December 1, 2009 (Vol. 29, No. 21)
Harry Glorikian Senior Executive, Board Director, Consultant, and Author
Novel Production Methods, Emerging Markets, and Improved Adjuvants Also Promoting Growth
Fears about influenza pandemics and the associated swine flu have brought the vaccine industry into the media spotlight recently. As profits soar and vaccine manufacturers struggle to meet the growing demand for seasonal flu vaccine, it is important not to overlook the other areas in the vaccine market that may also be poised for tremendous growth in the coming years.
The vaccine market today is composed of five main players and several smaller companies, with primarily low-margin vaccines aimed at prophylactic uses. The majority of these vaccines, including current flu vaccines, are manufactured via a cumbersome and antiquated egg-based production process. The high fixed cost associated with the manufacture of vaccines has prevented smaller players from entering this condensed market.
The vaccine industry will soon see a shift from conventional methods toward a new paradigm in which vaccines are manufactured quickly, at a lower cost, and by more players globally. This will be facilitated by new health initiatives in the world’s emerging economies, technological developments that will significantly advance the way in which vaccines are produced, and the introduction of therapeutic vaccines aimed at treating patients with specific conditions.
These new developments may soon disrupt the established vaccine market and create additional avenues for growth.
Economic improvements and growing government attention to public health agendas in emerging economies are leading to increased vaccination efforts such as national immunization programs. Driven by the aging population, increased purchasing power of the middle class, and improvements in healthcare funding, the need for vaccines is growing across all emerging economies, particularly in China.
Due to regulatory barriers for new entrants, the Chinese vaccine industry was heavily monopolized by China National Biotec Group; however, over the past two decades, the barriers have relaxed and the Chinese government has created initiatives to encourage research and development of new vaccines. Concurrently, about 50 new vaccine manufacturers are entering China’s $1 billion vaccine market.
This trend can also be seen in Brazil, where the Ministry of Health created a strategy to promote the development and production of vaccines among Brazilian manufacturers. As a result, the majority of vaccines administered in the country were provided by Brazilian producers. Within the majority of emerging economies, significant effort is being placed on national healthcare plans, which is also driving growth of the vaccine market.
This increased activity has not gone without notice. As growth slows within developed markets, big pharma is looking to emerging markets to offset the diminishing contributions. Recently, Novartis purchased an 85% stake in Zhejiang Tianyuan Bio-Pharmaceutical, a Chinese vaccine manufacturer controlling 3% of the total vaccine market in China. GlaxoSmithKline (GSK) is also aggressively pursuing entry points in many of the emerging markets. The company recently signed an exclusive 10-year agreement worth $2.2 billion to supply Brazil with its pneumococcal vaccine, and formed a partnership with Brazil’s Fiocruz foundation to develop vaccines for public health concerns.
GSK also acquired a 41% stake, valued at $31 million, in Shenzhen Neptunas Interlong Bio-technique to make flu vaccines for China. Sanofi-aventis continues to expand its presence through ongoing efforts to grow its employee base, establish more manufacturing plants and clinical development units, and maintain a relevant, broad product portfolio that caters to local needs. These initial movements into emerging economies have focused on investments in capacity and the identification of promising opportunities, factors that will be an immediate priority for big pharma.
Updating Manufacturing Practices
In addition to seeking opportunities in developing economies, vaccine manufacturers are increasing value by improving the process by which vaccines are manufactured. Since its inception, vaccine production technology has consistently advanced toward producing better, more efficacious, and safer vaccines.
For example, in the mid-1980s, the production of hepatitis B vaccine was converted from a plasma-derived vaccine to a recombinant vaccine for increased safety. In the early 1990s, the whole-cell Pertussis vaccine was replaced with an acellular Pertussis vaccine in order to increase the purity of the vaccine and reduce side effects. Vaccine production systems are still continuously being improved. The major shift in development occurring today involves changing the egg-based host system to one that is cell-culture based.
The egg-based method of vaccine production, in place since the 1940s, requires significant starting material, at least six months for production, and is extremely susceptible to contamination events. These inefficiencies can thwart the supply of vaccines and heighten the public susceptibility to disease. The migration to a cell- or tissue-based culture system will help to mitigate several of these issues and ensure an adequate supply of vaccines.
Several companies are working toward addressing the current problems present with vaccine production. Growing vaccines in cell- and tissue-based systems alleviates the need for long lead time and can allow for better control and scale-up during manufacturing. Cell-based vaccines also have the added benefit of increased tolerability, as allergic reactions to egg components would no longer be an issue.
Cell- and tissue-based approaches primarily involve the use of Vero cells, Madin-Darby kidney cells, and PER.C6 mammalian cells. Predominant global vaccine manufacturers are already pursuing this route for vaccine production, and several have ongoing Phase II and III trials with mammalian cell-based production systems for influenza vaccine.
Recent German approval for Novartis’ cell-based vaccine and Abbott’s recent acquisition of Solvay further signal the shift toward cell-based production systems. VaxInnate is also developing a cell culture-based E. coli bacterial system to produce influenza vaccine that is, currently, in preclinical trials.
Once the appropriate vaccine has been manufactured, several steps can then be taken to improve the antigenic effect of the vaccine. Adjuvants—compounds that can increase and/or modulate the effect of an antigen—are used to increase vaccine efficacy and immunogenicity. Only a few adjuvants are approved for use with human vaccines, including aluminum salts and MF59 (oil-in-water emulsion).
Aluminum salts have been traditionally used due to their safety, however, they do not work very effectively. New developments in adjuvant science aim to improve the immunogenicity of antigens by increasing both the intensity and duration of the immune response. Novel adjuvants in development include immunostimulators and microparticulate carriers.
Several new companies are entering the market and working to create effective adjuvants for use in vaccines. Isconova has developed an Immune Stimulating Complex technology platform that forms different matrices of adjuvants that, when used with a vaccine, lowers the required dosage of antigen. Intercell’s adjuvant (IC31) reportedly induces a wide array of immune responses and is a part of numerous vaccine candidates in clinical trials. Other developments such as Inovio’s DNA-delivery system aim to introduce DNA as a vaccine that is then inserted into cells where they will be translated into antigenic protein that will trigger an antibody and immune response. These developments, as well as many others, should improve the efficacy of standard vaccines, thereby allowing lower dosage levels and more cost-effective vaccines.
Until recently, vaccines were largely associated with preventing disease. Applications are now emerging, with approvals forthcoming, for vaccines that treat people with specific conditions. Therapeutic vaccines target a variety of indications including addiction, multiple sclerosis, HIV, and, primarily, cancer.
Melanoma, lung, pancreas, and prostate cancers have been the primary indications targeted by cancer vaccines in development due to their commercial attractiveness. Currently, none of these therapeutic vaccines have received FDA approval, however, there are several promising products working though the pipeline. The cancer vaccine that is closest to approval is Dendreon’s Provenge vaccine for prostate cancer. The future for therapeutic vaccines overall is uncertain, but with Dendreon paving the way with clinical trials and a new business model, there is significant potential other players will follow suit in this space.
Vaccines, antigenic agents that stimulate the immune system to recognize disease, have successfully combated several ailments through the course of history. Recent technological breakthroughs around novel targets, adjuvants, and production systems are creating new avenues for market growth. A host of new vaccine companies are set to enter the market space with the potential to generate success both in emerging markets and in areas previously not addressed by vaccines. These factors will disrupt the vaccine industry, creating significant growth and opportunity that will last far beyond the flu season.
Harry Glorikian ([email protected]) is managing partner, and Santosh Kuruvilla is an analyst at Scientia Advisors. Web: www.scientiaadv.com.