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Knives Are Out as Bharat Biotech Dumps its Brazilian, Dubai Partners in Covaxin Deal 

With the Brazilian parliamentary inquiry reaching the doorstep of Bharat Biotech’s top bosses, the Indian firm cut loose its partners to shield itself from the probe. But the inquiry is all set to intensify in coming weeks.
In this illustrative photograph, vials labelled ‘Covaxin’ rest on a table. Photo: Reuters

Sao Paulo: In a major damage-control exercise, Bharat Biotech announced on Friday that it is terminating its Memorandum of Understanding (MoU) with its Brazilian representative, Precisa Medicamentos, and a Dubai-registered firm called Envixia Pharmaceuticals as an investigation into the sale of Covaxin to Brazil inches closer to the company’s top leadership.

The vaccine maker, which has mostly maintained a silence amid serious allegations of corruption in the deal, also accused the Brazilian firm of fabricating two documents in its name. Suspended by Brazil on June 30, the $300-million contract for the sale 20 million doses of the vaccine to Brazil has snowballed into a massive scandal, with the lines of inquiry running from Brazil to India via Paraguay, Singapore and the United Arab Emirates.

If the Indian firm’s intention was to make a pre-emptive strike against its own partner to shield itself from the muck flying about, the move may backfire as a parliamentary commission of inquiry (CPI) looking into the deal is all set to intensify its probe into the scandal, known here as CovaxinGate. Also, Precisa Medicamentos, which is facing many inquiries including the CPI, may not be willing to go down alone.

Before taking a 15-day break last week, the CPI had asked the Brazilian company to produce its contract with the Indian firm and – more importantly – the details of ownership and assets of Madison Biotech, a Singapore offshore firm founded by Dr Krishna Ella, who is the co-founder and chairman and managing director of Bharat Biotech. The Indian company’s decision to cut loose Precisa Medicamentos will put the Brazilin company in a more complicated position than it already is. But it won’t reduce the heat on the Indian vaccine maker too.

With the MoU between the three parties terminated unilaterally by Bharat Biotech, the Covaxin contract is a dead duck. According to multiple sources in Brasilia, the cancellation of the contract is imminent as it has become too hot to handle for the government, besides the companies involved. With revelations which have severely damaged the reputation of the two companies and created a major crisis for the government of President Jair Bolsonaro, the parties in the crosshairs of investigators now seem to be turning on each other as they fight to save their own skin.

The live broadcast of the Senate proceedings has kept the country hooked on to revelations about and the investigation into CovaxinGate. Photo: Leopoldo Silva/Agencia Senado

On Friday, in a clear sign that the Indian firm was dumping its Brazilian representative without taking it into confidence, the Hyderabad-based company announced the “termination of its memorandum of understanding dated November 24, 2020 with immediate effect” but promised to “continue to work diligently with the Brazilian drug regulatory agency (ANVISA) to complete the regulatory approval process for Covaxin”. As all the paper work for Covaxin’s entry into Brazil, including its representation at ANVISA, has been done by Precisa Medicamentos, it is now practically impossible for the Indian firm to continue to seek the approval of Covaxin in this country.

“We have two applications of Precisa [Medicamentos] related to the approval of this vaccine [Covaxin] in the country: an application for emergency use authorization and another one for conducting clinical research in Brazil. Based on the announcement by Bharat Biotech [on Friday], ANVISA will reassess the processes and take relevant steps,” the health regulator said in response to a question from The Wire.

In another sign of a breakdown in trust between the two companies, the Indian vaccine-maker accused its Brazilian representative of submitting “false documents” to the ministry of health. In the two documents, published by O Globo on Friday, Precisa Medicamentos had declared that it was the “legal and exclusive representative of Bharat Biotech in Brazil” and that there was nothing to prevent it “from being authorized to (sign) contract with the ministry of health”. This is the first time that Bharat Biotech has questioned the authenticity of any document, which are part of the contract signed between the ministry and the company on February, though an invoice seeking an advance payment of $45 million sent by Madison Biotech has been a top headline for weeks amid accusations and counter-allegations of its fabrication.

Precisa Medicamentos signed a contract with Brazil’s ministry of health on February 25, 2021, as a representative of Bharat Biotech. As an evidence of its partnership with the Indian firm, the Sao Paulo-based company had submitted the MoU, which also included Envixia, to the ministry. Since November 2020, the executives of the Brazilian group have attended meetings with the ministry’s top brass and Bharat Biotech’s directors, discussing the price of vaccine and delivery schedule among other issues.

Senator Randolfe Rodrigues (left) in conversation with CPI rapporteur Senator Renan Calheiros who says the probe is moving in the right direction and will hold to account all those responsible for the scandal. Photo: Edilson Rodrigues/ Agencia Senado

Covaxin, which was supposed to enter Brazil in March as per the contract, suffered a huge setback when ANVISA rejected its application for “exceptional importation” in March. In June, the company was authorised to import limited doses under very strict conditions which also required it to conduct its phase-3 trials in Brazil. In mid-June all hell broke loose when Ricardo Miranda, a ministry of health whistleblower, went public with his complaint that Madison Biotech, which is not part of the contract, was seeking millions of dollars in advance into a Singapore bank account. As the CPI, already looking into the government’s failure in handling the pandemic, turned its complete focus to the Covaxin contract, revelations on daily basis brought out stories of suspected irregularities in all aspects of the India-Brazil agreement.

