How Krishna Ella built Bharat Biotech and why the company is at a tipping point


By Economic Times – How Krishna Ella built Bharat Biotech and why the company is at a tipping point In the midst of the lockdown in April, as the world was trying to get a handle on the nature of the novel coronavirus, a vehicle sped along the National Highway 65. Its occupants were aware of the urgency of their special mission that had started at the National Institute of Virology, Pune. However, despite the empty roads, the driver of the four-wheeler had to be careful. He could not afford an accident; the stakes were sky-high.

In the vehicle was a container with a live strain of the coronavirus in deep freeze. Its destination: the Bharat Biotech laboratory in Hyderabad. Eight months later, the biotechnology company announced a vaccine, after researching on such strains, that promises to protect us from Covid-19.

However, this journey has come with its pitfalls. The latest, and the most public, was seen after the Drugs Controller General of India (DCGI) on January 3 approved the Covid-19 vaccines of Serum Institute of India (SII) and Bharat Biotech for restricted use. While SII’s Covishield was developed in collaboration with the University of Oxford and AstraZeneca, Bharat Biotech’s Covaxin is India’s first indigenous coronavirus vaccine.

The DCGI’s approval of Covaxin, despite it not having phase-3 clinical trial efficacy and safety data, stunned several vaccine experts. Many expressed doubts about the company’s clinical trial processes. In a television interview, Serum Institute CEO Adar Poonawalla said only three vaccines — those engineered by Pfizer, Moderna and Oxford-AstraZeneca — would work. “Everything else has been proven to be safe, just like water,” he had said.

A moment of triumph became a defensive one for Bharat Biotech’s founder-CMD M Krishna Ella. “Some companies have branded me like ‘water’. I want to deny that. We are scientists,” an apparently upset Ella said at a press conference the next day. According to sources, senior government officials had to intervene to bring about a truce between the two companies. Despite repeated attempts, Bharat Biotech did not respond to ET Magazine’s queries. Ella could not be reached over the phone.
People who know Ella say he is a soft-spoken man. But the “safe like water” comment apparently did not go down well with him. “Am not surprised with Ella’s outburst,” says a Hyderabad-based pharma entrepreneur, requesting anonymity. “He is very passionate about his work. He is a scientist at heart. You got to give it to that guy because he engineered that vaccine himself. He was not a contractmanufacturer for some foreign lab.”

If Covaxin succeeds, it will cement Bharat Biotech as a formidable drug manufacturer in the world. The Hyderabad-based company that Krishna Ella founded with his wife Suchitra already has an enviable body of work. In fact, mass production of the rotavirus vaccine first by Bharat Biotech and then by SII emboldened the government to include the vaccine in its national immunisation schedule in 2019. It had to pay a fraction of the US dollar to bulk purchase the vaccine from these manufacturers.

Bharat Biotech’s Rotavac became an obvious choice for various governments, multilateral agencies, local bodies and private medical healthcare facilities as it was “prequalified” by the World Health Organization eight months before Serum’s Rotasiil. Five drops of the pink rotavirus vaccine delivered orally to babies three times in the first 14 weeks help cut infant mortality considerably. WHO says 90,000–153,000 children die from rotavirus infection in India each year “but these numbers are not based on nationally representative samples”. However, medical experts and doctors say the rotavirus vaccine has helped to reduce infant mortality across India.

The success of Rotavac positioned Bharat Biotech as a “small challenger” to Pune-based SII, the world’s largest vaccine manufacturer. The strategic guidance Bharat Biotech (BB) gets is also a reason for its rise, says the pharma practice head of a large consulting firm. “BB is more unique in its approach to vaccines. Their pick of diseases that need vaccination make them betterplaced — and more agile — than Serum. BB is purely a science and scientist-led company.” That shows Ella is a scientist as well as a businessman.

Before establishing Bharat Biotech in 1996 with a seed capital of Rs 12 crore, Ella taught at The Medical University in South Carolina. Two years after starting Bharat Biotech with his wife Suchitra, Ella rolled out a “safer” (cesium chloride-free) Hepatitis B vaccine, which Bharat Biotech claims to be the first in the world. Suchitra is the JMD of the company.

Over the years, it launched a string of vaccines, therapeutics and bio-therapeutics. Just before launching Rotavac, Bharat Biotech unveiled the world’s first typhoid conjugate vaccine, with a claimed efficacy of 87%. The company has a dozen other vaccines that claim to prevent diseases such as haemophilus influenzae, polio, swine flu, rabies, Japanese encephalitis and hepatitis B. It is working on a string of vaccines against chikungunya and Zika infections, human papillomavirus and malaria. Research is also on to develop an “intranasal vaccination process”, which may open up a new mode of vaccine delivery.

