Vaccines–investment viewpoint

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Dear Readers,

The goal of this post is to highlight various facts on the fast growing and indisputable emerging zone `Vaccines’ with an investment point of view. I am conscious, as ethically it is not okay to observe such outbreaks of pandemic infections as an investment opportunity. But if we spared from this current wave, surely have to use it as an opportunity to invest in vaccines :-).

Typically Vaccine segment is an ancillary of evergreen Pharma sector, rapidly picking up the pace its own, in vicinity of appearance of newer and mysterious pandemic ailments day by day. The principal factor driving the vaccine market is its potential to avert deaths from a vast range of diseases. Vaccines have eliminated numerous life-threatening diseases and many more vaccines are under R&D, which may serve as future life saviors.

Vaccines have emerged as one of the most beneficial segment in the global pharmaceutical industry, with a projected CAGR of over 16.52% during 2009-2012. The recent flare-up of H1N1 flu in our country, people are highly sentient to the significance of vaccines, which can effectively thwart the disease as well as from spreading. The discussion on vaccine to curb the H1N1 infection has become a hot subject around the world and it is almost materialized. It is truly weird that the names of such diseases were not even heard a decade back and it is still confusing whether the names are new or the diseases. It is quiet lucid to expecting much more such epidemics in coming days.

As the number of diseases is growing worldwide, global vaccine industry is also toning tempo with the same. India is emerging as a key spot of vaccines and is listed to play a leading role in the vaccine market of the globe. An unofficial reckon of the WHO reveals that manufacturing facilities across the globe may be able to produce only 900 million doses of A(H1N1) vaccine every year and since every human being needs at least 2 doses of the swine flu vaccine. Means a vast majority of about 7 billion world population will remains unprotected. Countries in Asia, Africa and Latin America are expected to be the worst affected according to WHO Director Margaret Chang. The same case with most of such infections, it is not enough to formulate the right vaccine for any syndrome, but the requisite production facilities and apt logistics is also a big issue which is a deadly concern to billions of common people.

India is gradually becoming the favorite hub for vaccine development and manufacturing industry. The environment is very much handy for vaccine industry in India. Let me list some key supporting factors which driving the growth of vaccine market in India or why should we invest in these companies, manufacturing life saving vaccines, with a long term perception. I hope following factors may influence your investment decisions among this thriving sector.

Stable demand assures the growth of industry -As of now, the pediatric vaccine segment is, and will continue to be the most vital part of the total vaccine market. The medically standardized vaccination structure for children in frequent intervals up to 5 years of age is a compulsory practice. It’s the sure business of vaccine industry and the consumption is soaring day by day.

Increasing birth rate as well as growing awareness on pediatric vaccination- The birth rate is estimated to decrease gradually in the long run by increasing awareness of family planning etc. But in view of country's current larger population comprising young/productive ladies, the number of new born babies in next 5 years will continue at a stable and relative high level. Means, its hardly possible any decrease in Vaccine consumption in the near future at this stratum.

Govt aided mass vaccination programs for fresh and deadly ailments. This will unquestionably boost the sale of vaccines. Some mutual beneficiary schemes are under planning stage by the Govt with leading Vaccine manufactures.

Govt aided mass child vaccination projects. Frequent and bulky vaccination programs for children by the Govt of India are a stable market for Vaccine industry (Oral Polio etc.). For example, one of the leading Indian vaccine manufacturers earning more than Rs. 500 Cr per year from such domestic business. The increasing awareness on child vaccination in lower/middle class population will make this business brighter.

Increasing awareness on vaccinations - The public awareness on the significance of vaccination is also rapidly mounting. The recent Bird Flue/H1N1 breakout considerably increased the awareness of prevention through vaccination among the public. The media is also playing a vital role on the issue. The deadliest nature of these diseases thrust people to a “Do or Die” counter to vaccination.

Low costs in R&D/Manufacturing/Clinical trials. Compared to US and other European countries, we are doing the whole R&D, manufacturing and clinical trial processes on much lesser cost. The relatively low cost manpower, infrastructure and raw materials are our great potential in this sector.

Presence of a large pool of scientific talent/skilled manpower/professionals- Again, it is our one another wonderful strength. We have highly talented manpower in every concerned field especially in Bio-Technology/Bio-Informatics. The full-fledged IT support stream is also help the industry to grow faster.

Full-fledged Production / R&D facilities to develop high quality vaccines -. Established and proved high-tech infrastructure for sophisticated R&D and manufacturing processes are one of the key growth factor of our Vaccine industry which is continuously upgrading with the technology advancements.

Higher investment in R&D/CRAMS projects - Our vaccine industry players, most of them MNC backed or have strategic alliance with MNCs, are continuously spending much on Research and Development. India is a soil where the business CRAMS (Contract Research and Manufacturing Services) is growing infinite. Various Flu vaccines have huge demand at present and all major vaccine manufacturers are investing in the segment. Vaccines have been found to be more profitable than the generic pharmaceutical drugs. The intention behind such heavy investment is none other than the great future potential of this segment.