Thrown under the bus

Amid the growing scandal, as Precisa Medicamentos denied – and obfuscated – all the charges, the Indian firm kept quiet, refusing to answer even basic queries. The CPI probe, being conducted by a panel of 11 Senators who have judicial and investigative powers, have been following the money in the deal as they suspect the Singapore offshore to be part of a big corruption scheme.  With some allegations of Precisa Medicamentos receiving a huge amount in commission, the Senators have been focused on two documents: the invoice from Madison Biotech and the contract between the Brazilian and Indian companies signed on January 12, 2021, in Hyderabad. On the details of both these documents, Bharat Biotech has remained silent, while Precisa Medicamentos aligned its position with that of the Jair Bolsonaro’s government which has called the Singapore invoice a “forgery” by the whistleblower.

Big cracks were developing in the ties between the Indian company and its Brazilian partner became evident on July 14, when the executive director of Brazilian company, Emanuela Medrades, appeared at the Senate as a witness. Batting bravely for her company, the Brazilian executive passed the blame to the Hyderabad company on all crucial questions, especially on the vaccine price, invoices and taxation. When pressed on the most contentious topic of invoices, which are suspected to be fabricated, Medrades said that they were made by Bharat Biotech in India.

At her testimony on July 14, Emanuela Medrades, the executive director of Precisa Medicamentos, had described Envixia Pharmaceuticals as a “broker” of the Indian company. Photo: Jefferson Rudy/Agencia Senado

Medrades’s testimony, watched by millions in a live broadcast, was a clear indication that the Brazilian company was washing its hands of the deal if not throwing the Indian firm under the bus. With the CPI on a break and Francisco Maximiano, the owner of Precisa Medicamentos, scheduled to testify on August 3 when the hearings resume, Bharat Biotech has lobbed the ball back into their partner’s court by scrapping the MoU and accusing them of forgery. Reacting to the announcement from Hyderabad, the Sao Paulo-based firm called the decision “hasty”. “Precisa Medicamentos regrets the cancellation of the MoU…. it is a direct consequence of the political chaos caused by the debate on the pandemic…,” said the company in a statement sent to The Wire.

Though the Brazilian firm has officially blamed politics for the cancellation of MoU, the company may itself be preparing to corner Bharat Biotech on the matter of the third party in the agreement: Envixia Pharmaceuticals LLC. Speaking strictly off the record to The Wire, a top executive of Precisa Medicamentos complained about the role of Envixia in the deal. Refusing to go on record, the executive said the company was working to resolve the “Envixia issue” with the Indian firm. “We are going to Hyderabad tomorrow [Saturday] to talk to Bharat [Biotech] about it. We have a meeting scheduled for Monday,” said the executive, asking for anonymity.

The first time ever Bharat Biotech acknowledged its MoU with Envixia was on Friday while announcing its termination. As reported by The Wire, the name of Anudesh Goyal, who had signed the MoU on behalf of Envixia, has figured in a probe into the fraud in Covid-19 tests at the Kumbh Mela. Despite repeated messages, both Goyal and Bharat Biotech have kept quiet on his identity. In her testimony, Medrades had called Envixia a “broker” of Bharat Biotech and claimed that her company had “nothing to with the company” which was part of the MoU between three parties.

Top order under the scanner

The MoU cancellation will have little bearing on the Senate probe, which has kept this country hooked to CovaxinGate. Now, as Bharat Biotech and Precisa Medicamentos chuck dirt at each other, with Envixia in the middle, the investigation may actually gain more momentum. On Friday, soon after Bharat Biotech’s charges against its Brazilian partner were revealed, Senator Simone Tebet said the episode confirmed the CPI’s suspicions of fraud in the deal.

“This is a crime of document forgery and the use of a private document that is false. The question is: for what purpose? They were negotiating for what? To receive an advance? To receive bribes? To be able to pay in tax haven this amount of $45 million to be given to whom? These are the answers that the CPI will work to get during the rest of the inquiry, especially from Francisco Maximiano [Precisa Medicamentos’ president] in the first week of August,” said Senator Tebet to The Wire.

Senator Simone Tebet has repeatedly questioned the authenticity of several documents submitted by the Brazilian firm to the ministry of health. Photo: Pedro França/ Agencia Senado

Since they started their work in April, the Senators have been trying to connect the dots in the scandal spread over several countries. Besides the suspicion of corruption by two companies, the country’s president, too, has been under the scanner. By annulling the MoU, Bharat Biotech has achieved nothing as the probe, in the words of CPI rapporteur Renan Calheiros, is moving in the right direction.

“The President [Bolsonaro] insisted on leaving his fingerprints on this contract twice. First, when he heard the Miranda brothers and did nothing and second when he sent to the Prime Minister of India [Modi] a request to buy 20 million doses of a vaccine exactly when he refused other vaccines; and the government bought the most expensive vaccines. and that still had no proven efficacy. The CPI will continue to deepen the investigation and will hold these people accountable,” Senator Calheiros said to Globo News on Friday.

With CovaxinGate, Bolsonaro is facing the worst crisis of his presidency as the scandal engulfs his government and his ratings plummet. The government has been exploring means to get rid of the deal by cancelling the contract which is being investigated by four government agencies besides the CPI. With its decision on Friday, the Indian company might have offered an excuse to the Brazilian government to dump its vaccine. In a report on Friday evening, CNN Brasil said that the ministry of health would “terminate” the contract with Precisa Medicamentos on Sunday “due to the disqualification of the company by Bharat Biotech”.

The MoU for Covaxin deal has been terminated. The $300-million contract may have the same fate soon. But after the rupture of ties between the two companies, the Senate investigators may call Bharat Biotech executives to hear their accusations against their ex-partner. The probe into CovaxinGate is not going to slow down anytime soon.

Shobhan Saxena and Florencia Costa are independent journalists based in Sao Paulo, Brazil.

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