As the World Health Organisation (WHO) puts it: “It is not vaccines that save lives, but vaccinations.” This sentiment extends beyond getting jabs into arms and encompasses the types of vaccines being produced, the fair distribution around world and longer-term thinking designed to create stronger local production efforts.
|THE QUICK TAKE
|To date, around 3.4 billion doses of vaccines have already been administered.
| AstraZeneca’s commendable approach has so far delivered more than 500 million vaccines and included a commitment to help with technology transfer while maintaining a focus on ensuring product quality.
|Vaccinations will feature, among other adaptations, increased work-from-home and online retail trends, while more time spent at home will alter humanity’s impact upon the local environment. All these changes will have implications for future business growth and investment opportunities.
The world now has five Western-developed vaccines for the Coronavirus (COVID-19), all of which have been approved for emergency use by the United States pharmaceutical regulator, the Food and Drug Administration (US). To date, around 3.4 billion doses of these vaccines have already been administered.
Until the final quarter of this year, to roughly sometime early next year, it will remain the production of these vaccines that continues to limit vaccination rollout programmes around the world, rather than their delivery. As a result, and in the midst of the global third wave of COVID-19, a task force has been formed by the World Bank, International Monetary Fund (IMF), WHO and the World Trade Organisation to try increase the supply of vaccines, therapeutics and diagnostics in developing countries. In addition, better tracking is also an area of focus. Financial muscle was lent to this drive at the time of writing, when US$50 billion in assistance was pledged by the IMF.
The reality though is that, even before the involvement of the task force, a huge increase in vaccine production was already in the pipeline and emerging market nations were at the back of the queue.
THE INS AND OUTS OF VACCINE PRODUCTION
Vaccines are much more complicated to produce than simple small-molecule drugs. While small-molecule drugs are generally produced by a few simple chemicalreaction steps, vaccines generally require biological processes. Rather than a modest number
of chemicals, these biological processes tend to produce an alphabet soup of output that then needs careful separation under tightly controlled conditions, along with careful characterisation of output. This means that it takes time to build and validate new manufacturing plants to ensure that the end-product is sufficiently similar to those used in clinical trials.
The relatively high cost of manufacturing mRNA vaccines (the yellow bar in the graph below), along with their arduous cold storage requirements, makes this type of COVID-19 vaccine unsuitable for much of the developing world. Non-replicating viral vectors (the orange bar) such as those used in AstraZeneca and Johnson & Johnson products provides a low-cost solution which, considering that both companies have pledged to supply vaccines on a not-for-profit basis, seems to indicate that this type of vaccine will be most likely to supply the developing world.
The removal of intellectual property rights would make virtually no difference to the growth in manufacturing output of these non-replicating viral vector vaccines but would likely create issues of ensuring quality. AstraZeneca’s commendable approach has so far delivered more than 500 million vaccines and included a commitment to help with technology transfer while maintaining a focus on ensuring product quality.
It should also be noted that the Novavax protein subunit (the pink bar on the graph) holds considerable promise as it could be produced inexpensively and on a large scale.
REPORTED COVID-19 VACCINE PRODUCTION CAPACITY (DOSES)
Source: United Nations International Children’s Emergency Fund
AN UNEQUAL DISTRIBUTION
While suitable vaccine options are increasingly becoming available to countries in the emerging world, the access and relative inequality of vaccine distribution globally has been apparent to all throughout the global pandemic.
Some nations took a chance and secured access to vaccines in advance of knowing if they would even work against the virus. Other vaccine-producing nations elected to focus on making doses available at home first, before focusing on exports. India, which has long been the centre of world vaccine manufacturing, is a case in point. The Serum Institute of India is, by some distance, the world’s largest producer of vaccines. The rise of COVID-19 cases in that country, abetted by a more virulent variant, led to a reduction in exports due to heightened national interest. This move also raises questions about the potential to increase the localisation of vaccine manufacture, which would be a solid step towards ensuring that nations do not suffer vaccine shortages in the future. Perhaps it would be wise if at least some of the IMF’s money was earmarked for this purpose.
QUESTIONS ABOUT VACCINE EFFICACY
The longevity of protection offered by COVID-19 vaccines, and of recovering naturally from an infection, remains unknown. However, the prospects of the virus and variants thereof becoming endemic are real. What is becoming clear in the face of new variants emerging is that frequent top-up doses of vaccines and the development of modified vaccines to counteract new variants is a likely reality, adding another layer of uncertainty around the vaccine rollout programme.
Given this reality, it is hardly surprising that for 2021 economists have generally acknowledged that the biggest unknown to their forecasts remains COVID-19.
Vaccination is, however, enabling countries to reduce the severity of nationwide lockdowns and buoy levels of economic activity. This is resulting in positive upgrades to economic expectations in certain countries. The pattern of performance from the equity markets of these jurisdictions suggests that these recoveries continue to be underappreciated by the equity market until they materialise.
HOW VACCINE EFFICACY COMPARES AGAINST THE ALPHA AND DELTA VARIANTS
Vaccine efficacy against infection and hospitalisation for each variant, by vaccine manufacturer, number of doses and country of study.
Source: Financial Times
This is the pattern we have seen in the United Kingdom and the US, which are both recording increases in gross domestic product forecasts, earnings estimates and share prices. Mainland Europe appears to be the next area likely to see the level of vaccinations required to materially support a positive economic surprise.
In the face of the economic shock caused by the pandemic, developed market central banks and governments have provided hugely stimulative responses that have cushioned economies, household budgets and had the side effect of boosting asset prices. Money, however, does not provide a quick fix for all things. While the task force should allocate funds to supporting the vaccine alliance, Gavi, in its efforts to help pay for vaccine procurement for emerging market nations, capital should also be injected to help create localised production facilities which would ensure more equitable vaccine distribution in the future.
“While suitable vaccine options are increasingly becoming available to countries in the emerging world, the access and relative inequality of vaccine distribution globally has been apparent to all.”
Once vaccinated, the world will ultimately return to a new normal. This will feature, among other adaptations, increased work-from-home and online retail trends, while more time spent at home will alter humanity’s impact upon the local environment. All these changes will have implications for future business growth and investment opportunities.
Our global equity team remains focused on looking for quality companies that offer growth, and which are still available at reasonable prices. Spotting structural growth themes or, conversely, areas of stagnation or decline, helps us to position our global equity strategies for continued success; no matter how the world looks in the future.
Disclaimer: The Ashburton Global Leaders Equity Fund holds positions in both Johnson & Johnson and AstraZeneca
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