More Grease on the COGs

Back in February, I wrote about the success of the global health vaccination programs in providing basic vaccines at affordable prices, e.g., for 2011 UNICEF planned to buy about 2.5 billion doses of 25 vaccines at prices ranging from $0.05 to 2.80 per dose (2011 Vaccine Projection and “Greasing the COGs”).  I also noted that one factor in increasing affordability and access to vaccines was reducing the cost of making them (aka cost of goods or COG), and that there were a handful of companies working on this problem (other challenges are how to fund purchases, project demand, and deliver product to millions in countries lacking infrastructure).  So it was interesting to see a finger added recently, and a big one at that- General Electric (GE), one of the largest manufacturing companies in the world.

Earlier in December, GE Healthcare, a division of GE with $4.5 billion in 2010 revenues, and M+W Group, a multi-billion German engineering and construction firm, announced that they had formed “a strategic alliance aimed at overcoming the lack of key biopharmaceuticals, especially in emerging nations … [and] will assist countries worldwide to become self-sufficient in the manufacture of vital biopharmaceuticals such as vaccines, insulin and biosimilars” (GE press release).  Apparently, the companies are responding to several market signals:

  • governments want self-sufficiency in their vaccine supply (e.g., the concern about the H1N1 vaccine supply during the 2009 pandemic scare, MacDonald 2009);
  • developing country biomanufacturers are investing in their production capacities for vaccines and biological therapeutics (like insulin);
  • the big pharma vaccine companies are continuing to develop vaccines for the first world markets first and sell to the developing world second (GSK is an exception); and
  • the major contract manufacturers (CMOs) are focused on securing high-margin contracts (pharmaceuticals for the developed world) although they may be in an over-capacity situation.

And hence, the GE/M+W is offering a “turn-key” solution in which they design and build the facility, provide equipment and materials, and train the personnel.  The resulting biofoundry will be cheaper, faster to get running, have lower operating costs, and be better all around than the competing options of building from scratch ($100s of millions) or buying product from big pharma or the CMOs.

Apparently GE Healthcare is serious about building its biomanufacturing business.  It has announced that research and development of new biomanufacturing technology is a key part of a five-year $1 billion plan (In-Pharma article) and has shown an interest in acquiring biomanufacturing process improvements:

  •  in 2007 it partnered with Novavax on its virus-like-particle manufacturing platform (Bionity article);
  • in September, GE and the French company Sartorius cross-licensed biomanufacturing technology patents (GEN article); and
  • this month it partnered with G-Con Manufacturing, a supplier of modular portable flexible clean room technology (another GEN article).

GE’s biomanufacturing effort is part of its larger strategy to meet rest-of-world health care market needs with new technologies, the center piece of which is its “Healthymagination” program (Healthymagination) which includes an investment fund and about which I wrote last year (“Medtech Made Easy,” 5/20/10).

How big a role in the global vaccine enterprise the GE/M+W turnkey offering will have remains to be seen.  Their first customers are likely to be in countries with no or little capacity and healthy balance sheets, e.g., in the Mideast and South America.  And given the scale at which these companies operate, the offering may not be attractive to governments and companies that want smaller, cheaper, more flexible, and easier-to-run facilities to make small volumes of multiple vaccines and biologics.  But then I’ve found only two companies that see this latter niche as a business opportunity:  Novavax and Xcellerex.

Maryland-based Novavax (Novavax) states it “is committed to using its technology platforms to create geographic-specific vaccine solutions and is therefore involved in several international partnerships, including collaborations with Cadila Pharmaceuticals of India and LG Life Sciences of Korea.”  Novavax is licensing its platform to Cadila apparently nonexclusively, so that the company can apply it to any vaccine target (the LG deal is specific to Novavax’s H1N1 vaccine, 2011 investor presentation).  But the company hit pay dirt early this year with a multi-tens of millions of dollars, US government, Biomedical Advanced R and D Agency (BARDA) contract for the clinical testing of its H5N1 ‘flu vaccine (Novavax press release), and will likely focus on running the trials rather than overseas business development.

Closer to home, Marlborough, MA-based Xcellerex (Xcellerex), about which I have posted previously (“DIY Vaccines,” 4/8/10), has had some success in selling its FlexFactory platform outside the US.  The platform’s claims include:

  • 60% reduction in capital investment;
  • 40% less space needed;
  • 85% reduction in water and waste;
  • 32% reduction in COGS;
  • 5x faster deployment (7-12 months vs. 3-5 years);
  • Simultaneous multi-drug production in same facility; and
  • Set-up in one place and transportable to another (Platform).

Although Xcellerex has not licensed any vaccine manufacturers in the lowest-income developing countries, in the past year the company has announced that it is working on a deal with SK Chemicals Co., one of South Korea’s largest industrial groups (Xcellerex press release) and sold a 2000L plant to the Russian pharmaceutical company, R‐Pharm (Business Wire article).  Interestingly, Xcellerex may be interested in developing vaccines for under-served markets using its technology.  In April, it published results of a Phase I study of its yellow fever vaccine (Business Wire) and has stated its interest in licensing candidate biotherapeutics or vaccines after Phase I/II trials (Xcellerex Partnering).  My suggestion is that Xcellerex lower the bar/increase the risk and take on earlier stage opportunities to prove its technology, especially those big pharma is overlooking.  More grease is always helpful.

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