[NVIC] Vaccines: Pharma Profit Machines

[Guest guest]

Look at some of these figures....follow the money.

Any wonder this country is such a mess. If I were a pharmaceutical industry

executive, I spose I'd be doing all I could to insure my profits, as well.

We would be ever so much more healthy, as a general population, if we gave the

doctors the boot, and kept ourselves healthy in the first place!

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http://www.businessweek.com/globalbiz/content/may2006/gb20060530_035432.html

Business Week online

May 30, 2006

 

by Kerry Capell

 

 

Vaccines: Back on the Front Burner

 

 

Once a neglected field, vaccine research is

taking off due to fear of

pandemics. And units such as Novartis' Chiron are

where the action is.

Compared with glamour drugs designed to battle

cholesterol, high blood

pressure, and depression, vaccines have long been

the poor relations of the

pharmaceutical industry. After all, ravages such

as smallpox, polio, and

measles were long ago cured. But now, thanks to

the emergence of avian flu

and other new viruses -- plus improved technology

and better economics --

vaccines are becoming the global drug industry's

next hot sector.

 

For proof, simply visit the Siena, Italy, labs

of biotech Chiron, a unit

of drugmaker Novartis (NVS ). It was here, tucked

between vineyards and

farms in the Tuscan hills, that the world's first

avian-flu vaccine was

developed in 1998. " Back then, no one was

interested, " recalls Rino

Rappuoli, the scientist who led the research.

" Now it's a totally different

story. " With fears that the avian-flu virus

sweeping Asia might evolve into

a form that could easily jump to humans,

governments are calling on vaccine

manufacturers to find a solution.

 

Scientists in Siena have developed a vaccine

with an ingredient known as

an adjuvant that renders it more effective at low

doses. That's a big

advantage, given the current capacity constraints

among vaccine

manufacturers. Moreover, Rappuoli's team is also

responsible for what's

likely to be Europe's first seasonal flu vaccine

produced from cell-based

manufacturing. Expected to hit the market later

this year, the cell-based

vaccine can be produced much faster than

conventional types, which require

growing flu viruses in millions of chicken eggs.

 

POOR RELATION NO MORE. Such innovation is one

of the main reasons Swiss

pharmaceutical giant Novartis (NVS ) ponied up

$5.4 billion for Chiron in

April, 2006. The global vaccine market is worth

$10.8 billion today -- less

than the nearly $13 billion in sales generated by

Pfizer's (PFE )

cholesterol-lowering drug Lipitor alone.

 

But analysts reckon the vaccine market will

grow much faster than the

market for prescription drugs. " We're in a period

where pharmaceutical sales

are growing at 5% to 6% a year, " says Novartis

Chief Executive Daniel

Vasella. " In contrast, the vaccine industry is

looking at nearly 20% annual

growth over the next five years. "

 

It's a dramatic change for a neglected corner

of the giant global drug

industry. Until recently, vaccines simply weren't

a very attractive

business. " Pricing was unattractive, margins

nonexistent, and there was a

constant fear of litigation, " Vasella says. From

more than 20 players in the

1980s, the field of manufacturers shrank to only

five today -- France's

Sanofi-Aventis (SNY ), Merck (MRK ) and Wyeth

(WYE ) in the U.S., Britain's

GlaxoSmithKline (GSK ), and Novartis.

 

PROFIT MACHINES. Today, the vaccine business

is undergoing something of

a renaissance. That's feeding an explosion of

biotech startups targeting

opportunities in everything from new methods of

delivery to so-called

therapeutic vaccines that treat diseases patients

already have. In 1989,

there were fewer than 10 biotech vaccine

companies, but today there are

nearly 200. The number of new vaccines in

development also has more than

tripled over the last decade, to 150 today. " It's

proof that the business is

waking up and becoming much more interesting, "

says Joerg Reinhardt, CEO of

Novartis' newly-created vaccines and diagnostics

business.

 

Credit a convergence of scientific advances,

policy changes, and improved

economics. Merck and GlaxoSmithKline paved the

way in the late 1980s, when

they developed genetically-engineered vaccines

for Hepatitis B. Safer and

more effective than previous drugs, they

commanded premium prices that

showed vaccines could be profit machines.

 

The picture has also improved thanks to tort

reform and legislation that

reduced liability risks for drugmakers. And the

mapping of the human genome

has exponentially increased the number of targets

for new vaccines.

 

ESCALATING INFO. Novartis' new meningitis-B

vaccine shows how far the

industry has come. Scientists had previously

managed to develop vaccines for

other strains of meningitis, a potentially fatal

infection of the nervous

system, but the B strain, responsible for 50% of

cases worldwide, proved

impossible. Chiron's Rappuoli convinced Craig

Venter, one of the leaders in

the mapping of the human genome and the founder

of Maryland's Institute for

Genomic Research, to sequence the genome of

meninigococcus B.

 

" In 18 months, we acquired more knowledge to

develop new vaccines than in

the past 50 years, " Rappuoli says. Novartis is

furthest ahead in developing

a vaccine for meningitis B, and potentially will

be the first to market a

combination vaccine for meningitis strains for

use in infants.

 

But it's flu vaccines that are expected to

drive growth in the immediate

future. Novartis is the second-largest

flu-vaccine producer, with 11% of the

market, well behind Sanofi-Aventis' 58% share.

Contamination problems at

Chiron's plant in Liverpool forced it to shut

down production. Reinhardt,

who reckons the problems will be fully resolved

in time for next flu season,

aims to close the gap.

 

CLOSING THE GAP. Things are already looking

up. On May 4, Novartis was

one of a handful of companies awarded

multimillion dollar contracts by the

U.S. Health & Human Services Dept. to work on

cell-based production

technologies as part of the government's

avian-flu pandemic plan. Reinhardt

says the company will use the $221 million

contract from the HHS to fund the

construction of a new cell-based plant in the

U.S. that will supply the

American market only.

 

With potential blockbusters in the pipeline, a

new plant in the works,

and substantial investment, sales at Novartis'

vaccine business could rise

from $1 billion to $3.4 billion by 2012, predicts

brokerage Bear Stearns.

Operating profits over the same period could zoom

from $207 million to $1.4

billion.

 

" The old image of the vaccine business as all

hassle no profit couldn't

be more wrong, " Vasella says. Now, drugmakers can

do good and do well at the

same time.

 

 

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