Interphex Connector, March 2015

Vaccines have gathered some attention lately courtesy of concerning events like the Ebola scare in West Africa and the possibility of a pandemic, the shortage of flu vaccines in 2014 and corresponding low efficacy rate (~34%), and the return of measles to United States.

A leading industry report states the global vaccines market is predicted to reach $48 billion in 2015 with the vaccine contract manufacturing a mere 1.2% of it at $0.62 billion. Another report that compares the company reported sales of the top 15 vaccine payers in the market, we see a 5.2% CAGR jump from $25.23 billion in 2013 to $27.93 billion (predicted) in 2015.

2014 witnessed some major reshuffling in the biopharmaceutical world. One of them was the mega 3-way deal between GSK-Novartis-Eli Lilly. The deal reshaped their core businesses and these biopharmaceutical giants’ future. One of the biggest moves was Novartis selling its vaccine division (excluding the flu business) to GSK for $5.25 billion; which is projected to rise to $7.1 billion depending on certain milestones. Though the crown jewel of this deal is perceived to be Bexsero—the on market vaccine against meningitis B. GSK also gained 20 vaccines in development, including the late-stage MenABCWY combination, which will boost the company’s pipeline. Additionally, GSK gained vaccine manufacturing network sites in India and China coupled with a reduced supply costs to further sweeten the deal.

Secondary research revealed some quantitative perspective on the GSK-Novartis transaction. We narrowed in and compared the sales generated by vaccines for the two companies over a three-year period 2013-15. We see that GSK vaccines sales increased from $5.79 billion in 2013 to forecasted $6.42 billion in 2015 (the highest gain among the top 10 market players); Novartis vaccine sales are projected to drop from $1.68 billion in 2013 to $1.30 billion in 2015 (the biggest drop among the top 10 market players)

Pipeline focus on vaccines also revealed a similar trend. We see that while GSK sales prediction increased from $16.9 billion in 2013 to expected $18.1 billion in 2015 (the highest among the top 10 market players); Novartis’ decreased from $3.1 billion in 2013 to forecasted $2.3 billion in 2015 an 0.8 shrinkage (again the greatest decrease among the top 10 market players).

The 2015 Nice Insight Biopharmaceutical Outsourcing Survey data showed 16 percent of all respondents will outsource vaccine production. The big biopharmaceuticals, Big Pharma and Big Biotech account for the majority of vaccine outsourcing, comprising 60 percent of the buying market. Emerging biotech and emerging pharma comprise approximately 23 percent of the buying market, and specialty pharma accounts for the remaining 18 percent. 

There were no changes in the ranking of outsourcing drivers among vaccine production outsourcers when compared to the 2014 results. Quality, reliability, and productivity made the podium in the order mentioned. Innovation, affordability and regulatory track record followed respectively to complete the rankings. However when we compare the ranking of outsourcing drivers among vaccine production outsourcers to overall partner attributes we find that quality, reliability and productivity maintain the top three positions, where as affordability jumps a spot to 4th dropping innovation to 5th to tie with regulatory track record.

We looked in greater depth at potential considerations for an outsourced vaccine production project by comparing the average customer perception scores among top 5 CMO’s for vaccine production. Interestingly only 3 percentage points separate the six outsourcing drivers, compared to 6 percentage points in 2014. Again quality topped the charts with 88%, followed closely by reliability and regulatory both at 87%. Productivity came in next at 86% and innovation and affordability wrapping up with each scoring 85%.

In comparing to the average scores of top 5 CMOs in 2014 to 2015, there was a noticeable increase overall in customer perception scores from 79% to 86%. We observed that there was a general increase through all the drivers over the one-year period. Again we can attribute some of the surge in interest in vaccines over the past 12 months. The highest jump was observed in regulatory; it increased 12% from 75% to 87%. Quality and innovation increased 8 percent each from 80% to 88% and 77% to 85% respectively. Next was a 6 percent jump in reliability (81% to 87%) and affordability (79% to 85%). Finally productivity showed a 5 percent increase from 81% to 86%.