INDIAN VACCINE INNOVATION: THE CASE OF SHANTHA BIOTECHNICS
Globalization and Health 2011, 7:9 doi:10.1186/1744-8603-7-9
Justin Chakma (email@example.com)
Hassan Masum (firstname.lastname@example.org)
Kumar Perampaladas (email@example.com)
Jennifer Heys (firstname.lastname@example.org)
Peter A Singer (email@example.com)
Article type Research
Submission date 5 February 2010
Acceptance date 20 April 2011
Publication date 20 April 2011
Article URL http://www.globalizationandhealth.com/content/7/1/9
This peer-reviewed article was published immediately upon acceptance. It can be downloaded,
printed and distributed freely for any purposes (see copyright notice below).
Articles in Globalization and Health are listed in PubMed and archived at PubMed Central.
For information about publishing your research in Globalization and Health or any BioMed Central
journal, go to
For information about other BioMed Central publications go to
Globalization and Health
© 2011 Chakma et al. ; licensee BioMed Central Ltd.
This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0),
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
- 1 -
Indian vaccine innovation: the case of Shantha
Justin Chakma1, Hassan Masum1, Kumar Perampaladas1, Jennifer Heys1, Peter A
1McLaughlin-Rotman Centre for Global Health, University Health Network and
University of Toronto, 101 College Street Suite 406, Toronto ON, M5G 1L7 Canada
- 2 -
Although the World Health Organization had recommended that every child be
vaccinated for Hepatitis B by the early 1980s, large multinational pharmaceutical
companies held monopolies on the recombinant Hepatitis B vaccine. At a price as
high as USD$23 a dose, most Indians families could not afford vaccination. Shantha
Biotechnics, a pioneering Indian biotechnology company founded in 1993, saw an
unmet need domestically, and developed novel processes for manufacturing Hepatitis
B vaccine to reduce prices to less than $1/dose. Further expansion enabled low-cost
mass vaccination globally through organizations such as UNICEF. In 2009, Shantha
sold over 120 million doses of vaccines. The company was recently acquired by
Sanofi-Aventis at a valuation of USD$784 million.
The case study and grounded research method was used to illustrate how the
globalization of healthcare R&D is enabling private sector companies such as Shantha
to address access to essential medicines. Sources including interviews, literature
analysis, and on-site observations were combined to conduct a robust examination of
Shantha’s evolution as a major provider of vaccines for global health indications.
Shantha’s ability to become a significant global vaccine manufacturer and achieve
international valuation and market success appears to have been made possible by
focusing first on the local health needs of India. How Shantha achieved this balance
can be understood in terms of a framework of four guiding principles. First, Shantha
identified a therapeutic area (Hepatitis B) in which cost efficiencies could be achieved
for reaching the poor. Second, Shantha persistently sought investments and
partnerships from non-traditional and international sources including the Foreign
Ministry of Oman and Pfizer. Third, Shantha focused on innovation and quality –
investing in innovation from the outset yielded the crucial process innovation that
allowed Shantha to make an affordable vaccine. Fourth, Shantha constructed its own
cGMP facility, which established credibility for vaccine prequalification by the World
Health Organization and generated interest from large pharmaceutical companies in
its contract research services. These two sources of revenue allowed Shantha to
continue to invest in health innovation relevant to the developing world.
The Shantha case study underscores the important role the private sector can play in
global health and access to medicines. Home-grown companies in the developing
world are becoming a source of low-cost, locally relevant healthcare R&D for
therapeutics such as vaccines. Such companies may be compelled by market forces to
focus on products relevant to diseases endemic in their country. Sanofi-Aventis’
acquisition of Shantha reveals that even large pharmaceutical companies based in the
developed world have recognized the importance of meeting the health needs of the
developing world. Collectively, these processes suggest an ability to tap into private
- 3 -
sector investments for global health innovation, and illustrate the globalization of
healthcare R&D to the developing world.
For many years, Western investors were attracted by the prospect of outsized returns
in the biotechnology industry. Amgen’s initial investors received returns of almost
100 fold after only 3 years , while Genentech’s patents generated hundreds of
millions of dollar in royalties .
Even as early enthusiasm for biotechnology’s potential commercial returns cooled in
the West over the past decade , the globalization of biotechnology spurred the
creation of a range of biotechnology companies in emerging markets. This select subset
of the developing world including China, India, Brazil and South Africa
experienced marked economic development over the last two decades, and now has
significant scientific and financial capital under the stewardship of relatively stable
In India, an industry-led biopharma sector emerged, with large companies like
Ranbaxy in the 1970s and 1980s leveraging recognition of process rather than product
patents from the Patent Act of 1970 to rapidly expand and become internationally
known for manufacturing generic drugs [4, 5]. However, India also has dozens of
lesser known small to mid size innovative biotechnology companies, most of which
have developed since 1990 [6, 7]. These companies have grown to play a pivotal role
in ensuring access to medicines globally by serving as a low-cost source of global
health innovation, particularly in the vaccine arena.
In this article, we describe and analyze the history and lessons of one of these vaccine
innovators, Shantha Biotechnics. In late 2009, in a landmark deal for the Indian
biotech industry, Shantha was acquired by the multinational giant Sanofi-Aventis
(France) at a valuation of USD$784 million . Founded by Dr. K.I. Varaprasad
Reddy in 1993, Shantha was one of the first Indian biotechs to create a recombinant
product, obtaining World Health Organization (WHO) prequalification for its
Hepatitis B vaccine in 2002 . Since then, the firm has grown to 750 employees and
brought 11 novel products to market. In 2009, Shantha sold over 120 million doses of
Hepatitis B vaccine to dozens of developing countries around the world, had revenues
exceeding USD$90 million  and maintained a sophisticated pipeline of biologics
including human monoclonal antibodies.
