Apr. 21, 2008 (Investor's Business Daily delivered by Newstex) --

Mention "rotavirus" and most parents might remember the week they spent cleaning up diarrhea and vomit and trying to convince their children to drink electrolyte fluids.

The gastrointestinal disease strikes nearly all babies before they turn 5. But while rotavirus can carry a big cost -- mainly from medical care and the time parents must take off from work -- it's rarely life-threatening.

Rotavirus causes at least 50,000 hospitalizations a year due to dehydration. Most children recover within weeks in developed countries.

In poor countries, the disease affects 111 million kids and causes about 600 deaths a year. This compares with 20 deaths in the U.S., says Dr. Harry Keyserling, professor of pediatrics at Emory University School of Medicine in Atlanta.

A Nod For Glaxo

Earlier this month, GlaxoSmithKline (GSK) won permission from the Food and Drug Administration to start marketing its rotavirus vaccine, Rotarix. It plans a launch in the second half of the year.

The approval was expected after the FDA's outside expert panel voted in favor of Rotarix in February. It will compete against Merck's (MRK) RotaTeq vaccine, which has been on the U.S. market since 2006. Both are oral vaccines.

Rotarix's arrival is expected to curb RotaTeq's potential sales.

"If the Glaxo product wasn't there, I'd guess there might be another 20% to 30% of sales (for RotaTeq)," said Lehman Bros. analyst Tony Butler.

He sees Rotarix accounting for $25 million in U.S. sales this year, $100 million next year and $150 million in 2010. As for outside the U.S., Butler expects $200 million this year, $260 million next year and $340 million in 2010.

Glaxo has been selling Rotarix in 100 countries since 2004, says company spokesman Jeff McLaughlin. The U.K. drug maker focused on foreign countries before targeting the U.S. -- a rough reversal of Merck's strategy.

Merck's RotaTeq brought in global revenue of $524 million last year, with most sales coming from America. About 60% of eligible U.S. children have received at least one RotaTeq dose, says Merck spokeswoman Kelley Dougherty.

Analyst Butler sees worldwide RotaTeq sales of $698 million this year and $752 million in 2009.

Lower Sales, High Margins

Like Butler, Raymond James analyst Mike Krensavage figures the Glaxo rivalry will cut into RotaTeq's potential sales, only not by as much.

Krensavage projects RotaTeq global sales of $725 million in 2008 and $950 million in 2009.

"Vaccines typically don't have the revenue potential of drugs you take for everyday illnesses, like Lipitor," Krensavage said.

Lipitor, a cholesterol treatment made by Pfizer (PFE), is the world's top-selling drug. It had sales of $12.7 billion last year, despite generic competition.

In contrast, the biggest vaccine, Wyeth's (WYE) Prevnar for meningitis in infants, recorded $2.4 billion in sales.

Vaccines still provide strong profits because they're cheaper to market than traditional pills and tablets.

Glaxo's next step involves a review by a Centers for Disease Control and Prevention vaccine panel in June. The panel is expected to back Rotarix and add it to childhood vaccination schedules. When this happens, pediatricians will begin using it, and private insurers will pay.

Glaxo proposes that Rotarix be meted out in two doses at two and four months, along with other childhood vaccines usually given at the same age. RotaTeq is given in three doses at two, four and six months.

Children typically are first infected with rotavirus before the age of 2. The first bout lasts a week, is more severe and can include fever. Subsequent rotavirus infection is mild because immunity develops.

Head-to-head studies comparing the vaccines are unlikely, due to high cost. "We don't have any information that shows one vaccine is better than the other," said Keyserling, who was involved in studies of both vaccines.

Meanwhile, federal health officials are monitoring RotaTeq for potential links to a disease called intussusception, a rare bowel disease marked by a twisting or blockage of the intestines. Rotarix also will be tracked after launch.

In 1999, RotaShield, a vaccine made by Wyeth, was pulled off the market because it was linked to 20 cases of intussusception. Previously healthy children are subject to sudden, loud screams caused by abdominal pain, and the disease can be fatal.

None of the 20 cases tied to Rota-Shield were fatal, though 12 of the kids required surgical intervention.

Heavily Researched

Neither RotaTeq nor Rotarix has shown an increased risk of intussusception. RotaTeq studies have involved almost 72,000 children; Rotarix trials included nearly 75,000. This puts them among the largest vaccine studies undertaken.

Officials are cautious because all three vaccines are weakened live viruses, though each is derived from different sources. At the time of its approval,

RotaShield also was thought safe. Much of its 23 years of development work was done at the National Institutes of Health.

During Rotarix's FDA review, officials mentioned concerns about an increased rate of pneumonia-related deaths among vaccinated infants in one of two pivotal studies. The overall death rate was similar to that in the placebo group.

McLaughlin says Glaxo will conduct a post-marketing study of Rotarix to keep track of potential side effects, including intussusception, pneumonia and convulsions.

Merck also is conducting post-marketing studies.

Originally published in the April 21, 2008 version of Investor's Business Daily.

Copyright (c) 2008, Investor's Business Daily, Inc. All rights reserved. This article is protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Investor's Business Daily, Inc. You may not alter or remove any trademark, copyright or other notice from copies of the content.