How the new vaccine market was born
Barely a year into his tenure as Glaxo's chief executive officer, Andrew Witty outlined the company's achievements during a conference call in October. Quarterly profit was up 30 per cent from a year earlier, orders for H1N1 flu vaccines had topped 400 million doses and the company was close to becoming the world's largest vaccine maker.
"I think the momentum of this business is going in the right direction," Mr. Witty told analysts. In short, Glaxo's big bet on vaccines was bearing fruit. And perhaps most surprisingly, the Swiss were buying again, despite having spent millions on H5N1 vaccine it never used.
This, Mr. Witty explained, was the brilliance of the new vaccine market. Glaxo had turned the Swiss situation into an opportunity to sell more vaccine.
Because adjuvant could be paired with any antigen, the leftover stockpiles could be used for other outbreaks by simply plugging in a different antigen, depending on which virus looked most threatening.
Once a country bought a large supply of adjuvant, it was locked in as a buyer for Glaxo's antigen for years to come. Countries were not just vaccine buyers now; they were subscribers, coming back annually to the company for more and different types of shots.
"If you go with an adjuvanted technology, you can actually keep a stockpile of your adjuvant and then simply rotate a new antigen in at the last minute," Mr. Witty said.
That is basically what the leading countries like Switzerland did.
"The real business is a business of stockpiling. It is not a reactive market. It is something that is proactively being built with governments," Mr. Monteyne said.
Other countries, including Canada, took notice of what the Swiss were doing. In the past 12 months, the number of countries using such stockpiling methods has grown to 60 from less than 10. When H1N1 broke out and temporary vaccine shortages occurred, Canadians learned that the federal government has become a big buyer of adjuvants.
As far as the vaccine makers are concerned, adjuvants are the future because they encourage countries to stockpile what they've bought from the drug companies. Asked by an analyst whether the company could keep generating the record vaccine profits it saw in 2009, Mr. Witty didn't hesitate: Yes, it could.
"What's been created this summer is essentially a stockpiling marketplace, which over a period of time will have to be refreshed," Mr. Witty told analysts. "And that's exactly where we see there being some kind of steady state" for the vaccine industry.
New fears over H1N1 were the catalyst to a completely new way of buying and selling vaccines that many countries are expected to follow. Flu shots are now a product for the masses. Non-seasonal flu shots such as H1N1 could become a yearly norm.
Soaring vaccine sales are also pushing companies to chase profit in other types of shots. The race is now on to develop blockbuster vaccines, defined as those that bring in more than $1-billion annually. Two recently developed vaccines - Prevnar for pneumonia and Garasil for cervical cancer - have become blockbusters, selling close to $2-billion a year.
For now, though, the flu is the driver of all of this.
Flu Inc. is fed by the worry of the unknown, the fears of government that the next pandemic lies just around the corner, or tucked away in some far off area of the world. In the case of H1N1, the threat of illness for 40 per cent of the country was real enough that they went for the shot, sometimes lining up for hours to get it. And that has spawned a new business.
"We are just at the early days of a new era which is just exploding," Mr. Monteyne said. "The whole vaccine industry is changing."
Dr. Ossi sees it as a permanent shift in habits. "The volume of vaccine that countries are asking for has gone up exponentially," he said.
"How many people got flu shots five years ago? Even the very high-risk people out there - the elderly, with chronic lung disease - only 60 per cent of those were vaccinated. Otherwise, many healthy people never thought of getting the flu vaccine.
"Now, all of a sudden, there's a huge demand and a lot of people are jumping on the bandwagon. It's something that will continue for good now. It's a new marketplace."
The Globe on H1N1
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