We begin by describing the history of Shantha’s unique evolution from a start-up to a
significant vaccine player, noting key challenges and decision points in the process
with respect to financials, corporate strategy and health impact. We then analyze the
Shantha case as a whole as an illustration of the globalization of healthcare R&D, to
draw out key lessons for scientists, entrepreneurs, and policy-makers. The goal of this
description and analysis is to accurately describe the case, and suggest observations
and lessons that may be applicable to those who wish to start, partner with, or invest
in R&D-intensive private-sector firms in emerging markets that tackle global health
- 4 -
This analysis is based on multiple site visits and face to face interviews with key
members of the Shantha Biotechnics team over the past five years, as well as analysis
of secondary material. Where not specifically noted or referenced, the report is based
on these interviews.
We chose a combination of the case study and grounded research methods as the most
appropriate ones to examine complex phenomena in context . Shantha Biotech
was chosen on the basis of being identified by previous studies as one of the first
innovative Indian biotechs, and one of the few to be acquired by a large foreign
pharmaceutical multinational company . It was part of a set of fourteen casestudies
focused on healthcare product development and investment occurring in India
and Africa (see e.g. ). This particular case-study also builds on other case-studies
of biotechnology innovation in emerging markets that our research group has
published . We have published a significantly abbreviated version of the case-study
in another journal 
Interviewees were selected based on purposive sampling. We analyzed transcripts
from semi-structured, face-to-face interviews that took place in Hyderabad with a
total of 16 Shantha representatives on four separate occasions (January 2005, 2006,
March 2008, October 2008). Interviewees included Dr. K.I. Varaprasad, Shantha’s
CFO N. Rajasekar and CSO Ashok Khar as well as Georges Hibon (a Director of
BioMerieux Alliance). These were followed by email follow-ups with Shantha and
BioMerieux executives in August-October 2009.
We also analyzed background documents on the Indian biotechnology industry from
the peer-reviewed literature and news reports; books published by biotechnology
industry and innovation academics; Indian and USPTO patents filed by Shantha,
reports and presentations from the Government of India, World Health Organization,
and World Intellectual Property Organization; institutional websites such as PATH,
NIH, International Vaccine Initiative; and firm websites of Shantha, Sanofi-Aventis
and BioMerieux. The firm was asked to fact-check the data derived from our analysis
prior to submission to ensure it was up-to-date and accurate. Analysis of transcripts
was supported by qualitative data analysis software ATLASti and NVivo. This study
was approved by the Office of Research Ethics of the University of Toronto.
The Hepatitis B Tragedy
Over 100,000 Indians die every year from Hepatitis B infection . About 40
million individuals are chronically infected, and 4% of the Indian population are
carriers. As a serious liver infection, it is transmitted through exposure to infectious
blood or bodily fluids, including during childbirth. By the early 1980s, the WHO
recommended that every child be vaccinated for Hepatitis B, but inexpensive
recombinant vaccines had not been developed. Merck and GlaxoSmithKline (formerly
SmithKlineBeecham) had developed recombinant vaccines in 1986, and they held a
monopoly with over 90 other patents covering manufacturing processes such as
isolation and purification . In the late 1980s, prices were as high as USD$23 a
- 5 -
dose. Plasma-derived vaccines had been produced in India since 1981, but concerns
arose around the capacity to produce large quantities of plasma-derived vaccines, and
about their safety since they are derived from human blood . With most Indian
families living on USD $1 a day with multiple children and three doses required per
child, vaccination was simply unaffordable .
An Engineer with a Cause
Dr. K.I. Varaprasad Reddy reported that he discovered the extent of the issue when he
attended a WHO conference in 1992, and learned that what was needed was an
inexpensive generic biotech vaccine. He felt that the vaccine would have to be
produced in-country rather than imported. The Indian biotech industry at that time
was focused on generic pharmaceutical products, and was not yet involved in
innovative biotechnology . Recombinant technology did not exist within the
country . When Dr. Varaprasad approached a Western firm for a technology
transfer he was told that, essentially, “India cannot afford such high technology
vaccines. India does not require vaccines. And even if you can afford to buy the
technology, your scientists cannot understand recombinant technology in the least.”
Despite being trained as an electrical engineer with no biotech R&D experience and
just an MBA, Dr. Varaprasad was motivated by this challenge and felt that the science
was something he could delegate to an experienced team of scientists.
Building the Dream
With an idea in mind and strong convictions, Dr. Varaprasad began to seek capital for
this new venture. Although he visited every major Indian bank, they were unwilling to
fund early-stage start-ups with no revenue, and had little understanding of the biotech
industry at large. But Varaprasad persisted, and raised $1.2 M USD by selling his
father’s properties, and seeking investment from family and friends. As Dr.
Varaprasad himself had no experience in biological research, he contacted hundreds
of expatriate Indian scientists, two of whom he persuaded to join him. Shantha was
founded in 1993 with few resources, but much hope. As one of the scientists, M.K.
Sudhir, stated: “If you ask me if I would go through it again, I would have to think
twice. At that point, it was a missionary zeal. There was no precursor for this kind of
product in India.”
Shantha incubated inside Osmania University at Hyderabad, but the company was
relocated because of perceived institutional politics. By 1995, Shantha had exhausted
its initial investment and was on the verge of bankruptcy. Dr. Varaprasad fortunately
found an unexpected ally in the Foreign Minister of the Sultanate of Oman, H. E.
