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Billionaire Horse Breeder’s Polio Shot to Undercut Glaxo

Photographer: Sanjit Das/Bloomberg

A polio vaccine is displayed by a volunteer during a global polio-eradication campaign in Moradabad, India. Close

A polio vaccine is displayed by a volunteer during a global polio-eradication campaign... Read More

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Photographer: Sanjit Das/Bloomberg

A polio vaccine is displayed by a volunteer during a global polio-eradication campaign in Moradabad, India.

Indian billionaire Cyrus Poonawalla, founder of the world’s biggest maker of vaccines, will slash the price of polio immunization and introduce shots for diarrhea and pneumonia, undercutting Pfizer Inc. and GlaxoSmithKline Plc. (GSK)

Poonawalla, who set up the Serum Institute of India Ltd. in 1966, will use last year’s acquisition of a Dutch vaccine business to add the injectable form of polio inoculation to the oral drops the Pune, India-based company supplies to organizations such as the United Nations Children’s Fund, he said. The closely held group also plans to sell a low-cost pneumococcal shot to compete with Pfizer’s $4 billion Prevnar pneumonia vaccine by 2016.

The plan by Serum Institute, which says it supplies vaccines used to immunize two out of three children worldwide, will “revolutionize” efforts to eradicate polio that affects nerves and results in paralysis, said Bruce Aylward, assistant director-general at the World Health Organization. The Bill & Melinda Gates Foundation, a key funder of the effort to exterminate the malady, has backed the proposal as oral drops, made of live virus, carry the risk of infection.

“On May 30, Mr. Gates came over for a private dinner at my house,” and asked that Serum Institute remain family-owned, Poonawalla, 71, who also rears thoroughbred racehorses, said in an interview at the company’s headquarters. “The obvious reason was that, as soon as we sell the company, ‘big pharma’ would immediately double the price of vaccines.”

Photographer: Sajjad Hussain/AFP via Getty Images

Poonawalla will use last year’s acquisition of a Dutch vaccine business to add the injectable form of polio inoculation to the oral drops the company supplies to organizations such as the United Nations Children’s Fund. Close

Poonawalla will use last year’s acquisition of a Dutch vaccine business to add the... Read More

Close
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Photographer: Sajjad Hussain/AFP via Getty Images

Poonawalla will use last year’s acquisition of a Dutch vaccine business to add the injectable form of polio inoculation to the oral drops the company supplies to organizations such as the United Nations Children’s Fund.

Poonawalla, who started Serum Institute by raising $12,000 selling horses, has his own expansion plan. He bought Bilthoven Biologicals six months ago to gain technology, expertise and manufacturing facilities in the Netherlands.

Injectable Vaccine

The facility makes an injectable vaccine based on an inactive form of polio virus developed by Jonas Salk in the 1950s, and is one of four facilities in the world with the capability, according to Martin Friede, a scientist at the World Health Organization in Geneva.

“We decided to go in for the acquisition of this plant with the encouragement of the Gates Foundation,” Poonawalla said, seated on a leather chesterfield armchair in a reception room featuring a dining table for 50 people beneath a 2-meter wide chandelier and domed ceiling with hand-painted cherubs. “This plant would be scaled up for production, as we’ve done in all our other vaccines, to give 100 percent of the requirement to the rest of the world.”

London-based Glaxo and Paris-based Sanofi are the largest suppliers of injectable polio vaccine, which is used in most developed countries to protect children against crippling poliomyelitis. Developing countries such as India use the oral formulation developed by Albert Sabin which contains live, weakened virus that’s easier and cheaper to administer.

‘Polio Endgame’

India, the world’s second-most populated nation, hasn’t reported a polio infection since January 2011, according to government data, while neighbor Pakistan is close to eliminating a strain of the virus.

Occasionally, the Sabin vaccine virus mutates back to a virulent strain and sparks immunization-derived polio outbreaks. That risk will deter governments and United Nations agencies from using the Sabin vaccine as the world comes closer to eradicating polio, requiring a switch to injected products based on inactivated polio virus, Poonawalla said.

The company “could really revolutionize the polio endgame,” said WHO’s Aylward. “They are potentially the most exciting game in town.”

