Almost every day, we hear another story about the spread of avian flu and the possibility that it will lead to a pandemic rivaling the disaster of 1918. Responding to this growing fear, the president recently announced a $7.1 billion plan that would include purchase of 20 million doses of vaccine to protect against the current strain of avian flu. The plan also included incentives to develop new production methods, and protection against liability claims so that vaccine makers would add U.S.-based facilities. “If a pandemic strikes, our country must have a surge capacity in place that will allow us to bring a new vaccine online quickly and manufacture enough to immunize every American against the pandemic strain,” said the president. (For more on the White House’s strategy, see my From the Editor commentary on page 12.)

Of course, this news didn’t occur in a vacuum. A year before the current panic, the U.S. faced a shortfall of 48 million doses of flu vaccine after Chiron revealed production problems at its UK facility. Before that, we worried about SARS. Before that, we had West Nile virus. Before that, it was anthrax. It seems we’ve been on the verge of a pandemic or a biological attack for years now.

With all these viral plagues ready to sweep the earth, you’d think that the vaccine market would be poised to rival that of therapeutic drugs. In reality, vaccines comprise a small portion of sales at the major players in the field, except at Chiron, where production problems left it vulnerable to a recent takeover by Novartis. Vaccine products have approximately $4.9 billion in U.S. sales, according to a recent report from the Freedonia Group. Despite our ongoing pandemic panics, conventional vaccines don’t have the cachet or profit margins of small-molecule drugs and biologics.

Market Shift

That may be changing. Several trends are fueling a resurgence in the vaccine market: the aforementioned pandemic fears; new production technologies; next-generation “therapeutic vaccines”; terror fears; needle-free delivery; and renewed efforts to vaccinate the Third World against easily preventable (by our standards) diseases.

One shift in recent years has been the introduction of higher-priced vaccines. Some of these products have reimbursement levels similar to therapeutic drugs, creating a greater market incentive for drug companies. Both major Pharma companies and small biotech firms are pushing innovative new vaccines through their pipelines.

Merck and GlaxoSmithKline are both working on vaccines to prevent human papilloma virus (HPV), a leading cause of cervical cancer. Merck’s Gardasil is closer to filing with the FDA, especially after Phase III reports showed the vaccine completely prevented early-stage cervical cancer and precancerous lesions in women caused by the two most common forms of the virus. (In our business, it’s rare that you read “completely” or “100%” in any clinical results.) A GSK spokesman contended that the market for cervical cancer vaccines may reach as much as $7 billion worldwide by 2010. Clearly, there are unmet needs that new vaccine technologies can help reach.

Rick LaPointe, senior vice president of operations at HollisterStier, a provider of lyophilization and fill/finish services, remarked, “Big Pharma is getting interested not only in ‘common, everyday’ vaccines like the flu, but in developing new-generation vaccines with protein-based products.” He pointed to the recent acquisition by GSK of lyophilization facilities in Marietta, PA as an indicator of increased strength in the vaccine market.

In fact, Glaxo recently announced plans to double its production of flu vaccine to 35 million doses, and to increase production of its antiviral drug Relenza. In addition to the Marietta acquisition (formerly a Wyeth facility), GSK also recently bought Canadian vaccine maker ID Biomedical, and is expanding its production facilities in Germany.

But these factors will have to balance out the consolidation and general abandonment of the market that haven taken place in recent decades. Several companies we spoke to said that the historic trend by Big Pharma away from vaccine development could be chalked up to resource allocation issues. Simply put, there was more money and less hassle to be had in developing therapeutics, and that’s where the resources went.

“Ten years ago, vaccines in the Pharma space were not commercially as attractive as therapeutic products,” said Peter Van Hoorn, executive vice president business development of the Biopharma business of Cambrex Corporation. “There were some obvious reasons for that. Typically, vaccines are administered once or twice per patient, give protection, and have done their job. Also, volumes are low, and the pricing is constrained by policy decisions, sometimes below market cost.”