Yusuf Bin Alawi Abdullah, who wanted an affordable vaccine for his own citizenry.
Oman injected $1.2 million USD in equity for a 50% stake in the firm, which allowed
Shantha to move into a new facility at the Centre for Cellular and Molecular Biology
in Hyderabad. This investment carried them forward to 1997 [See Table 1].
A Process Innovation
- 6 -
After four years of supporting his scientists, Dr. Varaprasad’s patience paid off. In
1997, Shanvac-B, India’s first home-grown recombinant product, launched at a price
of about USD $1 a dose. The vaccine was produced in Pichia pastoris, a yeast system
different from that used by the original inventors of the vaccine. Although at the time
Pichia pastoris was being used for research purposes, Dr. Varaprasad was told by the
manufacturers of the expression system that Shantha was the first company to use
Pichia pastoris to produce a commercial product . Its Shanvac-B process
innovation earned them two process patents, a beneficiary of India’s preferential
treatment of process patents over product patents in its Patent Act of 1970 .
According to Dr. K. V. Sudhir, one of the pioneering scientists, “in hindsight… [it]
was a major factor in us being so successful” because it led to better yields and more
efficient purification compared to even multinational processes .
From Lab to Village
According to the annual reports of Shantha, analysts projected first year sales of only
$100 000 USD given Shanvac-B’s low price, but actual sales in 1997 exceeded $1.6
million USD. Shanvac-B was launched at around USD $1 per dose because, in Dr.
Varaprasad’s words “…my gut feeling [was], unless it is made for one dollar, nobody
can afford this.” But it was not a charitable act - net profit margins were reported to be
around 20% .
Initial sales were financed almost entirely by the private-sector as the public health
agencies in India did not have a mandated vaccine schedule yet, and most healthcare
services were (and continue to be) provided by private healthcare. The price was a
fraction of that charged by the competition , based on Dr. Varaprasad’s desire to
make the vaccine affordable to Indian citizens rather than charging what the market
would bear. Consumption of vaccine increased from a few hundred thousand doses in
early 1990s to over 30 million doses in November 2008 with increasing involvement
of donor and public health agencies . Prices in the Indian market reportedly
dropped from about $15 to as low as $0.23 USD [6, 14].
Revenues exceeding $90 million USD in 2009 have validated Shantha’s high-volume,
low-margin strategy . This rapid success was partly due to mentorship from a
large multinational pharmaceutical for developing good manufacturing practices and
regulatory acumen. Pfizer (New York, NY) was impressed enough with the quality
that it agreed to co-market Shantha’s Hepatitis B vaccine under the HepaShield brand
in India in 2002 . In 2000, Morgan Stanley and the State Bank of India Mutual
Fund invested USD $10 million in a private round of equity raising to build
A Tradition of Innovation
Shantha continued to employ process innovations for subsequent products. Its second
product, interferon alpha 2-b (Shanferon), was also produced in Pichia pastoris
reportedly marking the first time this molecule was produced commercially in yeast
rather than the traditional bacterial system . Shanferon was reportedly priced at Rs
300 ($USD 6.50), which was also substantially lower than the then imported price of
- 7 -
Rs 1200 ($USD 26.00) . Shantha was one of the first biotechs to produce
erythropoietin in serum-free media, which quelled safety concerns regarding serum
use in manufacturing . In using these new processes, Shantha’s scientists not only
had to alter the method by which they produced their product, but also the entire
purification process. Although it took additional time to develop good manufacturing
practices that adhered to ICH-WHO norms, the decision to focus on process
innovation right from the beginning led Shantha to become the first Indian company
to be prequalified by the WHO . The initial investment in quality control helped
accelerate approval for its later vaccines: Shantha now has four vaccines that are
WHO pre-qualified 
After Hepatitis B, Shantha started development programs for interferon alpha 2-b,
vaccines for rotavirus, HPV, pneumococcal viruses and oral cholera, and set up a
subsidiary in the United States to develop monoclonal antibodies for cancer
indications [26, 27]. This was only made possible by Shantha’s commitment to invest
12-25% of its profits back into R&D every year  – a number higher than its
typical Indian compatriots, and an ambitious goal to keep new products coming onto
the market every one or two years. “The criterion was simply to look at products that
were relevant to India and the other developing country’s needs,” said Shantha’s CSO
Shantha facilitated this pipeline expansion through not only home-grown efforts, but
also partnerships with the US National Institutes of Health, Bill & Melinda Gates
Foundation, John Hopkins University, and PATH . By building a close
relationship with the Center for Cellular and Molecular Biology (CCMB) and other
Indian research institutes , Shantha has also benefited from access to local
scientists and R&D ideas for novel expression vectors. For example, it worked with
the International Center for Genetic Engineering in Biotechnology in New Delhi,
India for novel kinase inhibitors for cancer with the potential for revenue sharing.
Its focus on innovation and quality to meet WHO prequalification standards led to a
higher cost structure than its domestic competitors who did not meet these standards.
In recent years, this has limited domestic sales. However, Dr. Varaprasad believes
Shantha is able to compensate through greater access to international markets. This
focus on innovation and quality was demonstrated when a multinational competitor
ran a campaign that questioned the quality of its Hepatitis B vaccine . A doubleblind
comparative study showed that Shanvac-B was equivalent or superior to the
competitor’s product on all counts – immunogenicity was found to be higher, side
effects fewer, and seroconversion was high enough that only two doses of the vaccine
were required in contrast to the three doses required by the competition .
