Vaccines in the cold chain

　　For many disabling and life‑threatening diseases, vaccines are a well‑established, low‑cost, high‑impact preventive intervention, delivering public health benefits that translate into annual savings of tens of billions of dollars for healthcare systems. Yet, until recently, vaccine manufacturers have not received economic returns commensurate with this long track record of positive public health outcomes. Today, the vaccine industry stands at the forefront, posting robust revenue growth—annual double‑digit rates of 10% to 15%—and is expected to maintain this momentum in the years ahead, far outpacing the 6% to 7% growth rate typical of the traditional pharmaceutical sector.

　　This thriving landscape in the vaccine industry is driven by a wave of innovation in disease‑prevention science and by the strong emphasis national health systems place on vaccines as the primary tool for combating infectious diseases. These factors are reshaping manufacturers, their product portfolios, market dynamics, and key customer relationships. In an era marked by patent cliffs and shrinking product pipelines, the high success rates of late‑stage vaccine development and the long product lifecycles—often far exceeding patent terms—are compelling the industry to rethink its approach to vaccines. However, companies seeking to capitalize on this growth must adapt to a rapidly evolving market characterized by protracted clinical development cycles, substantial investments in complex manufacturing platforms, and frequently politicized pricing and reimbursement frameworks, which demand a keen focus on cultivating relationships with a wide array of external stakeholders.

　　Key Growth Factors

　　The preventive vaccine market holds significant untapped potential. Unmet needs persist, as many diseases continue to exhibit low immunization rates or lack available vaccines. Financial analysts project that this market will reach US$39 billion by 2015. Meanwhile, the World Health Organization forecasts that the global market could surge to US$100 billion by 2025, with companies set to launch 120 new products over the next decade.

　　Various factors are driving this growth. Our industry experience highlights three key drivers: heightened awareness of infectious diseases, shifting global affordability dynamics, and rising prices for new vaccines.

　　Rising Awareness of Infectious Diseases: Governments are the primary customers, playing a pivotal role in procurement, enforcement of safety regulations, and influencing vaccine uptake. Over the past decade, governments and international organizations have increasingly prioritized public awareness of infectious disease prevention, committing substantial investments to mass immunization and outreach programs—creating significant opportunities for manufacturers.

　　Global outbreaks of vaccine-preventable diseases have heightened public awareness. Seasonal influenza epidemics, such as H1N1, have claimed thousands of lives and imposed a heavy burden on national health expenditures. This increased awareness has prompted governments to implement various initiatives aimed at preventing future outbreaks. These programs fund mass immunization campaigns, which in turn help boost vaccine uptake. For example, the World Health Organization currently supports national governments in launching immunization drives through numerous public outreach campaigns; these efforts not only provide financial resources but also offer grassroots infrastructure support, including funding for the annual World Immunization Week.

　　The recent outbreak of meningococcal disease caused by serogroup B underscores the impact of such epidemics on public awareness and government policy, as it led to cases of meningitis on several U.S. college campuses and resulted in at least one death. Consequently, the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) have authorized the use of Novartis’s serogroup B meningococcal vaccine, Bexsero, for limited populations, despite the product not yet having received full approval for widespread use in the United States. Furthermore, both Bexsero and Pfizer’s rLP2086 have recently been granted “Breakthrough Therapy” designation by the FDA, qualifying them for accelerated review. We anticipate that the Advisory Committee on Immunization Practices (ACIP) will soon recommend the use of a serogroup B meningococcal vaccine. This recommendation is expected to prompt most payers to cover the cost of the vaccine for eligible individuals.

　　Nonprofit and non-governmental organizations—such as the Gates Foundation, the Clinton Health Access Initiative, and the Global Alliance for Vaccines and Immunization (GAVI)—along with many others, are wielding growing influence, serving as intermediaries and/or advocates for vaccine uptake in vaccine procurement negotiations conducted by health ministries in developing countries. These organizations have been receiving increasing levels of philanthropic support. They also supply medicines to emerging and developing markets, elevate the status of immunization on public health agendas, and help design national immunization programs by developing strategies related to coverage, pricing, and vaccine rollout.

