Shantha Biotechnics, the first biotechnology unit in Andhra Pradesh, has completed 10 years. Started in the year 1992 as an Indo-Omani joint venture, the company produced the first recombinant DNA Hepatitis-B vaccine, branded as Shanvac-B, in 1997, and launched Shanferon, an anti-cancer drug in April 2002. The company is all set to make history by launching the first indigenously made recombinant human insulin. The company will be launching three or four vaccines/drugs during the year.

The ISO-9001 company has received 65 national and international awards and the prestigious WHO pre-qualification for sale of its products to the world body recently.

K Varaprasad Reddy, an Electronics Engineer by training, who has become a pioneer in biotechnology, vows to fight the foreign multinationals by indigenously developing and supplying drugs and vaccines at affordable cost to the common man.

The maverick Managing Director of Shantha Biotechnics talks to P N V Nair of Pharmabiz.com on the achievements of the company, its future plans, the problems and prospects of the biotech industry, his competitors and the government's unhelpful attitude towards local entrepreneurs. Biotech Policy does not cover comprehensively the existing industry units and the biotech park has to have infrastructure and important equipment. Excerpts:

When are you launching the much-talked about recombinant human insulin which is being developed by a joint venture of Shantha Biotechnics and the Bangalore-based Biocon India Ltd?

Hopefully by October 2003. We started work on the human insulin project more than three years ago and had developed the cell line for insulin production. We also developed a bench-scale technology for fermentation and downstream processing. Since we have only a small capacity of 1,000 litres for fermentation, we entered into a joint venture with Biocon, which has a largescale fermentation capacity of 35,000 litres. Biocon is scaling up production of the insulin to industrial level and we expect to launch it by October 2003. The product is in the final stages of clinical trial and is waiting for regulatory clearance. The JV has to spent an additional Rs 50 crore for the project.

What is the difference between human insulin and the animal derived insulin in terms of quality and price?

The animal insulin – bovine and porcine – is developed from the pancreas of animals, whereas human insulin is developed from human genes using recombinant technology. It is more natural, much purer and safe and is identical to the insulin produced by the human body. Naturally it is costly, but our mission is to make it affordable at the cost of the bovine insulin.

By using a combination of lower pricing and extensive market propagation, we hope to shift a greater part of the Indian insulin market to recombinant human insulin. In India, diabetes is one of the largest disease segments. It is estimated that there are 40 million diabetics in India of which only 20 million are diagnosed.

The Danish Novo Nordisk, world's largest manufacturer of anti-diabetes drugs, and pharma major Eli Lilly, the two major suppliers of human insulin in India, have started a price war and announced substantial reduction in the prices of human insulin. Is it because of Shantha's human insulin which will hit the market soon or because the patent rights of their human insulin expire this month?

The prices of imported human insulin had come down from Rs 498 for a vial of 10ml to around Rs 300. Recently, Novo Nordisk cut the prices of four of its insulin products by Rs 50 or 25 % per vial, whereas, Eli Lilly reduced the prices by 33 % to Rs 145 per vial. Prices started falling from the time we launched our insulin project. We are happy that the people have benefited because of our effort to develop insulin indigenously. Shantha is making its presence felt strongly, and the foreign companies have realized that they cannot take us for a ride any longer. The price war will intensify when we launch our product, which will be priced much lower than the rates of both Nordisk and Lilly.

The recombinant technology helps develop combination vaccines and drugs. Are you developing any such combination vaccines/drugs?

Shantha is developing a four-in-one combination vaccine, DPT & Hepatitis-B, which is going through human trial and will be ready for launch by May / June 2003. The advantage is that four vaccines – diphtheria, polio, tetanus and hepatitis-B – can be administered with one shot. We are also launching a combination vaccine against typhoid, tuberculosis and new generation hepatitis-B vaccine later this year.

What are the other products in Shantha's pipeline and when will they be launched?

We are launching Streptokinase (a clot buster) in April. This will be followed by typhoid vaccine in May. Then there is GCSF (Granulos Cyte Stimulating Factor) to improve the immunity level in cancer patients. This will be launched in October/November 2003. We are also working on malaria and TB vaccines in collaboration with the Indian Institute of Science, Bangalore. The work is in the initial stages and will take four to five years to develop and market these vaccines. Another project is a drug against fungal infection -- Ampheterin. There is already a drug, which is highly toxic. We are removing the toxicity with our process.

You are already marketing the DNA recombinant hepatitis-B vaccine (Shanvac-B) and Shanferon, a human interferon alpha to combat leukemia and other cancers. How these two products are doing in the market?

Both are doing well. But it could have been better. Unfortunately doctors are not promoting our products which are low priced. We sell Shanferon at Rs 450 per dose against Rs 2,500 for the imported interferon. Since our prices are low, we cannot offer a matching commission as given by the foreign companies. However, because of the WHO pre-qualification, UNICEF is buying Hepatitis-B vaccine for export to East European countries. We are also exporting to Iran, Turkey and Russia. Shanferon has a low take-off. We have registered the product for export to some countries. The registration process will take at least 18 months. In another six months, we will start exports.

Recently there were reports that you were planning an Initial Public Offer (IPO) to raise funds to set up a second R&D/manufacturing unit. When are you coming out with the IPO and how much amount do you want to raise?

The original plan has been shelved and we decided to have the IPO only next year after the launch of three or four vaccines/drugs. By then our company will have a higher valuation, for which we need to have good turnover.

What was your turnover in 2001-02 and what is the projected turnover for this year?

Last year we had a turnover of Rs 26 crore and we expect a turnover of Rs 36 crore in 2002-03.

There is some controversy regarding the state government's proposal to buy Hepatitis-B vaccine from Shantha for its vaccination programme funded by the Bill and Melinda Gates Foundation. What is the present status after the court ruling?

It is now in stalemate. The government is sitting tight on the file. The whole thing is stupid and silly. We went through the WHO pre-qualification successfully, bur Bharat Biotech failed miserably. When they failed to get WHO pre-qualification, they had no right to stop us from supplying the vaccine to the government at the negotiated price.

The government had announced several programmes and incentives to promote biotechnology in the state. Hyderabad is also holding a number of international seminars and symposia on biotech. Do you think these measure will bring in foreign investments and encourage domestic investors to set up units here?

The government has allocated 200 acres for the Biotech Park, but making it work is an altogether different game. For international investors, the Park needs infrastructure of international standards and hassle-free clearances. The international conferences get attractive captions in the newspapers and the delegates enjoy the Hyderabadi hospitality. At the end what comes out of such meetings?

The incentive packages seem to be applicable only to new investors. What about the existing units? Industrialists are unable to meet the Chief Minister though he says he is industry friendly. He never replies to our mails or correspondence. I have been seeking an appointment with him for the last four months. We have not been able to meet even the health secretary or the health commissioner .

The system must be transparent and faster. Biotechnology, which is considered to be green and pollution-free around the world, is treated as a red and hazardous industry by the state government's Pollution Control Board in order to collect three times the fee. PCB says that since we are developing organisms, it could result in pathogens being released into the atmosphere. Tell me who will invest under such circumstances.

What are your future plans, say by 2005?

First we want to complete the projects already on hand and release as many products as possible by the year 2005 when foreign companies will enter in a big way. We will survive the foreign onslaught and we are gearing up for the competition.