Vaccines: Market on the Rebound - Pharmaceutical Executive

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Vaccines: Market on the Rebound
The vaccine business was safely inoculated against higher profits. But innovative therapies and looser government controls may spark an outbreak. Ready for opportunity?


Pharmaceutical Executive


Go-to-market strategy Many emerging vaccine pipeline candidates look nothing like traditional products. Some target adolescents and adults rather than children. Others aim to enhance quality of life, rather than preventing diseases with limited treatment options and life-threatening consequences. More than a few raise sensitive issues—in particular, the sexual activity of young women—and will require difficult conversations among doctors, patients, and their families. In addition, some of these new products will likely be off schedule, leaving greater discretion to physicians and patients, and posing additional reimbursement challenges.

Consider the experience of MedImmune in 2003, when it launched FluMist, a live, attenuated flu vaccine. A highly efficacious product that is administered nasally, FluMist represented a real innovation. The timing of launch was fortuitous as well, given supply shortfalls in the traditional killed vaccine. Nonetheless, initial results fell far short of expectations, as MedImmune sold roughly 20 percent of the doses it produced for the 2003 to 2004 flu season. While product-design features (e.g., refrigeration requirements) played a role, so did the go-to-market strategy: Prices were set at twice that of traditional vaccines, while an expensive, mass-market campaign did not raise sufficient product awareness. And distributing the new vaccine primarily through pharmacies instead of doctor's offices constrained availability. The new HPV by Merck and GSK will require creative, proactive go-to-market strategies as well.

Global market opportunities As governments worldwide commit more funding to vaccine procurement, and support for vaccines in lower-income countries grows, a global vaccine market is emerging. But many of the most threatening diseases in the developing world, such as malaria and cholera, barely afflict high-income countries. So vaccine companies cannot recoup R&D costs in high-income countries and then discount the product to lower-income markets. Early pioneers in these markets have formed development partnerships, such as the one between GSK and the Gates Foundation's Malaria Vaccine Initiative, but the winning model has yet to be determined. Moreover, even when diseases are found in regions with varying income levels, significant differences often exist, both in terms of the nature of the disease (e.g., which serotypes are present) and the vaccine characteristics appropriate across markets, such as cost, efficacy, and side-effects. For example, most high-income markets have a DTP vaccine that contains an acellular pertussis antigen; many lower- and middle-income markets want one with whole-cell pertussis. The polio vaccine market varies along the same lines.

So companies seeking to address global markets must decide if they want to develop a single vaccine applicable to all regions or develop separate vaccines in parallel or in sequence. This can be a difficult decision with many tradeoffs. Companies considering these opportunities must evaluate the impact of different product designs on the likelihood of successful development, time-to-market, and the value of first-mover advantage. In addition to product features (e.g., the number of serotypes addressed by the vaccine), companies will need to decide whether to apply existing manufacturing processes or to develop new processes that might be more efficient in the long-term. While this may seem purely operational, this decision can dictate the markets a company is able to pursue, particularly if the existing process is inefficient and results in higher production costs and constrained capacity. In such situations, the company may have priced its products out of middle-income and lower-income markets.

Alignment of product development with operational strategy Traditionally, vaccine companies have maintained two separate decision making tracks. Product-development personnel determine a vaccine's characteristics with limited involvement early on by the operations staff. Since decisions made by R&D teams as early as pre-clinical stages of development often place serious constraints on manufacturing options, the resulting cost and capacity characteristics may not be appropriate given market conditions. For example, the R&D team may choose to increase the dosage of a particular vaccine from 25 mcg to 50 mcg instead of using a more complex adjuvant to increase efficacy. This reduces effective capacity at the bulk-production step by 50 percent for any given fermenter size.


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