Breaking the Big Four: vaccine oligopoly unlikely to be challenged, analyst

By Dan Stanton contact

- Last updated on GMT

Image: iStock/BaMiNi
Image: iStock/BaMiNi

Related tags: Vaccine

Long lead times and high barriers to entry will restrict competition in the vaccines market, leaving GSK, Sanofi, Merck & Co. and Pfizer dominant, a Jefferies analyst says.

Earlier this week, GlaxoSmithKline hosted an investor day and tour of its vaccine production and fill/finish site in Wavre, Belgium.

Jeffrey Holford, an equity analyst at Jefferies, was impressed with GSK’s capabilities and innovation but said the nature of the vaccine industry and the long lead times would likely deliver robust revenue growth in the long-term for the firm.

“A typical vaccine can take anywhere between 10 to 26 months to go from start of production, to market, and around 70% of this time is spent carrying out quality control checks to ensure efficacy and safety,” ​he wrote in a note. “These long lead times, along with significant up-front costs, generate high barriers to entry.”

He added that as vaccines cannot be genericised like drugs the division does not suffer from patent cliff issues.

“All this means it's unlikely that there will be any significant disruption to the current oligopoly in the foreseeable future, resulting in vaccine sales remaining highly durable.”

According to an EvaluatePharma report​ on the vaccines market, GSK, Sanofi, Merck & Co. and Pfizer dominate the space, representing over 86% of total vaccine revenue in 2015. While this figure is expected to drop by 2022, the four firms will still control over 80% of the projected $48bn market, as the chart below shows (courtesy of Statista).

Statistic: Top 10 pharmaceutical companies based on global vaccine revenue market share in 2015 and 2022 | Statista
Find more statistics at Statista

Single-use technologies

But despite this, some vaccine developers have been looking to disrupt the space through new technologies aimed at reducing CapEx and easing market entry.

Takeda, for example, teamed up with Belgian bioprocessing firm Univercells last year​ in order to use the firm’s single-use, high cell-density bioreactor manufacturing platform to reduce production costs.

And PnuVax is looking to use single-use systems and modular facilities to make an inactivated cell-culture based yellow fever vaccine, teaming up with GE Healthcare in June​. CEO Donald Gerson told Biopharma-Reporter at the time such systems could revolutionise an industry which has seen little change in its processes for decades:

“There are a large number of legacy vaccine products that large pharma companies still make using technologies that were really good in 1962 – I’ve made them all – and as a rule the large companies have not been willing to invest in these products.”

GSK on disposable and modular

And speaking on Monday, GSK Vaccines’ head of Global Industrial Operations John McGrath agreed, saying not only can modular and disposable technologies reduce CapEx but his firm has already implemented such systems alongside its traditional technologies.

However, “there is still a trade-off between when you build a stainless-steel facility and when you build a modular facility,”​ he told investors. “It can lower the capex cost to entry, but you still need all the other expertise to go with it and if you want to get into serious volumes it is not going to dramatically impact your operating costs.”

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