　　Further universal access and more predictable pricing: Immunization is gaining greater prominence on national health agendas; governments, in collaboration with international organizations, are working to improve or expand vaccine coverage for preventive public health interventions. The 2010 Affordable Care Act mandates that all health insurance plans cover recommended vaccines without requiring patients to pay deductibles or copayments, a provision intended to provide enhanced preventive coverage to 88 million beneficiaries by 2013.

　　Other mature markets, including Japan, have elevated the importance of immunization, making it a key priority in public health. To close the country’s longstanding “coverage gap,” Japan’s Ministry of Health, Labour and Welfare (MHLW) has invested heavily in the vaccine manufacturing and R&D operations of Takeda, Astellas, Daiichi Sankyo, and Mitsubishi Tanabe, with the aim of advancing routine immunization against infectious diseases. The MHLW has offered substantial incentives to vaccine manufacturers and funded public awareness campaigns, and by 2015, it planned to incorporate vaccines for HPV, Hib, pneumococcus, varicella, mumps, and hepatitis B into the national immunization program. From 2006 to 2011, Japan’s vaccine market grew at a compound annual growth rate of 28%.

　　The use of vaccines is also largely driven by improvements in vaccine coverage and distribution in emerging markets (see the figure below). Argentina currently boasts one of the most comprehensive national immunization programs in Latin America, offering vaccines free of charge and expanding the number of mandatory vaccines from six to sixteen over the past decade. Furthermore, the Argentine Ministry of Health aims to raise the proportion of the population with insurance coverage from 80% to 95% and has already developed plans to expand the vaccine distribution system to ensure universal immunization. Brazil currently leads Latin American countries in terms of immunization coverage, with a national immunization program that includes 26 vaccines. In China, certain provinces and municipalities have implemented regional influenza prevention initiatives, introducing pediatric vaccines designed to alleviate the financial burden on uninsured patients.

　　The growing importance of immunization in emerging markets is further underscored by the heightened level of vaccine‑related activities among local mid‑size manufacturers and government laboratories. China’s Sinovac Biotech, Brazil’s Butantan Institute, South Africa’s Biovac, Mexico’s Birmex, and India’s Serum Institute of India are developing next‑generation vaccines, investing in more advanced manufacturing technologies, and increasing vaccine uptake. Brazil has made technology transfer a cornerstone of its national vaccination policy; accordingly, the Brazilian Ministry of Health agreed to purchase GlaxoSmithKline’s Synflorix—a pneumococcal conjugate vaccine—valued at US$2.2 billion, in order to gradually acquire the necessary expertise and eventually produce the vaccine independently upon expiration of the 10‑year contract. Sanofi has partnered with Mexico’s Birmex and Brazil’s Butantan Institute to sign technology‑transfer agreements for influenza vaccines. Many mid‑size research institutes have also entered into procurement agreements with international organizations, including Gavi, the Vaccine Alliance, the Bill & Melinda Gates Foundation, and the Program for Appropriate Technology in Health (PATH).

　　The rise in price levels reflects a shift toward innovation: part of the vaccine industry’s growth stems from the higher prices charged for cutting-edge, first‑in‑class vaccines, reflecting the value they deliver (see the figure below). In 2000, Wyeth launched Prevnar‑7 at a price that exceeded the combined cost of most other pediatric vaccines, yet it still demonstrated strong cost‑effectiveness. Merck’s HPV vaccine, Gardasil, was priced at nearly $400 when it debuted in 2006. Building on the added value of six additional vaccines, Pfizer introduced Prevnar‑13, with a price of approximately $513 per series.

