Sanofi pulls out of race for Shantha; GSK in fray

NEW DELHI: British drug major GlaxoSmithKline Pharmaceuticals is in advanced talks to buy at least a 51% stake from French company Merieux Alliance
in Shantha Biotech after the other contender, Sanofi Aventis, dropped out of the race, two persons privy to the development said.

“Only a few matters relating to the valuation need to be finalised,” a senior industry executive said, asking that neither his name nor that of his company be revealed. Sanofi Aventis is understood to have come to the conclusion that the privately-held company’s product portfolio was not attractive enough for it to proceed with negotiations, one of them said. France’s Merieux Alliance bought a 60% stake in Shantha Biotech in 2006 and subsequently increased it to about 80%. GSK is interested in buying at a majority stake in Shantha Biotech and shore up its vaccine business, especially the five-in-one pentavalent variety where it has lost out to rivals such as Panacea Biotec, Novartis and Shantha Biotech, a senior industry executive said.

The pentavalent vaccine protects infants from diphtheria, whooping cough, tetanus, hepatitis-B and the Haemophilus influenzae type b bacterium which causes diseases such as pneumonia and meningitis. While the size of a potential deal is not known, the French owners are seen estimating the value of Shantha Biotech at Rs 1,000-1,200 crore. In March, ET had reported that GSK and Sanofi Aventis were in the fray to buy the company. A Merieux spokeswoman said, “Merieux Alliance has been contacted many times by different international vaccine companies. There is nothing new on this topic and Merieux Alliance has no comments to add.” A GSK India spokesman said the company did not “comment on market speculation”. The original promoter KI Varaprasad Reddy, who is also the firm’s MD, owns about a 17% stake. Mr Reddy said he was not aware of any likely deal, terming the development a “rumour”. Shantha Biotech, whose sales are estimated to be around Rs 200 crore, shot into fame in 1997 after it became the first Indian firm to develop and market a recombinant Hepatitis B vaccine. It employs over 700 people and markets a range of vaccines in India and global markets. It also provides contract research and manufacturing services and has a wholly-owned subsidiary in the US. The proposed deal demonstrates the changing business dynamics in the global drug industry which is increasingly expanding into the generics business to maintain revenues. Indian drug companies are experts in making low-cost versions of blockbuster drugs. Shantha Biotech also provides low-cost manufacturing and research hub.