Increasing local demand due to frequent outbreaks of fresh infections - As I mentioned earlier, the seasonal or frequent outbreak of every fresh infections rapidly increase the demand of certain vaccines. As Vaccines are a life saving substance, people least bothered on the price. The intensified communication facilities boosting the vaccine market every time in havoc. The roles of media in spreading such mayhem on certain fresh ailments frequently shoot up the sales.

Bulk and assured orders from international organizations like UN/UNICEF, PAHO(Pan American Health Organization.) Indian Vaccine manufacturers supplies nearly 40% of the UNICEF’s global Hep-B vaccine, distributed in Africa, Latin America and elsewhere. Indian companies supplying 100% oral polio vaccine to UNICEF for the same purpose. Such organizations assure guaranteed business to our Vaccine industry which increasing year by year.

The fast spreading nature of fresh ailments - The manner and speed of spreading the new era infections are improbable and difficult to control. The means they spread through, is vary from disease to disease, Mosquitoes, Air or Water etc, which does not have effective prevention methods. It is also common that regional diseases are turning global due to increased traveling.

Innovative marketing strategies of Vaccine manufacturers - Unlike earlier, we have noticed some pharmaceutical companies started to promote their vaccines on television/visual Medias and even outdoors in the form of public service advertisements. This kind of marketing strategy helps to popularize the consciousness of disease prevention, hence increases vaccine consumption. It is probable in very near future that media ads for promotion of life saving vaccines, like what we experiences now with consumer durables.

Strategic alliances between Vaccine manufacturers - Strategic alliance with local players as well as MNCs makes better business opportunities. It helps the companies to globalize their business as well as sharing technologies/formulations.

Govt support to the industry. Central Govt. is planning to materialize some positive and favourable steps towards the Vaccine industry in the wake of recent outbreaks. The PMO (Prime Minister’s Office) and health ministry is already placed hint on such moves. Some state Govts are also planning in the same row and preparing to meet emergency requirements of vaccines. Meanwhile, the largest single purchasers of vaccines are governments. The Govt is also considering to setting up a vaccine manufacturers council, an apex body to promote vaccine manufacture and exports. This will help the vaccine sector to progress into high technology platforms of vaccine production and aggressively tap potential export markets. The government’s Expanded Programme for Immunisation (EPI) has also aiding the industry.

Few Players - The Rs 1500 crore domestic vaccine segment have just some 22 players. The presence of just a few players in vaccines as compared with other pharmaceuticals is primarily due to the sophisticated nature of vaccine R &D and manufacturing processes. Means, our alternatives are limited.

The emotional part - Above all, the uncertain atmosphere, which create havoc that you might have endure any disease, known or unknown, at any time, most of them are lethal, why would you take a chance. If there is a vaccine, the common man will look no where else. He must to avail not only for him but for the entire family. The possible materialization of much expected vaccines for deadly infections including HIV will boost the vaccine industry in limitless heights.

The turn down in the share of vaccine production by developed countries had led to the rapid expansion of the Indian vaccine business over the past decade. Many developed countries are no longer attracted in producing vaccines for various infectious/communicable diseases as their production has become uneconomical due to drastic reduction in the prices and lesser access to markets in developing countries. This has presented a big opportunity for our vaccine industry. As I mentioned earlier, the domestic vaccine sector comprises 22 companies, both local and multinational, selling about 25 vaccines in the Indian market for various diseases. Vaccine industry constitutes 40% of the total biotechnology industry in India.

Notable Quotes

“Global vaccine makers are able to manufacture only one-fifth of the current demand today. Twenty five million children are born in India every year. Europe has 5 million babies, China has 25 million and South Africa has 4 million every year. There is no dearth of a market for vaccines” (Homayoun Madjrouh, MD, Sanofi Pasteur)

“India is innovating its way out of poverty. With a massive and increasingly well-educated workforce, India is poised to revolutionize biotechnology just as it did the information technology industry. India’s biotech sector is like a baby elephant – when it matures, it will occupy a lot of space. The biotech industry is globalizing rapidly and the impact of India’s market entry and contribution to improving world health is potentially huge” (Peter A. Singer, MD, of the McLaughlin-Rotman Centre for Global Health (University of Toronto).

“Life or death for a young child too often depends on whether he is born in a country where the vaccines are available or not” (Nelson Mandela)

I strongly believe that investment in certain Vaccine manufacturing companies with a long term vision will bring good fortune for investors. The presence of such few best stocks is a mandatory with any portfolio in view of the above mentioned facts. Accumulate now for bright days ahead...

Readers are requested to comment whether negative or positive will encourage me to share more in this row.

My email- sthachat@gmail.com