Vaccines getting hot

For decades, infectious disease vaccines were viewed as unattractive products with low margins, small markets and liability issues. But fears of global influenza and avian flu pandemics, the SARS outbreak a few years ago and worries about bioterrorism and the spread of diseases like tuberculosis to industrialized countries have sparked what is likely to be more than a passing interest in the field.

At the same time, the risk/reward ratio for vaccines has improved: Successful vaccines become revenue annuities, as entry barriers are high and there is practically no generic competition. Also, prices have become less constrained, and the market has seen its first blockbuster product in Prevnar pneumococcal vaccine from Wyeth (WYE, Madison, N.J.).

As a result, market leader GlaxoSmithKline plc (LSE:GSK; GSK, London, U.K.) has expanded its vaccine development and manufacturing capabilities through several acquisitions, while Novartis AG (NVS; SWX:NOVN, Basel, Switzerland) has moved to jump into the space through its proposed acquisition of Chiron Corp. (CHIR, Emeryville, Calif.).

While NVS is new to the game, GSK, WYE, Merck & Co. Inc. (MRK, Whitehouse Station, N.J.) and sanofi-aventis Group (Euronext:SAN; SNY, Paris, France) are old hands.

"These four companies have turned vaccines from a public commodity into an industry," Alexander von Gabain, CEO of vaccine play Intercell AG (VSE:ICLL, Vienna, Austria), told BioCentury. "They have done that by consolidating the industry and by building a portfolio of potent vaccines."

By recreating the vaccine industry, they also have attracted a small group of newcomers (see "Infectious Vaccine Players," A5).

What's next, according to the big vaccine players, is more blockbuster vaccines targeting new indications.

(Almost) all about flu

Big pharma's changing attitude toward vaccines is most immediately obvious in the influenza field, where consolidation has gone on at a brisk pace.

GSK's deal to acquire ID Biomedical Corp. (TSX:IDB; IDBE, Vancouver, B.C.), announced in September, was the latest of several steps in the pharma company's strategy to meet expected worldwide demand for flu vaccines, to transform itself into one of the leading global influenza vaccine manufacturers and to prepare for the threat of a flu pandemic.

IDB has facilities in Canada and the U.S. and is expanding and upgrading its Canadian manufacturing facilities, which are expected to produce about 75 million doses of the company's Fluviral egg-based influenza vaccine per year, starting in 2007. Fluviral is marketed in Canada and

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