GlaxoSmithKline (GSK) recently entered into a strategic alliance with Intercell (INRLF.PK) for the development and commercialization of innovative needle-free patch-based vaccines. The deal includes a vaccine which is being developed by Intercell for travelers’ diarrhea (TD) and also covers an investigational single application pandemic influenza vaccine being developed by Intercell as well as potential future patch vaccines.

The patch technology will also be used to develop other vaccines in Glaxo’s portfolio. The successful development of patch vaccines could change the method of administering vaccines in future. The technology could make vaccines easier to administer, faster to deliver, and could result in lower or fewer doses. All these factors could help patch vaccines gain share over currently available vaccines which are delivered orally or through injections.

Under the deal, Glaxo will make an upfront payment of €33.6 million. Additionally, the company will make an equity investment of up to €84 million, through a staggered shareholding purchase option of up to 5% in Intercell.

The most advanced candidate under the alliance is the TD vaccine which is currently in phase III development. This candidate represents significant commercial potential as it is estimated that each year, about 20 million international travelers develop TD while visiting endemic areas in Asia, Africa and South America.

With no vaccine currently available for TD, Glaxo and Intercell could become leaders in this market on the successful development and commercialization of their patch vaccine. Phase II results on the candidate showed that the patch vaccine reduced the risk of moderate to severe TD by 75%.

The successful development of patch vaccines will open up a new avenue for delivering vaccines and should help Glaxo strengthen its position in the vaccine market where the company already enjoys a strong position. We currently have a Neutral recommendation on Glaxo.

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