Betting the Farm

The Pocono Biological Laboratories started on a hill where cattle and horses grazed in the hamlet of Swiftwater, Pennsylvania, more than a hundred years ago. Today those labs are part of one of the world’s largest vaccine-makers, Sanofi Pasteur. With the recent interest in my history of the facility, The Spirit of Swiftwater, generated by the TV show “The Haunted,” I thought I’d post a small portion of the book. Enjoy.

Betting the Farm
The stakes were enormous. Early in 1989, Dr. Howard Six walked into the office of Dave Williams with the proverbial good-news, bad-news scenario. The lawsuits and press coverage from the DTP scare had nearly ruined the company, along with most of the vaccine industry. Both knew the only way to survive was to produce a better diphtheria–tetanus–pertussis vaccine. The antigen of choice — an acellular pertussis component — was available in Japan. The good news was that Swiftwater had acquired this component from Biken and had gone into clinical trials, and the trials were going well.

As the first signs of green spread among the stone buildings of campus, Six, the vice president of Research and Development, delivered the bad news to his president: Through another Japanese company, Lederle Laboratories had done the same, and it looked as if Lederle would deliver its product first. Both men knew the first company to reach the market with what was perceived as a safer product would enjoy the accolades, as well as the profits.

Swiftwater book cover 72The stakes were even higher for Swiftwater. The new technology embodied in the acellular vaccine would drive the industry into the next century, leading to the creation of an innovative pipeline and helping Swiftwater to differentiate its products from the competition. And finally, Swiftwater did not have the luxury of funding research and development with revenue from pharmaceutical sales. If Connaught Laboratories was ever going to be a world leader in pediatric vaccines, the company had to move quickly. That meant money. And that raised a concern. Swiftwater was no longer a single company; it was now part of Connaught Laboratories Ltd.

In Canada, Dr. Don Metzgar, senior vice president of Connaught Laboratories Ltd. and the person with the purse strings, listened to the story on the speakerphone. Dr. Six had a plan. Biken’s clinical trials in Sweden had gone well. Under normal circumstances, Swiftwater would proceed step-by-step, waiting for each phase to be completed, analyzing the results, and then planning the next phase. But the labs did not have the time to proceed in sequence, not if it wanted to beat Lederle.

Swiftwater would plan the clinical trial phases in their entirety.

“Let’s assume everything will work and do it all at one time,” Six proposed.

Williams said he agreed. So did Metzgar. “If we’re going to go for it, let’s do it right,” Metzgar said. “Let’s increase the trials from 500 to 1,000.We’ll double the budget.”

“What about Lederle?” Six asked.

“We can catch them,” Metzgar replied.

And they did. Through hard work, long hours, and innovative clinical-trial planning, Swiftwater became the first company to receive an FDA license for an acellular pertussis product for infants in the United States.

It was another example of a gutsy decision by Dave Williams and his team.

“This was the only hope we had to be first to market,” he said. “Pertussis is an important product in pediatric immunization. It’s often called the keystone of the pediatric vaccine marketplace. It was also the key in the coming combination vaccine market. The decision had more to do with strategic positioning in the marketplace.”

Williams said the decision “would be challenged many times along the way” by people inside and outside the company.

Metzgar, too, was aware of the magnitude of the risk. “I authorized the doubling of the budget, the spending of 1.2 million in Canadian dollars,” he said. “I had the authority to do so on paper, but I didn’t have the funds.”

The persistence showed by management paid well. After the U.S. Food and Drug Administration licensed booster doses of Tripedia in 1992, it licensed the vaccine for infants in 1996.

That strategy also allowed Swiftwater to capture a greater portion of the world biologicals market. Between 1985 and 1994, the U.S. vaccine market grew at a compounded annual rate of approximately 11%. During the same period, Swiftwater’s revenue grew approximately 23%. Over the last decade, Swiftwater has seen tremendous progress. During that period, revenue grew from U.S. $30 million in 1985 to approximately U.S. $242 million in 1996.

Between 1997 and 2006, the U.S. vaccine market is expected to grow at a compound annual rate of about 14%, from slightly above U.S. $1 billion to more than U.S. $4 billion. Pasteur Mérieux Connaught anticipates its share of that market will grow from about 21% to about 33%, with most of the growth occurring in the pediatric, adolescent, and adult segments.

That kind of progress is sustained by innovation — in research and development, in marketing, in managing the resources the company possesses. As Swiftwater moves into the next century, it plans to broaden its product line, influence public policy on age-appropriate immunizations, and better manage the process of FDA approval. But as the gamble with Tripedia illustrates, the name of the game is research.

The Preeminence of R&D
In the 1990s, the Swiftwater Labs looked at the market’s new emphasis on cost-cutting and decided that if it wanted to change managed care’s perception of vaccines, it had to alter its own views on the subject.

“We shifted from selling undifferentiated commodities to marketing vital technology,” said Damian Braga, vice president of Finance and Administration and one of the persons who develops Swiftwater’s strategic plans. “We changed how we would view our products, from commodities to vaccines that are an essential part of health care. We started to place an emphasis on developing innovative products and being the first to market with them.”

New Technologies
Senior management has learned well from the success of ProHIBiT and Tripedia. They have followed the example of Dr. Slee when he adapted the Pasteur Institute formula for the new technology of the time — glycerinated small-pox vaccine— and built a business from it. They understand the importance of innovation. Now, they intend to take science to the next level.