Effective manufacturing strategies will be a key determinant of vaccine success
The introduction of higher value vaccines, like Prevnar, for example, which have the potential to generate annual sales in excess of $1 billion, could change the competitive dynamics of the vaccine field. This is suggested in a new report by independent market analysts Datamonitor. As competition is likely to increase, vaccines will begin to resemble the model for conventional pharmaceutical products, requiring rapid market entry in order to minimize lost revenue and avoid the threat of competition. Therefore, companies will need to enhance their manufacturing capabilities, in terms of volume and efficiency, in order to compete effectively within this market.
The authors of the report see the industry having to meet with future pressure to reduce cycle time while improving on quality, as they strive to maximise sales growth.
Consequently the sector will need to make considerable capital investment in improved and extended production capacity.
The alternative scenario is that companies will consider out-sourcing their manufacturing as a core strategy.
Vaccine manufacturers haven’t followed the industry trend.
The pharmaceutical industry as a whole has exhibited a clear trend towards outsourcing its manufacturing during the past decade. While procuring companies have been reluctant to outsource in the past, because of concerns related to quality assurance, there is a financial imperative to reduce capital infrastructure costs and focus on core competencies. This factor has fuelled a burgeoning demand for outsourced manufacturing solutions. However, despite this macro industry trend, key vaccine players have not yet shown such a dramatic shift towards outsourcing.
In the face of limited global production capacity, recent shortages in vaccine supplies, the increasing value and competitiveness of the market, and the importance that manufacturing plays in the product approval process, vaccine players are being forced to re-evaluate their manufacturing strategies.
Vaccine shortages threaten national health
In the last two years, 2001 - 2002, the US felt the effects of a shortfall in vaccine production capacity and manufacturing difficulties experienced by industry players. Shortfalls in pediatric vaccine supplies arose, in part, because of the limited number of companies with the manufacturing capability to produce essential components of childhood vaccination programs. Increased scrutiny regarding good manufacturing practice (GMP) has also led to regulatory problems and further shortfalls in supply while lack of spare capacity has prevented unforeseen demand being met.
No commercial imperative to adopt best practice in manufacturing
Vaccine production has been historically associated with high risk and low return on investment while profitability has depended largely on a high sales volume of low value products. In the pediatric sector, inclusion on immunization schedules is fundamental to the generation of high volume sales - an ’all or nothing’ approach to product success.
As a result, corporate involvement in the vaccine market is relatively limited, with only five major players: (Merck& Co. (GlaxoSmithKline, Aventis Pasteur, Wyeth and Chiron) generating about 80 per cent of global sales in 2002. Competition within the vaccine sector is minimal, with key players only occasionally marketing directly competing products. The commercial incentive to meet demand to meet tight time schedules may have been overlooked or ignored because there has been no commercial imperative to gain competitive advantage through best practice in manufacturing efficiency due to the lack of dynamism in the market.
Prevnar - case of a potential blockbuster vaccine
This competitive dynamic is set to change in the near future as a result of a number of factors. The introduction of ’high value’ vaccines, such as Wyeth’s Prevnar, with the potential to generate annual sales in excess of $1billion, will increase the incentive to invest in this market. Competition is likely to increase and vaccines will begin to act in a similar way to conventional pharmaceutical products, requiring rapid market entry in order to minimize lost revenue and avoid competition. Consequently, companies will be required to enhance their manufacturing capabilities, in terms of volume and efficiency, in order to compete effectively within this market.
Public supply could increase competition
Governments are becoming increasingly concerned about the annual shortfalls in vaccine supply and the risk that such shortages may pose to national health. In response to that perceived risk, proposals to supplement private vaccine supply with publicly funded initiatives have risen on the agenda. Action on this front would increase the supply of vaccine, consequently increasing market competition without requiring entry by novel vaccine players. The commercial incentive for companies to improve their production and supply capabilities will increase in turn. However, it remains to be seen to what extent governments are capable of implementing increased manufacturing capacity and in which indications it would be possible to overcome patent issues related to specialist vaccine technologies.
Active R&D creates competition for capacity
The active vaccine research and development pipeline is a pointer to how the breadth of indications covered and the scope of patient groups targeted is likely to increase over the next ten years. For example, more than 80 prophylactic products are in development targeting at least twenty diseases, for which there are currently no marketed vaccines. Volume sales and an associated demand for production capacity will also increase. This will drive companies, both pharmaceutical and outsourcing manufacturers, to increase capacity and improve the efficiency of their manufacturing processes.
Vaccine players will soon be faced with tough strategic decisions regarding the optimal method of achieving these objectives.
Outsourcing helps to deal with uncertainties in demand
Uptake of vaccine products is determined by multiple factors, many independent of product quality or market competition. Disease incidence and severity along with the economic and social burden of the disease are among various factors that impact on immunization coverage. Disease awareness and public perception of the risk of infection also have a significant impact on patient compliance. Predicting uptake of vaccines and the production capacity necessary to meet demand is difficult and fraught with error. Expansion into novel geographical markets can also lead to manufacturing complications, particularly those associated with overcoming unfamiliar regulatory hurdles. Manufacturing outsourcing can offer a valuable alternative in situations where companies wish to gain rapid access to additional production capacity or where a company wishes to expand the geographical range of a product line.
In these circumstances, companies can profit from the significant advantages inferred from outsourcing without incurring substantial investment risk and without risking core product revenue. Dr. Amber Gibson, Vaccines Analyst at Datamonitor, comments: "Increasingly, companies will be required to adopt best practice in vaccine manufacturing in order to maintain competitive advantage. Outsourcing manufacturing could offer one solution to companies wishing to focus on their core competencies, such as product development, while ensuring vaccine quality and supply demands are met."
Keywords : Vaccines Manufacturing Competition Outsourcing Market Industry analysis
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