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Coronavirus Vaccine: Development and Distribution Logistics

Life Stories | By •

coronavirus vaccine The election is behind us (well, maybe not), and during the campaign COVID-19 was a key talking point for both President Trump and former Vice President Biden. One of the biggest questions that still does not have an answer is when a coronavirus vaccine will be ready. Beyond that, there are all the logistical hurdles of producing enough coronavirus vaccines which will then need to be stored, distributed, and administered. As pharmaceutical companies around the world race to get a vaccine to the market, logistics companies are readying for the job ahead as well.

Coronavirus Vaccine Development

The race is on to develop an approved coronavirus vaccine with more than 50 vaccines in clinical trials on humans and more than 85 preclinical vaccines being tested on animals. There are six phases in the development cycle to get a vaccine from the lab to the general public. First is pre-clinical testing, where scientists test a new vaccine on cells and then on animals. The US is facing a shortage of test monkeys due to more demand and a dwindling supply from China. The second stage is Phase 1 safety trials, where a small number of people receive a dose to test for safety and dosage size. Phase 2 expanded trials is when scientists give the vaccine to hundreds of people split into different groups to see how they respond. Phase 3 efficacy trials are large scale trials where scientists give the vaccine to a set number of people and others receive a placebo to see if the vaccine protects against coronavirus. Early and limited approval is the next phase and is based on the results of Phase 3. Finally, there is approval where regulators review the trials and determine whether the coronavirus vaccine is approved.

For some of the trials that are ongoing, scientists have combined phases to try to speed up the development and approval process. From a numbers standpoint, 36 coronavirus vaccines are Phase 1, 14 are in Phase 2, 11 are in Phase 3, 6 have been granted limited approval in China and Russia. One of the challenging parts of these late-stage trials is having enough participants develop symptoms to be able to check whether they had been given a vaccine or a placebo. Only when enough participants have become sick can scientists fully measure the effectiveness of the vaccine.

Moderna has just finished enrolling 30,000 participants for its late-stage trial (Phase 3), which began in July. The company is touting the diversity in its trial as a key piece to solving the puzzle. Moderna has enrolled more than 7,000 participants over the age of 65, plus more than 5,000 under the age of 65 with pre-existing conditions such as diabetes and severe obesity. These high-risk groups make up more than 40 percent of participants.

BioNTech, in partnership with Pfizer and Fosun Pharma, has moved ahead with its Phase 2/3 trials with 30,000 participants in the US, Brazil, Argentina, and Germany. The trial then moved ahead to expand that number to 43,000 participants, including children as young as 12. By the end of October, the coronavirus vaccine trial had not experienced enough cases to see if it was truly effective.

Coronavirus Vaccine Distribution

With so many trials ongoing, there are still considerable hurdles in the development process. Once an effective vaccine has been approved for mass distribution, there are a number of logistical hurdles that will need to be addressed as well. As such, logistics companies have been busy getting ready over the last few months. One issue that could slow down the development and distribution of a vaccine is a shortage of glass vials. The rush to manufacture a vaccine has resulted in a rush to secure supplies. The issue with the glass supply chain is that the market is traditionally fixed, and slow growing. This means that it is also prone to shortages, such as this one. The relatively low number of glass manufacturers contributes to the issue. Experts are concerned that the slow market, paired with the lack of manufacturers and the exponential rise in demand, could lead to difficulty in producing the billions of vaccine doses needed.

Assuming that glass manufacturers can keep up with the expected demand for vials, the next issue becomes setting up the infrastructure to move all those vaccines around the world. Temperature control is of utmost importance for the vaccine, as it will need to be stored at temperatures around -94 Fahrenheit. Both UPS and FedEx have established their freezer farm infrastructure to store and ship the vaccines when they become available.

UPS has built two freezer farms in Louisville, KY and the Netherlands near the company’s air hubs. The two locations should help to ensure global distribution of a vaccine once it is available. Each facility will house 600 deep freezers which can hold 48,000 vials of the vaccine at temperatures as low as -112 Fahrenheit. Between the two facilities, UPS will be able to store over 57 million doses of the vaccine.

