Pandemic Threat Reignites Influenza Vaccine Market

The last few years have seen renewed interest in the vaccines market, overcoming the prevailing view that vaccines are a low-margin business with high barriers to entry. The flu vaccines market has been at the forefront of this trend, partially fuelled by fear of an impending pandemic. This trend is set to continue, although flu vaccine revenues will depend on ambitious coverage targets being met.

Recent ‘drug-like’ double-digit growth rates have expanded the global influenza vaccine market to an estimated $1.6 billion in 2005. This trend is set to continue, with a recent Datamonitor report forecasting that the influenza vaccine market in the seven major markets alone could exceed $3 billion by 2010.

However this depends upon ambitious coverage targets set by various health authorities being realized and on a significant expansion of production capacity. In the future, new manufacturing technologies, notably cell culture based approaches, will potentially account for 15% of overall capacity.

A profitable business

2005 marked the beginning of a new era for the sector. The past year witnessed frantic commercial activity including significant consolidation- notably through the GlaxoSmithKline/ID Biomedical, Novartis/Chiron and Crucell/Berna acquisitions. These have been primarily aimed at enhancing manufacturing capacities and securing novel technologies.

Vaccines in general, and influenza vaccines in particular, possess several attractive features: compared to ‘regular’ pharmaceutical products, vaccines have a higher probability of R&D success, with 70% of programs obtaining marketing approval post proof-of-concept. In addition, vaccines enjoy long product lifecycles – generic substitution is almost non-existent.

Since an estimated 90% of vaccines (by volume) are sold via public tenders to a few large customers, mostly governments and public health authorities, they also incur much smaller marketing and promotion costs. This explains operating margins comparable to pharmaceuticals.

On the flipside, current influenza vaccine manufacturing is very time-intensive, and yet in-time delivery is vital to ensure consistent market share. As such, delays or reductions in production can result in a loss of market share or tender offers and considerably damage company credibility.

There are also high entry barriers to the influenza vaccine market, such as biological manufacturing know-how and complex public and private business interrelationships, so the established players face little competition. According to the World Health Organization (WHO), there are approximately 15-18 influenza vaccine manufacturers operating in nine countries worldwide, the 14 biggest accounting for 90% of the total global supply. The leading player in the market is Sanofi-Aventis, with revenues of $835 million in 2005 and a 45% global market share by value in 2004.

New vaccination coverage targets set by international health authorities are driving renewed investments in the influenza market. In the US, influenza vaccine coverage of high-risk groups has doubled from 33% in 1989 to 66% in 1999, the ultimate goal being to boost this rate to 90% by 2010.

With current annual production of trivalent influenza vaccines estimated at around 280-300 million doses, global coverage is less than 5%, although it needs to be noted that there are large geographical variations. However, even in the US, where supply of flu vaccine may have amounted to up to 100 million doses in the 2005-06 season, demand still often outstrips supply. In fact, two recent vaccine shortages prompted the US government to encourage additional players to enter and supply the US market.

Ultimately, an improved vaccination coverage for the common seasonal influenza is a fundamental part of a strategy to enhance global preparedness for the anticipated avian influenza pandemic.

Pandemic preparedness

Seasonal, or epidemic influenza, has a global incidence of 10-20%, with an associated mortality of up to 500,000. Total direct and indirect costs of a severe epidemic are estimated at upwards of $12 billion in the US alone. However, a global pandemic could propel costs to $800 billion.

Experience from past pandemics has shown that 25-35% of the global population may become infected; and even quite conservative WHO estimates have placed the likely death toll at 2-7.4 million people. Importantly, this estimate was modeled on the relatively benign 1957 pandemic, while the highly virulent Spanish flu claimed an estimated 40-50 million lives in 1918.

As part of its pandemic preparedness plan, designed to contain the threat posed by the avian H5N1 strain, the WHO clearly states that adequate manufacturing capacities for pandemic vaccines can best be achieved by increasing vaccination coverage during seasonal epidemics.

Subsequently, the influenza market has seen a lot of activity: established players, notably GSK, have been expanding their manufacturing capabilities. For example, not only has GSK acquired new plants in Canada through its acquisition of ID Biomedical, but it has also taken over a former Wyeth manufacturing facility in Marietta, Pennsylvania, and further intends to expand its factory in Dresden, Germany.

However, depending on the timing of an eventual influenza pandemic, the sum of these efforts may well be insufficient, since current vaccine manufacturing technologies have significant limitations.

Moving away from egg-based systems

The most common epidemic influenza vaccines are trivalent inactivated influenza vaccines (TIVs), such as Sanofi-Pasteur’s Fluzone and GSK’s Fluarix. Live attenuated influenza vaccines (LAIVs), currently represented by MedImmune’s FluMist, only play a minor role. Currently, all these influenza vaccines are using egg-based manufacturing systems, which suffer from under-capacity, low yields, lengthy manufacturing processes (on average six months) and an inflexibility to rapid scale-up.

Maintaining tight quality specification on the finished egg-based vaccine product poses another enormous technical challenge. The avian H5N1 strain adds additional complications: not only would it be too virulent to be grown in eggs, but the supply of eggs themselves would be severely limited, as a great proportion of poultry would have been killed by the pandemic.

These significant disadvantages of current manufacturing processes and the increasing global demand in anticipation of an avian influenza pandemic constitute a vast commercial opportunity. R&D activities in the field are greatly encouraged by healthcare stakeholders worldwide. Thus, several companies are developing new, alternative technologies that address current shortcomings.

The most advanced lines of research focus on cultivating influenza viruses in mammalian cells. Companies active in this field include Solvay, Chiron and Sanofi-Aventis/Crucell. Mammalian cell cultures could eventually replace chicken eggs and, just as importantly, accelerate the vaccine production process. Unfortunately, cell culture-based vaccines suffer from safety concerns: some of the currently used cell lines may be carcinogenic. Datamonitor estimates that the first cell-culture based influenza vaccines will reach the US market in 2008.

Other alternative production technologies in development include FluBlok by Protein Sciences, a Connecticut-based biotech firm. FluBIok is a trivalent influenza vaccine using recombinant hemagglutinin antigens grown in insect cell cultures. Oxford-based PowderMed is developing a plasmid DNA influenza vaccine produced using a bacterial fermentation process.

Although all these efforts aimed at increasing global influenza vaccine supplies are advancing at a rapid pace, their significance for containing an avian flu pandemic remains highly uncertain. The timing of such an event and the virulence of the causative viral strain are unpredictable. The gene mutation enabling H5N1 to spread between humans, necessary for a pandemic strain, can happen anytime – or never.