The new-look Serum: How Adar Poonawalla is looking to recapture the Covid windfall

The year was 2021. The world had gone through a whole year of the Covid-19 pandemic. Lockdowns and social distancing had been implemented by governments to check the lightning speed of the virus’ transmission.

It was then, even before the most devastating waves of Covid killed millions, that Serum Institute of India (SII), the world’s largest vaccine manufacturer by volume, decided to take a bet on an untested vaccine developed by researchers at Oxford and pharmaceutical giant AstraZeneca.

It was a risky decision since clinical trials had been completed in record time; too quickly, some argued. “We put $800 million of our own money into it,” SII’s Chief Executive Officer Adar Poonawalla said at the time.

The bet paid off, and how. At its peak, SII produced about 200 million doses of the Covishield vaccine a month, or roughly enough to vaccinate the entire population of the UK thrice over. India became a shining example of a successful vaccine rollout, so much so that the Economic Survey of 2022-23 said 90% of the eligible population had been vaccinated by January 2023.

The Poonawallas became the toast of India, with Cyrus Poonawalla, the Chairman of SII, being awarded the Padma Bhushan, the third-highest civilian honour in India, in 2022.

And it wasn’t just the accolades. Business boomed. From Rs 5,446 crore just before the full spread of the pandemic in FY20, revenue jumped to Rs 7,201 crore the next year and zoomed to Rs 25,645 crore a year later as SII delivered a record number of vaccines for the Indian government’s Covid vaccination programme. Profits too kept pace. From Rs 2,251 crore in FY20, they rose to Rs 11,116 crore in FY22. As a result, privately held SII became the most valuable unlisted company in India, leading to repeated calls to go public.

That’s all in the past now. Two years after those heady days, domestic demand for the Covid vaccine—which had made Poonawalla the face of the pandemic response across the world—has disappeared. SII’s profits have plunged as a result. In FY24, SII’s revenue fell to Rs 9,549 and profits fell to Rs 4,278 crore. To be sure, these numbers are still better than what was reported before the pandemic.

But the steep fall has 44-year-old Poonawalla racing to diversify—from launching a slew of new vaccines, including one for cervical cancer, to eyeing high-value global markets and even venturing into finance and film production.

“Covid-19 was a windfall for many companies, including those in diagnostics, pharma, and vaccines. Naturally, after 2023, companies like ours would see a decline in profits as the pandemic was a unique event. What we are doing to maintain profitability is returning to business as usual,” says Poonawalla, smiling calmly.

Shifting Sands

Established in 1966 by Cyrus Poonawalla at Pune, SII began by producing products such as tetanus antitoxin, snake antivenom, and vaccines for diseases like diphtheria, pertussis, tetanus (DPT), and measles, mumps, and rubella (MMR). Today, it is the world’s largest vaccine manufacturer by volume, producing nearly 1.9 billion doses annually, and a total production capacity of more than three billion doses annually.

That capacity came in handy during the pandemic. As per industry estimates, the central government paid SII Rs 25,583 crore for around 2 billion doses of the Covishield vaccine. But Poonawalla was under no illusion that the pandemic boost to revenues would be hard to sustain. “In fact, in December 2021, we shut down production despite having hundreds of millions of doses in reserve,” he says. That’s because demand was driven predominantly by governments and their vaccination drive. “The private market for these vaccines is always small,” says Poonawalla.

To make up for the slump in Covid vaccine demand, SII has reinvested the windfall profits of FY22 that it earned from the Covishield vaccine. Nearly 80% of the investment has gone into advancing vaccine research and clinical trials. SII is operating at half its capacity, so it has switched focus towards vaccines with “growing demand”, such as those for malaria and cervical cancer.

It’s not just SII. While Bharat Biotech International Ltd (BBIL), the company behind Covaxin and a competitor to Covishield, is looking at other vaccines, it has been working on vaccine programmes for diseases such as cholera, malaria, chikungunya, Zika, paratyphi A, non-typhoidal salmonella, and tuberculosis. In March, the company also forayed into Cell & Gene Therapy (CGT) and viral vector production, it said in a statement.

Similarly, Dr. Reddy’s Laboratories, which partnered with the Russian Direct Investment Fund to introduce the Sputnik V vaccine, has significantly diversified beyond its core generics business. In March 2024, it entered an exclusive partnership with Sanofi Healthcare India to promote and distribute Sanofi’s paediatric and adult vaccine brands in India.

“In the last few years, we have boosted our vaccine portfolio and with the Sanofi partnership we are the second-largest player in India. Our aspiration is to become number one,” says M.V. Ramana, CEO, Branded Markets (India and Emerging Markets), Dr. Reddy’s.

There’s definitely potential for other vaccines. The global vaccine market, pegged at around $46 billion, is expected to reach around $70 billion by 2028.