Joined, but Not Beaten
The success of Shanvac-B was arguably an important step for the country’s health
technology sector. It provided a proof of concept that scientists working in India were
able to conduct advanced biotech R&D. Since then, several companies have followed
in its footsteps. There are now five Indian companies that produce the Hepatitis B
vaccine , and as noted by Shantha’s Executive Director Mr. Khalil Ahmed,
“Everybody and their cousin have started a biotech company in India.” The Indian
- 8 -
biotech sector, which was almost non-existent in the early 1990s, is on track to
generate at least $7 billion in annual revenues by the end of 2010 [34, 35].
Marketing proved critical to maintaining competitiveness. Shantha has a sales force of
175 people that market drugs directly to doctors using conferences and seminars to
reduce mark-ups through distributors that were said to reach up to 200% by the time
the product reaches the public. Although Shantha conducted vaccination and
education camps to increase public awareness with regards to the importance of being
vaccinated, Shantha’s Executive Director Khalil Ahmed observed that Indian doctors
felt that this is the “dirtiest thing companies could do, by selling cheaply to endusers.”
Given the respect that doctors command in India, Shantha executives felt
having their support was critical. Marketing to physicians allowed Shantha to
distinguish itself from the counterfeits and justify its premium. This was reflected by
Pfizer’s decision to purchase and sell Shanvac-B as a branded generic by leveraging
doubts and concerns among Indians about counterfeit or low-quality drugs [6, 36].
As Shantha’s reputation has grown, several emerging markets have engaged Shantha
in R&D and clinical collaborations for recombinant vaccines. The International
Vaccine Institute (South Korea) asked Shantha for help conducting clinical trials in
Kolkata and co-developing its own new-generation oral cholera vaccine . Despite
recommendations from the WHO for use of these new vaccines in 2001, only
Vietnam was locally producing oral cholera vaccines . However, an analysis of
this vaccine showed that for it to comply with WHO guidelines, the vaccine needed to
be reformulated and its production technology modified. The one internationally
licensed cholera vaccine, Dukoral produced by Crucell/SBL Vaccines, was too
expensive at $18/shot in India. Following successful reformulation in early 2009,
Shantha was selected by IVI to manufacture this new vaccine, and the price has since
reportedly dropped to $2/shot . Similarly, Shantha has partnered with Pediatric
Dengue Vaccine Initiative (South Korea) to run a Phase I clinical trial for its dengue
The French Attraction
Shantha’s success led to international attention in 2006 when Merieux-Alliance
(France) acquired a 60% stake in Shantha after the Omani investors sought an exit
. However, Dr. Varaprasad stated that he had no intention of ending up as a
“glorified employee of a multinational company.” Shantha insisted on maintaining its
focus on providing affordable vaccines to the poor, and being able to retain its Indian
characteristics such as the company name, management, and philosophies. The
transition led to Shantha sharpening its focus on vaccines. Its monoclonal antibody
development program wound down, and Shantha moved away from performing
contract research services. Dr. Varaprasad warns fellow entrepreneurs in emerging
markets to be aware of these challenges in striking a balance between health impact
and firm value. He admitted that the transition led him to think about retiring,
although he does concede that Merieux is focused on the welfare of Indians. “They
don’t want to take risks like an entrepreneur does.”
The acquisition helped Shantha to further build its reputation internationally and open
new markets. Almost 60% of Shantha’s revenues came from exports at the time
- 9 -
because the Indian Government had not added the Hepatitis B vaccine to its national
immunization schedule. In 2009, the firm was awarded a USD$340 million UNICEF
contract for pentavalent vaccines through 2010-2012, and in parallel, India adopted
the vaccines for its immunization schedule at the recommendation of the WHO .
This access to international markets proved useful again in 2009 when rumors
emerged that GlaxoSmithKline and other multinationals were interested in bidding on
Shantha . These rumors culminated in an announcement on July 27th, 2009 that
Sanofi-Aventis had acquired a controlling stake in Shantha at a valuation of $784
Our analysis based on interviews and the existing body of published secondary
literature finds that Shantha’s commitment to local health problems helped it to
achieve its financial success. The late C.K. Prahalad identified the existence of a
significant market among the lower-income populations of the world – the so-called
“bottom of the pyramid” [44, 45]. While the market size is certainly large, the process
of actually reaching these customers is difficult for large firms, let alone a small startup
with serious short-term financial concerns. It is a delicate balancing act between
developing affordable health solutions for the poor and increasing firm valuation.
While Shantha managed to achieve this balance—having provided affordable
vaccines both domestically and internationally, while still being financially
successful—questions remain regarding the degree to which it can continue to do so
under foreign ownership, and the road to be followed by other biotechs in emerging
markets with strong economic growth and stable political environments that wish to
emulate its successful balance.
As one of the first innovative biotechs in emerging markets to be acquired for a
significant valuation ($768 million USD) by a major pharmaceutical multinational, it
remains uncertain whether Shantha will be able to maintain its low prices and
commitment to the local health markets under foreign ownership. We outline several
lessons for how these biotech innovators in poorer but rapidly developing countries
such as India (whom we term Southern innovators in light of their traditional
geographic location) might successfully achieve this balance between local health
impact and financial returns.
First, Southern innovators should identify a therapeutic area where cost efficiencies
can be achieved for reaching the base of the pyramid, and combine this with strong
leadership skills [44, 45]. The idea that the poor are a sustainable and ideal initial
market has been a common thread in previous studies describing successful Southern
innovators, especially vaccine manufacturers including Indian Immunologicals and
the Serum Institute [4, 6, 11].
