IHS Global Insight Perspective | |
Significance | After months of negotiations, GlaxoSmithKline (GSK) has agreed to cut the value of the U.K. A/H1N1 influenza (swine flu) vaccine order, capping the number of doses at 34.8 million. GSK and Crucell are set to develop a malaria vaccine that combines their respective technologies. In India, GSK's consumer health division is set to make investments in expansion and infrastructure development. |
Implications | The cancellation deal with GSK will come as a relief to the government, as they estimate that it will deliver savings worth one-third of the value of the original order. Pre-clinical studies have shown that GSK and Crucell's combined vaccine may demonstrate high levels of immune responses against the malaria parasite; however, the companies are looking for funding for the clinical trials. The investments in India have been pegged at 2.7 billion rupees (US$61million). |
Outlook | With the general election coming up, the U.K. government is likely to face tough questions about whether it has secured a fair deal for the country, as well as pressure to reveal the exact value of the transaction. In terms of the malaria development deal, the project is still in its early stages, and the companies are looking to raise external funding to support the clinical work. As GSK continues its foray into the emerging markets, the India consumer health market is likely to continue to provide GSK with another diversified source of revenue. |
GSK Reduces U.K. Swine Flu Vaccine Order
Pharmaceutical major GlaxoSmithKline (GSK; U.K.) and the United Kingdom's Department of Health (DoH) have announced that they have reached an agreement for the cancellation of A/H1N1 influenza (swine flu) vaccine orders. According to the DoH's press release, the level of A/H1N1 flu vaccines supplied by GSK will be capped at 34.8 million doses, which represents savings of one-third of the original order. The 34.8 million doses include vaccines already supplied to the United Kingdom, as well as vaccines already produced as part of the government's order. No cancellation fee has been paid.
In terms of the surplus vaccines the government will be left with, the DoH has confirmed it will donate 3.8 million doses to the World Health Organisation (WHO) for distribution in Africa. The government will also retain a stockpile of the remaining vaccines for use in the United Kingdom.
GSK and Crucell to Collaborate on New Malaria Vaccine
GSK's biologicals unit and Dutch biotech Crucell are set to join forces for the development of a new malaria vaccine. According to a press release from Crucell, the vaccine will be a combination of its advanced adenovirus vector technology AdVac and GSK's paediatric malaria vaccine candidate RTS,S/AS, which is currently in Phase III development. Pre-clinical data has shown that when Advac technology and RTS,S/AS are combined, it may lead to high levels of immune responses against the malaria parasite. Phase I/IIa clinical trials are now set to begin on the venture; however, the companies are looking for third-party funding. If early clinical trials are successful, then the vaccine candidate will be investigated further.
GSK Consumer Healthcare Investments in India
GSK's international president Ian C. McPherson revealed in an interview with India's Economic Times newspaper that the company's consumer health division will invest up to 2.7 billion rupees (US$61 million) in India over the next three years. The investments will be targeted towards expansion activities at three plants in India, as well as towards building new infrastructure. Specific activities that will be targeted include research and development, manufacturing and supply, and merger and acquisition activities.
Outlook and Implications
The government has not officially confirmed how many vaccines it ordered from GSK; however, according to the online edition of U.K. newspaper The Times, the original order was for about 90 million doses. Attention has now turned to the value of the excess supplies the government will be left with in spite of this cancellation. The BBC estimates that only about 6 million doses of the vaccines have been used to date, and the government has confirmed that 3.8 million doses will be donated to the WHO. This means that up to 25 million doses will go unused, costing the government an estimated £150 million (US$228.8 million). The final cost of the excess swine flu vaccines bill is likely to be even higher when storage costs are taken into consideration. In January, the DoH also activated a break clause in its vaccines contract with Baxter (U.S.), which was for 9.2 million doses. It will come as a relief that the government has managed to cut the level of vaccine doses from GSK; however, the debate as to whether the government has secured a fair deal is likely to continue, especially ahead of the upcoming election. The French government also recently negotiated the cancellation of 32 million A/H1N1 flu vaccine doses from GSK, at an estimated cost of 36 million euro (US$48.69 million; see France: 23 March 2010: French Government Finalises Cancellation of Swine Flu Vaccine Orders).
In terms of the malaria development deal with Crucell, no financial details have been disclosed; however, the fact that the companies are looking for external funding to support the venture may be an indication that they will not be making a significant financial investment into the project themselves. Crucell has specifically said that the companies will be looking to partner with public and non-profit organisations on this project. GSK's RTS,S/AS is still in Phase III development, and the first set of results are not expected until 2013. With malaria being one of the biggest killers, especially in the developing world, with an estimated 900,000 deaths a year, it is likely that Crucell and GSK will be able to generate support for this project from philanthropic organisations.
The announcement of consumer healthcare investments in India comes as little surprise, given the focus on India as a lucrative emerging market. According to McPherson, GSK's consumer health business grew by up to 20% in India during 2009, and the company is looking to build on that success. So far, GSK's expansion India has been focused on pharmaceuticals. The expansion into consumer health is another indication of the company's attempts to diversify its sources of growth.