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Business Development

Who’s who in the vaccine market? A look at low- and middle-income countries

By | Business Development | No Comments

With Covid-19 becoming a big part of all our lives this past year, the vaccine market is more relevant than ever. But vaccine development is a completely different game compared with drug development; both in pathways and in players. Vaccines are one of the most cost effective and successful public health interventions, saving two to three million lives annually. In the following post, we share our experience of a few key facts bringing you up to speed on the basics of the vaccine market in low- and middle-income countries.

In 2018, the WHO estimated the global demand for vaccines to 3.5 billion annual doses excluding vaccines for oral polio vaccine, seasonal influenza vaccine, travel vaccine and military markets. This corresponds to a global market value of $26 billion. Sounds like a rather straight forward market with major needs, but it’s anything but simple due to a strong divide between high income countries and low- to middle-income countries. About 80% of global vaccine sales counted in value comes from high-income countries, primarily due to the preference of more expensive and complex vaccines. By volume sold, the high-income countries market corresponds to just about 20%. This unveils the important disparity that steers all key players on the vaccine market.

Game-setters: The buyers and regulators

You may be familiar with the pharma industry where the buyers of established drugs are hospitals and clinics, financial players, doctors or even patients themselves. In the vaccine market, it is instead large organizations such as UNICEF and PAHO that usually procure and distribute vaccines developed by a vaccine developer. It is the WHO, the national immunization technical advisory and regulatory authorities that have significant influence in determining the global vaccine demand by setting the agenda, immunization policies and programs, especially in low- and middle-income countries.

Regulatory and advisory bodies such as the US FDA, EMA and WHO have the important role of overseeing vaccine quality and safety. NGOs such as UNICEF and PAHO (Pan American Health Organization) function as pooled procurement organizations and are highly involved in a centralized vaccine procurement process. UNICEF procure vaccines for approximately 100 countries and PAHO procures for about 40 countries. Governments and private sector actors are involved to a varying extent as well. As an actor looking to sell vaccines, you should be aware that an estimated 5 to 10% of the total vaccine sales in developing countries are through the private sector. Thus, the private sector is very small in developing countries in general, however, some countries with rapid economic growth have a demand for new vaccines, as well as vaccines that are not included in the WHO standard vaccination program. These new and extended vaccines (the HPV vaccine being one example) would primarily be bought through the private sector.

A as a vaccine developer, you need to keep in mind that low- and middle-income countries together with their donors have a major influence on these discussions since 80% of the vaccine volume is purchased by these countries.

The producers

International quality standards are set by the WHO and all vaccine producers need to comply with these standards, which only a few does. As a consequence, about 80% of the global vaccine sales come from five Big Pharma companies. These Big Pharma tend to focus their in-house production on avcanced multivalent vaccines high income countries. For low- and middle-income they often go for a strategy where they do a technology transfer to local players for production and sales, since the products differ both in content (lower valencies) and in packaging. Thus, producers focused on low- and middle-income countries have a significant role in production of monovalent and certain combination vaccines and in terms of volume of doses, they supply roughly 50% of UNICEFs procured doses. Through this, the vaccine market landscape in low- and middle-income countries have changed by increased competition and increased supplier capabilities resulting in reduced vaccine prices; benefitting people across the globe.

The donors 

Donors are an essential part of the vaccine market for low- and middle-income countries as they make it possible for large organizations to run their agenda. Large donors include organizations like the Bill & Melinda Gates Foundation, but also many high income countries.

Implications for vaccine developers

High-income countries have different demands of vaccines compared with low- and middle-income countries countries in terms of desired formulations, in terms of valency and vaccine type, as well as packaging. This gives the vaccine producers a chance to change pricing for the different products and to avoid unprofitable parallel trade between countries. However, since this might increase the frequency of technology transfer to producers that target low- and middle-income countries as mentioned above, the price may decrease due to the increased manufacturing capabilities this offers. As a vaccine developer, it is essential to know who you’re targeting and make adjustments in manufacturing accordingly.

As mentioned above, high income countries have historically purchased more complex and expansive vaccines, e.g. with higher valencies and vaccines that are not included in the standard vaccination program. However, newer vaccines such as the rotavirus, pneumococcal and HPV vaccines that are being implemented with the help of donors, are being implemented at approximately the same pace. This is a game-changer for vaccine developers, since some advanced vaccines can be assumed to be implemented in a higher pace than generally assumed in previous years.

Since the vaccine market consists of few players (especially producers), there is a need for continuous discussions and balancing of demand and supply between different actors. And as a vaccine developer, you need to keep in mind that low- and middle-income countries together with their donors have a major influence on these discussions since 80% of the vaccine volume is purchased by these countries.

