Company News

French move fuels fears for flu vaccine sales

* French cancellation highlights European over-supply

* Move follows cutbacks by Germany, Spain and Switzerland

* Sanofi says new orders will make up for lost French sales

* Shares in vaccine makers Glaxo, Sanofi, Novartis slide

By Ben Hirschler and Caroline Jacobs

LONDON/PARIS, Jan 5 (Reuters) - France’s decision to cancel over half the swine flu vaccines it ordered has increased concerns that manufacturers’ revenues from the H1N1 pandemic will be lower than forecast.

Experts had initially anticipated that everyone would need two shots of vaccine for immunity against the H1N1 virus, but a single dose of vaccine is now deemed sufficient for adults.

That, combined with scepticism about the need for immunisation among the general population, has resulted in reduced demand for vaccines across Europe.

The French government said on Monday it aimed to cancel 50 million of the 94 million doses ordered from Sanofi-Aventis SASY.PA, GlaxoSmithKline GSK.L, Novartis NOVN.VX and Baxter International BAX.N because of over-supply. [ID:nnLDE6031W2]

A government spokesman said on Tuesday it had already cancelled 9 million doses from Sanofi Pasteur, the vaccines unit of Sanofi-Aventis, and was in talks about cancelling the remaining excess supply from other companies.

The decision follows similar moves last month by Germany, Spain and Switzerland to try and cut deliveries, return unwanted stocks to suppliers or sell them on to other countries, due to a low uptake at home. [ID:nLDE5BG1CU] [ID:nLDE5BH0X3]

Morgan Stanley analysts said the latest French cutbacks highlighted declining demand for H1N1 vaccines and translated into a modest near-term risk to earnings at Glaxo, Sanofi and Novartis.

“Longer term, the evident overcapacity with H1N1 should limit any multiple expansion related to income associated with pandemic flu,” they added.

Shares in Glaxo were down 2.2 percent at 1310 pence while Sanofi's were down 1.6 percent at 55.82 euros by 1118 GMT. Novartis was down 1.7 percent at 54.10 Swiss francs, also hit by concerns over dilution following its offer to buy out minorities in eye care group Alcon ACL.N via a share swap.

Sales of H1N1 vaccines have been a windfall for drugmakers since mid-2009 as governments have built up stockpiles, with Glaxo expected to be the single biggest beneficiary with anticipated sales of some $3.5 billion by the end of the first quarter of 2010, according to industry analysts.

Sanofi and Novartis have been forecast to book around $1 billion and $600 million apiece.

The latest cancellations in Europe could trim those numbers, although there is still outstanding demand from other parts of the world.

A spokesman for Sanofi Pasteur said his company expected to replace the lost sales in France with other orders.

“We see additional orders from countries we were not in position to supply before,” he said.

“We still see virus circulation going in many regions of the world. As it goes away from the north there will be strong reasons for governments in the south to have H1N1 vaccinations,” the Sanofi Pasteur spokesman said. He declined to disclose the countries interested in Sanofi’s vaccine.

Glaxo declined to comment on the commercial impact of the latest developments but a spokeswoman said the British group was in discussions with governments about orders. (Editing by Greg Mahlich)