Dr. Varaprasad recognized that expensive multinational recombinant vaccines had
minimal market penetration, and had not tapped into the full potential of the vaccine.
He realized that he could leverage India’s homegrown scientists, the lower cost of
labor, process innovation, and a low-margins business strategy to exploit this
opportunity. Executing this insight ultimately depended on Dr. Varaprasad’s strong
management skills, and reflects why venture capitalists often emphasize the
importance of the management team . In spite of his electrical engineering
background, Dr. Varaprasad was able to build a successful biotech. In fact, it may
- 10 -
have been because Dr. Varaprasad was outside the mainstream that he was able to
attempt something truly bold; he said: “A lot of scientists need reality checks…
science is one part of the whole thing.” Ultimately, his commitment to the local health
needs, ability to build a strong R&D organization, and vision were key ingredients to
Second, Southern innovators should persistently seek investments and partnerships
from nontraditional and international sources. Domestic early-stage financing still
remains scarce even fifteen years after Dr. Varaprasad created Shantha Biotech ,
especially given India’s current stage of economic development, where manufacturing
and service-oriented businesses have significant potential for high return on
investment with relatively lower risk compared to pure R&D-oriented businesses.
International investors from more R&D-intensive economies may be more receptive
to investing in R&D-intensive start-ups than local investors, because such
international investors have previously committed to and experienced such
investments. This difficulty in finding financing is not entirely dissimilar to that faced
by biotech innovators during the 1970s in the United States, who often had to
bootstrap themselves from non-traditional angel and NIH financing (although these
firms had the benefit of being preceded by semiconductor start-ups that established a
critical mass of astute domestic tech investors, and liquid capital markets for such
investments). Shantha was forced to grow in parallel and compete for financing with
the nascent Indian IT industry during the 1990s, which offered much quicker returns.
Varaprasad was so passionate about solving the Hepatitis B challenge that he was
willing to sell his father’s own property. This commitment was evident to the Omani
Foreign Minister and the local universities that provided free lab space. Dr.
Varaprasad says that “We had a lot of sympathy from many institutions. ‘These
people are struggling. They want to do something on their own. No technology
transfer from any country, and they want to do it on their own. Wonderful. And if
they ask any help, let's do that.’”
Shantha embraced partnerships with not only research institutes such as the NIH, but
also potential competitors in the form of a multinational pharmaceutical for regulatory
guidance. These principles of collaboration among domestic and foreign competitors
have been embraced through the founding in 2003 of the Developing Country
Vaccine Manufacturers Network (DCVMN), whose members collectively supply over
half of UNICEF’s vaccines .
Third, Southern innovators should focus on innovation and quality Shantha invested
in innovation from the outset, which yielded the crucial process innovation that
allowed its Hepatitis B vaccine to succeed. By continuing to invest a significant
proportion of its profits towards R&D , Shantha was able to develop a new product
every one or two years - a “tick-tock” strategy similar to semiconductor manufacturer
Intel’s approach (Santa Clara, CA) . This initial focus on process and quality
innovation may have delayed Shanvac-B’s launch, but it allowed Shantha to become
the first Indian firm to receive WHO prequalification, and opened the door to large
international contracts [See Table 2]. Obtaining this quality certification also allowed
Shantha to subsidize its R&D operations through contract research work for large
pharmaceutical companies. Pfizer was even willing to sell a branded generic version
of Shanvac-B (HepaShield) .
- 11 -
This focus on quality also led Shantha to recognize that for certain types of clinical
trials, India’s regulatory expertise was insufficient to conduct them at home . For
its monoclonal antibody trials for lung metastasis in melanoma, Shantha set up a San
Diego-based subsidiary (Shantha West) for a reported $9 million USD in 2000 – only
three years after the launch of Shanvac-B . In silico development was conducted
in San Diego, while wet lab work was conducted in India. Southern innovators should
be realistic about capacity for home-grown manufacturing or clinical trials, and
consider if it makes business sense. Approval processes in India can be slow, which
has in the past resulted in uncertain regulatory processes . Until recently India did
not have clinical data protection as mandated by the TRIPS agreement. However,
following the implementation of TRIPS, there was a significant inflow of clinical trial
outsourcing to India due to its cost advantage and genetically diverse population [51,
Fourth, Southern innovators should realize that integrated business models are still
viable in developing countries, and are arguably critical for reaching the base of the
pyramid. Before its acquisition, Shantha was a fully integrated biotech that would not
invest in any products for which it did not have internal capacity to execute on a
significant part of the project. In the developed world, a popular business model is to
become ‘virtual’, whereby biotechs outsource their clinical trials and even early-stage
work to contract research organizations (CROs) in both mature and emerging markets
. Such virtual biotechs rarely develop a sales force and other downstream
This model may not make sense for firms like Shantha, because the risks of low
quality and delays in outsourcing to another domestic firm are too great. By
maintaining internal development capabilities, firms are able grow from retained
earnings generated by contract research work and other revenues, as Shantha did.
Marketing and downstream capabilities are also critical for Southern innovators to
justify the premium of their drug to potential purchasers, and to distinguish their drug
While the dataset discussed in this article is limited to a single Indian vaccine firm,
there are a few other Indian biotechs that are following a similar trajectory including
Bharat Biotech, whose rotavirus vaccine is currently in Phase III trials, Panacea
Biotech, with over half a dozen single or combination vaccines against locally
relevant diseases such as cholera, encephalitis and meningitis, and Serum Institute of
India, which is the world’s largest producer of measles and DTP vaccines . Much
like how Amgen and Genentech provided a pioneering model centred on recombinant
manufacturing of known biologics for over a half-dozen biotech entrants in the United
States, Shantha’s pioneering integrated vaccine R&D model may prove applicable for
biotech firms in emerging markets over the next decade.