FedEx began building out its freezer farm infrastructure nearly a decade ago in response to the H1N1 outbreak. FedEx now has nearly 90 cold-chain facilities around the world where the vaccines can be safely stored. The company has also begun using Bluetooth to transmit a location every few seconds. Combined with temperature sensors, if something goes wrong with a shipment, FedEx will be able to pinpoint its location and work to fix the problem in a rapid manner.

Pfizer has also set up a massive cold storage infrastructure as it prepares to distribute its vaccine. The pharmaceutical giant has turned a stretch of land in Kalamazoo, MI into a staging ground with 350 large freezers than will be able to store millions of coronavirus vaccine doses. To keep the vaccines safe during transport, Pfizer has developed a reusable suitcase-sized container that can keep between 1,000 and 5,000 doses at ultracold temperatures for up to 10 days. The containers will be also be equipped with GPS technology to allow for real-time tracking. The hope is to deliver nearly 1.5 billion does by the end of 2021.

Maersk has sealed a deal with COVAXX to ship the American pharmaceutical firm’s Covid-19 vaccine around the world when and if it gets approval by regulatory authorities. COVAXX is currently in phase 1 of its vaccine trial in Taiwan and will roll out phase 2 in the US as part of a partnership with the University of Nebraska Medical Center. COVAXX will also conduct a large-scale human efficacy clinical trial in Brazil. Maersk will oversee all logistics activities to ensure efficient transportation to developing countries. The agreement provides for end-to-end supply chain management, packing and shipping, via air or ocean, ground transportation, warehouse storage and distribution to facilities to support COVAXX’s requirements for a pharmaceutical grade, temperature-controlled supply chain. COVAXX is planning to manufacture 100 million doses of its vaccine during early 2021, and a billion doses by the end of 2021.

Final Thought

While there are a lot of vaccines in various stages of the development lifecycle, we still have some time before one is readily available. However, pharmaceutical and logistics companies are racing to make sure the infrastructure is in place when a vaccine becomes available. UPS and FedEx have built out expansive freezer farms to store a vaccine, Pfizer and Maersk have built out their infrastructure to store and distribute the vaccines, and many other companies are preparing in similar ways. Getting the vaccine distributed will take Herculean efforts, the likes of which have never been seen before. This, in turn, will have an impact on general air cargo. Cargo carriers will likely bump other shipments in favor of distributing a coronavirus vaccine. This could cause shipping delays as a shortage of available air freight capacity is to be expected. But in the interest of the greater good, delays in consumer goods can certainly be forgiven.

Coronavirus is Disrupting Indian Industry

Automotive Industry | By •

coronavirusWhile the impact of coronavirus on Indian industry has so far been moderate, India’s extremely high import dependence on China means there are significant ramifications for Indian industry. Of the top 20 products that India imports from around the world, the average Chinese share is close to 30 percent. Sectors in India that have been are impacted by the coronavirus in China include shipping, pharmaceuticals, automobiles, electronics, textiles, and solar power. (All information sourced from Confederation of Indian Industry (CII) report, 16 Feb)

Coronavirus and the Electronics Industry

China accounts for 45 percent of India’s total electronics imports and sources close to 90 percent of certain mobile phone parts from the country. Extended supply chain disruption will negatively impact India’s electronics industry primarily in the form of production reduction. The mobile phone industry in India has already started running out of stocks and serious disruptions are expected for this sector of the industry.

Local manufacturing of electronics components is being considered and the CII recommends inviting companies from Japan, Korea, Taiwan, Europe and US that are presently in the supply chain, to set up plants in India.

Coronavirus and the Pharmaceuticals Industry

While India is one of the world’s top drug exporters, the Indian pharma industry relies heavily on imports of APIs (active pharmaceutical ingredients) and intermediates, with some 70 percent of APIs sourced from China. For many critical antibiotics and antipyretics, dependency on API imports from China is close to 100 percent.

