Top-Selling Vaccine Made Cheap Shows Challenge to Merck: Health

Asia’s biggest vaccine maker is working on a string of new low-priced offerings that threaten to undercut brands from the world’s biggest pharmaceutical companies.

Serum Institute of India Ltd., which makes vaccines injected in 65 percent of the world’s children, is targeting newer vaccines, including one for the human papillomavirus that could be available in late 2018 and sell at a third of the price of Merck & Co.’s blockbuster Gardasil. Also in development are vaccines for types of severe diarrhea and pneumonia.

The version of the HPV vaccine will initially be launched in developing countries and Serum aims to later secure approval for the product in Europe, Suresh Jadhav, executive director of the Indian company, said in an interview. Gardasil is the world’s second-best selling vaccine.

Fueled by the invention of advanced new products that command ever higher prices in western markets and a push to increase immunization for polio and measles in developing nations, vaccine sales are growing at double the rate of other pharmaceuticals, according to the World Health Organization.

The Ebola epidemic in West Africa has also lent urgency to the need for affordable versions of new vaccines for poor countries. The global market for vaccines has more than tripled to $25.5 billion from $7.4 billion in 2005, estimates Kalorama Information, a publisher of market research.

Global Trade

The world’s biggest drugmakers -- including Merck, GlaxoSmithKline Plc, Sanofi and Pfizer Inc. -- dominate the market because of the heavy investments needed to develop vaccines and the high failure rate of potential candidates. Unicef procures their vaccines cheaply for the governments of the world’s poorest countries, some on behalf of the Geneva-based GAVI Alliance, a charity that is the biggest provider of money for vaccines sent to developing countries.

In 2013, Unicef procured doses of vaccines for 100 countries, at prices that drug companies say represent their costs. Closely held Serum can undercut those prices because the Pune, India-based company has lower costs of production.

“This will result in creating much wider market access to HPV vaccines,” said Jayant Singh, director of the healthcare practice at Frost & Sullivan in New Delhi, referring to the Indian company’s planned product.

Most cervical cancers are caused by HPV, and the World Health Organization has recommended universal use of vaccines against the virus, creating an opening for vaccine makers in India and China to come up with cheaper alternatives. Xiamen Innovax Biotech Co., a pharma company based in southeast China, says it is working on an HPV vaccine against two strains of the virus.

Cervical cancer is responsible for more than 270,000 deaths annually, 85 percent of which occur in developing countries, according to the WHO.

Building Stockpiles

Merck earned $1.8 billion from sales of Gardasil in 2013, driven by approvals for use among boys, purchases for the U.S. Centers for Disease Control vaccine stockpiles and emerging market demand. Boys are vaccinated against HPV as a precaution against oral and anal cancer, which can be caused by the same virus.

Serum says it will intially run clinical trials in India and Africa for its alternative to Gardasil, and the first phase will start this year. Like Gardasil it would protect against four strains of HPV. London-based Glaxo also has an HPV vaccine called Cervarix, which protects against two strains. Glaxo via email said that each year around 80 percent of its vaccines, including Cervarix, go to developing countries at discounted prices.

Gardasil costs the U.S. Centers for Disease Control $113.54 per dose. Unicef’s website shows it has a contract to buy Gardasil from Merck at $4.50 a dose this year.

While Serum hasn’t yet agreed to a price, “it will be extremely affordable so that even the poorest of the poor countries can introduce it in their programs,” Jadhav said. “We are looking at at least about one-third the price that it is currently being procured at by the UN agency.”

Extremely Affordable

The presence of low-cost alternatives to Merck and Glaxo’s vaccine may encourage developing countries to add HPV immunization to their routine schedules, creating a bigger market for all the manufacturers and eventually benefitting Merck and Glaxo, said Singh.

Merck said it is “premature” to talk of HPV vaccines under development. Low-cost HPV vaccines targeted at 53 low-income countries that are under a tie-up with GAVI wouldn’t impact the company’s income as it has already committed to no-profit pricing for Gardasil in those nations, Merck said in an e-mailed response to questions.

Getting copies of Gardasil approved in Europe as interchangeable with Merck’s version will be challenging, if not impossible, said Richard Purkiss, an analyst at Atlantic Equities LLP in London. In many European Union countries, automatic substitution of biologics, or products like vaccines that are derived from living organisms, is prohibited or not recommended.

Serum has also been building its line-up of other vaccines. A vaccine it developed to target meningitis A in sub-Saharan Africa was this month approved for use in infants under one. It plans to sell a pentavalent rotavirus vaccine at $2 to $2.50 a dose to Unicef that will be available by the first quarter of 2018, Jadhav said. Unicef has agreed to pay Merck up to $5 per dose this year for the U.S. company’s RotaTeq vaccine. The virus can cause severe diarrhea.

Serum also has under development a pneumococcal vaccine which will be much cheaper than what it is procured at now and will be introduced by the first quarter of 2019. The product would compete with Glaxo’s Synflorix, which Unicef has agreed to purchase this year for up to $7 a dose.

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