by Florian Sommer
As pharmaceutical giants stare out over their well-publicized cliffs of patent expiries, vaccine industry participants are bathing in a comparative ray of sunshine. What was once an overlooked backwater has been sought out and picked over in a conglomerate search for growth. The swine flu has further enforced this change.
Vaccines used to be relatively unattractive products, with a high amount of upfront investment required, mediocre margins and a high amount of risk involved in achieving any return. The production and manufacturing plants are heavily regulated, spates of lawsuits were always a threat from possible side effects and in the case of a serious national emergency, manufacturers were occasionally forced into giving up the intellectual rights covering their products. Given those risks in what is a relatively small, bulk-order and price-based industry, it is no surprise that the number of manufacturers has consolidated from around 26 major players in the U.S. in the late 1960’s, to around 5 today.
However, as recent pandemic threats have shown, the health of any one nation is now increasingly dependent on the health of the rest of the world. The swine flu scare in particular, has again prompted governments in trying to address a global lack of manufacturing capacity. This should continue a trend that has emerged since avian flu, whereby several of the afore-mentioned issues have been rectified through funding, as authorities had to bridge the development gap that companies were unwilling to cross. Large pharmaceutical companies have also sat up and taken notice, and have been cornering the sector through acquisitions and partnerships. Partnerships are becoming the preferred model as they allow the smaller independent firms to retain innovation and leverage off of much larger sales and marketing capabilities. The larger firms benefit from outsourcing the early-stage risk, instead focusing on their specialties of later stage trials and bringing vaccines to market. The innovation continues to breed results; vaccines are being targeted not only at high-risk infectious diseases but also increasingly as therapeutic answers to highly complex diseases such as AIDS and cancers.
The consolidation trend has been ongoing for many years now, leaving the vaccines space with few sizeable independent companies. However, as the industry continues to transform itself, those that do remain are likely to see the fruits of their research and development highly valued when negotiating commercial agreements.
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