[Ip-health] Financial Times- Drug groups to reap swine-flu billions

[Biotech. Info. Inst.]

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I recall a similar prior posting implying that the vaccine companies
are making a killing, excessive profit, etc. from U.S. gov't
contracting for H1N1 influenza vaccine manufacture.

It may be very possible or likely that this is not the case -- that
these companies will not make much profit and that they would rather
not be involved in these contracts (we may never know).  Without more
details available, if I were a large stockholder (or company
executive) purely interested in profit, I would prefer these companies
avoid these gov't contracts, which have more down- than upsides in
terms of profit potential and have negligible other upsides, e.g., can
drag the companies into very public controversies.

It is very possible that these contracts are something that these
companies were essentially forced to do and that they did not
proactively on their own seek these contracts (public duty; expected
of them); that they would much rather direct the same manufacturing
capacity to seasonal vaccine manufacture (with more sales likely this
year due to all the influenza hype, forecasts of a more-pathogenic-
than-recent-years seasonal strain and potential shortages meaning
prices can be further increased; with prices likely already increased
from last year); and with the U.S. and presumably other governments
reportedly paying no more per dose for H1N1 than they do for seasonal
vaccine in bulk (with the manufacturing processes substantially the
same).  Combine these factors with recent reports that the H1N1 strain
is growing slower in culture than expected, meaning lower yield,
longer production runs to make the same number of dose, and with the
U.S. contacts being fixed-fee, the companies will be making less
profit than they expected.  And there is even less upside for these
companies in H1N1 vaccine manufacture, if you add in the expectations
for free or subsidized sales to poorer countries, accusations of
profiteering, difficulties in projecting demand and supply, the
potential for problems in manufacture (already happening) and gaining
FDA approval, and the likelihood of calls for reasonable pricing,
price controls or even nationalization of H1N1 vaccine manufacturing
if a real pandemic strikes.

Now, of course the companies are still likely going to make some
profit, including gov't-funded facilities upgrades some have
received.  But contrary to some press reports and opinion pieces, they
will probably be making less profit margin than they hoped, less than
that from normal free market sales, and probably would much rather not
be tied down by these high-volume, low-profit, fixed-fee gov't
contracts (vs. being able to make and sell more seasonal vaccine
worldwide at what the market will bear).

Ronald A. Rader
President / Author & Publisher of BIOPHARMA:  Biopharmaceutical
Products in the U.S. and European Markets
Biotechnology Information Institute
1700 Rockville Pike, Suite 400
Rockville, MD 20852
Phone:  301-424-0255 (9AM-5M Eastern U.S.)
E-mail:  biotech@biopharma.com
Web sites:  www.biopharma.com; www.bioinfo.com;
     www.biopharmacopeia.com; www.biosimilars.com


On Jul 21, 2009, at 10:38 AM, Terri - Louise Beswick wrote:

> This is a multi-part message in MIME format.
> --
> [ Picked text/plain from multipart/alternative ]
>
> Drug groups to reap swine-flu billions
>
>
> By Andrew Jack in London
>
> Published: July 20 2009 19:40 | Last updated: July 20 2009 23:43
>
> Some of the world=92s leading pharmaceutical companies are reaping
> billions of dollars in extra revenue amid global concern about the
> spread of swine flu <http://www.ft.com/indepth/swine-flu> .
>
> Analysts expect to see a boost in sales from GlaxoSmithKline <http://mark=
ets.ft.com/tearsheets/performance.asp?s=3Duk:GSK
> > , Roche <http://markets.ft.com/tearsheets/performance.asp?
> s=3Dch:RO>  and Sanofi-Aventis <http://markets.ft.com/tearsheets/performa=
nce.asp?s=3Dfr:SAN
> >  when the companies report first-half earnings lifted by
> government contracts for flu vaccines and antiviral medicines.
>
> The fresh sales =96 on top of strong results from Novartis <http://market=
s.ft.com/tearsheets/performance.asp?s=3Dch:NOVN
> >  of Switzerland and Baxter <http://markets.ft.com/tearsheets/performanc=
e.asp?s=3Dus:BAX
> >  of the US, which both also produce vaccines =96 come as the latest
> tallies show that more than 740 people have died from the H1N1
> virus, and millions have been affected around the world.
>
> GlaxoSmithKline of the UK confirmed it had sold 150m doses of a
> pandemic flu vaccine =96 equivalent to its normal sales of seasonal
> flu vaccine =96 to countries including the UK, the US, France and
> Belgium, and was gearing up to boost production.
>
> GSK also produces Relenza, an antiviral medicine that reduces the
> length and severity of the infection, and is preparing to increase
> manufacturing towards 60m annual doses. The UK placed an order for
> 10m treatments this year.
>
> One beneficiary of the fears about the pandemic has been Roche of
> Switzerland, which sells Tamiflu, the leading antiviral drug, and
> has seen a sharp rise in orders from private companies as well as
> governments.
>
> A report last week from JPMorgan, the investment bank, estimated
> that governments had ordered nearly 600m doses of pandemic vaccine
> and adjuvant =96 a chemical that boosts its efficacy =96 worth $4.3bn
> (=803bn, =A32.6bn) in sales, and there was potential for 342m more doses
> worth $2.6bn.
>
> It forecast that fresh antiviral sales could boost sales for GSK and
> Roche by another $1.8bn in the developed world, and potentially up
> to $1.2bn from the developing world.
>
> But there were also uncertainties for the pharmaceutical
> manufacturers. With demand likely to outstrip supply, and initial
> production suggesting that the yield for the pandemic vaccine is
> relatively low, they may face difficult choices in determining how
> much to supply to the countries seeking orders.
>
> They are also under pressure to provide more drugs and vaccines for
> free, or extremely cheaply, to the developing world.
>
> http://www.ft.com/cms/s/0/375dde06-7559-11de-9ed5-00144feabdc0.html
>
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