Sanofi Pasteur is the no. 1 producer of influenza vaccines, with more than 50% of global production capacity. So it's no surprise that Sanofi, a unit of Paris-based pharmaceutical giant Sanofi-Aventis (SNY), is leading the pack in the race to develop a vaccine that could help prevent an avian flu pandemic.
On Dec. 15, Sanofi announced promising results from early clinical trials of a vaccine against the deadly bird flu virus H5N1. While the trials continue, Sanofi has signed contracts with the governments of France, Australia, and the U.S. to produce more than 5 million doses of the vaccine to be stockpiled in case of emergency. In September, the company signed a $100 million deal with the U.S. Health & Human Services Dept. France's Health Ministry, meanwhile, was due to take delivery of 1.4 million doses before the close of 2005. Sanofi is also stepping up the development of new, speedier production methods.
Ordinarily, Sanofi wouldn't start mass-producing a vaccine before it had been fully tested. But, says Marie-Jose Quentin-Millet, Sanofi Pasteur's vice-president for research and development: "This isn't business as usual. There's a sense of urgency about this pandemic."
Until now, the H5N1 virus has infected only birds and humans who were in close contact with them. The potential nightmare is that it could mutate and begin spreading from human to human. Tamiflu, an antiviral drug made by Roche Pharmaceuticals (RHHVF), is approved for treating bird flu, but it isn't a preventive vaccine. GlaxoSmithKline PLC (GSK) of Britain and U.S. biotech Chiron (CHIR), controlled by Switzerland's Novartis (NVS), also are developing vaccines, but Sanofi is further along.
Experts, however, caution that bird flu vaccines are unlikely to be big moneymakers. That's because profit margins on government supply contracts are generally thin, according to a recent report by Wood Mackenzie, an Edinburgh consultancy to the energy and pharmaceutical industries. Sanofi-Aventis, which posted a 12.5% rise in operating profits in 2004, to $9.8 billion, on sales of $30.4 billion, said most of that growth was fueled by top-selling nonvaccine drugs such as blood thinner Lovenox and cancer treatment Eloxatine. The Wood Mackenzie report also notes that if a pandemic did break out, drugmakers would be unable to churn out an adequate amount of vaccine quickly enough to immunize everyone. Global production capacity now stands at about 300 million doses, less than what would be required in the U.S. alone.
Ordinary seasonal flu vaccines will remain a far more lucrative business for Sanofi, says Marie-Hélène Leopold, a pharmaceutical analyst at SG Cowen in Paris. Demand for traditional flu vaccine is steadier, since new supplies are ordered for each year's flu season. Sanofi's flu vaccine sales last year rose 33%, to $627 million. Sanofi Pasteur MSD, a joint venture between Sanofi and Merck & Co. (MRK), posted an additional $132 million in flu vaccine sales in Europe, up 10.2% over 2003. Avian flu vaccine production, by contrast, "isn't an important commercial activity," Leopold says. "I wouldn't buy Sanofi [shares] for this reason."
Sanofi is pressing ahead. The early trial results, released on Dec. 15, based on tests involving 300 people in France, showed the vaccine was safe and effective when given in two doses and combined with a chemical that stimulates the immune system. Second-stage trials could be completed by the end of 2006.
Sanofi will submit those results to government regulators in an effort to speed up the approval process for mass production in case of a pandemic. The vaccine may never make Sanofi rich. But if health authorities' worst fears about avian flu come to pass, it could help save millions of lives.
By Carol Matlack