Stock Review: Aventis Pharma

Aventis Pharma has decided to sell its 49 per cent stake in the vaccine manufacturing unit, Chiron Behring Vaccines, to its joint venture partner, Novartis Vaccines and Diagnostics, for $22.4 million.

The deal puts an end to atwo-year-old battle over rights for India's largest selling anti-rabies vaccine, Rabipur. The vaccine posted sales of around `118 crore (for Aventis) two years ago, with a market share of about 70 per cent.

Until February 2009, Aventis marketed the anti-rabies product manufactured by Chiron Behring Vaccines Private Ltd (51:49 joint venture between Novartis and Aventis) at the Ankleshwar plant in Gujarat. Novartis had objected to the renewal of a 10year marketing licence to Aventis Pharma then and got afavourable court verdict.

Aventis, while gaining on cash after its exit from the joint venture, can now also market Aventis-Sanofi's anti-rabies brand, Verorab, in the estimated `250-crore anti-rabies market in India. The company plans to launch low-priced anti-infective and anti-inflammatory products, while also increasing its field force through the Prayas project. Analysts estimate incremental revenues to the tune of `500 crore over the next five years.

The acquisition of Shantha Biotech in calendar year 2009 (CY09) is expected to pave the way for more launches, especially in the cardiovascular segment and vaccines. The cash received from the stake sale in the joint venture will strengthen its balance sheet, which had cash of `585.95 crore at the end of CY09. This can be used for future inorganic growth, as well as good dividend payouts, reckon analysts.

Looking at various initiatives, analysts at Angel Broking estimate revenues to grow at a compounded annual rate of 14 per cent over CY10-12 to `1,390 crore. The stock, at `1,747, trades 20 times CY11 and 18 times CY12 estimated earnings.

Besides monetary gains, the exit from Novartis JV paves the way for marketing of Aventis-Sanofi's anti-rabies vaccines