Covid-19 How to view the vaccines

If 2020 revived the notion that corporate heroism is alive – Big Pharma could certainly put its hat in the ring. This is a long way from the “The Constant Gardener” a 2001 John Le Carré book on pharmaceutical corruption.

C-19 offers Big Pharma a chance for image restoration. A Gallup poll in 2019 on the US public perception of 25 major industries ranked Big Pharma last. Americans were more than twice as likely, 58% v 27% to view the industry negatively.

Many industry players have been working 24/7 for a C-19 vaccine. Big Pharma has provided the means, expertise and funding for testing drug candidates in collaboration with smaller biotechs/ university research facilities who have contributed the science. Over 200 different vaccine candidates are being investigated globally.

The race to tackle C-19 is analogous to the Grand National. A protracted race event with plenty of hurdles to jump!

The disproportionate impact of C-19 on the USA is well known. The US has c. 4% of the global population but has had 21% of infections (12.59m/ 59.81m) and 18.4% of fatalities (259.9k v 1.41m) according to John Hopkins University. The USA in pharma terms remains the trophy asset, the source of 50% of global drug profits – the key goal is C-19 market share in the United States.

Given the context of the C-19 pandemic and hundreds of Americans dying every day, key ‘first mover’ hurdles for all companies wanting US market share include:-

a)        Clear evidence from large scale (phase 3) patient trials of vaccine safety and efficacy and proof of correct dosage

b)        Quick regulatory filing / rapid US Food & Drug Administration approval

c)        Large scale manufacturing & distribution (key will be the ability to quickly fill pre-orders) and the ability to secure sufficient APIs (active pharmaceutical ingredients) and vials.

The priority now is effective quick roll-out. Pricing, administration and logistics are less important factors. Going into 2021 drug specific factors will become more important. Capture of C-19 market share will then depend more on:-

a)        Single shot doses that simply vaccine delivery and administration

b)        More convenient chilled (2-8 degree) or even room temperature storage

c)        Longer vaccine shelf life / longer protection

d)        Competitive pricing

e)        Engagement in a global solution is available that allows countries to access sufficient C-19 vaccine on a fair and cost-effective basis.

The dynamics of C-19 pandemic mean that the first drugs to market could be temporary and expensive fixes that give way to better alternatives in 2021.

The ‘early birds’ notably Pfizer, Moderna and Astra Zeneca have a 2-3 month headstart. Their first mover advantage allows them to build market share quickly and possibly deal with the C-19 problem quickly insofar as it relates to higher risk people.

A key issue is the time taken to distribute and inoculate the population who are deemed to be higher risk and hence higher up in the vaccine pecking order. These categories would include the late middle aged, elderly, sick, healthcare, care home workers etc. In terms of population this could easily be 25% of the total inoculations.

This might explain why some companies, notably GSK (the world’s largest vaccine maker) and its partner Sanofi have been slow relative to their peers. GSK/ Sanofi is playing the long game, which might cost it US market share in the short term and give it a lot of catching up to do in 2021.

GSK/ Sanofi will use the extra time to create a more effective drug that is better suited to lower risk population subsets. GSK is possibly targeting an affordable vaccine suitable for the industry standard 2-8 degree cold chain infrastructure.

We still have some known “unknowns”. Notably:-

i) potential side-effects from various C-19 vaccines

ii) Many governments have yet to decide whether inoculations will be mandatory, or if they will be mandatory only for certain population subsets. If vaccinations are not mandatory this would impact C-19 vaccine demand.

Understanding Vaccine Efficacy (VE)

The bar is now been set high in efficacy terms for late arrivals. Vaccine efficacy is generally calculated as:-

VE = (ARU- ARV) / ARU *100%

VE: vaccine efficacy

ARU: attack rate of unvaccinated people

ARV: attack rate of vaccinated people

It is worth noting that “vaccine efficacy” is an industry measurement based on pharma trials which differ from real world performance, known as “vaccine effectiveness”. This is because people chosen for clinical trials are often young or middle aged and healthy. A trial sample will not match the medical profile of the population at large. Furthermore people can have medical conditions that interfere with a vaccine’s performance. C-19 has primarily impacted and killed people with pre-existing medical conditions. Hence this category needs to be part of the trials.

