If there is a price cut, could that impact you adversely?

A: I cannot say anything about it now as all of us including Bharat Biotech is working for the country at this point in time. It is a commercial issue between Bharat Biotech and the government, so I can not say anything about it. We are just a producer for Bharat Biotech. Accordingly, we will make and provide it to them. So, I would really don’t want to comment on a product, which we are not manufacturing, we are only a raw material supplier. 

Q: What is your outlook on international business growth and what opportunities are visible there? Also, will we get a chance to see further tie-ups, like Covaxin, on a long to medium term basis?

A: Last year, the International business was hit hard because we were not able to export our vaccine from here as well as from Nepal as flights were restricted or stopped most of the time. But we are quite sure that it is not so that our demand has reduced or the business has moved out on a permanent basis from our hand just because we were not able to do business last year. As far as our vaccine export target is concerned, we have set a target of 100% growth this year as compared to the last year, when it was down by 3% as compared to the year before it. But, we are confident that we will do 100% this year. And, today, we have made investments in manufacturing in Tanzania and Nepal. Going forward, we are looking forward to the ways to tie up with the distribution companies in the African Continent instead of manufacturing. We like to invest in it, take a stake in those and be a participant and look at the ways to increase the distribution. Because, when we have already established a manufacturing plant then it should be seen that how much of the products can be distributed from it and what can be sold. So, we will have a major focus on distribution for the next two years after the plant is commissioned. Also, focus on distribution is beneficial in terms of the bottom line because distribution activity is not a capital intensive activity. We have to make goods and sell them, in which we have to buy from outside and do it, so, we will have a working capital but no CapEx will be involved in that and we will increase our top line a lot.