　　Even within the highly competitive vaccine category, innovation has enabled price differentiation; Sanofi Pasteur’s Fluzone HD is a case in point, targeting the elderly—a population with the most significant unmet needs in the influenza‑vaccine market. Although, as of press time, Fluzone HD did not demonstrate superior protection against influenza compared with standard‑dose flu vaccines, it elicited a stronger immune response in clinical trials. The product’s private‑label price exceeds twice that of many standard‑dose flu vaccines. Meanwhile, AstraZeneca’s FluMist recently received the Centers for Disease Control and Prevention’s recommendation for pediatric vaccination. According to the CDC, among children aged 2 to 8, immunization with the nasal spray significantly reduces the incidence of influenza. FluMist, too, is marketed at a premium price.

　　In addition to the aforementioned drivers, we have also found that successful lifecycle management strategies have further fueled industry growth. Two of the highest‑grossing vaccines in the preventive vaccine segment—Gardasil and Prevnar—serve as prime examples. For instance, following approval for indications covering male anal cancer, genital warts, and precancerous lesions, Gardasil doubled its vaccinated population. In January 2013, Pfizer’s Prevnar likewise received FDA approval for use in individuals aged 50 and older, a decision that prompted Wall Street analysts to forecast an increase in the product’s annual sales from $4 billion to $5 billion. Vaccines currently leading the market are already delivering—and will continue to deliver—steady growth, as manufacturers seek to leverage their R&D, manufacturing, and marketing capabilities to boost annual investments in promotional spending, post‑marketing surveillance studies, and expansion of approved indications.

　　Industry growth has fueled a wave of mergers and acquisitions: many large-scale manufacturers have turned to vaccines to drive sustained growth and boost brand revenue. In 2010, the sector saw 195 vaccine‑related deals, including Johnson & Johnson’s acquisition of Crucell, which closed at $2.3 billion and brought into J&J the mid-sized vaccine maker’s portfolio of pediatric, regional, and travel vaccines.

　　Other notable M&A deals include GlaxoSmithKline’s recent $5.25 billion cash acquisition of Novartis’ non‑influenza vaccine assets, in exchange for the transfer of GlaxoSmithKline’s oncology franchise and the development of its distinctive consumer health business. This acquisition brought GlaxoSmithKline travel‑vaccine capabilities, including a promising meningitis vaccine franchise. In 2008, Sanofi Pasteur acquired Acambis, bolstering the world’s second-largest vaccine maker with resources in West Nile and dengue travel vaccines, as well as expanding its portfolio of influenza and custom multivalent formulations. In 2007, AstraZeneca acquired MedImmune for $15.6 billion; the Synagis and FluMist vaccines acquired through this deal positioned AstraZeneca as the world’s sixth-largest vaccine manufacturer. Takeda (see sidebar) established a new vaccine division in early 2012, while Mitsubishi Tanabe Pharma acquired the Canadian company Medicago, gaining access to the latter’s innovative technology for producing virus‑like particle vaccines from tobacco leaves.

　　The Future of the Vaccine Industry

　　The next generation of vaccine development hinges on a platform‑based strategy, underpinned by genomics, reverse vaccinology, high‑throughput DNA sequencing, novel plant‑ and insect‑based expression and production systems, and innovative, more effective vaccine adjuvants. These advances hold the potential to rapidly generate new, cost‑effective vaccine candidates with strong prospects for clinical success. Promising new vaccine candidates—targeting pathogens such as Neisseria meningitidis serogroup B, Group B Streptococcus, methicillin‑resistant Staphylococcus aureus, Streptococcus pneumoniae, and pathogenic Escherichia coli—are already in development. Moreover, these cutting‑edge platforms not only enhance the outlook for vaccines against major infectious diseases—including HIV/AIDS, tuberculosis, dengue, and malaria—but also lay the groundwork for the development of therapeutic vaccines targeting emerging conditions such as allergies, autoimmune disorders, and cancer.