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Pharma: The vaccines potential
Jan 5, 2007

There is an old age maxim - ‘Prevention is better than cure’. While this may seem like a cliché, it nevertheless has assumed importance in the pharmaceutical industry in the form of vaccines. In this article, we shall examine the global and Indian vaccines market scenario, the major players and the potential of this therapeutic field going forward. Why vaccines?
Vaccines are important preventive medicines and are a critical component of a nation’s health security. Generally, international agencies such as the World Health Organisation (WHO) and the United Nations Children’s Fund (UNICEF) promote global immunization drives and policies. However, the success of an immunization programme in any country depends more upon local conditions and national policies. While a huge interest has been evinced in this area across the globe, it must be noted that vaccines fall under the ‘biotechnology’ class. This means that while the potential is immense, the entry barriers are high in the form of longer product development time, huge investments in R&D and technology and the capital extensive nature of this field. This also explains the fact that globally, the players in this field are relatively fewer in number.

Vaccines were earlier characterised by the commodity like nature of the segment, falling prices and thin margins. However, the scene has undergone a change with major players looking to target new diseases, new markets and newer ways of administering doses (for example combination vaccines). These initiatives are expected to help drive up realisations and consequently revenues from this business going forward.

Global scenario
The global vaccines market has grown from around US$ 3 bn in 1994 to US$ 8 bn in 2004, implying a compounded annual growth rate (CAGR) of around 10%. Moreover, the market is expected to grow to US$ 20 bn by 2010, representing a CAGR of around 17% (Source: Panacea Biotec annual report). This indicates huge potential in this field. As far as the segmentation of the market is concerned, on the basis of customer type, pediatrics account for a larger chunk of the pie with around 42% share of the market in 2004. The balance is made up by flu and travel vaccines and government bio-terrorism stockpiles. The market can also be classified as Government (accounting for around 90% of volumes and 40% of revenues as per 2004 estimates) and the balance is made up the private sector (Source: Panacea Biotec annual report). The global vaccines market is currently dominated by four large players namely Sanofi-Aventis, GlaxoSmithKline Plc, Wyeth and Merck.

Indian scenario
The biopharmaceutical segment, contributing 75% to the Indian biotech industry’s revenues, focuses on:

  • Vaccines and other speciality products such as statins,

  • Therapeutics, and

  • Diagnostics for the prevention, treatment and more accurate assessment of the disease.

The 30% YoY growth in biopharma in 2005 was chiefly driven by the vaccines segment, which accounts for around 47% of the biopharmaceutical market in India. In FY05, the vaccines market in India was worth US$ 379 m (Source: IBEF). In the Indian vaccines market, the focus is mostly on vaccines such as Tetanus Toxoid, Polio, DPT, Typhoid and Hepatitis B (recombinant). India is the largest producer of recombinant Hepatitis B vaccine in the world today. The Hepatitis B vaccine market in India is growing at a rate of 20% per annum and is presently estimated at US$ 22.2 m (Source: IBEF). However, the Hepatitis B vaccine has not been included in the immunization programme and efforts are being made to do so. In India, GSK Pharma, Aventis, Wockhardt, Panacea Biotec and Shantha Biotechnics are major players in the vaccines segment.

Key product launches in the Indian market include the Hepatitis B vaccine launched by Shantha Biotechnics in 1998, ‘Prevenar’ (vaccine for infants) by Wyeth and ‘Rabipur’ (for rabies) by Aventis. GSK Pharma has also unveiled plans of launching ‘Rotarix’ (for rotavirus in children) and ‘Cervarix’ (cervical cancer vaccine) from its parent’s portfolio in the Indian market mid-2007 onwards.

The way forward…
In recent times, India has witnessed a flurry of activity (by MNCs in particular) in the vaccines arena due to the introduction of the product patent law and the low cost advantage that the country offers. However, it must be noted that the extent of price realisations depends upon whether a particular vaccine is part of the government immunization programme or in the self-pay segment. The realisations in the case of the former tend to be low with not much flexibility to increase prices. Further, given the fact that vaccine manufacture tends to be expensive and time consuming, those players operating in the self-pay segment tend to earn higher margins. Having said that, with companies focusing on inventing vaccines to target therapeutic areas such as cancer and hepatitis and the scare of a possible global flu pandemic (read avian flu) has meant that the fortunes of the vaccine business globally as well as in India are likely to change after all.

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