Glaxo Sanofi GlaxoSmithKline and Sanofi-Aventis are reported to be in separate talks to buy a majority stake in Indian biotechnology firm that pioneered indigenous recombinant vaccines, Shantha Biotech.

The two European drug-makers are negotiating with France's Merieux Alliance, which owns 80 per cent of unlisted Shantha, the newspaper said, citing two unnamed people familiar with the matter.

The French company had acquired a 60-per cent stake in the Hyderabad-based bio-pharmaceutical firm from the Oman-based financial firms, which had invested in Shantha a few years ago that enabled the Indian company to develop its indigenous capabilities  to strengthen its presence in India.

"The proposed deal will allow the buyer to get a majority stake and management control. Talks are at an initial stage and Merieux is looking at selling its entire 80 per cent stake," it quoted one source as saying. A deal could be worth up to Rs1200 crore ($237 million), it said.

Both Glaxo and Sanofi called the report speculative, while Merieux avoided commenting. Shantha's managing director K I Varaprasad Reddy, who holds 17 per cent of the firm, said Merieux regularly received collaboration proposals but he was not aware of any sale discussions, the report said.

In 1997, Shantha became the first Indian company to develop, manufacture and market India's first recombinant hepatitis-B vaccine, Shanvac-B, in 1997 followed by Shankinase (recombinant Streptokinase) and Shantetra, an indigenous 4-in-1 combination vaccine that prevents diseases like diptheria, pertusis, tuberculosis and hepatitis-B.

However, it has been unable to replicate these successes, though it has supplying its products directly in various countries and through UNICEF agencies after its Shanvac-B received the WHO-Geneva pre-qualification. Shanvac-B and Shanferon received an overwhelming response mainly because they brought down the cost of treatment in the recipient countries. The Shanvac-B vaccine was priced at Rs50 compared to a comparable vaccine from a multinational priced at Rs780. The story of the pricing differential for its second product Shanferon (Interferon Alpha-b) had been similar.

One person was quoted as saying that said Merieux was quoting a number between Rs1,000 crore and Rs1,200 crore in its discussions with the two suitors, but that could come down as the talks had just begun.

The second person, a senior executive in India's pharma sector, confirmed the talks between Merieux and the two European drugmakers, and said GSK was the front-runner to clinch the deal. Although he was not aware of the numbers, he said a valuation of more than Rs1,000 crore for Shantha appeared plausible.

In 2006, Merieux Alliance bought an initial 60 per cent stake in Shantha and subsequently increased it to about 80 per cent. The Indian company's annual sales are estimated to be around Rs200 crore.

Shantha Biotech employs over 700 people and markets a range of vaccines in India and global markets. It also provides contract research and manufacturing (CRM) services, and has a wholly-owned subsidiary in the US.

Last year, Japan's Daiichi Sankyo acquired India's largest drugmaker Ranbaxy for $4 billion. Other Indian pharma companies such as Mumbai-based Piramal Healthcare and Wockhardt have also been reported to be in talks with global companies to divest a part of their respective businesses, although Piramal has repeatedly denied any such move.