How Big Pharma Profits from Swine Flu

Once spurned by drugmakers as low-margin and risky, vaccines to fight diseases such as H1N1 are now a growing business for Novartis and others

A person receives an H1N1 flu vaccine in a gymnasium in Paris. LIONEL BONAVENTURE/AFP/Getty Images

By Kerry Capell

Swiss pharmaceutical giant Novartis gave U.S. efforts to combat pandemic influenzas a boost with the Nov. 24 opening of the country's first large-scale cell-culture manufacturing plant. Located in Holly Springs, N.C., the Novartis plant, backed by $487 million in federal funding, represents a major milestone in using biotech production technologies to replace the 50-year-old manufacturing process based on growing vaccines in eggs. "This technology has the potential to leapfrog the traditional egg-based approach, increasing the reliability and productivity of vaccine production," says Novartis Chairman and Chief Executive Daniel Vasella.

Novartis (NVS) is one of two vaccine manufacturers using the newer cell-based methods. The Novartis plant will produce flu vaccines in dog kidney cells instead of chicken's eggs, shaving around one month off the estimated three to six months needed to create vaccines using eggs. According to Novartis, the plant will be able to crank out 50 million doses of seasonal flu vaccine and 150 million doses of pandemic vaccine for the U.S. within six months of the declaration of a pandemic. However, it will be 2011 at the earliest before the factory is able to start making cell-based vaccines.

Adjuvants and the H1N1 Vaccine

Still, any future increase in capacity is welcome news for the U.S. The current shortage of H1N1 (also knows as swine flu) vaccinations in the U.S. has highlighted the need for newer, more reliable vaccine development technologies. Though 50 million doses of the H1N1 vaccine have been distributed to date, that's only enough to reach about one-third of the 160 million Americans that the Centers for Disease Control would like to see inoculated.

A big part of the problem is that the U.S. Food & Drug Administration, unlike its counterpart in Europe, has yet to approve use of adjuvants, which are additives that increase the body's response to vaccines, lowering the required dose. Novartis already makes cell-based seasonal and H1N1 flu vaccines with its own licensed adjuvant at a factory in Marburg, Germany.

The Novartis seasonal vaccine is approved in Europe and Japan, and the pandemic vaccine recently won regulatory approval in Germany and Switzerland. Vasella says the trials have shown that using adjuvants could potentially double or even quadruple the vaccine supply. "Some 45 million doses of the cell-based vaccine with adjuvant have already been safely administered, so it is quite established in other countries," say Vasella. He's confident that cell-based technology will eventually be approved in the U.S. And if the pandemic suddenly explodes, the FDA would likely act quickly to approve the use of adjuvants.

The Resurgence of Vaccines

It wasn't too long ago that vaccines were deemed the poor relation of the pharmaceutical industry. Their complexity and high manufacturing cost—coupled with relatively low margins and risk of major litigation—deterred all but a handful of players, including Novartis, Britain's GlaxoSmithKline (GSK), France's Sanofi Aventis (SNY), New Jersey's Merck (MRK), and Wyeth—now a unit of Pfizer (PFE).

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