Roche Holding AG Encounters Dilemma

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Roche Encounters Dilemma As Bird-Flu Fears Fade By JEANNE WHALEN

December 21, 2007; Page B3

Two years ago, Roche Holding AG was under attack because it couldn't

make enough Tamiflu, the drug seen as the best available treatment for

avian flu. Now, bird-flu fears having subsided, Roche is having a hard

time finding buyers.

Roche's reversal of fortune shows the difficulty of producing drugs

that are used in times of crisis. When catastrophe seems imminent,

production lines can't be expanded fast enough. But when the panic or

problem passes, manufacturers are left with idle capacity.

This year, Roche estimates government orders for Tamiflu will be half

what they were last year: 50 million packs, compared with 100 million

in 2006. Tamiflu sales in the third quarter were down 60% from a year

earlier to 257 million Swiss francs ($222 million). GlaxoKline

PLC, which makes a similar antiviral drug called Relenza, said that

drug's sales fell 7% in the third quarter to £28 million ($55.9

million), " reflecting lower demand from governments to stockpile it

for use in the event of a flu pandemic. "

In an interview, Reddy, who heads Roche's influenza-pandemic

task force, said some countries have stopped ordering because they

have already stockpiled enough. Others, he said, have become lax.

" Some really are in a very poor state of preparedness in terms of

antiviral stockpiling, with very little or none, " he said, noting that

the drug will be in short supply again if a pandemic hits. " People

think...if a pandemic hits, we can call 1-800-Roche and get our

medicine. But that's not going to happen. "

Some countries are very well-prepared -- France, the United Kingdom

and Austria, for example, have enough antiviral medication stockpiled

to cover more than 40% of their populations, according to Roche. The

U.S. has stockpiled enough to cover more than 20% of its population.

But Brazil, Italy and Greece have enough stockpiled to cover less than

10% of theirs.

Under pressure from governments and public-health officials two years

ago, Roche went to great lengths to increase its production capacity.

The Swiss drug maker can now produce 400 million packs of Tamiflu a

year, seven times its capacity in 2005. The company will use less than

half of that capacity this year: In addition to the 50 million packs

for government stockpiles, it will produce 110 million packs for

corporate stockpiles and regular seasonal-flu use. Tamiflu was

originally developed as a treatment for regular flu.

For now, Roche is keeping its manufacturing capacity in place but will

review the question every quarter. Dr. Reddy said it is " a challenge "

to maintain the capacity, but he wouldn't comment on the cost, calling

that " commercially sensitive. "

The H5N1 virus is known to have infected 340 people and killed 209

since 2003, according to the World Health Organization. It mostly

infects and kills birds, only occasionally spreading from birds to

humans. For a human pandemic to occur, the virus would need to mutate

and become easily transmissible among people. Public-health officials

say that is still possible.

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