Unfortunately, a key contributor to that decision appears to be the Clinton administration’s well-intentioned “Vaccines for Children” plan. The policy, stemming from the failed 1993-4 attempt to provide universal health care in the U.S., seems to have caused long-standing vaccine makers to leave the market, with its policy of forcing 50% discounts on vaccine makers in exchange for government-purchasing of one-third of the nation’s supply (“Think of the children!”). It’s a matter of record that there were 25 companies producing vaccines for the U.S. market in 1973, and only five doing so at present.

In 2003, the National Academy of Science’s Institute of Medicine contended that the government’s vaccine-purchasing policies led to “declining financial incentives to develop and produce vaccines.” In our irony-free era, Sen. Clinton (D-NY) has called for a Government Accountability Office investigation into the flu vaccine supply and distribution system.

The Shield

Another government program is currently spurring on advances in vaccine development: Project BioShield. The federal program is working with a variety of Pharma and Biopharma companies to protect the country against a biological attack, and one key aspect of Project BioShield is a series of vaccine programs, including second-generation vaccines against anthrax and smallpox.

Like any federal enterprise, Project BioShield has had its share of problems. Its highest profile deal—a $877.5 million contract with VaxGen for 75 million doses of a next-generation anthrax vaccine—was not received warmly in the industry. Some criticized the fact that the government purchaser handed a contract of that size to a company that didn’t have the manufacturing capacity on hand to meet it. One exec told me his reaction at the time was, “Oh, come on, guys! Surely you screened for companies that have the capacity to actually make the product!”

Still, most of the people I spoke to for this article contended that BioShield has helped jump-start the vaccine industry in the U.S., especially in the field of new product development. Said Nick Hyde, global business director for Dowpharma, “I think Project BioShield has yielded at least a 10% increase in the size of the vaccine market. There are liability issues that remain, but the project has made it more financially feasible for companies to get into this business. And because vaccine-makers are dealing directly with one customer (i.e., the government), it’s more attractive to smaller companies, since they don’t need a 5,000-strong salesforce calling on all the primary healthcare venues.”

One of Dowpharma’s entry-points into the vaccine industry is its Pfenex expression technology, a pseudomonas-based technology for the production of recombinant proteins. Said Mr. Hyde, “We’re excited about the vaccines area because we believe there is a major trend toward the use of protein-based sub-unit vaccines. Approximately 50% of the development pipelines involves protein-based candidates, and many of those products are highly relevant to our Pfenex protein expression system.”

Dowpharma is working with Dor BioPharma for production of BT-VACC, a vaccine against botulinum toxin. The product is in preclinical development, where it managed to demonstrate protection or prolonged survival in animals against 30,000 times the lethal dose of  botulinum toxin. The Pfenex technology is intended to expedite production of the three antigens in the vaccine, so the product is ready to move from lab scale to cGMP production in time for clinical production.

“Government has been funding a number of companies’ research into vaccines,” added Mr. LaPointe. “Anthrax has been the most high profile—along with smallpox—but there are others. This level of interest and funding has enabled some companies to get started and survive in a competitive market. The incentives are certainly in place to fund the development and speed the growth of a lot of biotech companies.”

HollisterStier is working with several BioShield-funded companies. Mr. LaPointe mentioned that the startup nature of those new vaccine companies is a natural fit with the CMO arena. “If a small, startup biotech company has its survival predicated on its vaccine technology, it’s not going to spend capital building manufacturing equipment. So it’s very logical that those firms will outsource their manufacturing.” He added that smaller sponsors may be inclined to work with smaller CMOs. “We’ve heard this numerous times from clients. They like the size and flexibility of a smaller CMO, one closer to their scale.”

Not everyone is as sanguine about the BioShield initiative. Cambrex’s Mr. Van Hoorn remarked, “The vaccine landscape around the BioShield effort has some issues, because the business process is not as attractive as other commercial vaccine programs. There is a tendency for deals to be more back-end loaded rather than milestone based because of the focus on the stockpiling part.”