To keep up with the ever-changing dynamic of the vaccine market, our best advice is to:

  • Work with vaccine experts that are knowledgeable in the vaccine field specifically.
  • Read up on WHO guidelines and follow their developments because they set the international quality standards.
  • Follow the interests of important donor organizations such as PATH, GAVI, UNICEF since they steer and influence the market and supply to a large extent.

Out-licensing in the Nordics: maximizing company value

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There is a constant aim of raising capital and propelling company growth within the nature of the biotech industry. When the timing is right, out-licensing a drug candidate might be the right choice instead of seeking to raise capital from the market and, for most, even an inevitable step in the company journey. We would even go so far to say that it may even be the “Nordic model”, where the best way to achieve the largest therapeutic potential and maximize the company value is likely to out-licensing a candidate to a global pharmaceutical company. We have had plenty of exposure to different types and stages of out-licensing deals throughout the years, so we put together a brief primer on the essentials to know about out-licensing endeavors within the biotech industry.

Set purpose and objective

Finding the right partner to out-license a candidate to can be a long process, during which many different factors could cause the process to halt. A company looking to out-license would be wise to have a thoroughly planned strategy for identifying potential partners. This will save time for both parties and improve the chances of identifying the best potential partner. Thorough research and a targeted approach are the key pillars here. This means that a company seeking to out-license a drug candidate needs to set a purpose and objective before going full force, while also having an open mind and being opportunistic.

Asset stage often sets the structure 

The structure of the out-licensing deal will mainly depend on the development stage of the out-licensing company as well as company resources. The two relevant types of agreements for a smaller biotech firm to seek are licensing or acquisition. If a company would like to just out-license their candidate there will still be shared work, capital costs as well as some control over the candidate development. In the case of an acquisition, the out-licensing company will no longer be involved in development, be relieved of all development costs, and lose control of candidate development.

These two agreement structures are the two extremes of the spectrum, meaning deal structures can land somewhere in between. For example, agreements can also be structured differently in regard to certain geographies or indications.

Is there an optimal timing to out-license?

Optimally timing an out-licensing process is an essential factor that will contribute to a successful outcome. Generally speaking, out-licensing a candidate can result in a variety of deal structures depending on the development stage of the candidate, or simply put, the timing. The different potential deal structures are primarily tied to the development risk that follows after the candidate is in-licensed.

If a candidate is out-licensed at an earlier development stage, a low upfront payment is to be expected. This could, however, be outweighed by high potential milestone payments and royalties. Essentially, the company out-licensing the drug candidate needs to determine if they think it is beneficial for them to share the development risk at that time. An additional benefit to out-licensing a candidate at an earlier stage, despite a relatively low upfront payment, is a positive response from investors who might then see the successful out-licensing as a validation of the company’s core technology, making them more willing to continue investing in other development candidates in the company’s portfolio. There is of course also the other side to this, if a license deal is terminated ahead of time or the drug candidate is returned, negative effects will likely be seen from investors no matter the explanations.

If a candidate is out-licensed at a later development stage, a higher upfront payment is to be expected. A candidate that is in later stages carries less risk than one in an earlier stage, leading to a substantially larger net present value. However, a company that decides to wait until a later stage to out-license their candidate needs to be prepared to keep most of the development risk in-house until then.

The process of choosing a license partner is described to be similar to that of marriage –
you are stuck with the partner likely for years to come, so you better choose right.

Who would be a good partner?

Several times we have heard clients describe the process of choosing a license partner as being similar to that of marriage. You are stuck with the partner likely for years to come, so you better choose right and while you can compromise on certain things, there are some things that are deal-breakers. So, what should be considered ahead of time?

One of the key questions when evaluating a potential partner, especially when milestones and royalties are involved, is: Will the partner be able to successfully develop and commercialize the candidate? While the question is obvious, the answer is less so. A few key factors to look at when trying to answer this question are the therapeutic focus and technology expertise of the potential partners. Analyzing the pipeline of a potential partner can help with this process. For example, did a potential partner recently fail a Phase II trial within a relevant indication? Will your drug candidate be able to fill the gap that was left after the potential partner’s candidate produced inadequate results?

Nurturing relationships with care

When approaching licensing activities, a focused business development team needs to be prepared and provided with the right resources and expertise required to drive the process forward. It is a precarious relationship that needs to be nurtured, often during several months to sometimes years.

Sealing the deal 

No one said it would be easy, but history tells us that licensing deals are more than achievable with the top 20 partnership and M&A deals of 2019 reaching a value of around $300 billion. Better yet, the deal landscape has shown no signs of slowing down.

MSC Nordics has the experience required to bolster companies seeking to out-license their candidate, whether it be through valuation and deal structuring or partnership identification and outreach. If your company is considering if it is time to out-license a candidate, or even if the decision has already been made, don’t hesitate to get in touch with us.