Waiting to exhale

Waiting to exhale

With increasing awareness and ‘prevention is better than doctors’ phenomenon gaining ground, vaccines market is witnessing a lot of activity. But vaccines are not an easy market to tap. Nandini Patwardhan analyses the challenges that this market puts forth

In the year 1997, Shantha Biotechnics announced its arrival in the vaccine marketplace by launching the first ever r-DNA product, Shanvac B. Since then, there has been no looking back. Over the years, there have been quite a few players in this segment, both pure and integrated with a variety of offerings. What has remained constant over the years is the fact that various challenges and pressures are weighing down the vaccines segment which is all set to take off!

Red signal

Problems are aplenty. To start with, the industry is characterised by strong players leading to a high degree of competition. Competition has pulled down the sector which is now characterised by falling realisations. “The main challenge facing vaccine manufacturers is falling realisations for mass vaccines like Hepatitis B in the domestic market. This leaves the organisation with minimal funds to plough back in research for newer vaccines,” explains Varaprasad Reddy, Managing Director, Shantha Biotechnic.

Vaccines by nature are high maintenance products. They require complex infrastructure in place so that stockists and chemists in rural areas can store the products at the required temperature which generally ranges between 2-8oC. Vaccine R&D too requires high payoffs making it a complicated field to enter. “A pharma product can be launched by doing some bioequivalence studies. But as far as vaccines and biologicals are concerned, you need to do a huge human trials which is expensive,” states Adar Poonawalla, Executive Director of Serum Institute. These factors make the vaccine market a ‘spend more earn less’ situation.

“Vaccines are a volumes game with profits in numbers. All the vaccine manufacturers aim to get their vaccine listed as part of the Immunization Plan”

– Utkarsh Palnitkar Leader – Business Advisory Services

Ernst & Young

Adding to all the drag forces, funding becomes a big problem when it comes to new enterprises. However, today there are quite a few VC funds in the country, which are open to invest in the biotech sector which was not the case a few years back. Also after the initial funding, companies find it difficult to generate and utilise funds for expansion. “Indian companies have performed exceptionally well in the domestic and the lesser regulated markets. However, funding opportunities to drive expansion or drug-discovery plans is important to rise up the value chain,” claims Utkarsh Palnitkar, Leader-Business Advisory Services, Ernst & Young.

Though vaccine players do not have the margins advantage that other pharmacos have, they share similar disadvantages of pharmacos like the ageing of their product basket. “The pressures are to counter ageing of the product basket and ensure a good viable pipeline of products. As a result, some of the domestic companies have started investing in drug development in collabora-tions with various institutes,” clarifies Palnitkar.

While delaying the ageing of product bouquet might be a serious hurdle, vaccine players are also confronted by regulatory environment, logistic management, research and procuring and retaining qualified human capital. “Today it is difficult to find specific people trained for handling GMP and vaccine manufacturing processes,” declares Poonawalla. “The other thing is regulatory approvals. The process has improved a lot, but further speeding of process is the need of the hour. This can be possible only if the single window clearance system is in place,” he adds.

All these issues are however not reasons enough for companies to slip out of the vaccine market. In addition to dedicated pure players, the market is also a witness to pharma majors like GSK which are going heavy on vaccines; all indicating a silver lining. Nevertheless companies have come up with various business models to stay afloat in this segment.

Vaccine makers are now forging alliances for drug discovery and co-development of newer vaccines.

Bharat Biotech International has partnered with US-based Novavax to develop avian influenza vaccine for India and other developing countries from South East Asia. This initiative is in close conjunction with the Department of Biotechnology (DBT) and will therefore be a significant step in the public-private partnership development in public interest.

Serum Institute of India supplies vaccines to over 137 countries across the world and has been partnering with Chiron for development of a meningitis vaccine. It also has a tie-up with Gates Foundation and PATH for accessing testing technology at international level for developing pneumococcal vaccine.

Shantha Biotechnics is developing cholera and typhoid vaccines in co-operation with International Vaccine Institute of Korea, and rotavirus in conjunction with NIH. Shantha is also planning a vaccine for rotavirus and varicella zoster. They are working on measles and its combinations, meningiococcal vaccines, rotavirus, IPV, HPV, rabies and Japanese Encephalitis to name a few.

The Bill and Melinda Gates Foundation has pledged financial assistance and support for development of vaccines for diseases like malaria, HPV, Hepatitis B and pneumococcus. They are also keen to see development of vaccines against diseases like TB and HIV. ICMR in India is already supporting development of two types of vaccines for HIV/AIDS, one undergoing clinical trials in Chennai and another one at NARI, Pune.

Some new generation vaccines are being developed in close co-operation with premier research institutes like the National Institute of Cholera & Enteric Diseases, Kolkata; National Institute of Immunology, Jawaharlal Nehru University and All India Institute of Medical Sciences all in New Delhi; Central Drug Research Institute, Lucknow, Institute of Microbial Technology, Chandigarh, Indian Institute of Science Bangalore, Center for DNA Fingerprinting & Diagnostics, Hyderabad, National AIDS Research Institute and National Institute of Virology, both at Pune.

