Smaller players are seizing opportunities as well. ID Biomedical (recently acquired by GSK Biologicals), Acambis, Avant Immunotherapeutics, and other biotechnology firms have developed a thriving discovery role as the market expands. Avant discovered and developed a rotavirus compound and licensed it to GSK. These biotechnology players are also applying vaccine technologies to non-traditional therapeutic areas. For example, Avant is working on a cholesterol-control product. Beyond discovery, players have been innovating in other aspects of vaccine technology as well. Over the past 50 years, simple alum has been the dominant adjuvant, the additional ingredient that facilitates the action of the antigen in a vaccine. Today, companies such as Corixa, Coley Pharmaceutical Group, and CSL Limited are developing new adjuvants that may revolutionize the field. Other biotechnology and medical device firms are also creating new production mediums and delivery mechanisms.

Opportunities and Challenges

While the outlook for vaccines is quite positive, senior industry executives face four high-stakes issues as they build their vaccine businesses:

• Business design choices
• Go-to-market strategy
• Global market opportunities
• Alignment of product development with operational strategy

When a market is relatively stable, business designs can endure and succeed for a long time. However, major changes in a market, such as those occurring in vaccines, can render existing business designs obsolete. This requires incumbents and new entrants to consider (or reconsider) the design choices they have made.

One of these choices is the basis on which they will compete. In the old vaccine paradigm, companies tended to compete by being first to market, achieving licensure, convincing governments to recommend the use of their new product, and facilitating physician and patient education. However, in the new vaccine era, that paradigm is changing, as new products are less likely to enter the market with limited competition, given the growing pipelines of products targeting a wide range of disease areas. In this more dynamic environment, companies will have to determine how to compete along other dimensions, such as product differentiation. The inter-pandemic influenza market is a good example of this trend, as nearly 10 products using different technologies and delivery systems are currently in development by companies including Baxter, GSK, and Chiron.

The Internet is encouraging patients and parents to play a more prominent role in vaccination decisions. In a 2003 survey of US pediatricians, over half indicated that parental concerns about general vaccine side-effects, as well as past intussusception issues with Rotashield (Wyeth's withdrawn Rotavirus vaccine, the first of its kind), would make reintroduction of a Rotavirus vaccine difficult. Valid or not, parental concerns about thimerosal, links to autism, and adverse side effects will affect uptake and need to be addressed.

In light of these developments, vaccine market participants need to carefully consider the age groups they target, and the way they position products in the minds of patients and influencers. In addition, they need to think carefully about the make-up of their product portfolio and the allocation of R&D spending.

Focused technology firms, for their part, must carefully consider which advancements will improve their customers' systems economics. For example, a biotech's decision about whether to develop a new viral or bacterial production medium will hinge not only on how much this innovation can improve yields in the bulk production process, but also on how such improvements solve specific problems for vaccine manufacturers—including capacity constraints, quality issues, and cost positions.