Further case study research on firms like Bharat Biotech, Serum Institute of India and
Panacea Biotech may prove useful to deepen the lessons generated from Shantha.
Although Bharat has yet to be acquired like Shantha, Bharat’s reported 2007/2008
revenue was only ~ $2 million USD less than Shantha’s . Another limitation of
the generality of our study may be Shantha’s large domestic market in India, which
was similarly true for China and Brazil’s domestic vaccine innovators. Vaccine
- 12 -
innovators in smaller countries will likely have to seek international markets sooner,
but this may still be a viable path to success, given that the majority of Shantha’s sales
occur abroad and that it faces intense competition in the local Indian market that has
lowered profit margins.
Shantha’s founder, Dr. Varaprasad, emphasizes the importance of Southern
My strong claim is in developing countries these initiatives are necessary.
Absolutely necessary. And if there was no such initiative, the Indian populace
would have remained not using the vaccine, and consumption would have
remained at 180,000 doses. Today it is possible. The government has not done
that – we have created awareness. We have conducted mass vaccination
camps, and we are giving it at 23 cents which made all people buy it from
private doctors. 100 million doses are being consumed. Awareness is there,
and the children are protected.
While initial focus on generics and contract research, as well as reduced patent
protection for drugs, has allowed the Indian biotech industry to build expertise and
capacity, without incentives and focus on innovation the industry risks falling into the
trap of focusing on low risk and profitable drugs rather than important health
challenges. As of early 2008, of the 424 home-grown Indian biopharma companies,
only 57 (<15%) held US patents . Among biotech firms, this study reported a total
of 19 US patents filed from 2001 to 2010. Among these only 2 (11%) were
characterized as ‘product,’ with 9 (47%) being process patents, and seven (37%) both
‘product and process’ patents and only one (5%), a design patent . With the Indian
government having adopted the WTO-TRIPS agreement that emphasizes product
patents over process patents, Indian firms will be forced to innovate as they may be
unable to afford the royalties to Western products while keeping their prices low .
It may become significantly more difficult for new Indian biotechs to emulate Shantha
with the higher barriers to innovation for market entry, and existence of a large
critical mass of competitors. In 2007, over 15 companies were found to be involved in
the marketing of 50 brands for 15 different vaccines in the Rs 3053 crores ($USD 745
million) vaccine market . The cost advantage that India has enjoyed is also
diminishing. Home-grown innovative engines like Shantha remain critical; the
Global Alliance for Vaccination Initiative (GAVI) continues to resist requests by
countries with generic industries for supporting the transfer of patented vaccine
technology [13, 57] Varaprasad therefore believes that the Indian biotechnology
industry cannot afford to continue along the road of generics, or merely serve as an
outsourcing shop for Western biotechs.
However, these fears concerning the inability of Indian biotechs to innovate and/or
maintain domestic access may have been overstated as studies by GAVI following the
implementation of TRIPS in 2006 revealed that all five major Indian vaccine
manufacturers had novel vaccine projects for local markets . Moreover,
governments maintain the option to use provisions of the Doha Declaration on TRIPS,
as well as protections within the TRIPS agreement itself to maintain access to new
priority vaccines . Technology transfer is continuing to occur through initiatives
- 13 -
such as the Meningitis Vaccine Project, which oversaw the transfer of polysaccharide
conjugate technology to local manufacturers, and the Developing Country Vaccine
Manufacturers’ Network (DCVMN) .
GAVI financing has also ensured low pricing by guaranteeing markets for suppliers –
when it first began there was only one Haemophilus-influenzae type b (Hib)-
containing vaccine available, while there are now four available with three
manufactured in emerging markets such as India . And even if prices of vaccines
increased due to the need to absorb the increasing cost of innovation, studies show
that vaccine introduction by governments often proceeds independently of moderate
price differences, and rather depends on national prioritization based on disease
burden, competing priorities, and ability to demonstrate meaningful health impact
. Moreover, over 95% of drugs that are sold in India are already off-patent, so
even if product patents were to eventually raise prices of biologics, the impact would
be minimal . These results suggest that the changing intellectual property
environment is unlikely to impede the ability for Indian vaccine manufacturers to
innovate, or limit access to vaccines by governments.
The globalization of healthcare R&D activities has made it possible for some parts of
the developing world to begin to innovatively solve their own health problems. The
case of Shantha Biotechnics shows that a billion dollar biotech can be built not only in
the developing world, but for the developing world. More critically, it may be an early
sign of the shift of global healthcare R&D away from rich countries to emerging
markets. A recent study found that not only do vaccine producers in emerging markets
account for over 60% of traditional childhood vaccine doses globally, they now also
account for over 20% of innovative products such as combination vaccines – and this
latter fraction appears to be growing . Indeed, increasing interest in emerging
markets from multinationals, orphan drug-like legislation and innovation platforms
reveal that both global health and global wealth might be pursued in parallel .
