According to media reports, pharmaceutical company Abbott Laboratories is looking to auction off its influenza vaccine business in a deal that could be worth up to $600m. Abbott's established link to the Russian flu market and its advanced cell-based technology make the business an attractive prospect for would-be buyers, which may include the likes of GlaxoSmithKline and MedImmune.
Abbott's decision does not come as a surprise
Driven mainly by the H5N1 pandemic threat and the recent H1N1 influenza pandemic, influenza vaccines have become an area of significant interest for pharmaceutical and biotech companies over the past decade. The market for seasonal influenza vaccines, valued at $2.8 billion in 2008-09 across the seven major markets (the US, Japan, France, Germany, Italy, Spain and the UK), has grown at a strong compound annual growth rate of 12.6% since 2005-06. In addition, during 2009-10, the H1N1 pandemic translated into large commercial windfalls of several billion dollars for manufacturers of pandemic influenza vaccines.
Three large players dominate the market: GlaxoSmithKline, Sanofi Pasteur and Novartis. However, owing to an increasing market opportunity and generous government funding for influenza vaccine-related products and technologies, a number of new market entrants have recently embarked on the development of influenza vaccines. Considering the increasing competition and commoditization in this sector, where commercial success requires a critical mass, significant consolidation has begun to occur. The latest example of this is Abbott's recent decision to auction off its flu vaccine unit.
Solvay's vaccine business has not lived up to expectations
The influenza vaccine business has been part of Abbott since its acquisition of the pharmaceutical unit of Belgian conglomerate Solvay in September 2009. Solvay had been manufacturing influenza vaccines for several decades, but remained a niche player with annual influenza vaccine sales of approximately $300m in 2009. Solvay's operations in the flu vaccine sector were largely limited to Europe, where the company has two egg-based seasonal influenza vaccines in distribution: Influvac and Invivac. Solvay's lead product, Influvac, accounted for 82% of the company's total influenza vaccine sales in 2009.
In the pandemic sector, the company lost out on commercial windfalls from the H1N1 pandemic. Despite having initially been eager to participate in the race for H1N1 vaccine stockpiling contracts, Solvay failed to secure a contract to supply the Dutch government with an H1N1 vaccine in June 2009 after it said that it could not meet the production deadline. Considering the lack of portfolio fit and a vaccine franchise beyond Solvay's relatively small influenza business, Abbott's decision to sell off this segment does not come as a surprise nine months after its takeover of Solvay.
Abbott's presence in the lucrative Russian market is an attractive selling point
One of the most attractive propositions for potential buyers of Abbott's flu vaccine business is the company's established presence in the Russian influenza market. In 2004, Solvay established a presence in Russia through a partnership agreement with Petrovax Pharm. As a result, Solvay is developing both egg- and cell-based formulations of a seasonal influenza vaccine incorporating Petrovax Pharm's adjuvant polyoxidonium, targeted at markets within the Commonwealth of Independent States.
Russian approval for an egg-based seasonal influenza vaccine was granted in September 2008, while the adjuvanted cell-based vaccine Grippol Neo was registered in Russia in September 2009. Considering the high market-entry hurdles for external companies into the Russian pharmaceutical market, this relationship is a very attractive selling point for other flu vaccine players looking to expand their geographic coverage into emerging markets.
Abbott's cell-based manufacturing technology is interesting, but competitive advantage has been lost
Some 10 years ago, Solvay was the clear leader in the development of a cell-based seasonal influenza vaccine. Its cell-based version of Influvac, named Influvac TC, was approved in the Netherlands in 2001 as the first vaccine to be manufactured in MDCK cells. However, despite benefiting from a $298m US grant which it received in 2006 for the development of Influvac TC, Solvay failed to capitalize on this competitive advantage in the following years.
While Influvac TC is still in clinical trials in 2010, Novartis gained EU approval for its own cell-based seasonal influenza vaccine Optaflu in 2007. Solvay cancelled its plans to build a US cell-based manufacturing facility in 2008. While its cell-based manufacturing technology may remain interesting for some potential buyers, it is questionable whether Influvac TC will become a commercial success, particularly considering the generally low tolerance of high-priced vaccines in this increasingly competitive market.
Several existing flu vaccine players may look to strike a deal
Datamonitor believes that several different influenza vaccine players could be interested in acquiring Abbott's influenza vaccine unit. One of the most likely contenders is GlaxoSmithKline. The British pharmaceutical giant is one of the most successful influenza vaccine players, marketing a wide portfolio of seasonal and pandemic influenza vaccines. In 2009, GlaxoSmithKline reported global influenza vaccine sales of $1.7 billion, making the company market-leader in the field in that year ahead of its fiercest competitors Sanofi Pasteur and Novartis.
However, the company's outstanding financial results were mainly driven by pandemic stockpiling, with H1N1 vaccines accounting for over 80% of total influenza vaccine sales. In the seasonal flu segment, both Sanofi Pasteur and Novartis continue to outperform GlaxoSmithKline, having invested in new technologies for their seasonal vaccine portfolios.
In this light, Abbott's cell-based manufacturing technology could provide an incentive to GlaxoSmithKline, which is lagging behind other flu vaccine players with regards to cell-based manufacturing. Furthermore, considering GlaxoSmithKline's reported strategic plans to increase its footprint in the emerging markets, Abbott's established Russian business constitutes an even more attractive proposition for a potential deal.
Another scenario could see a smaller player such as MedImmune combine Abbott's flu business with its own influenza unit to achieve a critical mass in the sector. As of 2010, the only marketed influenza vaccine of MedImmune (which was acquired by AstraZeneca in 2007) is the inhaled seasonal vaccine FluMist, currently marketed in the US but not approved in Europe.
Handicapped by its premium price and narrow approved age range, FluMist has failed to claim significant market share since its launch in 2003. Indeed, in 2009, MedImmune recorded sales of only $145m for seasonal FluMist. A potential acquisition of Abbott's influenza vaccine business would provide MedImmune with two marketed seasonal influenza vaccines in Europe, Abbott's Influvac and Invivac, and consequently provide access to the European influenza market. This would allow MedImmune and, by extension, AstraZeneca to increase the competitiveness of their influenza vaccine business compared to the main players in the field.
Related research
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• Abbott Laboratories: PharmaVitae Profile
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• Commercial Insight: Influenza Vaccines and Antivirals - The pandemic's long-term impact
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The Vaccines Market Outlook To 2014: Competitive landscape, pipeline analysis, growth opportunities and market forecasts
