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Propaganda in Action: Vaccinating The World's Poor - Glaxo is betting it can combat Third World scourges


Vaccinating The World's Poor
Glaxo is betting it can combat Third World scourges -- and still make money
Source: Business Week

Jean Stephenne is an unlikely revolutionary. The president of GSK Biologicals, the vaccine subsidiary of GlaxoSmithKline PLC (GSK ), is unusually soft-spoken, almost shy. But his gentle demeanor belies a bold risk-taker willing to gamble hundreds of millions of dollars on vaccines to combat diseases in the world's poorest countries.

Stephenne's bet this year may be the biggest in his 30-year career at GSK Bio, in Rixensart, Belgium. He is investing as much as $300 million to test a vaccine against rotavirus, a highly infectious parasite that can cause deadly gastroenteritis. It is one of the largest and most expensive such trials since the Salk vaccine was tested against polio more than 50 years ago. But this time, most of the 60,000 inoculated children are in Latin America. And even though rotavirus is endemic throughout the world, Stephenne submitted the vaccine for approval first in Mexico, where authorities could give it the nod by the end of this year.

For Glaxo and the drug industry, the trial marks a new paradigm in vaccine development. Traditionally, products have been introduced in wealthy countries first, reaching developing countries only after the manufacturer has recouped the cost of research and development, which can take decades.

Stephenne is taking the opposite tack -- and if he succeeds, it'll be the first time a new vaccine is launched in a country with massive medical need but little profit potential. His plan is to roll out the vaccine in low- and middle-income countries in Latin America, Asia, and eventually Europe -- saving the U.S., the most lucrative market, for last. "Our business model is to supply vaccines to the world, not just the U.S. and Europe," he says.

The changing economics of the vaccine business gave Stephenne the confidence to pioneer this "south first" strategy. For one thing, research in this field is enjoying a renaissance as biotechnologists apply gene-based tools to the quest. And philanthropies, starting with the $27 billion Bill & Melinda Gates Foundation, are rewarding those efforts on behalf of the Third World.

But that's just the start. The surge in private money has spawned a slew of public-private partnerships aimed at improving access to existing vaccines and speeding the development of new ones. Industrialized countries now realize that if developing nations are to become less reliant on foreign aid, the disease burden must be reduced. Vaccinations, often costing just pennies per dose, are the most cost-effective approach. So wealthier nations are stepping up their contributions to global vaccination programs and simultaneously increasing vaccine spending at home in the hopes of preventing global outbreaks of exotic diseases, such as SARS. Stephenne reckons that these trends, along with Glaxo's strategy of manufacturing for global markets, will make vaccines pay off.

GSK Bio is already the world's leader in vaccines, with $2 billion in yearly revenues -- roughly a quarter of total vaccine sales worldwide. And the company has more than 20 novel vaccines in clinical trials, a few of which could become billion-dollar blockbusters. Some of the new products will be for diseases that afflict developed and developing countries alike (table). But what makes GSK Bio unique is its focus on vaccines for scourges such as malaria, which kills three children every minute in developing countries. Glaxo is the only major pharmaceutical company in the world with vaccines for malaria, tuberculosis, and HIV in the clinic.

Until recently, the lack of commercial interest in vaccines for Third World diseases was understandable. Public companies couldn't justify to shareholders the investment of millions of dollars in products for which there was no paying market. This kept the public and private sector at each others' throats for years. Getting "drugs and vaccines to low-profit, high-need countries of the Third World has been an enormous problem for a long time," says Dr. Ann Peterson, assistant administrator for global health at the U.S. Agency for International Development in Washington.

Enter the Gates foundation, which has brokered a truce between industry and the public sector. Since its creation four years ago, it has invested more than $1.6 billion to speed the development of vaccines and procure existing ones for the world's poor. One of many Gates-backed initiatives is the Global Alliance for Vaccine & Immunization (GAVI), a partnership between industry and the private sector that says it has provided more than 8 million children with access to basic vaccines. A study by the Center for International Development at Harvard University notes that the Gates foundation is outspending the seven most powerful economies in the world combined -- helping create a market where none existed.

Yet global health experts estimate that it will take a minimum of $10 billion a year to fund the purchase of vaccines needed throughout the developing world. And huge challenges remain. Last year, GSK Bio had an urgent request from the World Health Organization. A new strain of meningitis had emerged in Burkina Faso in Africa and existing meningitis vaccines offered little protection. GSK Bio scrambled to develop something more potent, producing 6 million fresh doses in just six months and offering them for $1 a dose. Still, there wasn't enough money to cover even this small cost, and a group of donors had to jump in with funds.

For Stephenne, the key is sizing up potential markets. In the mid-1980s, both Glaxo and Merck & Co. (MRK ) launched vaccines for hepatitis B, targeting it at teenagers because the disease is mainly transmitted sexually. When that tack proved politically impossible, U.S. health authorities recommended vaccination at birth, drastically increasing the size of the market. Merck couldn't keep up with demand. But GSK was ready with ample manufacturing capacity, recalls Dr. Jerald C. Sadoff, former head of vaccine development at Merck and current president of the Aeras Global TB Vaccine Foundation. Overnight, GSK went from 10% of a small market to 60% of a massive one.

Glaxo's Third World experiment poses different challenges, says Sadoff, "but if it's successful, it enables them to do the right thing for the developing world and still make money." That's the magic formula that motivates Stephenne, the foundations, and the government agencies that share his world view. If they can make it pay, everybody wins.

By Kerry Capell in Rixensart, Belgium

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