Succeeding in the vaccines business is not easy. Low margins and manufacturing challenges make it a difficult business for any pharma company. In fact, two large manufacturers, Baxter and Novartis, recently pulled the plug on their vaccine efforts. Four of the remaining sponsor companies, GSK, Merck, Pfizer, and Sanofi Pasteur, are formidable competitors. Despite the challenges that exist, Takeda decided in 2012 to enter this global market, building upon its 70-year history of Japanese vaccine business, with plans to be the world leader by the year 2020.
Takeda's entry into the market was an initiative pushed by Tadataka (Tachi) Yamada, who served as the company’s chief medical and scientific officer (CMSO) from 2011 until being succeeded by Andrew Plump in 2015.
In an August 2013 article in Life Science Leader, Yamada noted vaccine development is a great business investment. He stated vaccines represent a product line not dependent on the life cycle of intellectual property, while pointing to the growth taking place in the vaccines market (increasing from $5.7 billion in 2002 to $27 billion in 2013, and expected to grow by a 10.3 percent annual rate through 2015.)
Rahul Singhvi, COO for Takeda’s Vaccine Business Unit, agrees with Yamada, noting vaccines can make such a huge impact on patients’ lives. After clean drinking water, immunization is an investment that can substantially improve the lives of people around the world.
Vaccines are a preventative medicine, so they are also cost-effective. The measles vaccine, for example, costs pennies. A vaccine shot early in life can prevent you from getting that disease, in some cases, for your entire life. That’s a pretty remarkable intervention in someone’s health.
Singhvi believes preventative medicine should be a commitment for all healthcare companies, and vaccines are a big component of that. If you make a good vaccine, it can be effective at reducing the disease burden by up to 99 percent. There are not a lot of medicines that can make that claim. And you can do this at a population level. With vaccines, you are not only treating an individual; the entire population, including unimmunized persons, may be protected indirectly by those vaccinated.
Unfortunately, there are also major challenges that must be overcome when working with vaccines. Even with the recent exit of Novartis and Baxter, the four dominant manufacturers still make for a concentrated industry on the multinational side. There are also emerging vaccine companies in countries like India focused on producing vaccines for the lowest possible price.
For Takeda to be successful, it must have a unique and differentiated strategy. “The established business we have in Japan is our foundation,” notes Singhvi. “That infrastructure gives us a dominant brand in an important market, which is one of the pillars of our strategy. Another is to innovate with best-in-class products. We have acquired two companies with promising vaccine candidates. One is a vaccine against norovirus, which is the diarrheal disease that is increasingly recognized as a major problem in many settings, including day care centers, longterm care facilities, hospitals, and cruise ships. It is one of the most dominant GI bugs, even in first-world countries like the U.S., and we hope to be first on the market with this important vaccine.”
The other vaccine targets dengue fever, a worldwide mosquito-borne problem. Over the last four decades, the disease has steadily spread geographically, and the growth of cities in tropical regions places an increasing number of people at risk. Singhvi acknowledges Sanofi is ahead of Takeda in that area, but he feels his company has a good candidate against the disease.
But it will take more than a good strategy to become the industry leader. First and foremost, Takeda will have to work on diseases that are globally relevant. Both norovirus and Dengue will be important in many countries, if not worldwide. But to become a global vaccines manufacturer, the company will have to scour the world to find the best possible vaccine candidates, acquire them, and put its development and manufacturing expertise to work to bring them to market.
Beware Of Manufacturing Challenges
In addition to the two vaccines mentioned previously, Takeda has several other candidates, including one for another mosquito-based disease, and one for Enterovirus 71, an infection of children that causes a rash illness and neurological infection, more commonly known as hand, foot, and mouth disease. Although these are all candidates the company believes it can execute on, it also wants to be careful about how many vaccines it takes on at one time.
“Developing a vaccine takes a lot of effort, and we have to be careful about balancing our focus on these products versus being too broad,” says Singhvi. “We have a great virus-like particle vaccine platform that has shown a lot of promise, and it is this platform on which the norovirus vaccine is based. But it can also be used for other vaccine candidates, and we need to be prudent in how we move forward with it.”
Vaccine manufacturers also need to be prepared to ramp up quickly in the event of a pandemic. Managing an organization to be ready to do so is another challenge.
“I think the H1N1 pandemic influenza outbreak in 2009 was a particularly extreme example,” adds Singhvi. “Even countries like the U.S., which have enormous resources at play, were unable to bring a vaccine in time. That, I think, was a wakeup call. When you see a situation like that and realize what a virus can do, you know that it is not a theoretical problem anymore.”
In Japan, as part of its pandemic preparedness process, Takeda built a massive flu facility based on cell culture, which can be quickly scaled up. Takeda purchased the technology for this facility from Baxter. The ability to quickly scale up is something Takeda refers to as surge capacity, and it gives the company enormous volume potential.
