The office of Varaparasad Reddy, managing director and chief promoter of Hyderabad-based Shantha Biotechnics, has all the accoutrements of a family man. Lined on his desk are photographs of his mother, after whom he has named the company, his wife, two daughters and two grandchildren.

An electronics engineer from Osmania University, Varaprasad Reddy plunged into the brave, though difficult, new world of biotechnology in 1993 after exiting the family-owned electrical goods businesses, because he was convinced India needed its own manufacturers of affordable life-saving drugs than being dependent on the benevolence of expensive foreign producers.

A family man who loves music and hasam (humorous Telegu poetry), Reddy is an avowed socialist and says, " I am a Naxalite at heart." Reddy says he promised his mother that he would always keep in mind the needs of the poor when fixing the profit margins on his products.

Soon after the successful launch of Shantetra, an indigenous 4-in-1 combination vaccine that prevents diseases like diptheria, pertusis, tuberculosis and hepatitis-B Varaprasad Reddy talked to domain-b about the genesis of Shantha Biotechnics and its future plans.
By Mohini Bhatnagar

What made you set up a biosciences company since you did not have anything to do with the medical field?
The idea of setting up a life sciences company started in1992 after I attended a seminar abroad where I felt I was being looked down upon for being an Indian. There was a feeling among western governments that India and its other neighboring countries did not have the commitment to provide vaccination to their children and came with a begging bowl to them for subsidised vaccines. We were looked down upon as a nation for not being able to take any initiatives either for developing the vaccine or for importing it. I found this very insulting.

At the time the World Health Organisation had mandated that hepatitis-B should be incorporated into the immunisation schedule. The reason India could not incorporate hepatitis-B into the immunisation schedule was because of a serious foreign exchange crunch and hepatitis-B was a very costly vaccine.

It was priced at Rs780 per dose and three doses were required to be administered. For this reason the masses could not obtain the vaccine. When I approached a western company for technology, the company spokesperson told me that India did not have the resources to pay the high technology fee for buying the vaccine nor the ability to absorb the technology.

I wanted to prove it to them that Indians were capable of producing high quality vaccines and offering them at affordable prices to the masses.

How were you able to finance the research of hepatitis-B?
To begin with, I initiated the project as an R&D exercise at Osmania University, under the industry-university interaction programme in 1993. After that we conducted the research at the Centre for Cellular and Molecular Biology (CCMB).

Since biotechnology was a relatively unknown segment and there were no venture capitalists around as today, funding proved to be a difficult task.

We finally received funding from the Sultanate of Oman to the extent of 50 per cent of the equity. We also received a long term loan from Oman International Bank at a very subsidised rate of interest. After this we received a loan from ICICI for technology development.

We launched India''s first recombinant hepatitis-B vaccine, Shanvac-B, in 1997 followed by Shankinase (recombinant Streptokinase). Our indigenous development of recombinant hepatitis-B vaccine enabled India to join the select club of five countries in the world to have the know-how to produce hepatitis-B vaccine.

What are your other areas of focus and future plans?
Our main focus is on new drug discovery indigenously. The company is extending its manufacturing facility to facilitate manufacture of its various products coming out of the R&D phase. Shantha''s new drug discovery programme involves work on monoclonal antibodies against non-small cell lung carcinoma.

We are contemplating developing biogeneric drugs and new molecules. The main thrust is to go for monoclonal antibodies for various types of cancer. However, we are going to limit ourselves to health care products using biotechnology and will not get into pharmaceuticals - not even if it means subsidising biotech research. We also plan to launch a combination vaccine of DPT+ hepatitis-B and typhoid. We also plan to provide contract research and contract manufacturing services, while also looking for collaborative arrangements for co-development of any new drug or molecule.

Where does Shantha Biotech stand today?
We are the first Indian biotechnology company to develop, produce and market the first recombinant product in the country. Our successful development of recombinant products has motivated scientists and given them enough confidence to try out indigenous development and production of other life saving drugs in the country without having to depend on imports.

The success of our company has spawned a number of entrepreneurs who have been motivated by the success of our innovative R&D efforts in producing the country''s first hepatitis-B vaccine and India''s first interferon alpha (''Shanferon'').

We are targeting a Rs100-crore turnover this year. We keep extremely low margins on our products unlike many pharmaceutical companies who hike their margins to 100 per cent mainly due to the high costs of drug discovery. In contrast, our margins are never higher than 10 per cent of the price of our products. We are offering Shantetra (combination vaccine) at Rs80 to Rs85 per dose against Rs225 per dose being charged by MNCs like GSK and Chiron.

What has been you total investment in the company so far?
Our investment in the company is around Rs125 crore. Shantha had raised the funds by equity through private placement and loans from banks and institutions.

What has been the success rate of your recombinant drugs?
Apart from supplying the products all over India, we have started supplying them to various countries directly and also through UNICEF agencies after Shanvac-B received the WHO-Geneva pre-qualification. Shanvac-B and Shanferon have received overwhelming response mainly because the former brought down the prices of imported vaccine from Rs780 to Rs50 in 1997 and to Rs25 in 2003 and similar has been the case with our second product Shanferon (Interferon Alpha-b).

Tell us about your manufacturing facilities.
We have a facility at Medchal near Hyderabad where we manufacture products Shanvac-B (Hepatitis B vaccine), Shanferon (Interferon Alpha-2b) and also Shankinase (Streptokinase drug). We have invested about Rs50 crore on manufacturing facilities. We also plan to manufacture bacterial vaccines, for which we are expected to spend about Rs60 crore.

Are you planning to come out with an initial public offering?
Yes, we are planning to come out with an initial public offering in the near future though I can''t divulge the details of the offering.

Why haven''t you gone to the public before this?
We did not list Shantha Bio because I feel that once you are listed on the market, you are measured by your stock price. In the biotech industry especially, research is a long and painstaking process and if by chance a particular research fails it sets you back by many months and even years sometimes.

Unlike other biotech companies, which are listed on the stock markets, we are not into elementary products like statins for instance. We are into molecular research, which is a long and difficult process. However, we will be going to the public now.

What is your vision for the company?
I don''t believe in visions. I set up Shantha Biotechnics to offer affordable healthcare to each and every Indian. I believe that India has a vast pool of talented people who can develop the latest technology available in the world.

A Naxalite who has opted for the capitalist route to bring life-saving products to the masses.