Picking Winners
Referring to this bouquet of vaccines, a former deputy director of the Central Drugs Standard Control Organisation says: “Vaccine and drug manufacturers see a lot of failures when they try to develop new products. This hurtles them to severe losses as well. But in the case of BB, the number of failures are far fewer than their peers. They’ve managed to come out with a successful vaccine every three-four years.”

In 2019, the company reported a profit of `112 crore on a turnover of Rs 763 crore. According to a private equity player specialising in unlisted pharma companies, Bharat Biotech posted a net sales in excess of Rs 1,100 crore last financial year; the profit range was estimated at Rs 250-320 crore.

Bharat Biotech’s product concentration is high with nearly 85% of its revenues coming from Rotavac, TCV and the oral polio vaccine. “90% of the company’s revenues come from vaccines,” says a person close to the company. “Rotavac, TCV, antirabies vaccine and oral polio vaccine are the biggest revenue-earners. Apart from selling vaccines to central and state governments, the company has a robust play in the private market, too. The paediatrics/doctor network alone brings in Rs 100-120 crore worth of sales.”

While Ella gushes about affordable vaccines, his company has veered away from the low-margin oral polio vaccine business. Instead, Bharat Biotech is lobbying hard to sell its rotavirus and typhoid vaccines, which have better margins.

“Ella is a man of science, but his business acumen is very good,” says a Hyderabad-based pharma business consultant. In February 2019, BB acquired Chiron Behring Vaccines, a small unit of GSK that specialises in rabies vaccine. The manufacturing facility was refurbished and the vaccine was rebranded and re-launched as Chirorab (earlier Rabipur). Chiron Behring is believed to have logged revenues in the range of `80–120 crore last financial year.

“The Chiron acquisition is a wellplanned one. There’s a shortage of rabies vaccine world over, much like the antidotes for a snake bite,” the pharma business consultant adds. Bharat Biotech’s Japanese encephalitis vaccine, Jenvac, is another example of a product that serves a small section of the population but rings in sizable profits. This type of encephalitis is mostly seen in North and East India, and countries like China, Thailand, Cambodia, Nepal and Malaysia. Jenvac brings in Rs 30–50 crore.

The biotechnology company is a tightly held family business and has only a handful of investors. Nearly 75% of the equity rests with the Ellas. According to data from Tracxn, the company has a dozen institutional funders and three angel investors. Among the funders are three “investment” grants — from the Department of Biotechnology, Gates Foundation and the Coalition for Epidemic Preparedness Innovations. ICICI Venture, Subhkam Ventures and IFC are the only private equity investors in the company. Bharat Biotech has received just over $13.73 million worth of funding so far.

The investors seem to be happy with BB’s growth and Ella’s leadership. “The company is growing at 30–35% CAGR,” says Rakesh Kathotia, founder-chairman of Subhkam Ventures and an investor in Bharat Biotech. “Ella understands diseases and vaccines. Science forms the basis of his business. We’ll continue our journey with him.” Kathotia, an avid investor, invested in Bharat Biotech some 15 years ago, convinced by Ella’s vision to manufacture affordable vaccines.

Manu Punnoose, MD of Subhkam, says: “We’re very happy as Bharat Biotech has managed to roll out some blockbuster vaccines over the past few years. Beyond that, Ella is a good human being. He never brags about his achievements, which are many.”

Though not many know it, the Ellas have branched out to other businesses as well. Ella Foods deals with “cryogenically ground cold pasteurised spices.” BIOVET works around veterinary drugs and vaccines. This vertical has already launched vaccines to prevent foot-and-mouth disease, bluetongue disease and haemorrhagic septicaemia among livestock. But the family’s core business is making vaccines for humans. And, going by what paediatricians say, it should.

“The rotavirus and typhoid vaccines have helped in reducing the incidence of two deadly diseases that affect children,” says Dr Harish Kumar Pemde, a member of Indian Academy of Pediatrics. “BB’s rotavirus and typhoid vaccines are landmark products. The fact that WHO has prequalified these vaccines speaks for their quality.”

Just like the Covid vaccine, Bharat Biotech faced serious challenges while developing the rotavirus vaccine, too. The clinical trials had to be conducted on newborn babies. The company took nearly 10 years to finish the trials and get the necessary approvals.

The hard work has not gone unnoticed. “BB’s rotavirus vaccine was their best till date. It has very high efficacy rates,” says Dr Ashish Bavdekar, associate professor & consultant in paediatric research at KEM Hospital, Pune. “But it was a long-drawn process covering thousands of newborn babies.” Bavdekar participated in the clinical trials as an investigator. The road to a Covid vaccine wasn’t easy either. But the scientist with a business acumen has brought it this far. There are many who are betting on him to go much further. It is a journey Ella will have to helm as carefully as the driver who transported the virus strain from Pune to Hyderabad.

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