How did Serum Institute of India become the most profitable company in COVID-19 pandemic?

In the face of mounting Omicron fears, the Serum Institute of India (SII) has requested clearance from the Drugs Controller General of India (DCGI) for Covishield booster shots. The company, who earned a net margin of Rs 2251 in the year 2019-2020, is expecting a huge increase in sales if permitted to build the booster shots.

While multiple businesses of particular fields have been forced to shut down or work with minimal or no profits at all amidst the COVID-19 pandemic, numerous companies are not just sustaining but making colossal profits. Despite the slump seen in the public sector earnings, the private manufacturers and suppliers have continued to benefit even during the raging pandemic. A corporate database prepared by Capitaline shows that 418 Indian companies during the pandemic have a net sale of Rs 5000 crore and above. And one that tops the list is none other than India’s vaccine manufacturing company, Serum Institute of India. Although SII undoubtedly plays a crucial role in India’s fight against COVID-19, its name at the top of the profit-making list came as a shock.

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The Huge Profit Margins

Out of the net sale of Rs 5446 crore that Serum Institute of India completed in 2019-2020, Rs 2251 crore is the net margin of SII, which is 41.3% of the total sale. No company with Rs 5000 crore has earned such a huge profit.

The reason for this huge amount of net margin is SII COVID-19 vaccine, Covishield. Earlier when the government was procuring vaccines from Serum Institute, it was at the rate of Rs 150 per dose. According to CEO Adar Poonawalla the firm was making a normal profit even at a price of Rs 150 per dose. “This is based on the Modi government’s request, and we’ve risen to the occasion, sacrificed profits — I wouldn’t say we’re not making any profits — but we’ve sacrificed what we would call ‘super profits’, which we would need to further build capacity, innovate and compete with the Western companies,” Poonawalla told NDTV.

In fact, after the first shipment went out, SII CEO Poonawalla showed his intention to price one dose of vaccine at Rs 1,000 ($13), telling ANI he said, “We have given a special price of Rs 200 for the first 100 million doses only to the Government of India… and, after that, we will be selling at Rs 1,000 in private markets.”

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The Prime Minister, Narendra Modi on April 19 announced a “liberalised and accelerated phase 3 strategy” of vaccination effective from May 1. Keeping silent on previous prices for the Centre, the Serum Institute within two days announced differential pricing for states and the private sector. Giving its new rate card, SII said that it will make available the vaccine at Rs 400 per dose to states and Rs 600 per shot to hospitals from May 1 when all adults in the country will qualify for inoculations.  

At the rate of Rs 600 per dose, Indians getting inoculated with Covishield at private hospitals could end up paying the highest price in the world for this vaccine developed by the University of Oxford and AstraZeneca. This rate is even higher than the price at which governments in countries such as the US, UK and in the European Union are sourcing directly from AstraZeneca. Amid the infuriation across the state government, the company was forced to decrease the price and it lowered down the cost of one shot from Rs 400 to 300 per dose, claiming it as a philanthropic gesture. But, the rate still remains on a higher side.

Gap Between Demand And Supply

Adar Poonawalla, India’s “vaccine prince” gained massive fame when he became the only Indian billionaire to be a crucial part of an international Covid-19 vaccine. But since then, he has made headlines and been in the news for his statements that are often confusing and contradictory at times.

Poonawalla, the CEO of the world’s largest vaccine manufacturing firm Serum Institute of India, Mumbai, struck a deal with AstraZeneca to manufacture and stockpile its Covid-19 vaccine last year. These doses could be sold in India and to other countries under contracts with AstraZeneca. 

Adar Poonawalla, CEO of Serum, talked about the manufacturing capacity of its firm in a recent interview. He said, “The company expanded its annual manufacturing capacity from 1.5 billion doses to 2.5 billion and will increase it to 3 billion by October. In India, the question is how much, and how soon, can it supply to states. So far, in about four months, it has supplied a total of 150 million doses.” 

However, a Serum Spokesperson in a recent statement released on May 3, said,  “It will supply 110 million doses each to the Centre and states in “the next few months”. This creates a wide gap between the demand and supply of the vaccine in India. 

On being asked why SII did not ramp up the vaccine manufacturing capacity as promised, Adar told, “The company needed ₹3,000 crores, either from the Centre or banks, to reach monthly production of 100 million covid-19 vaccine doses.”

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