THE Pinelands-based vaccine manufacturing plant owned by the Biological & Vaccines Institute of South Africa (Biovac) received a massive vote of confidence last month when its major shareholder opted to increase its stake in the business.

JSE listed health services group Litha Healthcare Holdings has secured an agreement that allows it to acquire another 15% stake in the Biovac Consortium.

Litha already holds a controlling 62.5% stake in the Biovac Consortium, which in turn holds a 52.5% interest in Biovac.

Litha’s stake now moves to 77.5%, which must position the group well to eventually secure outright ownership of the promising Biovac operation.

For the last eight years the Biovac Institute has been tasked with the sizeable annual order for government’s Expanded Programme on Immunisation (EPI) through importing and beneficiation within South Africa.

CBN has previously pointed out that Biovac supplies vaccines for as much as 60% of the public sector market. Initial successes – especially the snatching away of business from the multi-national drug companies – prompted Biovac in 2007 to start domestic vaccine formulation and filling. With a captive client base such a move – despite the extensive capital outlay – makes sense, especially as a way for Biovac to substantially bolster its operating margins.

Currently the Pinelands plant is planning to reach full-scale production in 2013. The decision by Litha to increase its exposure must speak volumes about the potential for profitable vaccine production over the longer term.

Interestingly Litha (then still known as Myriad Medical) initially paid R114 million for its original 51% stake in Biovac – which gave the business an enterprise value of more than R225 million.

Interestingly Litha’s increased shareholding means additional net profit from Biovac. It was calculated at approximately R240 000 for the two months ended 30 June 2010.

This would suggest Biovac – which one has to remember is still at least two years off full-scale production – is already churning some solid profit numbers.