The small private company Protein Sciences skirted bankruptcy, fought off a hostile takeover bid, spent three years angling for a sorely-needed government contract, and survived a four-year dialogue with the FDA before winning approval this year for the first influenza vaccine made with genetic engineering and without eggs.
Now comes the hard part.
The 115-employee business, based in Meriden, CT, must build a customer base for its the vaccine, which it markets as Flublok, in a $1 billion US market dominated by drug industry giants, including Sanofi Pasteur, Novartis, and GlaxoSmithKline.
“These are big guys, and it’s hard to inch in and get a bit of market share,” says Ramya Kartikeyan, lead analyst on infectious diseases for GlobalData, a research and consulting firm.
Protein Sciences CEO Manon Cox says the company is in the process of developing marketing channels for its flu vaccine. The vaccine, the company’s first product, is called a “recombinant” vaccine because its production in a cell culture is directed by a genetically engineered virus whose genes have been combined with certain influenza virus genes. Traditionally, flu vaccines have been made by culturing the flu virus itself in chicken eggs.
“I believe that a recombinant protein vaccine is just a higher quality product,” Cox says. “Many people are aware of this product, and many people want it.”
Manufacturers made about 145 million doses of flu vaccine for this winter, according to the Centers for Disease Control and Prevention. Protein Sciences is now gearing up to produce at least 500,000 doses of its version at its Meriden plant for the 2013-2014 flu season, and may manufacture as much as 3 million more if the FDA approves the plant it is expanding in Pearl River, NY.
Meanwhile, though, Protein Sciences’ big pharma competitors have been fielding innovations of their own with new flu shot formulations, manufacturing processes, and methods of administering the drugs. The flu vaccine business—once a stodgy, low-margin enterprise—has been stimulated by an influx of money from the federal government, which was gobsmacked in 2004 by an influenza scare much worse than the current winter’s severe flu season.
Nearly half the U.S. flu vaccine supply—about 50 million doses—had to be scrapped in 2004 due to contamination at the Liverpool, England, plant then run by Emeryville, CA-based Chiron, which was later acquired by Novartis. Few other companies had the capacity to fill the supply gap. Most flu vaccine at the time was produced in eggs, a decades-old method with long lead times. On top of that, epidemiologists were tracking the spread of an often-lethal new strain of avian flu that they feared could escalate into a pandemic while nations lacked the means to make vaccines against it.
A bout with the seasonal flu may be no more than an annoyance for most people, but it can be deadly in more vulnerable populations, such as the elderly. Protein Sciences was one of the beneficiaries of government funding programs designed to draw new companies into the vaccine business, and to support new vaccine technologies to supplement the more cumbersome egg-based method.
Protein Sciences’ vaccine is produced in reactors full of cells derived from an insect, the fall armyworm. These cells are each turned into small factories to churn out copies of the proteins that make up the vaccine.
Like other flu vaccines, Protein Sciences’ version will consist of different proteins each year, depending on which influenza virus strains are expected to circulate commonly for that winter season. Each flu virus strain produces characteristic proteins, or antigens, that the human immune system recognizes and tries to attack.
This is where the genetic engineering comes in. Protein Sciences induces the armyworm cells to make copies of the antigen proteins by infecting the cells with a genetically modified insect virus containing the genes that code for the flu virus proteins. In the older method, fertilized chicken eggs are infected with a live flu virus strain, which multiplies during an incubation period and then, typically, undergoes many purification and inactivation steps. Assembling an uncontaminated egg supply is a major strategic endeavor for vaccine makers, and some flu strains don’t grow well in eggs, the FDA says. By contrast, cell cultures can be frozen to stand ready for a quick manufacturing start.
The development of a recombinant flu vaccine is a “big deal,” says Kartikeyan, the GlobalData analyst. It reduces manufacturing time, and generates the exact proteins needed for the vaccine by using the genetic code for the protein as a blueprint, she says.
This rapid manufacturing capability is a boon for emergency public health responses, said Karen Midthun, director of the FDA’s Center for Biologics Evaluation and Research, when Protein Sciences’ new vaccine was approved Jan. 16.
“The new technology offers the potential for faster start-up of the vaccine manufacturing process in the event of a pandemic, because it is not dependent on an egg supply or on availability of the influenza virus,” Midthun said in an FDA statement.
But whether that technological advance will cause doctors or patients to clamor for the recombinant flu vaccine is uncertain, Kartikeyan says, because it has not proven more effective than other vaccines in clinical trials.
