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Biotech's Babies: Doing Well by Doing Good

By Lisa Miller

Adams is well-placed to know what kind of "cat" he's talking about. Whereas current flu vaccines rely on growing the virus in chick embryos, a process that uses up millions of specially bred chicken eggs each year, biotechs like Protein Sciences use genetic engineering to culture the cells they need in the lab. Since this method is much faster and more flexible than the old production model, shortages are far less likely, and new strains of flu can be addressed rapidly.

HARD TO COPY. Just how rapidly? In 1997, Protein Sciences got a call from the National Institutes of Health during a scare about a nasty flu virus that was spreading from chickens to humans in Hong Kong. Asked to come up with a vaccine, the company obliged by cranking one out in just eight weeks. Compare that period with the six-or-more months it takes to brew up the current, egg-based influenza vaccines, and it's clear biotechnology outfits are onto something.

This swanky new technology also helps keep imitators at bay. Since each vaccine has a unique production procedure, that process functions as a sort of built-in protection against copycats. Conversely, old-style vaccines are easy to knock off and sell cheaply in countries where patents aren't recognized. "When you stick a virus in an egg, what's proprietary about that?" Adams says. "But today, the product in biologics is the process.... That's patentable, that's proprietary -- so people can't use that product to make a competing vaccine."

Thus, when Protein Sciences finishes shepherding its influenza vaccine through the Food & Drug Administration's daunting regulatory process, it will have a patented product that fits neatly into one of those rich-country niche markets that are proving so lucrative.

In 2000, three proprietary vaccines accounted for 30% -- $1.7 billion -- of the total market, yet they represented only 1% of total market volume, according to Mercer. One of these products is Prevnar, a pneumococcal vaccine released by Wyeth in February, 2000. It racked up over a half-billion in sales that year, and now brings in about $1 billion annually. Its success has so inspired suppliers that many talk about "blockbuster" vaccines the way Big Pharma talks about blockbuster drugs.

HIGH HURDLE. Niche vaccines may be hot, but they're also often voluntary. Consumers can choose whether or not to get a flu shot, for example, in contrast to the vaccinations that children must have before than can enter school, or for adults traveling to other countries. This makes it crucial to reach the consumer directly. For instance, MedImmune's (MEDI ) FluMist, which it produces with Wyeth, routinely shows up in television commercials. This is a "very different approach" for a vaccine, according to Andy Pasternak, director of Mercer Management Consulting in Chicago. But it's one that will become increasingly necessary as suppliers try to exploit these markets.

That presents a high hurdle for smaller outfits, which lack the huge sales teams and marketing departments necessary to both educate consumers and then distribute the product to them. "You obviously need a distribution strategy," says Pasternak. "You're not, as a biotech company, going to distribute [vaccines] yourself, so you're going to do it through one of the big four."

Such alliances between biotechs and the big pharmaceuticals are now fairly common in vaccines, a trend that will likely continue. Big Pharma is increasingly willing to look outside its own R&D departments for new vaccine products and technology, but that hasn't always been the case.

FICKLE BUSINESS. "Historically, the major companies have, for the most part, controlled everything in the value chain -- so, they've made the drug and distributed the drug [in vaccines]. That's changing," Pasternak says. With the move to partnerships, "the biotech company develops the drug and the pharma company distributes it. That's a classic model that has been used in [non-vaccine] pharmaceuticals for the last 10 to 15 years."

Besides marketing and sales, other big worries for smaller outfits include meeting regulatory requirements -- which, in the U.S., means building the factory before the FDA will approve production -- and staying alive financially during the many years it can take to get a vaccine from laboratory to market.

The sometimes fickle nature of the industry presents yet another challenge, especially since opportunities can dry up as quickly as they appear. Governments now so attentive to biodefense might lose their focus in a few years, with a corresponding decline in appropriations for vaccine projects. Foundation money for poor-country vaccines may not keep pace with the demand for the drugs, causing the carefully crafted economic incentives to unravel.

MISSED POTENTIAL. Similarly, a promising deal with a major pharma outfit could fall apart -- no big deal for the larger partner, but a disaster for a biotech outfit with a thin pipeline. "It's a little tough, doing these deals with these big companies," says Protein Sciences' Adams. "They think differently than we do. It's not life-threatening to them if something doesn't work out. Your product isn't life or death for them."

That metaphor is particularly apt, when a product can not only make or break a company but also save millions of lives around the world. Even the flu kills about 36,000 people on average each year in the U.S. Profit potential and sexy technologies aside, many involved in vaccines are drawn to the industry because they want to make a difference in people's lives. Adams gets good and angry when he considers the gap between the biotech industry's potential and where it is now. "It's not doing a fraction of what it could be doing," he says. "People are dying who shouldn't die."

Hopefully, with so many new outfits getting involved in vaccines, biotech is poised to take a giant leap forward, saving more and more lives along the way.

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Edited by Roger Franklin

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