Will Sanofi’s Big Bet On Vaccines Pull It Out Of Its Diabetes Slump?
While reporting its first-quarter financial results yesterday, French drug giant Sanofi said that sales in its diabetes unit fell 3% year-over-year to 1.8 billion euros ($2 billion) and would likely lag for the rest of the year, due to competition in the U.S. The vaccines unit also saw its sales decline—by nearly 5% in the first quarter to 697 million euros ($784 million)—but Sanofi and many of the analysts who follow it are confident vaccines will help pull it out of its slump. Sanofi makes some of the world’s most widely used vaccines to protect against such diseases as influenza, polio, and meningitis. And now it’s preparing to launch a vaccine to fight dengue, a mosquito-borne illness that affects more than 50 million people a year in 100 countries.
The first-quarter disappointment hasn’t dampened Sanofi’s high expectations for its vaccines unit. The company said the sales decline was caused by a delay in flu vaccinations in the southern hemisphere. Minus flu, vaccine sales were actually up 17%. “Overall, I’m confident that Sanofi Pasteur will have another good year in 2015,” said Chief Financial Officer Jérôme Contamine, referencing the full name of the company’s vaccine unit, in a post-earnings interview online.
Sanofi expects full-year sales growth in its vaccines unit to stack up to last year, when Pasteur’s revenues rose 7% to 4 billion euros ($4.5 billion). But that estimate doesn’t include the dengue vaccine, which, depending on how the rollout proceeds, could boost those results. Last fall, Sanofi released results from a second Phase III trial of the vaccine, which showed that it produced a 60% reduction in cases of dengue and an 80% reduction in hospitalizations caused by the disease. Some analysts estimate the vaccine will bring in sales of more than $1 billion by 2025.
The vaccine has been a huge gamble for Sanofi ever since it first made a commitment to combating dengue in the early 1990s. The company’s first vaccine attempt failed. Then Sanofi acquired a company called Acambis in 2008, gaining an early-stage vaccine that worked against all four dengue serotypes.
Sanofi flipped the standard model of production, choosing to invest in manufacturing capacity long before anyone could say for certain the vaccine would succeed. Michael Watson, vice president of global immunization policy at Sanofi, says the company chose that route so it could get the vaccines to the countries that needed it the most right out of the gate. “Historically it has taken five to 10 years to get vaccines out to lower-income countries,” Watson said in a phone interview shortly after the World Vaccine Conference, held in early April in Washington, D.C., where he was a featured speaker. “What we said with dengue is that we would go ahead and invest in [production] right up front. So we took a risk.”
After more than 20 years of stops and starts, and an estimated $1.5 billion in R&D costs, Sanofi is now preparing to apply for approval for the vaccine in several countries. During a conference call with analysts after the first-quarter results were released, Sanofi’s vaccines chief, Olivier Charmeil, said he expects the first licenses to be granted in Asia and Latin America in the second half of 2015.
Sanofi has several other vaccines in the pipeline, including a late-stage combination shot for children that protects against six diseases. But the company is constantly fighting headwinds in the market that Watson refers to as the “Five A’s” of vaccine development: access, awareness, acceptance, availability, and activation.
In developing countries, access to standard vaccines like polio and diphtheria-tetanus-pertussis (DTP) has been one of the biggest challenges, Watson says, but not because vaccines are unaffordable. “Most children don’t get polio or DTP [vaccines], which cost 12 and 19 cents respectively,” Watson says. “So while some of the newer vaccines were quite expensive to begin with, actually bringing those prices down hasn’t solved the access problem to those one in five children who are not getting anything.”
To combat the access problem, Sanofi is pilot testing research programs in Mexico, Romania, and the African country of Gabon aimed at understanding why coverage gaps are occurring and then developing plans to address the issues. Last year, Watson says, the Mexican government took what it learned from the research and developed a plan to expand access to the flu vaccine. Vaccination rates have risen 60% there in the last year, he says.
As for access to the dengue vaccine, that’s where the flipped production model comes into play, Watson says. The company’s goal is to make the vaccine available in large quantities in the countries where the disease is endemic. He expects Sanofi will still see a significant return on its investment—just not in the same way vaccines makers did in the past. “Rather than taking the old-fashioned route, which was to start with a smaller volume of higher-priced vaccines, we’re going for much higher volume initially,” Watson says. “It’s a much bigger risk, but for everybody’s benefit, we need to do it.”
Source: Forbes Health