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Big Pharma sees revenue in vaccines
By Ben Hirschler and Sam Cage
Published in The Saudi Gazette on 10 - 03 - 2009


VACCINES may be the next big thing for Big Pharma.
Drugmakers' traditional model is under threat from looming loss of exclusivity on some of the industry's biggest sellers and companies are keen to diversify away from the core business of prescription medicines.
“All of a sudden the black sheep of the family has become very exciting again and part of that is down to the absence of drugs coming through the regular pipeline,” said Simon Friend, global pharmaceutical leader at PricewaterhouseCoopers.
US healthcare reform, with President Barack Obama targeting high drug prices, is adding to the pressure and making vaccines – previously notorious for low margins – seem ever more attractive as both their sales and profitability improve.
A new generation of high-price blockbusters like Wyeth's Prevnar and Merck & Co Inc's Gardasil have changed the landscape and tempted more companies.
Sanofi-Aventis SA, Merck, GlaxoSmithKline Plc and Wyeth have historically dominated the field, but that is altering.
Novartis AG became the world's fifth largest vaccine maker in 2006, after buying full control of Chiron, while AstraZeneca Plc won a foothold in vaccines in 2007 by buying MedImmune.
Now Pfizer Inc is gate-crashing the party with its plan to acquire Wyeth.
One key advantage of vaccines is their relative immunity to generic competition. As biological medicines they are hard to manufacture, typically requiring a large capital investment of $100-600 million per plant, according to analysts at UBS.
“Generics don't play in the vaccines space, so you have them for a long time,” PwC's Friend said.
Recent vaccine growth is impressive, with sales by the top five producers – together accounting for 85 percent of the market – reaching $16 billion in 2008, up one-third in just two years. By 2012, market leader Sanofi predicts revenues of $22 billion and many analysts think that is conservative.
Modern science
Driving that will be a wave of new products tapping what Philippe Monteyne, Glaxo's head of global vaccine development, describes as “an explosive stage of growth” in research, due to progress in science, especially immunology.
Recent advances in preventing diseases as diverse as cancer and flu have taken vaccines beyond their traditional marketplace in infancy, and establizhed immunization as a cost-effective option for adolescents, adults and the elderly.
At the same time, a new field of so-called therapeutic vaccines – designed to treat diseases like cancer by boosting the immune system, rather than simply preventing infections – could in a few years revolutionize whole areas of medicine.
As a result, many drug companies are eyeing vaccines as among their most promising $1 billion-a-year-plus products. Novartis, for example, has two meningitis vaccines, Menveo and MenB, in late-stage development that David Kaegi, a buyside analyst at asset manager Sarasin, sees as key major earners. “With multibillion-dollar sales potential, MenB is the most important product in Novartis' pipeline,” he said.
Sanofi has an experimental dengue fever vaccine that Chief Executive Chris Viehbacher says has billion-dollar sales potential, while Glaxo is pinning high hopes on Synflorix, a rival for Prevnar, and Cervarix, which competes with Gardasil.
More M&A expected
Increasingly attractive fundamentals mean big companies have been eager to snap up promising vaccine assets – a trend which is expected to continue.
Crucell is one vaccine maker that has attracted plenty of interest. Wyeth was in talks to buy the Dutch company until it was itself bought by Pfizer. Either Sanofi – which has been frequently linked to the Dutch group – or another of the top players could still be interested.
Austria's Intercell is another vaccine maker that has been tipped as a takeover candidate, and already has a partnership deal with Novartis.


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