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No one knows yet whether the swine flu outbreak will turn into an alarming pandemic or a blip in the annals of infectious disease. The good news is, the vaccine industry is far better prepared to deal with the threat than it was just a few years ago. If the outbreak worsens and governments decide a vaccine should be rushed into production, the industry's capability could be tapped.
Officials at the Centers for Disease Control in Atlanta are discussing whether to ask drug companies to switch from making the standard seasonal flu vaccine to manufacturing a swine flu version. CDC scientists are growing seed stocks of the new virus, so if there's a decision "to turn production toward making this, we will be ready to move," says Dr. Richard E. Besser, the CDC's acting chief.
Some companies are already preparing to ramp up, if governments are willing to pay. "Given the current situation, investing in production is the right thing to do," says Dr. Andrin Oswald, CEO of Novartis' (NVS) Cambridge (Mass.)-based vaccines division. "But we will supply the vaccine first to governments who commit to us."
Asking industry to jump in quickly would be costly and politically fraught. But the surprising thing is that such a step is even possible. That was not the case during the flu season of 2004-05, when the industry couldn't make enough vaccine for the regular flu. Only two companies were in the business then—Aventis Pasteur, now a unit of Sanofi-Aventis (SNY), and Chiron, which has been acquired by Novartis. And one of Chiron's facilities had to be shut down because of safety concerns.
Since then, there has been a vaccine revival, fueled by both improved profitability and government dollars. Three pharmaceutical giants—Sanofi-Aventis, Novartis, and GlaxoSmithKline (GSK)—now make flu vaccine, along with smaller players such as MedImmune, a unit of AstraZeneca (AZN). These companies have already begun making vaccine for next winter's flu season. While Sanofi-Aventis says it can't make the regular vaccine and the swine flu version at the same time, the industry as a whole has the capacity to do both—at least, for some parts of the world.
The swine flu vaccine can't be made swiftly. Even if governments act now, it will take six to nine months. The virus first must be grown in eggs, then harvested to be turned into a vaccine.
But this limitation may not be as severe as it first seems, for two reasons. First, if the current outbreak follows past patterns, a more serious pandemic won't occur for many months. "That will factor in our decisions whether to manufacture a vaccine," says the CDC's Besser. Second, there is a path to a quicker response. Several companies have pioneered new approaches, such as growing viruses in cells rather than eggs. None of these processes has been licensed yet by the Food & Drug Administration. So one of the difficult decisions the Obama Administration will face if the epidemic spins out of control is whether to fast-track approval of a next-generation, possibly riskier, vaccine. The bigger the crisis, the greater the tolerance for regulatory risk.
Just a few years ago, the pharmaceutical industry was fleeing the vaccine field in droves because it just didn't pay. Global vaccine sales in 2004 were a mere $8 billion, less than those of some individual blockbuster drugs. But since then, the economics have changed dramatically. "Vaccines used to be unprofitable, but they've now demonstrated they can be billion-dollar products," says Rahul Singhvi, CEO of Rockville (Md.) vaccine startup Novavax (NVAX). Wyeth paved the way with its vaccine against pneumococcal bacteria, charging a high price—now $84 per dose. Wyeth's strong vaccine business was one reason the company was snapped up by Pfizer earlier this year.
Other companies followed with their own high-priced vaccines. Merck's Gardasil for human papillomavirus (HPV), which causes cervical cancer, goes for $130 per dose. GlaxoSmithKline has a similar HPV product and has targeted vaccines as a key growth area.
The vaccine industry also got a boost from Uncle Sam. In 2005, worried about flu and other threats, Congress authorized $7.1 billion to better prepare for a pandemic. About $1 billion went to companies to develop cell culture methods for producing influenza vaccines. Novartis is building a cell culture factory in North Carolina with government support.
The increased dollars have led drugmakers to grab promising vaccine startups. Glaxo bought Canada's flu vaccine maker, ID Biomedical, in 2005 for $1.5 billion and beefed up its own research team. Last September, Sanofi-Aventis spent $528 million to buy Britain's Acambis, which was developing vaccines for West Nile virus, dengue, and other illnesses.
Meanwhile, other startups have jumped in with novel technologies. Novavax is testing flu vaccines made from virus-like particles. Cranbury (N.J.)-based VaxInnate makes vaccines in bacteria—including one the company hopes will help fight any flu strain. Developments like these could help now, says Dr. David Taylor, VaxInnate's chief medical officer. And the world will be even better prepared next time.
Carey is a senior correspondent for BusinessWeek in Washington. With John Cady