Protein Sciences could try competing by setting a lower price per vaccine shot, says Kartikeyan’s colleague, GlobalData analyst Brad Tebbets. The company’s process has the potential to produce antigens more cheaply than other methods, Tebbets says.
But Cox, Protein Sciences’ CEO, says she’s preparing to take the opposite approach. Market studies indicate that the company’s vaccine could be positioned as a premium product worth a higher price, rather than a “me-too” flu vaccine, Cox says. The vaccine is free of ingredients that some people don’t want in a shot, she says.
The vaccine has, for example, a built-in potential market among people who are allergic to eggs. The company has built a database of such people looking for alternatives to other vaccines. Cox says the vaccine could also be attractive to vegans and health conscious people who have expressed concerns about preservatives and other elements sometimes found in more traditional flu vaccines. Also, some young people incorrectly believe that they can become infected through traditional flu shots, she says, and so Protein Sciences has been emphasizing that Flublok’s manufacturing process doesn’t include the use of live flu virus.
“People want something pure,” Cox says.
Kartikeyan says this marketing strategy could draw some fire from other vaccine makers. Scientists and doctors have seen no links between vaccine ingredients such as preservatives and the health outcomes that people fear, she says.
Cox, however, says unfounded perceptions may discourage some people from getting vaccinated. Her company’s formula might allay their concerns, she says.
Protein Sciences is now hiring a marketing expert, and exploring distribution channels to reach likely customers for the vaccine. The company is, for instance, trying out a distribution arrangement with FFF Enterprises of Temecula, CA, which is experienced in delivering small quantities of flu vaccines to doctors’ offices. But Cox says she’s also looking for outlets like the natural grocery chain Whole Foods, which attracts the kind of health-conscious patrons that might be interested in her company’s vaccine.
Cox says the company may set its initial price for the shot at $30, though the cost might come down as Protein Sciences scales up production. Eventually, the company could make as many as 10 million doses at Pearl River, and may later contract for production of much larger batches for the United States market at a plant in Japan operated by its partners UMN Pharma and Astellas, which have the rights to develop the vaccine for the Japanese market.
A $30 price tag could limit adoption of the vaccine, Kartikeyan says. Health insurers might balk, when the average payment to vaccine manufacturers is in the range of $6 to $12 per dose, she says. Kartikeyan and Tebbets wrote in a recent GlobalData report that Protein Sciences’ product will compete directly with vaccines such as Novartis’ Fluvirin that, like Flublok, include proteins from three different viral strains every year. Such vaccines are called “trivalent.”
But GlobalData analysts see the more serious competition from the new “quadrivalent” vaccines, such as GlaxoSmithKline’s Fluarix Quadrivalent and Flumist Quadrivalent, a vaccine delivered by nasal spray made by MedImmune, a division of AstraZeneca. Both were approved by the FDA last year.
These quadrivalent vaccines include proteins from four different viral strains, to increase the chance of protection against the flu germs that end up being most prevalent in a given winter. Health authorities see the quadrivalent vaccines as superior, Kartikeyan says.
Amid that competition, Kartikeyan predicts that Protein Science’s vaccine will reach peak sales of $39 million by 2014. After that, she says, “We see them tapering off and disappearing in about 2018.”
Cox, however, says Protein Sciences plans to pursue a quadrivalent form of its vaccine. The company is also interested in making a future version that can be injected under the skin, like Sanofi’s intradermal version of Fluzone, instead of into a muscle, which is more painful and requires a larger needle.
Such further innovations could raise Protein Sciences’ prospects, Kartikeyan says. But clinical trials of those new formulations would take a substantial amount of time. Meanwhile, Novavax of Rockville, MD, (Nasdaq: NVAX) is already in Phase II trials with a recombinant flu vaccine that is also quadrivalent, she says.
Protein Sciences is well positioned to face the coming challenges, Cox says. It made an undisclosed profit on $31 million in revenues last year, and has been building a cash reserve, she says.
The company draws revenues from making proteins for the research projects of other companies. It has received about $70 million so far from its hard-won federal contract from the Biomedical Advanced Research and Development Authority, a division of the U.S. Department of Health and Human Services. The agency recently said it would continue to support Protein Sciences’ development and manufacturing scale-up of Flublok, and its work on Panblok, its vaccine designed to combat a potential influenza pandemic.
The small staff is in growth mode as workers are being added for all these programs, Cox says.
“We are hiring everywhere,” she says.