Makers Keepers: What can we learn from listed vaccine makers

I’ve found it more reliable to be informed by company filings and management commentary, than by media. Since world’s leading vaccine makers are publicly listed, I went through their Q1 2021 filings to see what I could learn. Here’s a summary.

Three scale vaccines, yawning gap thereafter.

Vast majority of vaccines didn’t cross borders.

Vaccine passport is an inadvertent oxymoron. Look at % of business derived from home-market

·      Pfizer-Biontech: 70% of revenue (>75% of doses) from US

·      Moderna: 79% of revenue (86% of doses) from US

·      AstraZeneca: 81% of revenue (82% of doses) from EU+UK

·      J&J: 100% of revenue/doses from US

With all of above vaccines made in US or Europe (67:33 split), ~90% of doses were delivered to North America and Europe. US, by law, exported zero vaccines in Q1. Europe reluctantly did better, but even EU & UK are squabbling over blocking vaccines to each other. ~5% of doses were delivered to COVAX initiative, aimed at getting vaccines to poorer countries.

Big-3 expect to more than double doses in Q2 vs Q1.

Q2 volume estimate

·      Pfizer-Biontech: 200+M going to 500+M in Q2 (200+M deliveries in April/early-May)

·      Moderna: 102M going to 200-250M in Q2 (guidance)

·      AstraZeneca: 68M going to 100+M in Q2 (Guided to up EU deliveries from 30M to 70M)

·      J&J: no indication of scale-up

Combined, Big-3 expect to take 370M doses in Q1 to 800+M doses in Q2.

But, North America and Europe demand likely to double too.

If we compare April vaccination run-rate to Q1 run-rate in Western markets

·      EU: 3x

·      US: 2x

·      UK: 1.5x

·      Canada: 3x

·      Mexico: 3x

Implying that 85-90% of (enhanced) Q2 production will still end-up in North America & Europe. Rest of world could get 20+M/month (up from 10+M/month), but not much more. Pfizer and Moderna could seed various contracted countries in Q2, but are unlikely to make bulk supplies.

Except for a few silly commentators, rest of world understands this.

·      Brazil, Chile, Turkey have anchored their program around China vaccine.

·      Countries who have contracted orders have publicly acknowledged modest single-digit million delivery volumes in May-June (e.g. Japan, South Africa, Turkey).

·      COVAX’s recent 500M dose contract with Moderna explicitly mentions 34M doses in Q4 of 2021 and 466M doses in 2022.

·      COVAX announced distribution of 14M Pfizer-Biontech vaccines across 47 countries in their next round of distribution scheduled to happen over the next few months (likely to spill into Q3 as COVAX is way behind on prior round quantity and timeline targets).

H2 of 2021 is looking better though, for vaccine supply to rest of the world.

Production estimates for 2021

·      Pfizer-Biontech: 2.5-3 billion doses (1.6 billion contracted)

·      Moderna: 0.8-1 billion doses

·      AstraZeneca: no guidance

Above implies 400+ million doses/month over H2 of 2021 from two manufacturers. If N America + Europe vaccination stays at April pace of 200+M/month, availability for export to rest of world could increase disproportionately in H2.

A word of praise for AstraZeneca.

I’m for businesses earning profits, preferably without breaking the law. I’m against unemployable freeloaders telling others what to do with their money. But, when a business does good that it needn’t have done, while bearing sizeable cost, it’s commendable. AstraZeneca seems to have done this in more than one way.

(Realized price is for Pfizer/Moderna higher including government grants/reimbursements. Moderna price was $15.5 to US and $27 to Europe.)

Profitability of Covid vaccine

·      Pfizer: High-20s pre-tax margin, after passing on 50% of gross-margin to Biontech (it felt like profit-pool across Pfizer & Biontech was roughly half of customer price)

·      Moderna: 80% gross-margin (they don’t provide pre-tax margin just for vaccines)

Even assuming AstraZeneca’s no-profit pledge holds only until pandemic rages, AstraZeneca is likely to forego pre-tax profit of nearly $10/dose on a few hundred million doses. No hollow pledge, this.

Doses delivered to COVAX initiative

·      Pfizer-Biontech: 1.2 million

·      Moderna: Zero

·      AstraZeneca: 18.4 million (sub-licensee Serum delivered another 29.9 million)

While Pfizer & Moderna have contracted future deliveries to COVAX, it’s well after supply-demand eases at home. While numbers till date are a rounding error on poorer countries population, AstraZeneca has done most among big-3 to deliver affordable vaccines to all.

We’re lucky to have Serum Institute and Bharat Biotech

Western vaccine triopoly retained ~90% of vaccines for home use. Outside of a few tiny countries, each slightly larger than Andheri, Big-3 made no difference to any country’s vaccination program. In no scenario could they have made a difference to India’s. Our only option in H1 of 2021 (and beyond) is to have our own Aatmanirbhar, global-scale, credible vaccine manufacturers.

While I have always thought highly of Serum Institute, I didn’t realize how high they were in global pecking order until I studied Western peers. Serum is World’s #2 covid-vaccine producer. Serum makes as many vaccines out of Pune as Pfizer does out of its US site in Kalamazoo. Serum has achieved >2x scale of its parent AstraZeneca, while selling vaccines at half the price. That AstraZeneca is struggling to meet even a third of its commitment to EU (300M doses in H1) indicates how non-trivial Serum’s achievement is. Serum has sold >200M vaccines to India at $2/dose and will sell even more at $4/dose. Thanks to Serum, India can buy over half a billion doses at a price lower than Moderna’s material cost. Serum has exported 3x more vaccines to developing countries than Big-3 combined (>60M vs 20M). As it scales from 70M doses/month to 100M doses/month, Serum will maintain its World #2 status.

Since I have focused on Q1, I spoke more of Serum than Bharat Biotech. However, Bharat Biotech is equally commendable. Their May production run-rate (30M/month) nearly matches AstraZeneca’s and is 3-months behind Moderna’s ramp-up. At 70M doses/month, they’ll match Moderna in a few months. That they did it without an MNC collaborator makes it even more creditable. To have two Indian companies amidst global top-5 in a highly-specialized niche is a phenomenal achievement (and blessing).

There’s a vested narrative, painting Indian vaccine makers as a ‘profiteers’, with irresponsible threats of compulsory licensing and casual criticism of not doing more, better, sooner. While I don’t generally advocate vigilante justice, one tight slap is in order for such maleficence. India’s 2 billion doses/year run-rate in H2 2021 will be nearly as large as that of US and larger than that of EU. This is as good as it can get, amidst a global pandemic. Thank you, Bharat Ratnas.

In Summary:

Global vaccine triopoly. Three Western companies, manufacturing in West, mostly for West. Despite impressive scale-up, marginal quantity shipped from West to Rest in H1 of 2021. Makers keepers. Can’t get vaccines for love, money or contracted orders. This could change in H2, although India will likely not need their supplies at that point.

Rest not waiting with bated breath. Some counting on China. Many on prayer. India lucky to have two credible homegrown vaccine manufacturers to count on, one already global-scale, another getting there soon. They’ll likely ensure that every Indian adult who wants a vaccine gets one in 2021. So, don’t grudge the world-lowest price that they charge. Treat them with the respect they deserve.

Sources:

https://investors.pfizer.com/events-and-presentations/default.aspx

https://investors.biontech.de/investors-media

https://www.astrazeneca.com/investor-relations/results-and-presentations.html

https://www.investor.jnj.com/

https://investors.modernatx.com/events-and-presentations

https://ourworldindata.org/covid-vaccinations