Levac : Immunization for Leprosy

Indian Institute of Technology Gandhinagar

Saurya Prakash SinhaBabulal ChoudharyVarun Gupta

Leprosy Situation in India

• India reports almost 60% of all the leprosy cases worldwide annually.

• India reported 126,800 cases of leprosy out of which 61,000 were new cases.

• States like Maharashtra, Bihar, Uttar Pradesh, Chhattisgarh and Rajasthan have the maximum cases of Leprosy

• The government has allocated 250 Cr. rupees as a part of NLEP for eradicating leprosy

Ref: http://www.who.int/wer/2011/wer8636.pdf

Opportunity Tapped

• Un availability of Leprosy Vaccine

• Untapped market in India and abroad.

• Favorable government policies and funding opportunities.

• Leprosy elimination is one of the top agendas for the government.

Our focus

• We plan to enter the market in the commercialization phase of technology

• Concentrate on its local low cost manufacturing and distribution

• Plan to start off by setting up a manufacturing unit, but in the long run we aim at developing our R&D expertise in the sector and also scaling up our production capacity.

• If successful in India, we next plan to extend our services in other heavily affected countries like Brazil and Indonesia.

Industry Trends & Growth PotentialVaccine Market:

• Indian Vaccine market :US$ 900 million & Global vaccine market is around US$ 10 billion and expected to grow up to US$ 23 billion by 20128

• Vaccine industry will continue to grow at a CAGR in the range of 10-13% over the next 10 years to reach a size of between US$1.4 billion and US$1.8 billion by 2020

• India produces about 40-70% of the WHO demand for DPT and BCG, and almost 90% of the demand for measles

• Several new companies have come up in 1990s and several new companies have entered vaccine business. Prominent among them are Serum institute of India, Bharat Biotech International Ltd., Shantah Biotech Ltd. and Panacea Biotech, Delhi.

wcos.com/Report/IM153.htm

Government Policies

• The Biotechnology Industry Partnership Program offers funds to the industry to carry out high-risk research.

• The Small Business Innovation Research Initiative in which the government provides early-stage funding.

• National Biotechnology Regulatory Authority is being set up which would create a single regulatory body managing all aspects of biotechnology and drug regulation.

• Another initiative, the New Millennium Indian Technology Leadership Initiative program assists public-private partnerships in the industry.

Government Regulations

NTAGI: National technical Advisory group on immunizationMoH: Ministry of HealthUIP: Universal Immunization Program

Competitive Analysis

• Cadila Pharmaceuticals

• Panacea Biotec

• Shantha Biotechnics

• Transgene Biotek

• Bharat Biotech International

SWOT Analysis

Strength Weakness Prevent disease Vaccines are widely available

and programs have reduced cost as a barrier to vaccination

Vaccines Will Not Face Significant Generic Competition

Vaccine Research and Development is Lengthy and Expensive

Less awareness Vaccine Manufacturing : High

cost High maintenance products Regulatory approvals Funding to new enterprises

SWOT Analysis

Opportunity Threats Vaccines for Diseases

Currently Without a Vaccine Improved Vaccines for

Partially Vaccine-Preventable Diseases

Global recognition of the benefits of immunization

Combination vaccines – way ahead

Only strong players so intense competition

Domestic Indian companies depend on government procurement to push volumes

Gestation period is long Vaccine Distribution

Networks

Marketing Plan

• Marketing effort of the government agencies

• Promote and advertise its products by creating awareness

• Organizing free annual health check up in the affected regions

• Company would be looking for opportunities to showcases its products in tradeshows

Barriers to entry

• Financial Barriers

Hurdles: Companies require market incentives and funding to overcome opportunity costs

Potential Solutions: Appropriate financial incentives for research, commercialization, and purchase commitments

• Information Barriers

Hurdles : Companies lack access to and experience with neglected disease science

Potential Solutions: Establish links between neglected disease-focused academic groups and companies, Match the right companies to the right science

• Regulatory Barriers:

Hurdles: Companies require clarity and transparency around regulatory requirements for neglected tropical diseases

Potential Solutions: Promote policy initiatives that encourage regulatory bodies to align strategies around neglected tropical diseases

• Intellectual Property Barriers

Hurdles: Ability to obtain or enforce intellectual property rights in country of innovation and distribution

Potential Solutions: Provide strong and clear patent rights and protect against early entry of generic competition

Risk

• Low purchasing power creates a high price sensitivity which drives down profit margins for vaccine manufacturers

• Lack of comprehensive healthcare infrastructure limits accessibility and reach of immunization programs.