Serum Institute will enter the injectable polio vaccine market with a shot costing as little as 0.7 euros (93 cents) in multi-dose vials, he said. That compares with the current price of about 2.5 euros per shot, Poonawalla said.

Poonawalla’s Strategy

The U.S. Centers for Disease Control and Prevention has a contract with Sanofi (SAN) ending in March to buy e-IPV, an enhanced- strength injectable polio vaccine, at $12.24 a dose, the Atlanta-based agency says on its website.

The company’s strategy of not spending on advertisements and waiting for demand for the vaccines to increase has helped it control costs, Poonawalla said. Serum Institute typically enters vaccine markets about five years or longer after a new product has been released, demand is well established and patent protection has ended.

“We’re going to follow the Serum Institute’s philanthropic policy of just putting it at half the price,” said Poonawalla, who also runs two hotels in the U.K. and an airline charter service in India. “So we can’t see any competition coming our way.”

The price of injectable polio vaccine may be lowered further by the use of additives, called adjuvants, that boost potency, he said.

‘Affordable Answer’

“Vaccine manufacturers in developing countries, like the Serum Institute of India, are critical to bringing down vaccine prices,” said Trevor Mundel, president of the global health program at the Gates Foundation.

Sanofi Pasteur, the vaccine-making unit of France’s largest drugmaker, is well positioned to face competition from Indian manufacturers with its Hyderabad-based unit, Shantha Biotechnics Pvt., said Olivier Charmeil, president and chief executive officer of the unit.

Shantha produces shots for hepatitis B for emerging markets, tetanus shots for Unicef, and cholera vaccine for Haiti and Africa. The company’s Shan6 inoculation will be an “affordable answer” to six diseases including polio, Charmeil said.

“Shantha allows us to manufacture vaccines with the right quality standards at affordable prices,” Charmeil said in an e- mail. Shantha, which is developing immunizations for diarrhea and cervical cancer, will fuel Sanofi Pasteur’s growth in emerging markets, he said.

Poor Nations

Glaxo spokesman David Daley declined to comment on competition from low-cost manufacturers. The company’s shares fell 0.3 percent to 1,401 pence as of 9:21 a.m. in London.

The GAVI Alliance, which buys vaccines for children in poor nations, and the Gates Foundation are encouraging the Serum Institute to supply the shots at a third to a quarter of the current cost, Poonawalla said.

“The Serum Institute has already demonstrated the impact its high quality, low cost vaccines can have on some of the world’s poorest communities,” said Seth Berkley, CEO of the GAVI Alliance. “GAVI welcomes all efforts by partners to drive down prices and increase access to high quality vaccines.”

The Geneva-based alliance was formed in 2000 after the Gates Foundation gave it a start-up grant of $750 million. The Serum Institute is a key supplier.

Patient Studies

“The whole philosophy of Serum Institute right from the beginning has been very low cost,” said Poonawalla, whose strategy helped create a $3 billion business. His company supplies about 1 billion doses of vaccine annually, generating about $500 million in revenue. Sales this year will expand in the range of 35 percent to 40 percent, he said.

The Indian company plans to start selling a vaccine for diarrhea-causing rotavirus in 2015 in competition with Merck & Co. (MRK)’s RotaTeq and Glaxo’s Rotarix. Unicef had a contract to buy a single-strain rotavirus vaccine from Glaxo for 1.88 euros a dose and a five-strain formula from Merck for $5 a dose last year, according to data the organization’s website.

It also plans to begin patient studies of human papillomavirus, the most common cause of cervical cancer next year, Poonawalla said. It will build a plant to manufacture about 35 million doses of the shot, he said.

Serum Institute will start selling a pneumococcal vaccine in 2016, initially protecting against 10 types of the pneumonia- causing bacterium before extending to 15 types, Poonawalla said.

Unicef had a contract to buy a 13-strain pneumococcal vaccine from Pfizer (PFE) at $7 a dose last year, according to data on the organization’s website. Glaxo also sold Unicef a version of the vaccine that protects against 10 strains of the bacterium.

“The day we launch it, it will be 100 million-plus capacity,” said Poonawalla, whose stud farm has bred horses that have won 9 Indian Derbies. “We have promised to give the vaccine at $2 and still make a profit.”

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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