Vancomycin Prices Decline Due to Generic Competition

18 January 1999 00:00  [Source: ICB Americas]

By Feliza Mirasol

Competition from generic producers and a slowdown in demand have led to falling prices for vancomycin, according to analysts, although they caution that pricing varies from market to market. Despite the flatness of the vancomycin market, however, analysts expect the antibiotic to remain a high value, low yield product.

Current prices for bulk vancomycin are roughly $3 to $5 per gram, notes Leo Hepner of London-based L. Hepner & Associates. Industry sources note that pricing varies based on the purity of product.

"Vancomycin's price is around $4 per gram in the US, but that is just for the oral-grade material," says Michael Barber of London-based Michael Barber & Associates.

"We see pricing dropping in all markets due mainly to increased competition--for example, generic companies competing with Eli Lilly, which of course scales back to the bulk manufacturers," adds Thor Kristiansen, president of Alpharma Inc.'s fine chemicals division. "Prices [have been] dropping [for the] past several years, but we believe now that they're flattening out. Last year, they dropped about 10 to 15 percent on the bulk level."

Demand is growing steadily at a rate of 3 or 4 percent per year, according to Mr. Hepner. Analysts say vancomycin accounts for only a small segment of the human antibiotics market because it is a treatment of last resort against methicillin-resistant Staphylococcus aureus (MRSA). It is also used to treat bacterial meningitis and is increasingly being used for infections in immuno-compromised patients. As a result, the product's growth is difficult to gauge accurately.

Mr. Barber estimates that up until 1997, sales "both in terms of value and volume were declining at an annual rate of 4 to 5 percent, with volume decreasing slightly less rapidly than value." He attributes this to pricing competition and vancomycin's status as a drug of last resort. It is used as little as possible to guard against breeding bacteria that are resistant to it.

Despite low growth and declining prices, however, analysts expect vancomycin to remain a high-value product.

"I think vancomycin is a niche product with a case history of being difficult to make in a pure form," Mr. Barber says. "The more difficult it is to make something pure, the more difficult it is for people to copy. So, from a commercial point of view, vancomycin is almost a cash cow."

Mr. Hepner says it is very difficult for a company to be successful in vancomycin unless it is well established in the US market. The US is the leading consumer of vancomycin, followed by Japan and major European countries.

Industry sources estimate annual worldwide consumption at 20 to 25 tons. Mr. Barber rates the market at roughly 30 tons in 1998, with the US consuming 15 to 16 tons.

Responding to its need for additional vancomycin capacity, Alpharma's fine chemicals division acquired SKW Biotech, a part of SKW Trostberg AG, in Budapest, Hungary (CMR, 1/11/99, pg. 1). Alpharma plans to substantially increase the capacity of the Budapest site within the next year.

"Copenhagen will continue to be our primary facility, but we will certainly invest in Budapest to build our capacity there," says Mr. Kristiansen. "I believe that our Budapest facility can add 40 percent to 50 percent to our capacity within a couple of years. We have further growth ambitions, and we want to strengthen our position as a major vancomycin supplier."

Mr. Kristiansen says the company also plans to expand its solvents capabilities for the production of gramicidin and thyrothricin, which it currently outsources to contract manufacturers, as well as products in its R&D pipeline. "I would expect us to have other products manufactured in Budapest in the next two or three years."

In addition, Alpharma has launched a second-phase expansion of its recently built recovery and purification plant in Copenhagen. The company plans to bring further manufacturing capacity on stream in the second quarter.

Despite its aggressive growth plans, analysts say Alpharma will remain a small player in the mainstream human antibiotics market. They note that the company's strength lies in animal health and generic pharmaceuticals.

Lilly remains the leader of the vancomycin market with a 50 percent share. Plymouth Meeting, Pa.-based IMS Health estimates Lilly's annual vancomycin sales in the US at $46 million on a year-to-date basis up to November 1998. Abbott ranks second with an estimated 35 percent market share and $32 million in US sales during the same time period.

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