Novartis: underlining its strong
position in the flu vaccine market
Novartis is set to increase the
supply of its influenza vaccine Fluvirin to the US market to 40 million doses
for the 2007/08 season. With Optaflu, a cell-based vaccine just approved in
Europe, and Fluad, an adjuvanted candidate awaiting submission in the US,
increasing Fluvirin production is the latest step taken by Novartis to
strengthen its position in the challenging influenza vaccines market.
Influenza is a highly contagious disease with a huge clinical and economical
impact. In the US alone, 60 million people per year become infected, leading
to 200,000 - 400,000 hospitalizations and 35,000-70,000 deaths, mainly among
the elderly and very young children (CDC, 2006). Influenza kills as many
Americans as breast cancer and two to three times more than HIV/AIDS, with
annual direct and indirect costs, including lost work days, estimated at
$12-14 billion for severe flu epidemics.
Fuelled by the H5N1 pandemic influenza threat, which has caused huge public
attention, awareness for influenza and its complications has been growing over
the recent years. As a result, healthcare authorities around the world have
been eager to extend vaccination recommendations for seasonal influenza. The
US is leading the field, having broadened recommendations to include small
children aged 6-59 months, chronically ill, pregnant women, healthcare
workers, elderly aged 50 years and over as well as all household contacts of
all risk groups during the influenza season 2006/07. This has increased the
total number of persons advised to receive a flu shot in the country to
approximately 218 million (CDC, 2006a).
Insufficient vaccine supply
Flu vaccine manufacturing capacity is lagging behind this theoretically huge
demand. The global influenza vaccine production volume in 2006 is estimated by
the WHO at 350 million doses, growing at 8% annually between 2000 and 2004
(WHO, 2007).
In the US, large efforts have been made to increase national influenza vaccine
supply. Before 2005, the country relied on just three manufacturers, Sanofi
Pasteur, Chiron and MedImmune, to provide a total of 87 million doses for the
season 2003/04. However, in 2004, Chiron experienced severe contaminations in
its UK manufacturing facilities and was not able to produce any vaccine for
the US market, leading to a supply shortage with only 61 million doses
available. Ever since, US authorities have been encouraging additional
manufacturers, e.g. GSK, to file their flu vaccines for approval in the US in
order to render the national flu vaccine supply more stable and less dependant
on a small number of producers.
As a result, supply has been increasing steadily, reaching 86 million doses in
2005/06 and a record 118 million doses in 2006/07 (HHS, 2006) . Although this
figure is the highest ever, it is still only sufficient to cover just over 50%
of the recommended target population.
Novartis to consolidate market position
In the light of this ongoing lack of capacity, last week's news from Novartis
can be seen as highly positive. Novartis, the second largest supplier of
influenza vaccines to the US market, has announced plans to increase the
supply of their product Fluvirin to the US by 30% to reach 40 million doses
for the upcoming 2007/08 influenza season (Novartis, 2007).
The Swiss company emerged as a major player in the influenza vaccines sector
after acquiring weakened Chiron in April 2005 and has since successfully
expanded its US operations.
"The planned 30% increase in Fluvirin production capacity for the US market
will allow Novartis to nearly draw level with Sanofi Pasteur, market leader in
the US with 50 million supplied doses in 2006/07 and to by far exceed GSK's
contribution of 25 million doses in 2006/07," comments Hedwig Kresse,
infectious diseases analyst for Datamonitor.
However, it remains questionable to what extent Novartis will be able to
capitalize on its extended capacity, as flu vaccine demand is fluctuating
widely from one year to the next, depending on a large number of factors.
These encompass not only national vaccination recommendations or availability
of vaccine, which can be planned for, but also largely unpredictable factors
such as subjective perceptions of infection risk or even the weather in a
given season.
Unpredictable demand
Although recommendations have been broadened more and more, and the number of
distributed doses has increased in the US over the last decade, the actual
demand has always turned out to be lower than vaccine supply. In 2006/07, 20
million doses of the 118 million supplied shots were discarded (Poland, 2007).
One reason for the low demand is the insufficient coverage of influenza
vaccination in large parts of the target population, particularly among
pregnant women and household contacts of people at risk.
A lack of awareness coupled with confusion among physicians, who complain
about the complexity of national recommendations, are mostly to blame. The
unpredictable demand leaves vaccine manufacturers with significant risks of a
commercial failure every year. The vaccine composition needs to be updated on
a yearly basis to include the most recent influenza virus strains which are
announced by the WHO in February, giving manufacturers and distributors a very
short time frame of approximately six months to produce and deliver the
vaccine before the onset of the annual flu season in October.
The traditional manufacturing process, carried out in chicken eggs, is both
lengthy and inflexible with little room for capacity adjustments. Therefore,
demand planning for influenza vaccines takes place very early in the year,
with any unused supplies having to be discarded by the end of the flu season
due to the yearly changing composition of the vaccine.
Novartis stands to gain
Novartis' plans to increase its US supply will therefore only prove
commercially successful if the company manages to ensure a stable demand. One
promising way of achieving this is by developing novel, faster manufacturing
techniques, allowing an earlier distribution of the vaccine ahead of the
competition. Indeed, Novartis has said that as a result of accelerated
production, half of the Fluvirin doses for the next season will be already
available by the end of September, whereas the remaining doses will be
delivered by the end of October (Novartis, 2007), which may give the Swiss
company a competitive edge over its main competitors Sanofi Pasteur and GSK.
However, the increase in Fluvirin supply is not Novartis' only strategy to
strengthen its position in the global flu vaccine market, sized at
approximately $2.2 billion in 2006. In June 2007, the company received EU
approval for its seasonal vaccine Optaflu, which is manufactured in a cell
culture system, promising faster and more flexible production (Novartis,
2007a). Preparing for a potential approval of Optaflu in the US, Novartis is
further expanding its manufacturing capacity by constructing a $600m vaccine
manufacturing plant in Holly Springs, North Carolina, which will mainly be
used for Optaflu production (Novartis, 2006).
Novartis is also expanding its capacity for flu cell culture vaccine
production in Marburg, Germany. In addition, the company is trying to
strengthen its position in the crucial US market by planning to submit the
adjuvanted vaccine Fluad, particularly suitable for use in the elderly
population, to US authorities before the end of 2007 (Novartis, 2006a).
"Novartis' announcement to increase Fluvirin supply is one of several steps
taken by the company to further strengthen its position in the crucial US
influenza vaccine market," concludes Kresse. "Datamonitor believes that the
company will establish itself as a leading force behind market leader Sanofi
Pasteur, but ahead of GSK, and has an excellent perspective for further
expansion over the next decade."
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