On Nov. 6, Takeda Pharmaceuticals (TAK 0.53%) announced results from its ongoing Phase 3 trials for its vaccine candidate targeting dengue, a mosquito-borne disease that threatens upwards of 3.9 billion people, or about half of the world's population. Generally, the disease causes flu-like symptoms that resolve within a week, but around 5% of patients, or an estimated 22,000, die from more severe, life-threatening symptoms annually.
Takeda's research found its vaccine candidate effectively prevented the disease in children ages four to 16, although its effectiveness varied based on the specific strain of the disease and whether a person previously contracted dengue. To the company's delight, though, no significant safety issues or adverse effects were observed.
So with an estimated 390 million documented cases of the disease annually across the globe, investors might be wondering how to cash in on a promising new solution to this epidemic. To answer this, it's important to understand the context and history leading up to Takeda's news.
The rough road to prevention
Currently, there is no treatment for dengue, and only one other vaccine is internationally approved. But, its history and prospects aren't pretty.
In May, the FDA approved Sanofi's (SNY) vaccine, Dengvaxia, with heavy restrictions. Not only was the vaccine limited to use on people aged 9 to 16 years old, but recipients must have already had dengue in the past and they must live in a place where the disease is active. That's a very tiny amount of people in the United States, since dengue-infected mosquitoes exist primarily in the sparsely populated territories of American Samoa, Puerto Rico, and the US Virgin Islands. Virtually all other reports of dengue infection in the country originated while the patient was traveling abroad, making cautious travelers one of the vaccine's primary targets in the United States. Unfortunately, the FDA's restrictions eliminated this potential market.
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This all came after the European Medicines Agency's 2018 decision to approve the vaccine with similar requirements regarding past infection and current risk of exposure. In Europe's case, however, it may be used in people up to 45 years of age.
These severe limitations stem from Sanofi's 2017 findings that its vaccine might cause the severe, deadly form of the disease if a person ended up contracting dengue despite their vaccination.
Since the Philippines is experiencing a multi-year dengue epidemic, its government jumped on the opportunity to mass distribute Sanofi's vaccine in 2016. After more than 800,000 children received the vaccine, the government did an about-face following Sanofi's discovery. In addition to ceasing use of the vaccine nationwide, the country's government criminally charged six Sanofi employees and 14 Filipino government health officials with reckless behavior resulting in death, as 35 total deaths were under investigation for possible links to Dengvaxia. Sanofi denies the charges, stating that its vaccine has not been conclusively determined to have caused any actual deaths.
With Sanofi's vaccine under intense restrictions, there still remains an enormous opportunity to prevent the widespread disease.
One door closes, another one opens
Enter Takeda's vaccine candidate, which is currently in Phase 3 trials. This vaccine is derived from a strain of dengue, called the dengue serotype 2 virus. By contrast, Sanofi's vaccine is derived from a strain of the yellow fever virus. It's unclear, though, how this fundamental difference influences the effectiveness or safety of each vaccine.
As for what this might mean for investors, unfortunately, there isn't much data to draw from since Sanofi's troubles have severely hindered revenue generation from the vaccine. What we can consider, however, is a news report from 2016 that found Dengvaxia was selling for around $69 a dose in Indonesia. With three doses being required, this came out to about $207 total per person.
If Takeda priced its vaccine at $200 per person, it would take 5 million people being vaccinated for the company to pull in $1 billion. With 3.9 billion people being threatened by the disease, and governments, such as the Philippine government, willing to pay for it on behalf of its citizens, Takeda would only need to capture a small share of the market to substantially boost its earnings. For reference, the company reported revenue of around $15 billion in the first six months of 2019, when converted from Japanese yen.
But this is all hypothetical, and the company isn't willing to sit and wait on the opportunity. Only a day before announcing the vaccine's results, the company spilled the beans on a new manufacturing plant in Germany built just to produce its dengue deterrent. The company revealed it had poured over 130 million euros into the facility, with up to 200 employees expected to staff the joint.
Is that a screaming sign of confidence, or did they jump the gun by relying too much on hope? Perhaps it couldn't hurt to reconsider the data...
Research limitations
Since research surrounding vaccines against dengue is still emerging and relatively new, there is a possibility that the risk of severe dengue, and the associated restrictions, might not be exclusive to Sanofi's product. As a result, investors should carefully consider the strength of Takeda's evidence surrounding the safety of its vaccine in people without a history of dengue, known as "seronegative" people, in addition to any potential triggers of the more severe form of the disease.
Additionally, Takeda's vaccine didn't evenly protect against all four strains of dengue. Serotype 2, which the vaccine is based on, had the best results, with 97.7% of infections prevented. Only about 74% of serotype 1 and 63% of serotype 3 cases were stopped, while there weren't enough serotype 4 cases available for research.
As it relates to Takeda's hope of equally protecting people without a history of dengue as those with such a history, only serotypes 1 and 2 showed a similar degree of effectiveness between the two groups of people. The serotype 3 infection was blocked mostly for people with a history of the disease, while serotype 4 lacked data in this area.
The inequality across all four strains undermines Takeda's ability to market its vaccine worldwide, since each geographic region worldwide might suffer from one strain more than another. Unless the company can effectively combat all four strains, it will only be able to capture so much of the market for the vaccine, leaving investors and patients alike asking for more.