Shantha’s affordable high-quality vaccines have already reached hundreds of millions
of children globally. The open question that Shantha and Varaprasad have always
struggled with is balancing the need for affordable solutions for domestic health needs
with focusing on what will increase firm valuation. Governments in the developing
world similarly struggle in finding the right balance to reward long-term domestic
health innovation, while promoting cheaper solutions for the domestic health gap. The
hope is that firm value will align with improving drug access and local health
outcomes. Finding a happy medium will be challenging for healthcare innovators in
the developing world, but Shantha has shown that it can be done.
PAS has received consulting funds from Merck Frosst Canada and is on the scientific
advisory board of the Bioveda II fund in China.
JC, HM and PAS contributed to the concept and design of this study. HM and JH
participated in site visits and data collection. JC, HM, KM and PAS analyzed the
findings, and participated in manuscript development. All authors have read and
- 14 -
approved the final manuscript.
This work was funded by a grant from the Bill & Melinda Gates Foundation through
the Grand Challenges in Global Health Initiative.
1. Binder G, Bashe P: Science Lessons: What the Business of Biotech Taught
Me About Management. Cambridge: Harvard Business School Press; 2008.
2. Feldman M, Colaianni A, Liu K: Commercializing Cohen-Boyer 1980-1997.
Kauffman Foundation; 2005.
3. Pisano G: Science Business: The Promise, the Reality, and the Future of
Biotech. Cambridge: Harvard Business School Press; 2006.
4. Kumar NK, Quach U, Thorsteinsdottir H, Somsekhar H, Daar AS, Singer PA:
Indian biotechnology – rapidly evolving and industry led. Nature
Biotechnology 2004, 22(Suppl):DC31-6.
5. Maiti R, Rahavendra M. Clinical trials in India. Pharmacological Research
6. Frew SE, Rezaie R, Sammut SM, Ray M, Daar AS, Singer PA: India’s health
biotech sector at a crossroads. Nature Biotechnology 2007, 25(4):403-417.
7. Ramani SV: Who is interested in biotech? R&D strategies, knowledge base
and market sales of Indian biopharmaceutical firms. Research Policy
8. Sanofi Pasteur [http://en.sanofiaventis.
9. Torsoli A: Sanofi agrees to take control of India’s Shantha.
10. Yin RK: Case Study Research: Design and Methods; 2003.
11. Al-Bader S, Masum H, Simiyu K, Daar AS, Singer PA: Science-based health
innovation in sub-Saharan Africa. BMC Int Health Hum Rights. 2010 Dec
13;10 Suppl 1:S1.
12. Chakma J, Masum H, Perampaladas K, Heys J, Singer PA: India’s Billion
Dollar Biotech. Nature Biotechnology (2010), 28(8):783.
13. World Health Organization Country Office for India: Introducing Hepatitis
B Under Universal Immunization: Frequently Asked Questions.
14. Frost LJ, Reich MR: Access: How do good health technologies get to poor
people in poor countries? Cambridge: Harvard University Press; 2009.
15. UNICEF [http://www.unicef.org/infobycountry/india_statistics.html]
16. Shekhar C: Pischia Power: India’s Biotech Industry Puts Unconventional
Yeast to Work. Chemistry & Biology (2008), 15(3):201-202.
17. Revathi C: Meeting of Commission of Intellectual Property Rights,
Innovation & Public Health.
18. Financial Express: Shantha Biotech Plans To Raise $25 Million.
- 15 -
19. Acharya T, Kumar NK, Muthuswamy V, Daar AS, Singer PA: “Harnessing
genomics to improve health in India” – an executive course to support
genomics policy. Health Res Policy Syst (2004), 2(1):1.
20. Government of India [http://india.gov.in/citizen/health/hepatitis.php]
21. Bloomberg News: Sanofi Agrees to take Control of India’s Shantha.
22. World Intellectual Property Organization: A Process for the Production of
Human Interferon Alpha from Genetically Engineered Yeast.
23. Natesh S, Bhan MK: Biotechnology sector in India: strengths, limitations,
remedies and outlook. Current Science (2009), 2(25):157-169.
24. Business Standard: Shantha Bio launches its 4th r-DNA product.
25. World Health Organization
26. Shantha Biotech: Research & Development: Pipeline
27. Shantha Biotech: Corporate Presentation.
28. Shantha Biotech: Research & Development.
29. PATH [http://www.path.org/projects/rotavirus_vaccine_projects.php]
30. Centre for Cellular & Molecular Biology
31. Pantulu CC: Shantha Biotechnics accuses SmithKline of indulging in
unfair practices. Financial Express (20 May 1998)
32. Abraham P, Mistry FP, Bapat MR, Sharma G, Reddy GR, Prasad KSN,
Ramanna V: Evaluation of a New Recombinant DNA Hepatitis B Vaccine
(Shanvac-B). Vaccine (1999), 17:1125-1129.
33. Motwani N: Biosimilars Jumpstart Biotech in India. Genetic Engineering &
Biotechnology News 2007, 27(8).
34. Department of Biotechnology, Ministry of Science and Technology,
Government of India: National Biotechnology Development Strategy: Key
Elements. Delhi; 2007.
35. Rao SR: Indian biotechnology developments in public and private sectors
– status and opportunities. Asian Biotechnology and Development Review
36. The Economist. Big drug firms embrace generics: friends for life. (6
37. International Vaccine Institute
38. International Vaccine Institute. World’s first low-cost cholera vaccine
licensed in India. (20 April 2009)
- 16 -
39. Pharmafocus. Sanofi buys Indian vaccine firm. (27 July 2009)
40. Margolis HS: Pediatric Dengue Vaccine in the Americas. New Orleans;
41. Shantha Biotech [http://www.shanthabiotech.com/news_9.htm]
42. Sanofi-Aventis [http://www.shanthabiotech.com/Shantha_UN%20Order-
43. Martino M: Rumor: GSK close to deal for Shantha Biotech. (29 May 2009)
44. Prahalad CK: The fortune at the bottom of the pyramid: eradicating
poverty through profits. Philadelphia: Wharton School Publishing; 2004.
