Swine Flu Vaccine Makers Find Governments Can Be Fickle Customers

Novartis(NVS) the Swiss pharmaceutical group makes the H1N1 Swine Flu vaccine. Over the last eighteen months it has made and sold a great deal of this vaccine to various countries around the globe as they inoculated their populations against the threat of the H1N1 flue. The company estimated that sales were up seven percent due to this product as core net profit for 2009 was almost $13 billion.

The company though expects sales to fall off over the near term as the requirement for the vaccine dries up. Many countries did not use all that they stockpiled as the flu threat ended up not being as severe as thought. This led some Government customers to cancel orders as Serbia did. The former Yugoslavian state ordered three million doses from Novartis for the six-and-a-half million people in the country but only used 857,000 of them. The country is refusing to pay for the remaining 2.2 million doses.

France as well plans to reduce their orders by over half. That Government had ordered ninety-four million doses from Novartis, Sanofi-Aventis (SNY), GlaxoSmithKline (GSK) and Baxter International (BAX). Now it thinks it won't need fifty million of them. In France's case Novartis will try to have their contract honored.

Another possibility that will actually help the drug companies is countries not needing their stockpile trying to transfer it to other poorer ones. The World Health Organization (WHO) is helping organize this movement. This plan is moving slowly though as recipient countries need to prove to WHO that they are able to store and transport the vaccine as necessary. These requirements are sometimes more then a less developed country is able to meet hindering the provision of vaccine.

Novartis recently has been taking a strong line with Governments trying to break their orders. They have gone on record as stating that in the future if there is a similar situation where large numbers of a vaccine are ordered Novartis will fill those of reliable partners first. This means that some Governments may not be able to meet there needs in a real emergency. The Swine Flu pandemic did not occur at anywhere near the original estimates. Poland, for example, refused to buy or use any vaccine and had only a few deaths.

Some in fact are accusing WHO and the drug makers or conspiring to create a sense of urgency with the swine flu. This would lead to increased demand and profits for the drug companies. This is denied by the WHO and would seem to be quite a stretch.

The problem faced by the drug companies is that demand for this kind of product ramps up very fast but then disappears. Once an adequate number of product is made it may not be needed again for several years. In the U.S. they are looking at storing bulk vaccine already made for future use. This means that if another type of flu threatens there may be no need for quick production and thus no sales. This may mean as Novartis has discussed no motivation on the manufacturer to provide the product. A fickle customer may be out of luck in the future when a real need exists.