That said, Pfizer/ BioNTech claimed their vaccine had a 95% VE rate, Moderna claims a 94.5%, the Russian Sputnik claims “over 90%” whilst Astra Zeneca claims around 70% if results from both dosing regimens are combined.

Are drug candidates required to show very high VE for US regulatory clearance? No. The US Food & Drug Administration has said it will grant emergency approval for vaccines that showed 50% efficacy. Setting the regulatory bar at this low hurdle could mean quite a few vaccines will be approved, increasing competition.

But marketing of C-19 vaccines will be easier the higher the advertised VE rate. This is important to justify the more expensive treatments from Pfizer and Moderna.

Big Pharma could win the C-19 battle but lose the war; Vaccine Nationalism – is the ability of wealthier countries to ‘crowd out’ poorer countries from the market via large scale pre-ordering, higher pricing and easier distribution. It is a reputational risk for the pharmaceutical industry who could be accused of favouritism and/or only protecting or prioritising their best clients.

Pre-ordering (needed to fund investment in vaccine R&D and trials) is well underway with the US, UK, EU, Japan holding purchase options over significant portions of the expected manufacturing capacity. In the case of the US, UK and Japan these countries’ C-19 orders exceed their population and substantially exceed the expected early stage mandatory inoculations.

Source: / 24th November 2020

NB. The EU has ordered 160m Moderna vaccines on the 25th November 2020.

Covax, a group of 94 of the wealthiest countries (excluding the USA) is co-lead by Gavi (the Global Vaccines Alliance), the Bill and Melinda Gates Foundation and Serum Institute of India aims to procure, effectively allocate and deliver 2bn doses of C-19 vaccine. It has an ambitious target to inoculate 20% of the global population by end 2021. It has already raised its $2bn requirement for 2020 and needs a further $5bn to secure its 2021 objectives.

Covax has secured a deal for the Astra-Zeneca/ University of Oxford AZD1222 for 2bn doses (covering 1 bn people) at a maximum cost of US$3.00 a dose. This is expressly allocated to 92 low – middle income countries and it is claimed this being done on a “not for profit” basis i.e. at cost price.

However it is thought that up to c.17bn doses may ultimately be required globally, given the risks of theft, counterfeiting, spoiling and wastage (according to WHO wastage is c. 50% globally due to a lack of cold chain requirements in parts of world) and the problem of not knowing precisely how long the average dose protection will last. It is critical that the pharmaceutical industry distributes C-19 fairly and is seen as doing so.

Astra-Zeneca / Oxford – AZD1222

The Astra-Zeneca/ Oxford AZD1222 Phase 3 results were disappointing. Why was this?

*Firstly this was an interim analysis of phase 3 data from 11,636 i.e. a small sample of a total Astra phase 3 trial expected at c.60,000 globally. There are 23k more still being tested and those results are due this year. This second data reading could shift up or down making this early read unreliable. But the trial showing a 90% efficacy (half dose then full dose) was from a sample of just 2,741 people whilst the 62% (2 full doses one month apart) VE rate came from the larger 8,895 test giving an average of c.70%. It is worth pointing out that pharmaceutical trials involve hundreds of people in Phase 2 but many thousands in Phase 3. Whilst encouraging in safety terms, this reading is based on partial information. The FDA could insist on the full trial results being submitted.

*No reasons were provided for the large VE discrepancy between the two trials’ data sets. The inference is that Astra-Zeneca does not know the reason, because if so, it should have disclosed it.

*The age categories of the sample sizes were not revealed on Monday. This is a major factor impacting VE. It has since emerged that for both reported results, the age group was ’sub 55’ only (also relatively vague). This grouping has a far lower risk of C-19 hence pushing the stated results to the upside. Regulators will want to know the performance for elderly people. In the Pfizer trial 41% of people were in the 56-85 age bracket.

