Flawed Trials, Defects and Politics – Commercial Impacts of the Introduction of COVID-19 Vaccines
This article aims to discuss the trends and struggles in the pharmaceutical and life sciences industry, as well as to give a brief overview on how the 2021 market will be shaped by the arrival of the vaccine.
Pharmaceutical, Life-Sciences and Healthcare
As important as the development of COVID-19 vaccine is, distributing the vaccines is equally as important. Delivering a vaccine from a manufacturing plant into a patient’s arm requires the cold chain to remain intact — if it is not, the vaccines will break down and become unusable. However, building up the infrastructure to maintain cold supply chains, training and managing staff to administer the vaccines, and configuring manufacturing lines are costly with high risks of litigation in the complex and highly technical transportation process. Suggested solutions for this include working cross-industries. For instance, working alongside with food companies which have some cold supply chain to distribute the vaccines.[1]
Nonetheless, the pharmaceutical trends set out in 2020 will be reflected in 2021 as well. In terms of M&A activity, the race to develop a vaccine catalysed the digitization of healthcare in 2020, accelerating the rise in conglomerate mergers and the build-up of consortiums between rival pharmaceutical and biotech companies, as seen with AstraZeneca’s mega $39B acquisition of Alexion.[2] With the top dozen global pharmaceutical companies having more than $170B in M&A dry powder, M&A activity following this trend would continue in 2021.[3]
An equitable distribution of vaccines? The return to normality and market stability largely depends on vaccines. Competing national priorities and limited manufacturing capacity risk lower-income countries being unable to access medical remedies – this may mean reinfection for the rest of the world. Some firms, such as US drugmaker Johnson & Johnson and UK’s AstraZeneca/Oxford,[4] do not wish to profit from the global crisis, especially after receiving so much outside funding, and have pledged to sell vaccines at cost price. Whilst Moderna’s (Moderna sells vaccines on profit) shares from the COVID-19 vaccine development rose by 720%, more than both Pfizer and BioNTech, in the long run, the real winner of the vaccine race will be the business that is able to generate the most positive impact from its efforts and to score the biggest PR win from ESG measures.[5] A proposal by India, South Africa and other countries is also calling on the World Trade Organisation to exempt member countries from enforcing some patents and other intellectual property rights under the organisation’s Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips), for a limited period of time.[6]
Commercial Landscape
While the industries most impacted by the COVID-19 pandemic are set to gain the most from the administration of a successful administration of COVID-19 vaccines, it must be noted that the sudden surge in profits may not be enough to offset the bet and equity dilution by companies that struggled to survive during the pandemic. For instance, whilst the arrival of vaccines gave a boost to the aviation industry, with EasyJet, BA, Rolls Royce’s shares all surging by around 5%, countries are still tightening their border controls and the hardship in the industry is likely to continue through 2021.[7] Simultaneously, whilst shares from high-flying tech companies tumbled after Pfizer’s announcement of the arrival of the vaccine (i.e., Zoom slumped as much as 17.4%, Nextflix fell by 8.6% and Amazon by 5.1%), the 2021 market will continue to be anything but unpredictable, especially as countries take a more protectionist approach.[8]
Sources
[1] https://www.wsj.com/articles/covid-19-vaccines-mass-distribution-supply-chain-11607874181
[2] https://www.astrazeneca.com/content/astraz/media-centre/press-releases/2020/astrazeneca-to-acquire-alexion.html
[3] https://www.mckinsey.com/business-functions/m-and-a/our-insights/a-new-prescription-for-m-and-a-in-pharma
[4] https://www.bbc.com/news/business-52663523
[5] https://www.forbes.com/sites/jonathanponciano/2020/12/09/these-stocks-have-the-most-to-gain-from-covid-19-vaccine-making-and-distribution-according-to-bank-of-america/?sh=53bf0761884a
[6] https://www.scmp.com/comment/opinion/article/3116228/coronavirus-vaccines-why-world-should-support-intellectual-property
[7] https://www.thisismoney.co.uk/money/markets/article-8929237/FTSE-100-shoots-remarkable-5-pharmaceutical-giant-Pfizer-says-Covid-vaccine-works.html
[8] https://www.telegraph.co.uk/business/2020/11/09/markets-live-latest-trade-furlough-rishi-sunak-election-us-dollar/
