Vaccines Are Getting a Booster Shot

As their profit potential jumps, so does new investment in R&D

In the pharmaceutical industry, vaccines have long been poor stepsisters to big, glamorous drugs. Immunization campaigns have worked wonders, wiping out scourges such as polio. Yet annual global sales of vaccines are just $6 billion--about $1 billion less than what best-selling cholesterol drug Lipitor generates in one year. And the number of major companies selling vaccines has shrunk from 20 in the 1980s to just 4. For many years, "it wasn't an economic business to be in," says Dr. Paul Drayson, CEO of PowderJet Pharmaceuticals PLC, a vaccine maker in Oxford, England.

No more. In late November, Merck & Co. (MRK ) reported that its experimental vaccine could ward off infection from cervical cancer-causing human papillomaviruses (HPV). And GlaxoSmithKline PLC (GSK ) is working on one for herpes. If proven safe and effective in larger trials, both could become blockbusters, analysts say. And that's just the start. Company research-and-development pipelines are bulging with nearly 100 vaccines against infectious agents, with dozens more being engineered in academic and government labs against everything from Ebola virus to West Nile disease.

The surprising result: Annual growth for the vaccine industry will rise to the mid-teens per year, up from an historic average of 10%, according to a recent report commissioned by the Global Alliance for Vaccines & Immunization (GAVI). "It's really a good time to be in the vaccine business," says Dr. Thomas P. Monath, research chief at Acambis Inc. (ACAM ) in Cambridge, Mass., which is churning out smallpox vaccine for the U.S. government.

Moreover, vaccines are becoming far more versatile. Traditional immunizations prime the immune system to fight off parasites, bacteria, or viruses such as flu. But increasingly, vaccines are tackling diseases beyond the infection itself. Merck's HPV vaccine doesn't just prevent infection from HPV--it also holds the hope of eliminating the cervical cancer caused by the virus. Other experimental vaccines are aimed at prodding the immune system to eat away malignant tumors or chew up the brain tangles of Alzheimer's disease. "We are ready for a renaissance in the whole vaccine area," says Stephen A. Johnston, a biochemist at the University of Texas Southwestern Medical Center.

What explains the resurgence of vaccines? Credit a combination of smart policy moves, advances in science, and a big change in the economics of the business. Back in the 1980s, companies bailed out of vaccines because prices--and profits--were low, and because they faced huge legal threats from people harmed by vaccines. Congress largely solved the liability issue with a 1986 bill setting up a program to compensate victims. "That led to increased research, and we are seeing the fruits of that now," says independent drug analyst Hemant K. Shah.

The ability to command premium prices helped, too. In the late 1980s, Merck and SmithKline launched gene-spliced vaccines for hepatitis B. At $30 to $40 per dose, they cost well above what is charged for common childhood vaccines used to prevent measles, tetanus, or whooping cough. That marked the start of "increased interest in vaccines as a business as opposed to a public-health intervention," says Piers Whitehead, vice-president of biotech company VaxGen Inc. (VXGN ) in Brisbane, Calif., and co-author of the recent GAVI report.

Now, vaccines are racking up profits once seen only with blockbuster drugs. The best example is Wyeth Corp.'s (WYE ) Prevnar, a vaccine that helps protect children from the pneumococcal bacteria that cause meningitis. Prevnar's price is a lofty $232 for a four-dose course. Lehman Brothers Inc. analyst C. Anthony Butler predicts that the vaccine, with estimated sales of $625 million this year, could soon be a $1.5 billion product. "Wyeth's success has shown other companies that there is a potential for vaccine blockbusters," says Dr. Stanley A. Plotkin, consultant to Aventis Pasteur Ltd., one of the four big vaccine makers, and professor emeritus at the University of Pennsylvania.

Improved economics have prompted vaccine makers to boost R&D spending. The four industry leaders--Merck, GlaxoSmithKline, Aventis Pasteur (AVE ), and Wyeth--are estimated to spend more than $750 million a year on vaccine R&D--as much as a fivefold jump at some companies since '92. Scientific advances also are helping prompt renewed interest. One hot idea is to develop a basic vaccine that could be customized for a range of diseases. Acambis, for example, is using its yellow-fever vaccine as a way to deliver bits of other viruses--such as West Nile--to the immune system. Other drugmakers are creating vaccines made of DNA that could be spliced quickly with new genes when novel diseases or bioterror agents suddenly emerge (box).

None of this will make vaccines as glamorous--or as profitable--as drugs. For one thing, getting a vaccine approved can take longer than it does for drugs. The Food & Drug Administration wants proof that no serious side effects will appear even when the product is given to tens of millions of people. But that's tough, as evidenced by the current controversy over whether mercury in past children's vaccines could have caused autism.

Finally, scientists caution that they're still a long way from creating vaccines for viruses crafty enough to hide from the immune system, such as HIV. But with a host of important new vaccines now in companies' pipelines, this former poor stepsister is getting ready for the ball.

By John Carey in Washington, with Kerry Capell in London

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