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Vaccines are making a big impression on global pharmaceutical companies. Following in the footsteps of GlaxoSmithKline, Novartis and Pfizer, Daiichi Sankyo-owned Ranbaxy has just taken a shot at the business by acquiring Bangalore-based Biovel.

Biovel gives Ranbaxy a technology platform for the development of haemophillus influenzae type B and typhoid vaccines.

Biovel seems to be very small in size and somehow has not come in public glare. Nonetheless, its pipeline, which balances between vaccines and biotherapeutics mainly focusing on oncology, dermatology and cardiology drugs such as enoxaparin pre-filled injections, appears promising.

It was noted in this column some time ago that Bangalore is suddenly springing up as a very rich source of technology for pharmaceutical companies. The last six months saw Germany based Merck and Swiss contract research and manufacturing giant Lonza picking up small but important Bangalore-based companies that fit into their bigger global plans.

Vaccines as a whole are set to become a very important part of the global pharmaceutical business. Immunisation programmes funded by governments and global agencies such as the WHO for preventive diseases have attracted a few but large companies.

Scaling up on those assured revenue areas will give pharmaceutical companies sustained growth and help them establish their own marketing teams in the identified target markets.

Supplies to health agencies and government programmes is not seen as a very high-profit business, but at the back of large volumes, Indian companies such as Panacea and Shantha Biotech have been able to draw decent returns.

Of course, there are uncertainties of losing contracts in the annual bidding wars in the fiercely fought tender businesses, but that is more an issue of changing business dynamics and every company has to work on retaining margins while pocketing big deals.

Also, a number of small companies such as Shantha Biotech are working on next generation vaccines like heat stable and therapeutic vaccines like the cervical cancer drugs from Glaxo and Merck.

It may not have been noticed by many but a few Indian companies like Biological E, Bharat Biotech, Cadila Healthcare and Cadila Pharma are also working on a range of vaccines for the H1N1 flu.

Interesting collaborations have taken place between small vaccine companies, such as Biological E’s pact with VaxInnate of the US or Novavax’s alliance with Cadila Pharmaceuticals of Ahmedabad. Separately, Cadila Healthcare has also reached the human trials stage for the same product. Bharat Biotech has recently announced that it will soon commence trials on a flu vaccine based on cell culture against the more accepted egg-based development of vaccines.

Like in the field of generics, India has an inherent advantage in development of vaccines. Some of the bigger companies, such as Serum Institute, have been quietly making combination vaccines, while Panacea Biotec, a few years ago, has gone ahead and done a deal with Chiron Vaccines, now owned by Novartis.

More notable is the setting up of an equal-stakes joint venture between UK’s Wellcome Trust and Merck. The new company will be operating from India and aims to develop a few vaccines that have not been tried before but are hugely relevant to the poorer countries.

Sanofi Aventis bagged Shantha Biotech with the same intent of having a foothold in a low-cost country like India for supply of vaccines to the world.

One of the big reasons for Pfizer’s buyout of Wyeth was the Prevnar vaccine brand. It is not routine to see big pharmaceutical companies develop anti-infection products like Prevnar for children. The mindset change in multinational companies shows that there is a market waiting to be tapped globally and there is a decent rate of return.

India, China and a few other thickly populated nations will become the thrust areas for companies that want to be into the vaccines business or see the segment as an integral part of their growth strategies.

Ranbaxy has quoted independent research that the Indian vaccine market was $700 million in 2008 and the world market for vaccines was $21 billion. For a country with a very high cohort, that figure still looks very low. But with a new found interest led by foreign companies, the growth in the vaccines segment will definitely accelerate.

Pillman is an executive closely linked to the global pharma industry