As the excitement over Pfizer (NYSE:PFE) and BioNTech's (NASDAQ:BNTX) vaccine announcement ebbs, some harsh realities have started to set in. The vaccine candidate -- while a marvelous feat of science -- has some hurdles to overcome if it's going to fulfill the promise of helping end the global pandemic.
Beyond regulatory approval, there are manufacturing, logistical, and efficacy questions to deal with. With the world waiting, there is no question human ingenuity will prevail. But getting this vaccine out to billions of people may not be the walk in the park the markets seem to assume. Let's look at a few issues the potential Pfizer vaccine will have to overcome to reward shareholders and save lives.
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Approval
Pfizer appears to have passed the most difficult technical barrier; the company has developed a vaccine that seems to be 95% effective in preventing COVID-19. However, this is only an interim analysis -- an early look. While there were more than 40,000 participants in the overall trial, this reported efficacy is based on 170 individuals. I'll be curious to see whether the efficacy rate holds up when more data is revealed.
We also don't know how long this vaccine will remain effective. While vaccines are normally not approved unless they protect people for at least a year, these aren't normal times. Pfizer has applied for emergency use authorization from the FDA, which should come in the next few weeks. Since the agency has noted that any vaccine with greater than 50% efficacy will be approved, I don't see Pfizer having an issue with approval.
Manufacturing
Messenger RNA -- the method used by Pfizer's vaccine candidate -- is very unstable, and no mRNA vaccines have yet been approved for human use. Creating mRNA in specially designed stainless steel bioreactors requires sterile conditions with a precise temperature and humidity. This instability is one of the reasons the vaccine must be kept so cold.
As you might imagine, it's a lot easier to make a small batch of mRNA for a clinical trial than it is to make hundreds of millions of doses for full-scale distribution. In the distribution arena, at least, Pfizer has gotten some help. In May, the company agreed to purchase vials made of Valor Glass, a container made by Corning (NYSE:GLW) that's specially designed and created for vaccines. Valor is an entirely new category of glass that prevents contamination and allow high-volume production lines to flow smoothly, without jams.
Earlier in the pandemic, Pfizer faced a delay in replacing manufacturing equipment and getting more raw material to make the vaccine. The company has addressed those problems and has updated production lines in the U.S. and Europe.
The next challenge will be the custom bags that line the bioreactors where vaccines are produced. These bags act like liners in slow cookers; they're removed when batches are done, eliminating the need to sterilize the bioreactors after each batch. The shortage of these bags, which has lasted several weeks and counting, was addressed in October when Operation Warp Speed injected $31 million into the bag manufacturer -- which is now part of Danaher (NYSE:DHR) -- to ramp up production. Although the funding was needed, the constraint remains.
Distribution
Pfizer was careful to note that its vaccine candidate was not part of Operation Warp Speed, and in a similar approach, the company has chosen to distribute its own vaccine rather than rely on the government. Given the complex requirements, it is likely for the best. Almost everyone now knows that the Pfizer vaccine must be kept at temperatures colder than any ever recorded in the U.S. (even Alaska!) -- negative 94 degrees Fahrenheit.
To maintain the temperature as the vaccine is shipped from either the Wisconsin or Michigan manufacturing sites, Pfizer developed a supercooled suitcase. The "pizza box," as they call it, allows temperature and location to be tracked at all times. Using dry ice, the vaccine is kept at the necessary temperature for 10 days once sealed. The cases can only be opened twice per day for less than three minutes at a time. Each case holds between 1,000 and 5,000 doses and may take four days in transit. That means each site with a case would have to administer about 850 doses per day before the vaccine destabilizes. More dry ice can be added to extend the timeline, but there is a shortage of that too.
Storage
The type of freezers needed to store a vaccine at negative 94 degrees Fahrenheit are not cheap, nor are they easy to find. The freezers can cost about $20,000 and the current wait is about six weeks. Leasing space is an option, but cold storage makes up only 2% of the overall warehouse market and the vacancy rate is less than 5%. It's just not something that has garnered a lot of investment.
While there is a sudden need for many freezers to handle many vaccines, hospitals may find it difficult to spend the money knowing they may never use the equipment again. Add in the uncertainty about what the federal government will pay for, if anything, beyond the vaccine itself, and you can see the dilemma. Thankfully, Walgreens (NASDAQ:WBA) and CVS (NYSE:CVS) have said they are ready and able to store the Pfizer vaccine. Given the nearly 20,000 locations between them, this one fact may overcome most other barriers the vaccine faces, and ease investors' minds.
Administration
Once the vaccine has been developed, tested, manufactured, shipped, and stored, it needs to be administered. Once again, the Pfizer vaccine raises the bar in terms of difficulty. The vaccine must be mixed at the administration site with a sterile liquid -- usually water -- and given within six hours of creating the solution. Since the vaccine will be shipped in cases with a high volume of doses, rural communities may not have the population, or infrastructure, to administer a case of doses while still cold. Because of this, residents in rural areas who want the vaccine may need to travel to a more centralized location to get it. At least in long-term care and nursing homes -- where nearly a third of COVID deaths have occurred -- there is a plan. CVS has said it stands ready to begin administering a vaccine to those at-risk populations as soon as one is approved.
But there are reasons for cautious optimism
Earlier this year, Pfizer agreed to sell 100 million doses of its vaccine candidate to the U.S., with an option for 500 million more. I'm confident the logistical challenges will be figured out and any current shortages will be addressed. Science has made a great leap forward in creating an mRNA vaccine, and the problems that arise will likely be ones that have been solved before, albeit perhaps on a smaller scale.
Although much of the global discussion revolves around how to make sure less wealthy nations have access to the vaccine, the practical considerations span the globe. Think of Australia: While it is a developed economy, the country lacks the manufacturing capability to create an mRNA vaccine on its own soil, as well as the cold-storage chain to maintain the deep-freeze temperatures required for the long term. If that country is going to distribute the Pfizer vaccine, it will have to figure out how to get the drug from the American Midwest into the arms of its citizens in less than 10 days.
Despite the challenges, the U.S. is fortunate to be where we are with respect to the vaccine. I believe the existing cold-chain infrastructure, and Pfizer's foresight, will allow the company to get doses to citizens throughout most of the U.S. That should be enough to bolster shares and make the company one of the winners of the overall vaccine race. It is on my radar as a stock to buy, but I'll be much more bullish when I see people lining up at the local clinic or drug store for doses of the vaccine. Only then can investors start looking at 2021 as the year that life went back to normal.