To construct the facility, Takeda received assistance from the Japanese government, which provided two-thirds of the total cost through capital investment. It was a shared risk, but done in the spirit of serving the public health and being in a position where Takeda could quickly produce large quantities of a vaccine in extreme circumstances.
The facility equates to a great opportunity for Takeda, but it also represents another challenge: How do you keep the facility “warm” during times when there is no pandemic? “That is an important consideration for us,” says Singhvi. “We have to find work for that facility in order to pay the bills, since the operating costs are enormous. One approach that helps is to get into the seasonal flu business. The seasonal flu vaccine can be manufactured in the same facility that might be used for a pandemic. This is the approach we are taking, and the hope is our production management will keep the facility warm and ready to produce vaccines should we get the call.”
The Desire To Be Number One
With the challenges that exist, how will Takeda execute on its goal to be number one in vaccines by 2020? Finding the right talent is certainly critical. Since the globalization of its vaccine business in 2012, Takeda has been able to attract almost 200 talented professionals, including the president of its Vaccine Business Unit, Dr. Rajeev Venkayya. Venkayya was previously the director of vaccine delivery at the Bill & Melinda Gates Foundation, where he was responsible for the foundation’s top two priorities of polio eradication and new vaccine introduction. Singhvi is another example. He started his pharma career at Merck and was part of the team that developed the shingles vaccine.
Partnerships will also be a key component of the company’s success. Singhvi notes partnerships in pharma used to be nonexistent, citing his time at Merck when companies were fairly self-sufficient. Today there are many more partnerships with both CROs and CMOs, and Takeda is more open to these partnerships. Takeda will even work with other manufacturers if they have competencies the company requires.
"Developing a vaccine takes a lot of effort, and we have to be careful about balancing our focus on these products versus being too broad."
COO for Takeda’s Vaccine Business Unit
“We believe this type of collaborative partnering approach is beneficial to all companies involved,” states Singhvi. “Drug and vaccine development is not a zero-sum game. We believe that by working together, we can expand the pie and create additional value for both companies. I personally feel this is a trend that is good for the industry, and others are recognizing that as well.”
When deciding what parts of the development or manufacturing process should be outsourced, Singhvi believes companies need to be strategic with their choices, provided options are available. One situation where it makes sense to do so is when the company needs to get a product to market as quickly as possible. “In the old days that was unheard of,” he adds, “because of the complexity involved with producing vaccines. This includes the number of tests you have to go through to get a vaccine released, as well as the volume that must be produced. With vaccines, a manufacturer might have to produce tens of millions of doses that, in the case of the flu vaccine, have to be produced and sold within a couple months.”
The situation requires manufacturers to closely manage volume, quality, and the forces of demand and supply. On top of all that, there are cost pressures, because you don’t have the luxury of high prices that you might find with other drugs. “When you look at all of these factors, you realize how difficult manufacturing vaccines can be,” he says. “Companies, for good reason, have been reticent in outsourcing vaccine development. However, there are opportunities where we can certainly use a CMO model for manufacturing.”
To avoid a catastrophic situation, Takeda does not want to be dependent on just one facility. In some situations, the CMO being used acts as the second supplier, which provides additional security.
All of this helps manage the complexity of manufacturing, but it does not make the business any easier. After all, vaccines, like most biologics, are difficult to manufacture and require excess capacity for scale-up. Further, vaccines are part of an industry dominated by four top-10 pharma companies, and that industry constantly pressures sponsors for lower prices. So, why choose to enter the market at all, especially at a time when some pharma companies are looking for an exit?
Pharma companies are certainly not ignorant of the risks involved with vaccines. My colleague, Louis Garguilo, recently wrote two articles for Outsourced Pharma dealing with this very topic. His conclusion? Pharma companies are increasingly unable to sustain the costs of vaccinating populations around the globe. To meet the world demand for vaccines, new technologies and updated facilities are necessary. But without higher prices on vaccines, that reinvestment is not possible. Unfortunately for the manufacturers, global organizations like WHO and UNICEF believe higher prices are unacceptable. According to Garguilo, when innovators can’t sustain their R&D business model, they will curtail their R&D efforts and/or exit vaccines altogether.
But perhaps Takeda will not have to bump heads with other large pharma companies. The company is not looking to invent a new vaccine for measles, DTP (diphtheria, tetanus, pertussis), or polio. It is looking for innovative vaccines that do not currently exist. That means it is more likely to be competing against the smaller start-ups and biotech companies.
“From a business perspective, I would add that vaccines are a medicine that is somewhat immune — no pun intended — from generic competition,” adds Singhvi. “In the U.S., we still do not have a competitor for the MMR vaccine introduced by Merck in the late 1960s. Contrast that with the drug industry, where generic competition is a major concern for pharma. From a profitability standpoint, this is a steady business. Developing a vaccine requires a strong and long-term commitment, and these products take longer to come to market than most drugs. But once they’re on the market, they tend to have a long life.”