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 Canaccord Genuity Corp.

COVID-19 Vaccine Stocks: Supply Problems on the Road to Herd Immunity

Delwin Graham - Dec 11, 2020
Coronavirus vaccine stocks are riding on big ambitions – they don’t want to reach millions of people; they want to reach billions. But the task of vaccine distribution promises to be complicated.

Investors are quite aware of the potential of the COVID-19 vaccine market – from zero to US$40 billion in a year, according to Bernstein analyst Ronny Gal (Cf., Keith Speights, “$40 Billion COVID Vaccine Market in 2021”,, December 8, 2020). To that point, Moderna (MRNA:NASDAQ) is up over 900% in 2020 on excitement over its coronavirus vaccine. On November 30, the company asked the US Food and Drug Administration (FDA) to authorize its coronavirus vaccine for emergency use.

Coronavirus vaccine stocks are riding on big ambitions – they don’t want to reach millions of people; they want to reach billions. But the task of vaccine distribution promises to be complicated. For one, the vaccine supply chain is very complex and involves various levels of government (e.g., local, provincial/state, federal), as well as hospitals, pharmacies and doctors’ offices. The two most advanced coronavirus vaccines must be stored at specific temperatures and given in two doses several weeks apart. Someone has to keep track of who gets that vaccine and when. Then there is also the issue of acceptance – some people are wary of being administered a drug that went through clinical testing at record speeds. While it is estimated that 60% to 80% of the world must be vaccinated in order to achieve herd immunity, these supply constraints could delay complete coverage for months or even years. (Cf., Allison Gatlin, “Pfizer and Moderna Face Their Biggest Challenge: Vaccinating the World”,, December 3, 2020)

There has already been some hiccups. Pfizer (PFE:NYSE) and its vaccine development partner BioNTech (BNTX:NASDAQ) were the first companies to gain approval for a coronavirus vaccine using messenger RNA (mRNA) technology. Whereas vaccines work by training the body to recognize and respond to the proteins produced by disease-causing organisms (bacteria or viruses), traditional vaccines are made up of small and inactivated doses of the whole disease-causing organism or the proteins that it produces, which are introduced into the body to provoke the immune system into mounting a response. Messenger RNA vaccines, in contrast, trick the body into producing some of the viral proteins itself. In this case, scientists create a synthetic version of the mRNA that is introduced into the human body, whose cells read it as instructions to build the spike protein that covers the virus known as SARS-CoV-2. The body then launches an immune response. Moderna uses a similar approach. Moderna’s vaccine is proven to be 94% effective, while Pfizer’s is proven to be 95% effective.

The problem for both Pfizer and Moderna is that their drugs must be kept cold. Moderna’s vaccine can live in a standard refrigerator for 30 days. It can also be frozen for six months. Once thawed, providers must administer the vaccine within 12 hours. This creates a logistical challenge for transportation. As a result, Moderna will be heavily reliant on external suppliers. They will be using companies like CryoPort (CYRX:NASDAQ), C.H. Robinson Worldwide (CHRW:NASDAQ) and McKesson (MCK:NYSE) to work out the logistics plus storage and shipping management. (Cf., Gatlin, “Vaccinating the World”, December 3, 2020)

The supply-chain challenges are even more demanding for Pfizer. Pfizer’s coronavirus vaccine needs to be stored at -70C. Pfizer has developed a special shipping container that can store the vaccine for 10 days unopened. Road and air transportation will be used to ship the container anywhere in the US within a day or two. The vaccine can also be stored in an ultracold freezer for up to six months. However, these freezers are expensive - about US$20,000 apiece. Some universities and hospitals have them. Pfizer is said to be investing heavily in freezer farms across the US. Given these storage limitations, it is thought that the Pfizer vaccine is likely to go to more populous locations with ultracold storage capabilities, while Moderna will send its drug to more rural communities. (Cf., Gatlin, “Vaccinating the World”, December 3, 2020)

While initially enormous, the duration of the revenue stream from the coronavirus vaccine is unknown. Mizuho Securities analyst Vamil Divan expects Pfizer to generate US$875 million in coronavirus vaccine sales in 2020 and US$7.25 billion in 2021. This will eventually trend down to US$700 million - US$$800 million each year, depending on how often people need booster shots of the vaccine. He envisions a revenue stream of years or decades. But this presumes that COVID-19 is endemic like the flu or the common cold. But if COVID-19 is more like measles, mumps, rubella, smallpox, chicken pox and some strains of the flu, then there should be very few cases of re‑infection and little need for re-inoculation. The fact that there have been very few cases of COVID-19 re-infection seems to point to a strong natural immunity. (Cf., Gatlin, “Vaccinating the World”, December 3, 2020)

Of course, the possibility of a coronavirus vaccine is much more than an investment opportunity. But it is an opportunity. Please contact me at or 780-408-1518 for a few ideas.