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OUTSOURCING INSIGHTS REPORT 16 LIFESCIENCELEADER.COM JUNE 2014 Advances in both pre ventative and therapeutic vaccines have renewed interest and brought about competition in this market segment. K A T E H A M M E K E Director of Marketing Intelligence Nice Insight As Outsourcing Relationships Evolve, Vaccine Production Will Continue To Shift To CMOs The vaccine contract manufacturing market currently accounts for less than 1 percent of the total vaccine market — approximately $705M of $33.7B — but it is expected to grow over the next decade. Varying factors will influence the growth of the contract manufacturing market segment, including overall growth of the vaccine market, especially in emerging markets, as well as the shift in the dynamic of outsourcing relationships. raditionally, vaccines had been viewed as a low-margin business with high barriers to entry. Complexity of devel- opment and production, combined with significant fixed costs, low profit mar- gins, and overregulation had limited competition among vaccine manufac- turers and supposedly restricted inno- vation. However, advances in both pre- ventative and therapeutic vaccines have renewed interest and brought about competition in this market segment. Among Nice Insight survey respon- dents, the primary area of therapeutic focus for vaccine production outsourc- ers is infectious diseases, at 71 percent. Increased global demand for the influen- za vaccine has contributed significantly to the growth of the outsourced vaccine market — especially since the vaccine doesn't offer long-term immunity and must be administered annually. Support and media exposure from organizations such as the International AIDS Vaccine Initiative help to keep the important role of vaccines in healthcare in the forefront and drive attention toward developing vaccines for diseases that currently have no cure. This exposure, coupled with recent reports of progress in two sepa- rate approaches to provoking an immune response to HIV, certainly contributes to the increasing number of biopharmaceu- tical companies interested in developing or manufacturing vaccines. Oncology is another key area for vac- cine advances, with 52 percent of vaccine outsourcers engaged in this therapeutic category. Nationwide immunization pro- grams for HPV (human papillomavirus) vaccination established in 2008 in the U.S. and Europe have strengthened this market to an estimated value of $2.2B by 2018. The efficacy of the vaccine, as well as the expansion of the target audi- ence to include both males and females, has secured the HPV vaccine's future and made it a strong candidate for out- sourced production. Anticipated shifts in vaccine pro- duction from innovators to contract manufacturers influenced the decision to add this service to the Nice Insight Biopharmaceutical Outsourcing Survey for 2014. At present, the data shows 13 percent of all respondents will out- source vaccine production, or 40 per- cent of respondents who outsource biomanufacturing. Big Pharma and Big Biotech account for the majority of vac- cine outsourcing, comprising 59 percent of the buying market. Emerging biotech and emerging pharma each comprise By K. Hammeke AS OUTSOURCING RELATIONSHIPS EVOLVE, VACCINE PRODUCTION WILL CONTINUE TO SHIFT TO CMOS 0 6 1 4 _ R e p o r t s _ O I . i n d d 1 0614_Reports_OI.indd 1 5 / 2 1 / 2 0 1 4 1 1 : 5 4 : 0 1 A M 5/21/2014 11:54:01 AM