The future of the vaccines market

Andy Pasternak

Partner, Bain & Company

Why have vaccines become such an attractive investment?

The vaccine market has been growing quite rapidly over the course of the last decade and is now approaching about $20 billion globally—about half of that in the US. The vaccine market was a bit of a backwater; and that changed over the course of the last 10, 15, 20 years, started primarily by some technology innovation that did occur that enabled the creation of new vaccines for very serious bacterial infections—such as Pneumoccocal, Meningococcal, Haemophilus Influenza—as well as viral infections, such as Human Papillomavirus. And that created an onset of very, very powerful and impactful new products that were life-saving and created a significant public health benefit.

The vaccine market started to contrast quite significantly with the traditional pharmaceutical market in that there are no generic products for vaccines today, and therefore, you see a very long period of revenue growth and sustainability well beyond the patent period. And I think that makes investments in this area quite compelling.

What are the growth opportunities in vaccines?

Prospects are still very attractive for vaccines overall. However, there are fewer and fewer traditional pediatric targets that are available for development because a lot of low-hanging fruit has been capitalized on in recent years.

There are exceptions to that, of course, such as the Meningococcal-B bacteria, which is going to be a big blockbuster vaccine. But we are seeing fewer and fewer of those; and therefore, a lot of the future growth is going to come from non-traditional opportunities, such as different market segments, and diseases that are endemic more to countries outside the US and Europe.

The emerging markets are playing an increasingly pivotal role in the vaccine space, as they industrialize and generate additional national income, immunization is a key priority.

A great example to the gradual shift to more of a global market, from a US- and Europe-centric market, I think, is the launch/introduction of the Rotavirus vaccine. Where GSK first launched its Rota vaccine, Rotarix, in Mexico, which was the first time a major vaccine launch had happened in that way.

We’re seeing two other factors that are augmenting the globalization of the vaccine market: The efforts of the Gates Foundation and associated non-government organizations who are contributing very significant funding to the development and introduction of new vaccines into the developing world. In addition, there is real growth in the capabilities and aspirations of suppliers and vaccine manufacturers located in emerging markets, such as India. These manufacturers have historically been more focused on GAVI and WHO markets in the developing world, and are now increasing the sophistication of their pipelines and products and have bigger aspirations in terms of the markets that they’re targeting.

What are the key challenges for vaccine manufacturers?

There are a number of challenges that vaccine manufacturers need to proactively address in order to ensure their continued success. A key issue for vaccine manufacturers is aligning their business models to the global market that now exists. As I mentioned earlier, vaccines are an increasingly global market, and that creates a very complex equation for any vaccine manufacturer—really any pharmaceutical company—both in terms of how products are developed, what capacity should be used and what commercial strategy should be employed.

And there are lots of debates among manufacturers about whether they should develop tailored vaccines for specific regions given the diversity of disease, or more ubiquitous products.

Another key challenge is for vaccine manufacturers to ensure that they are accessing external innovation and external assets. As there are fewer and fewer targets that are available for traditional product development, we see this as a critical requirement going forward, and we do see a steady increase in the amount of activity from a business development standpoint to create strategic alliances in the vaccine space—everything from accessing technology platforms, accessing specific antigens and strains, accessing novel adjuvants, and finally, accessing delivery systems.

Developing the supply chains of the future is also critical for the success of vaccine manufacturers. Manufacturing has always been a key element to the business model of any vaccine manufacturer, but with growing regulatory vigilance, increasing volume requirements from large emerging markets around the world, and the need for low-cost positions and pricing that’s affordable, we see a real challenge to create the supply chains of the 21st century for vaccine manufacturers that are low-cost, that are reliable, and that are flexible and able to meet the varying requirements of markets around the world.