This is especially true of developing countries, says Suresh Subramanian, National Lifesciences Leader at EY Parthenon India. The industry is shifting toward long-term strategies, such as routine immunisations and next-generation vaccines, and research and development is key.

However, Vishal Manchanda, Senior Vice President of Institutional Research at investment advisory firm Systematix, sees challenges ahead for SII. He points out that the company has always been one of the most profitable pharmaceutical firms, and Covid-19 accelerated its success. But investing the windfall may prove challenging.

New Opportunities

Among the opportunities that have presented themselves to vaccine makers, India’s vaccination programme aimed at preventing cervical cancer is among the biggest.

Such programmes are helping vaccine makers get back to vaccine development. SII launched Cervavac, India’s first indigenous quadrivalent, gender-neutral HPV vaccine, in January 2023, aiming to combat cervical cancer.

Though small quantities of the HPV vaccine have been launched in the private market—about one or two million doses—Poonawalla anticipates much larger volumes this year. He is aiming to bring out one or two new vaccines each year to fuel growth as he looks to double the company’s turnover within the next five to six years.

Going Global

One potential solution to boost revenues is the expansion in high-value markets such as Europe and the US. “We see ourselves as a global player now,” says Poonawalla. Indeed, the price differential is quite significant. The R21/Matrix-M Malaria vaccine, priced at an estimated $2–4 in low-income countries according to industry estimates, is currently available only in African countries.

Similarly, Cervavac is approved only in India and available for Rs 2,000 per dose (around $23-24) for the private markets. However, when sold to the Indian government, the price of the vaccine will be substantially lower. The Pneumosil Pneumococcal vaccine is said to be priced at $2 in low-income countries.

Asked if SII plans to go public, Poonawalla responds in the negative. “If we did, we would likely have to double or triple our prices,” he explains.

Beyond Vaccines

Manchanda of Systematix believes SII should focus on acquisitions and exploring new business ventures. “Biologics present an attractive area for expansion,” he suggests. The sector is growing rapidly, and is highly capital-intensive, which could allow Serum to deploy its capital productively, he says. However, he points out that acquisition targets are scarce in this sector.

Of course, SII has interests outside vaccines. There is the big push in financial services through Poonawalla Fincorp, known earlier as Magma Fincorp in which the Poonawallas acquired a controlling stake in 2021. In FY24, the company posted a record profit of Rs 1,027 crore, an 83% year-on-year (YoY) increase. Its assets under management crossed Rs 25,000 crore, while quarterly disbursements reached Rs 9,688 crore. However, in FY25, its net profit slumped 81% YoY to Rs 62 crore, though AUM jumped 43% YoY to Rs 35,631 crore. The firm is focused on digital lending, particularly in the consumer and MSME segments.

Rajesh Pherwani, Founder and Chief Investment Officer of Valcreate Investment Managers LLP, says the company’s focus on the mid-to-high-yield segment is particularly important. “This space usually gives better margins compared to low-yield sectors, though it does require tighter control on repayment risks to get good returns on the loan book,” he explains.

Film Foray

Last August, the film industry was caught by surprise after a news report revealed that film director Karan Johar was scouting for investors in his companies Dharma Productions and Dharmatic Entertainment. It was rumoured that Johar had reached out to India’s conglomerates to sell a majority share in the company.

The reason Johar was looking for investors was not hard to find. Per company database Tofler, Dharma Productions has seen a turbulent few years since the pandemic. Sales plummeted from Rs 735 crore in FY20 to Rs 118 crore in FY21. They recovered in FY23 to Rs 1,040 crore. But profit after tax in FY23 was just Rs 11 crore, down from a PAT of Rs 37 crore on revenues of Rs 276 crore in FY22. But the recovery in sales did not last. In FY24, sales dipped by more than half to Rs 512 crore, and Dharma was barely profitable, reporting a PAT of just Rs 60 lakh.

Discussions with Saregama and Reliance Industries went nowhere, with the valuation proving to be the sticking point. So, when Poonawalla-led Serene Productions announced that it was paying Rs 1,000 crore for a 50% stake in Dharma, it came as a surprise. Johar retains the other half of the companies and will be the Executive Chairman, overseeing operations.

Poonawalla tells BT that Dharma’s strong brand recognition was one reason he made the deal. “Over the next few years, we see Dharma building India’s strongest and entertainment first, global-facing content portfolio,” he says.

Poonawalla says the traditional theatrical model is evolving, and the new approach will balance big films with digital-only content. “[Return on investment] is measured not just by the box office, but by the strength of the IP, longevity on streaming platforms, and licensing revenues across music, international sales, and merchandise,” says Poonawalla.

Serum has spread its bets as it looks to recapture the heights of FY22. Will they inject a much-needed boost? 

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