*Even if 90% VE is used rather than 62% this was still a lower VE rate than either Pfizer or Moderna. Whilst AZD1222 should obtain US regulatory clearance, the real issue is whether US healthcare authorities feel comfortable buying AZD1222 in these circumstances given the data is showing a weaker relative performance. I don’t see the pricing as necessarily a key factor.

*The subtext is AZD1222 is less attractive in the US market than its peers when viewed on purely medical grounds. AZD1222 may well be fine for the rest of the world but there the vaccine pricing is less favourable and Astra-Zeneca has committed to significant sales at cost price.

The Astra-Zeneca share price response, a 500p drop from Monday morning speaks volumes for itself. The stock was moderately lower in London trading but very sharply down once US trading started suggesting US investors were taking a dim view of the data. Futhermore the Pfizer share price was holding up well, and has done since, suggesting investors believe AZD1222 is not a competitive problem for Pfizer.


We are in an early stage here ahead of FDA approval and key data so it is too early to draw firm conclusions. I would not write-off AZD1222 due to its better pricing and storage requirements. However AZD1222 is clearly on the back foot in the USA, its second round of data has to show real improvement.

Market size and impact on financials

A closer look at the Pfizer revenue opportunity is required. (Pfizer and Moderna are operating on a commercial basis unlike Astra Zeneca and Johnson & Johnson).

The US government has agreed to buy up to 100m of Pfizer’s difficult and expensive vaccine, at $39.50 (2 doses) – even assuming a 50% inoculation rate, and 30% market share, and this is supplied in 2021 that is c. $1.95bn a c. 7.6% upside to Pfizer $52bn annual revenues. Nice but not earth shattering.

Pfizer US EU Japan UK Others Total
Dose Pre-orders 100m+500m (option) 300m 120m 40m 56.5m 616.5m
Pre-orders/ Population 50m 150m 60m 20m 28.25m 313.25m
Population 331m 448m 127m 68m 142m 1,116m
Addressable market 165m 224m 63m 34m 71m 558m
Market Sh 30% 20% 20% 10% 10% 21.04%
Deliveries 49.5m 44.8m 12.6m 3.4m 7.1m 117.4m
Revenue $1.95bn $1.77bn $0.5bn $134m $280m $4,634m


The total global revenue opportunity is c.$4.6bn over 2021 assuming Pfizer market shares of 30% in the US, 20% in EU and Japan, 10% elsewhere – hence c 8.9% of Pfizer 2019 revenues. It is also worth noting the relative importance of the US to Pfizer, the 500m option order for example, the pricing could well be critical to a positive outcome.


This is a fast moving situation and since “Pfizer Monday” (10th November 2020) the Pfizer board have submitted (20th November 2020) their request to the FDA for Emergency Use Authorisation (EUA). Permission would allow vaccine roll-out by mid December 2020 to 15m-20m C-19 high risk members of the population. This could slow the advance of C-19 significantly in the USA by late January 2021.

Getting to a C-19 vaccine is certainly reputation enhancing for all concerned. But possibly the C-19 vaccine is being over-trumpeted as a profit opportunity for drugs companies.

The issue of national champions has also been raised, specifically in relation to the Russian Sputnik V treatment which lacks global distribution and received local authorization before phase 3 trial results were released! Only Hungary has expressed an interest in Sputnik V which is being priced at $10 a dose with the apparent intention of undercutting Pfizer by 50%. Some countries will be more willing to reward their national champions which would give Astra Zeneca an advantage in the UK and possibly in the EU.

The US appears willing to award the first round to Pfizer notwithstanding the storage problem (liquid nitrogen) and administrative difficulty. Based on our findings I broadly concur with this assessment. Astra-Zeneca can still catch up but has its work cut out, a similar conclusion holds for GSK/ Sanofi and J&J.





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