He added that product liability remains a big concern, as it is throughout the vaccine field. “The government is determining liability on a case-by-case basis. There are concerns around conducting clinical trials with vaccine products in humans since they are usually very abbreviated trials.”

After all, it’s not very easy to develop clinical vaccine trials that are also ethical. It’d be easy to find out if a vaccine provides protection against a particular disease, but only by deliberately exposing your clinical patients to the virus. “I’m not a specialist in the clinical space, but it certainly makes for a difficult landscape,” said Mr. Van Hoorn.

Also, while Project BioShield has opened plenty of doors for development, that’s not to say it’s risk-free for Biopharma companies or the CMOs they work with. Nabi Biopharmaceuticals’ vaccine for staph infections, StaphVax, recently failed in Phase III trials. Vaccine or therapeutic, BioShield or VC-funded, Phase III is Phase III. Contractors who were expecting to work with Nabi on commercializing StaphVax may now have to scramble for new products to fill their lines.

Chicken and/or the Egg

Clinical failures notwithstanding, the biggest change for vaccines may be in the means of production. The long manufacturing method for the flu vaccine has been getting plenty of press lately, and it’s left people befuddled as to why the production process should take nearly nine months. There are plenty of regulatory hurdles to clear, but the market is wide open for companies that can develop a better mousetrap when it comes to flu vaccines.

As our demands have increased, and as other vaccines have grown more complex, companies are looking to bring vaccine production into the biotech age. Presently, flu vaccine is grown in chicken eggs, a fixed-speed process. Some companies, including Sanofi-Pasteur, are trying to use the cell-culture method to produce much more vaccine in a shorter timeframe (approximately four months), while a few others are experimenting with DNA-cloning vaccines. This latter model, according to its proponents, could yield 500 million easy-to-administer doses in a span of three months. As with any experimental technology, we’ll believe it when we see it. Still, it’s a good sign that companies are willing to investigate new methods of production.

Mr. Hyde from Dowpharma summed up the past resistance to change, saying, “If something has worked well enough for the past few decades—there hasn’t been a true pandemic since 1918—there’s simply no pressure to change. But when you get an event like last year’s production failure at Chiron’s facility, you get a wake-up call. When that coincides with the development of more advanced technology, it can work out for the best. But unless you have a new solution to a problem, the wake-up call doesn’t serve much good.”

Helene Pora, Ph.D., vaccine application development director at Pall Life Sciences, agreed that Biopharma developments are fueling innovation in vaccines. She remarked, “A vast majority of the pipeline of new vaccines is due to small Biopharma companies. The question is: what proportion of the successful products will be acquired by one of the Big Five vaccine manufacturers? Those five companies receive around 80% of the revenues but represent less than 50% of the total number of vaccine doses produced.”

Pall produces disposable components for bio-manufacturing and vaccine production. Dr. Pora contended that new methods of vaccine production can benefit greatly from disposable systems. “These systems will help improve cleaning and validation issues (especially with the potent micro-organisms in the upstream parts of the process), make conditions safer for the operator, and offer flexibility to ramp up production,” she remarked.

The nature of the new generation of vaccines also presents challenges to the CMO field. “From a molecular standpoint, vaccines are extremely diverse,” said Mr. Van Hoorn. “There’s probably not one CMO that can deal with that whole spectrum, so it’s a fragmented CMO market by definition. There will be some companies that can handle virus-based products. Others cannot, by definition, because you can only mix-and-match so many different technologies in a single facility.”

Mr. Van Hoorn felt that larger vaccine companies consider CMOs as a viable option, but mainly an adjunct to their own capabilities. “The big players invest internally in their vaccine development and manufacturing capabilities, but not in certain directions, where they find it better to rely on a CMO for a distinct technology or scale of operation. One of the challenges for a CMO is figuring out what to include in your portfolio of production technology. If you have a specialty technology in-house, then it’s probably harder to get good use of it and make a return on investment.”

The market for vaccines is clearly on the rise, driven by both innovation and terror. Contract service providers have a significant role to play, with manufacturing, process development, finishing dosage forms, and more.