Making the right moves

It is a truth universally accepted in the business community that where there are lesser margins there are volumes. “Vaccines are a volumes game with profits in numbers. All the vaccine manufacturers aim to get their vaccine listed as part of the Immunization Plan to leverage the volume play,” opines Palnitkar.

Companies like Serum have been involved in capacity creation to maximise volumes. “It was my father Dr Cyrus Poonawalla’s (the Chairman of Serum) vision to look at increasing the capacities giving the volumes to satisfy the demands of the entire world in terms of measles, DPT group of vaccines, hepatitis vaccines and so many others,” beams Poonawalla. “Because we did it in such huge volumes, we always managed to keep the prices lower than the next highest multinational,” he adds. This strategy succeeded in fighting off competition. “This in turn benefited us as others found it too competitive to get into the market without enough pay off. The others weren’t able to see this and now they are trying to catch up,” he states.

Quite a few vaccine manufacturers go with the supply in bulk strategy. That’s where supply to supranational agencies like WHO, UNICEF as well as to the Government of India become major buyers, should the need arise. Serum Institute of India, Panacea Biotec and Shantha Biotechnics have been pre-qualified as vaccine manufacturers that agencies procure vaccines from at highly competitive prices.

Yet another favourite of vaccine makers is the export market. “Vaccine manufacturers like Serum Institute of India and Indian Immunologicals have a very strong global presence. Serum exports its vaccines to more than 140 different countries world-wide, whereas Indian Immunologicals is the largest supplier of vaccines for foot and mouth diseases,” explains Palnitkar. Exports are significant for vaccine manufacturers as they ensure a steady flow of revenues which can be re-invested in other efforts.

Though exports seem to be the focus, India with its history of infectious diseases also ranks high as a market. “Domestic vaccine market is attractive in terms of growth. It is more than double the pharmaceutical industry growth rate. Moreover, tremendous opportunities exist for launch of newer vaccines like rotavirus, IPV and DTP,” says Reddy. “Vaccines business is attractive as the domestic biopharmaceutical segment contributes to 75 percent of the total biotechnology market, wherein, 47 percent alone is the contribution of vaccines,” he elucidates.

According to Utkarsh Palnitkar, the Indian vaccines market is worth Rs 1800 crore in 2005-06, and the human vaccines segment is the fastest growing segment in this sector.

Prominent players include in this segment include Serum Institute of India, Panacea Biotec, Indian Immunologicals, Aventis Pharma, GlaxoSmithKline, Shantha Biotechnics among others. Top five vaccines in India are for Rabies (Rs 90 crore), Varicella (Rs 70 crore), TT (Rs 60 crore), HiB(Rs 45 crore), MMR(Rs 40 crore) and Hepatitis B (Rs 32 crore).

Globally, five major companies contribute to the vaccine sales worldwide; these are GSK, Aventis-Pasteur, Merck, Chiron, Wyeth. These five MNC’s contribute to around 40 percent of the world’s turnover of vaccines. Major bulk buyers of vaccines are supranational agencies like UNICEF and PAHO.

Increasingly the global MNC pharmaceutical companies are launching their portfolio of products in India with minimal lag time from the global launch. The US-based drugmaker Wyeth is poised to bring into India its $1 billion paediatric vaccine for pneumococcal diseases. French vaccine maker Sanofi-Aventis influenza vaccine in India in a week and four more are expecting regulatory approvals by mid-2006.

UK-based GlaxoSmithKline, for which vaccines are a Rs 100 crore business in India set up a vaccine manufacturing facility in Maharashtra earlier this year. GSK recently got regulatory clearance for clinical trials of Infanrix hexa, a six-in-one combination vaccine.

A bright tomorrow

A variety of options exist for a vaccine company to attain a competitive edge. Some of them are enhancing capabilities, increasing R&D and manufacturing activities.

It is also forecasted by many that the vaccines market will witness a boom in the coming years with the government agencies with a bouquet of funding opportunities. For instance, the Technology Development Board (TDB) is the first organisation to encourage commercial enterprises to take up technology-driven projects. It offers soft loans to enterprises for commercialising innovative indigenous technologies and adapting imported technologies to Indian conditions. Some of the projects financed include production of recombinant Hepatitis C viral antigens by the Hyderabad-based Sudarshan Biotech and pentavalent vaccine (DTP+Hib+HepB) by Shantha Biotech.

Though vaccines represent a crowded market, there is a way ahead in terms of new generation combination vaccines. “Combination vaccines hold significant opportunity for Indian manufacturers as they possess inherent advantages in terms of low delivery cost and single-dose administration,” observes Palnitkar. Also vaccines for ailments that are common in our part of the world like flu, dengue, rotavirus, cholera and Japanese encephalitis make way for an opportunity. There is scope in improvements to commonly available vaccines like acellular pertussis instead of whole cell pertussis in DTP and injectible polio virus instead of OPV. According to Palnitkar, recombinant vaccines segment will witness emergence of multivalent vaccines with improved patient compliance and newer vaccines to meet the unmet medical needs of the people in the next few years.

However, it is going to be no easy path. “The critical success factor is to develop a vaccine that addresses the healthcare needs of our country at a price that is affordable to majority,” affirms Reddy. Since pricing dynamics will continue to play a critical role, active participation and support from the government is required to fill the gaps in the system as well as the industry.