• Lack of awareness of immunization creates low demand for vaccines especially for non-mandatory/optional vaccinations

Key Challenges

• Navigating unpredictable political, regulatory, and economic landscapes

• Handling business disruptions due to natural disasters or political/social upheaval

• Balancing tax advantages with a suitable operating climate

• Establishing flexible manufacturing capacity

• Satisfying lead times required to establish manufacturing capacity

• Managing the supply chain and its costs

• Managing required regulatory approvals

Entry strategy

• Entry in the commercialization phase of technology

• collaborating with external firms and organisations like NII for technology acquisition

• manufacturing unit is located in Ahmadabad, Gujarat

• state governments and NGO’s who would be responsible for vaccine distribution through primary health centres

Uniqueness• One of the neglected infectious diseases that haven’t been

explored for reasons

• Developed vaccine at Levac is has passed the clinical test and has been effective in strengthening the effects if MDT and prevention.

• Low pricing structure associated with the vaccine makes it very affordable

Pricing• The government has allocated Rs 250 Cr. as a part of National

Leprosy Eradication Program (NLIP)

• Assuming that the government would give around 30% is given for vaccine sales and distribution

• Thus the government can at max pay Rs 750 for each vaccine so that the end user gets it for free.

• We’ll have tried to manage our total product cost around Rs 154 with a profit margin of Rs 20 each.

• Would be selling the product to the government at Rs 182, thus having the government also the flexibility to spend one fourth less for each vaccine.

Strategic Alliance

• National Immunology Institute

• Public Health department

• Logistics Service Providers

Sales and Logistics

• Initial collaborations would be with the government agencies and NGO’s

• Banking on already existing public health care network for the vaccine penetration to the remotest part

• Logistics provided by companies like FedEx and E-kart for distribution of the vaccine across the nation

Exit Strategy

• The leprosy rate is gradually decreasing and after the onset of Vaccine the number if new cases would decline

• It will result in a very small market available for the product.

• We expect that in a span of 20 years the number of people suffering from Leprosy would be very less and we would look out for mergers after 10 years of successful operation.

Broad Financial Projections

• Price per vaccine = Rs 182

• Profit after taxes per vaccine(@10%profit margin)= Rs 20

• Net Profit Margin: 10%

• Estimated ROI after first year: 6.51%

• Actual payback period = 5 years.

Funding Requirements

Type of investment Value in Rupees(Cr)

Fixed Capital 5.27

Working Capital 0.8

Maintenance& Repairs 0.05

Total investment 6.12

Income Statement

2013 2014 2015 2016 2017Net Sales 3.64 4.19 5.58 7.45 9.94Cost of Goods Sold 0.85 0.98 1.30 1.74 2.32Gross Profit 2.79 3.21 4.28 5.71 7.62 Other expenses 1.53 1.59 1.92 2.32 2.79Net interest 0.30 0.28 0.28 0.23 0.13Depreciation 0.39 0.39 0.46 0.46 0.46Earnings before tax 0.57 0.95 1.63 2.71 4.24Tax 0.17 0.29 0.49 0.81 1.27 Earnings after Tax 0.40 0.67 1.14 1.90 2.97

Balance Sheet

Balance Sheets Assets 2013 2014 2015 2016 2017Current Assets: Cash 1.14 1.20 1.79 2.15 3.08Fixed Assets 4.88 5.49 5.03 4.57 4.11Total Assets 6.02 6.69 6.82 6.72 7.19

Liabilities and Owner's EquityIIT Loan 5.50 5.50 4.50 2.50 0.00Owners Equity 0.12 0.12 0.12 0.12 0.12retained earnings 0.40 1.07 2.20 4.10 7.07Total liabilities 6.02 6.69 6.82 6.72 7.19

Cash Flow Statement

Cash Flow Statement2013 2014 2015 2016 2017

Net profit 0.40 0.67 1.14 1.57 2.10Depreciation 0.39 0.39 0.46 0.46 0.46Loan Received 6.00 0.00 0.00 0.00 0.00Owners Equity 0.12 0.12 0.12 0.12 0.12Net cash Inflow 6.91 1.18 1.72 2.15 2.68Loan Paid 0.50 0.00 1.00 2.00 2.50Investments made 5.27 1.00 0.00 0.00 0.00Net Cash Outflow 5.77 1.00 1.00 2.00 2.50net cash flow 1.14 0.06 0.60 0.03 0.06