While not at crisis level yet, the coronavirus outbreak has resulted in shortages and potential price increases of generic drugs in India, and Indian pharmaceutical companies are now considering supply from other countries.

Currently, Indian manufactures do not have a compelling case to manufacture APIs locally, due to inadequate infrastructure, increased compliances, cumbersome processes for environmental clearances, and lack of incentives and support from the government.

Coronavirus and the Automotive Industry

The shutdown in China has affecting the imports of components affecting both the Indian auto manufacturers and the auto component industry. However, current levels of inventory seem to be sufficient for the Indian industry, at least for now. The impact on individual Indian companies in this sector varies depends on the extent of their business with China. An extended shutdown in China is expected to result in an 8 to 10 percent contraction of Indian auto manufacturing in 2020.

With China dominant in the electrical vehicle (EV) battery supply chain, the impact on India’s fledgling EV industry may be greater. The Indian EV industry is dependent on Chinese imports especially for lithium chemicals used to make cathodes and battery cells, as India seeks to build lithium-ion battery manufacturing plants.

Coronavirus and the Solar Power Industry

Chinese companies dominate the Indian solar components market, supplying about 80 percent of solar cells and modules. The coronavirus situation has led to about delays in Chinese production, quality checks and transport of components. As a result, Indian solar companies have started facing a shortfall of raw materials needed for solar panel production.

Coronavirus and the Export Implications

When it comes to exports, China is India’s third largest export destination and accounts for 5 percent share. The demand-side impact will be felt in sectors including organic chemicals, plastics, fish products, cotton, and ores.

The CII refers to an “unprecedented opportunity” to position itself as a production hub for the world and an alternative to China. However, for this to be successful a number of policy actions need to be instituted urgently. These include forming an inter-ministerial task force with industry participation to create awareness on India as a sourcing destination; encouraging Chinese companies to set up in India; enhancing export credit and insurance schemes; and building up competencies in trade facilitation and logistics to Chinese standards.

Coronavirus and the Automotive and Pharmaceutical Supply Chains

Automotive Industry | By •

coronavirusEarlier this week, the death toll from the Wuhan coronavirus rose to over 1,000 people, invoking memories of the 2003 SARS outbreak. However, the coronavirus has yet to be contained and appears to be more contagious than SARS. While the human aspect of this outbreak is clearly the biggest story, the virus is causing major disruptions in global supply chains as well.

China’s economy has grown significantly over the past twenty years and is now a piece of imports and exports for all major world economies. This outbreak has caused companies to start rethinking their overall supply design and contingency plans. While supply chain risk has always been a part of the overall planning process, the impact of coronavirus on the global supply chain has certainly brought supply chain risk management to the forefront of company’s minds.

As my colleague Steve Banker pointed out yesterday, the global high-tech supply chain has been hit particularly hard. But other industries are feeling the impact as well.

The Impact of Coronavirus

One of the biggest questions people aren’t necessarily asking but should be is “what is the impact on logistics?” Considering China is a major manufacturing hub for the world, figuring out exactly how products going to get to consumers has become a bit more complex. Air carriers have begun suspending their flights, and certain borders have been essentially closed to every other mode of transportation. Some countries are looking at completely banning all products from China until the coronavirus outbreak has been neutralized.

The timing of the coronavirus is a double-edged sword, and you can look at it from both the positive side and the negative side. On the positive side, the lead-up to Chinese New Year is a good thing. Factories normally shut down for the holiday, which means that lots of inventory has been shipped ahead of time. In the two weeks leading up to the holiday, there is a general surge in volume as companies know that for a two-week stretch, not much will be happening from a production standpoint. This ensured that cargo left China before the outbreak hit.

