As the excitement passed Pfizer (NYSE: PFE) and BioNTech‘s (NASDAQ: BNTX) the announcement of vaccinations has waned, some harsh realities have begun. The vaccine candidate – though a wonderful feat of science – will have to overcome obstacles if it is to deliver on its promise to help end the global epidemic.
In addition to regulatory approval, manufacturing, logistics and efficiency issues need to be addressed. With the world waiting, there is no question that human ingenuity will prevail. But getting this vaccine to billions of people may not be the walk the market assumes. Let’s look at some of the issues a potential Pfizer vaccine must address in order to reward shareholders and save lives.
Pfizer appears to have overcome the most difficult technical hurdle; the company has developed a vaccine that appears to be 95% effective in preventing COVID-19. However, this is just an interim analysis – an early appearance. While there were more than 40,000 participants in the overall study, this reported efficacy is based on 170 individuals. I will be wondering if the efficiency ratio will persist if more data come out.
Nor do we know how long this vaccine will remain effective. While vaccinations are not usually allowed unless people are protected for at least a year, these are not normal times. Pfizer has applied to the FDA for permission for emergency use, which should arrive in the coming weeks. Since the agency noted that all vaccines with efficiencies greater than 50% are approved, I don’t see Pfizer having a problem with approval.
Messenger RNA, the method used by Pfizer’s vaccine candidate, is very unstable and mRNA vaccines have not yet been approved for human use. To generate mRNA in specially designed stainless steel bioreactors requires sterile conditions with accurate temperature and humidity. This instability is one of the reasons why the vaccine needs to be kept in such a cold state.
As you can imagine, it is much easier to make a small dose of mRNA for a clinical trial than to make hundreds of millions of doses for full distribution. At least Pfizer has received some help in the distribution arena. In May, the company agreed to buy Valor Glass vials Corning (NYSE: GLW) which is specifically designed and developed for vaccinations. Valor is a completely new category of glass that prevents contamination and allows large volumes of production lines to flow smoothly without jamming.
Earlier in the pandemic, Pfizer faced delays in replacing production equipment and procuring additional raw materials to produce the vaccine. The company solved these problems and upgraded its production lines in the United States and Europe.
The next challenge will be the individual bags that line the bioreactors where vaccines are produced. These bags behave like liners for slow cookers; they are removed when preparing sections, so there is no need to sterilize the bioreactors after each batch. The lack of these bags, which lasted several weeks and was counted, was remedied in October when Operation Warp Speed injected $ 31 million into the bag maker – which is now part of Danaher (NYSE: DHR) – to increase production. Although funding was needed, the constraint remains.
Pfizer cautiously acknowledged that its vaccine candidate was not part of Operation Warp Speed, and in a similar approach, the company decided to distribute its own vaccine rather than rely on the government. Given the complex requirements, this is probably the best. Almost everyone knows that the Pfizer vaccine should be kept at a colder temperature than ever recorded in the United States (even Alaska) – negative 94 degrees Fahrenheit.
To maintain the temperature as soon as the vaccine is shipped from a manufacturing site in Wisconsin or Michigan, Pfizer has developed a supercooled suitcase. The “pizza box” as it is called allows you to keep track of temperature and location. Using dry ice, the vaccine is kept at the required temperature for 10 days after sealing. Cases can only be opened twice a day for less than three minutes at a time. In each case, it is between 1,000 and 5,000 doses, and delivery can take four days. This means that in all cases, the site should administer approximately 850 doses per day before the vaccine is destabilized. Additional dry ice can be added to extend the timeline, but there is also a shortage of this.
Freezers for storing vaccines at negative 94 Fahrenheit are not cheap and are not easy to find. Freezers can cost about $ 20,000, and the current wait is about six weeks. It is possible to rent space, but cold storage accounts for only 2% of the total warehouse market and the vacancy rate is less than 5%. It just didn’t mean a lot of investment.
While suddenly a lot of freezers are needed to handle a lot of vaccinations, it can be difficult for hospitals to spend money knowing they will never use the equipment again. If we add the uncertainty about what the federal government pays, if anything, beyond vaccination, you can see the dilemma. Gratefully, Walgreens (NASDAQ: WBA) and CVS (NYSE: CVS) they said they were ready and able to store the Pfizer vaccine. Given the nearly 20,000 locations between them, that one fact could overcome other barriers to the vaccine and ease the minds of investors.
It must be administered after the vaccine has been developed, tested, manufactured, shipped and stored. Again, the Pfizer vaccine raises the bar in terms of difficulty. The vaccine should be mixed with a sterile liquid, usually water, at the injection site and administered within six hours of reconstitution. Because the vaccine is delivered in large doses, rural communities do not have the population or infrastructure to still administer doses in a cold state. Because of this, rural residents who want the vaccine may need to travel to a more centralized location. At least in long-term care and nursing homes – where nearly one-third of COVID deaths occurred – there is a plan. CVS has stated that it is ready to administer the vaccine to vulnerable populations as soon as it is approved.
However, there are reasons for cautious optimism
Earlier this year, Pfizer agreed to sell 100 million doses of its vaccine candidate to the United States, with an option to receive an additional 500 million. I am confident that logistical challenges will be invented and any shortcomings addressed. Science has made great strides in the development of the mRNA vaccine, and the problems that have arisen are likely to have been solved earlier, though perhaps to a lesser extent.
While much of the global debate is about how to ensure access to vaccination for less affluent nations, practical considerations extend to the entire globe. Just think of Australia: Although it is a developed economy, the country lacks the production capacity to produce mRNA vaccines on its own soil, and the cold storage chain does not ensure the long-term maintenance of frozen temperatures. If this country is to distribute the Pfizer vaccine, it will have to find out how the drug can be delivered from the American Midwest into the arms of its citizens in less than 10 days.
Despite the challenges, the United States is fortunate to be where we are about the vaccine. I believe the existing cold chain infrastructure and Pfizer’s foresight will allow the company to receive rations for citizens in much of the United States. This should be enough to strengthen the shares and for the company to be the winner of the entire vaccination competition. You can buy it on my radar as a kit, but I’ll be much bullier when I see people queuing up for vaccine doses at the local clinic or drugstore. Only then can investors begin to see 2021 as the year when life returned to normal.