45. Hammond AL, Kramer WJ, Katz RS, Tran JT, Walker C: The Next 4 Billion:
Market Size and Business Strategy at the Base of the Pyramid.
Washington DC: World Bank Group; 2007.
46. Patel P, D’Souza R: Uncovering Knowledge Structures of Venture Capital
Investment Decision Making. Washington: The Office of Advocacy of the
U.S. Small Business Administration; 2008.
47. Jadhav SS, Gautam M, Gairola S: Emerging markets & emerging needs:
developing countries vaccine manufacturers’ perspective & its current
status. Biologicals (2009): 165-168.
48. Intel [http://www.intel.com/technology/tick-tock/index.htm]
49. Chaturvedi K, Chataway J: Strategic integration of knowledge in Indian
pharmaceutical firms: creating competencies for innovation. International
Journal of Business Innovation and Research (2006), 1(1-2):27-50.
50. Crabtree P: An East-West Team. San Diego Union-Tribune (25 February
51. Maiti R, Raghavendra M: Clinical trials in India. Pharmacological Research
52. Chakma J, Calcagno JL, Behbahani A, Mojtahedian S: Is it Virtuous to be
Virtual? The VC Viewpoint. Nature Biotechnology (2009), 27(10):886-888.
53. Milstein JB, Kaddar M: The role of emerging manufacturers in access to
innovative vaccines of public health importance. Vaccine (2010): 2115-
54. Frew SE, Kettler HE, Singer PA: The Indian and Chinese Health
Biotechnology Industries: Potential Champions of Global Health? Health
Affairs (2008), 27(4): 1029-1041.
55. Milstien JB, Kaddar M, Kieny MP: The Impact of Globalization on Vaccine
Development and Availability. Health Affairs (2006), 25(4):1061-1069.
56. Nauriyal DK: TRIPS-Compliant New Patents Act and Indian
Pharmaceutical Sector Directions in Strategy and R&D. Indian Journal of
Economics & Business (2007), Special Issue China & India:1-18.
57. Milstien JB, Gaule P, Kaddar M: Access to vaccine technologies: Brazil and
India. Vaccine (2007), 25(44):7610-7619.
- 17 -
58. Kettler HE, Modi R: Building local research and development capacity for
the prevention and cure of neglected disease and cure of neglected
diseases: the case of India. Bull. World Health Organ. (2001), 79(8):742-747.
59. Milstien J, Kaddar M: Managing the effect of TRIPS on availability of
priority vaccines. Bulletin of the World Health Organization (2006), 84:360-
60. Milstein J: Challenges and potential solutions to innovative vaccine
development for developing countries. Proceedia in Vaccinology (2009), 1:
61. Rezaie R, Singer PA: Global health or global wealth? Nature Biotechnology
- 18 -
Table 1 - Shantha Timeline
1992 Dr. Varaprasad attends immunization conference in Geneva; Hep-B
1993 Shantha Biotechnics is born, staff works out of Osmania University
1994 Shantha Biotechnics moves to Centre for Cellular and Molecular
1995 Oman invests $1.2 million in equity; Shantha moves into own facility
1997 Shantha’s Hepatitis B vaccine, Shanvac-B, launched (first
recombinant health product in India)
1998 Shantha sells 22 million doses of Shanvac-B this year, far
1999 Comparative study proving the high quality of Shanvac-B published
2000 Morgan Stanley and State Bank of Indian Mutual Fund invest $10
million in equity
2002 Shantha introduces first bio-therapeutic product, Interferon α 2b,
onto the market
Shantha receives WHO pre-qualification for Shanvac-B
2005 Shantha introduces first combination vaccine onto market –
Shantetra (diphtheria, pertussis, tetanus, hepatitis B)
2007 Merieux Alliance picks up 60% stake in Shantha, which it later
expands to 80%
2009 Shantha wins a $340 M USD contract from UNICEF for pentavalent
Sanofi-Aventis acquires an 80% controlling stake valuing the firm at
$784 M USD
Table 2 - Shantha’s Product Pipeline (2009)
Product Description Development Stage Development Partners
- 19 -
Hepatitis B (Shanvac-B) On market since 1997,
post-marketing survey in
On market Green Cross Vaccine
Hib (ShanHib) On market Berna Biotech
Rotavirus Preclinical NIH, Bill and Melinda
Gates Foundation, PATH
Varicella Preclinical NIH
Dengue Preclinical Inviragen, CDC
HPV Preclinical NIH, NCI, John’s Hopkins
Pneumococcal R&D PATH
On market Intervax Biologics
On market Intervax Biologics
Cholera (oral) Clinical trials International Vaccine
Typhoid Clinical trials International Vaccine
MMR R&D -
DPT On market -
Shantetra: DPT, Hep B On market -
ShanHib-DPT: Hib, DPT On market -
Shan5: DPT, Hep B, Hib On market -
DPT, Hep B, influenza Was expected on market
Lung cancer Preclinical -
Melanoma Preclinical -
Cocktail R&D -
Interferon α 2b
On market -
On market (launched
On market - discontinued -
Insulin On market Biocon
GCSF Clinical trials -
Hepatitis B On market -
Cancer (α-feto protein) On market -