Novartis' ($NVS) vaccine business is hanging in the balance, relying on the potential approval of a shot to protect against a meningitis-causing bacteria to keep the unit afloat.
The company's vaccine unit--created with the $7.5 billion acquisition of Chiron--needs European Union backing of Bexsero, which would be the first vaccine to protect against the meningococcus B bacterium, a bug responsible for meningococcal disease. The disease can cause brain damage, hearing loss and death. But failure of the vaccine could force Novartis to scale back or sell the unit into which the company has dumped billions of dollars in funding, Bloomberg reports.
As branded drugs fall off patent and lose sales to generics, many big pharmas are turning to vaccines units to make up the losses. The complexities of vaccines limit the threat of generics. But the strategy hasn't panned out as some executives may have hoped. Take Bristol-Myers Squibb ($BMY). In August, the company ditched a hepatitis C pill it bought for $2.5 billion in January after a patient died while taking the drug and others were hospitalized, Bloomberg reports. And Merck KGaA is closing the headquarters of its Serono drug unit after the division it bought for $17.6 billion did not deliver new products.
Novartis wrapped up the Chiron deal in 2006, landing a set of blood tests for viruses including HIV and hepatitis, and access to the global vaccines market. The vaccines and diagnostics division hit a high of $2.9 billion in 2010 on revenue from influenza vaccines sold during the H1N1 flu pandemic. Last year, the revenue reached $2 billion and the business had a $249 million operating loss.
Approval for Bexsero has been delayed in the EU due to a need for more information. And late-stage trials haven't even begun in the U.S. Barclay's analyst Michael Leuchten predicts sales of the vaccine to reach $200 million in 2015--but that's if it's approved.
"If the division flunks, does that mean a restructuring? Possibly," Leuchten told Bloomberg. "Does it mean a disposal? Possibly. Those are both scenarios that I've discussed with people close to management."
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