Britain joins others in curbing flu vaccine supply

LONDON (Reuters) - Britain became the latest country to tackle a surplus of swine flu vaccines on Friday, as health authorities across Europe grapple with oversupply due to low demand, leaving drug company sales uncertain.

The Department of Health said it was in talks with major provider GlaxoSmithKline about reducing further supplies of its H1N1 vaccine and might exercise a break clause in its contract with Baxter International.

It might also sell or donate stocks to other countries.

Governments across Europe are scaling back orders because of limited vaccine uptake and the fact one dose is enough to protect against the virus, rather than two as originally anticipated.

France has said it aims to cancel 50 million of the 94 million doses ordered from Sanofi-Aventis, Glaxo, Novartis and Baxter, while Germany wants to cancel half the 50 million doses ordered from Glaxo.

Last month, Spain said it was looking to return unused vaccine, and the Netherlands and Switzerland plan to ship surplus supplies to countries still facing a shortage.

Britain’s director of immunization, David Salisbury, said there were two issues to deal with -- surplus stock already received and new doses due to be delivered under contract.

In the case of Baxter, which has delivered 5 million doses, Britain has a break clause allowing it to halt supplies.

With Glaxo, Salisbury said the government was “in discussions right now.” The British drugmaker has so far delivered 23.9 million vaccine doses.

Sales of H1N1 vaccines have been a windfall for drugmakers since mid-2009 due to government orders. Glaxo was expected to be the single biggest beneficiary with anticipated sales of $3.5 billion, according to industry analysts.

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

The latest cutbacks suggested sales booked in the fourth quarter of 2009 and the first three months of this year may turn out to be lower than expected, though company officials said there was still unmet demand outside Europe.

Glaxo shares have fallen 5 percent since hitting a 12-month high on December 29, reflecting concerns about lost sales, a decline some believe is an over-reaction.

Savvas Neophytou, a pharmaceuticals analyst at Panmure Gordon, said a worst case scenario of 50 percent of Glaxo’s European contracts being canceled would lop less than 1 percent off full-year pretax profit.

Scott Rosenstein at political risk consultancy Eurasia said it would still be a bumper season for vaccine makers.

“While efforts to cancel some of these contracts may slightly cut into their bottom line, these governmental contracts have removed some of the risk that these companies face during typical flu seasons when they are frequently left with large supplies of unwanted and unsold vaccine,” he said.

The French government, in particular, has been criticized by opposition politicians for wasting money by over-ordering.

Angus Nicoll, a flu specialist at the European Center for Disease Prevention and Control (ECDC), said: “All of the vaccination programs were built on two shots and the good news is that ... we only need one shot to get us protected. So, there is a natural excess there.”

“I would not say any country over-ordered because they were ordering on a basis of being cautious to a pandemic that could have been considerably worse.”

The United States, meanwhile, said it had made no decision on whether to cancel or sell any of its orders.

Additional reporting by Kate Kelland; Editing by Dan Lalor