On the other side, however, the timing can be considered bad. In the normal scenario, operations usually resume by mid-February when all workers return. However, Chinese New Year could certainly delay the re-opening of factories and warehouses as families travel to be with each other, which has sped up the spread of the virus. With the quarantine in place, there is no real clarity on when normal operations will resume. For some factories, due to the economy, tariffs, and duties, the answer could be never.

Coronavirus and Automotive Parts

On Monday, Steve Banker and I had the opportunity to speak with Razat Gaurav, CEO of Llamasoft. Razat had some interesting takes on the outbreak, especially as it relates to the automotive and pharmaceutical supply chains. On average it takes 30,000 parts to make a finished automobile. Due to the virus, production facilities have already indicated that they will have lower than normal parts volumes. This has left companies scrambling to make contingency plans. During my conversation with Razat, he mentioned that inventories for most of these automotive parts are managed on a lean just-in-time basis. This means that, on average, companies have anywhere between two and twelve weeks of buffer inventory on-hand for automotive parts. As production volumes are decreasing, this has the potential to cause quite the global shortage of parts. The buffer inventory will only last so long, and once the pre-holiday supply runs dry, the industry is going to be in serious trouble. According to Gaurav:

“Most OEMs single source components for new vehicles and China is a large supplier of those. Thus, there is exposed risk. The automotive industry has been going through a ‘regionalization’ trend for the last 5 to 8 years with major hubs emerging in Mexico (for the North America market), Eastern Europe (including Poland, Romania, Slovakia, Czech Rep), Morocco, and China. Even so, there is a ripple effect in other parts of the world.

For example, Hyundai is one of the first automotive companies announcing closures outside of China, at its South Korean factories; France’s Renault also announced a shutdown in its South Korea facilities. Fiat Chrysler warned it may need to halt production in one of its European plants due to a shortage of parts. While we have talked a lot about the manufacturers themselves, the impact on the supplier base is significant as well.”

Coronavirus and Pharmaceuticals

Another industry that is feeling the impact of the coronavirus is the pharmaceutical industry. The average buffer inventory for the pharmaceutical industry is between three and six months. However, this does not tell the full story. Gaurav mentioned that China is responsible for producing 40 percent of the active pharmaceutical ingredients (APIs) for the pharmaceutical world. Additionally, China supplies 80 percent of key starting materials (KSM’s), which are the chemicals in APIs, to India. Put together, this represents 70 percent of all APIs across the world.

Due to this fact, the risk for disruption is even higher within the pharmaceutical industry. While companies may have alternative sources for either the drugs themselves or the active ingredients, even those supplies likely require ingredients that come from China. Much like other highly specialized items, pharmaceuticals would require months of lead times to set up new manufacturing facilities. Given the amount of testing, not to mention the initial investment, that is required to get a new plant up and running, companies are instead looking those alternative suppliers, even though it could take a significant amount of time to get the supplies that are necessary.

Coronavirus and Hockey?

One more example of coronavirus impacting the supply chain comes from an unexpected source: the National Hockey League (NHL). Hockey players, like most professional athletes, are very particular about their equipment. This is especially true of their sticks. The two largest suppliers of hockey sticks, Bauer and CCM, account for about 75 percent of the sticks in the NHL. According to reports, the work shutdown in China has caused a stoppage of stick replenishment. With how often players break their sticks, this could be a big problem as the outbreak and hockey season wear on. Stick suppliers have said that they have the majority of sticks needed for the season in storage in North America now, but did admit that the halt in production has raised concerns.

Final Thought

The coronavirus continues to spread throughout China, and the human toll cannot be ignored. Nor should it. However, there are other ramifications from the outbreak, perhaps most notably on the global supply chain. Two industries in particular are feeling the effect: automotive parts and pharmaceuticals. These industries are dealing with delays and shortages for required components to make a final product. This can have last effects on the companies and their consumers. For automotive parts, it is a matter of factories not being able to produce vehicles as needed. For pharmaceuticals, it can be a matter of life and death. For both of these industries, the reliance upon buffer inventory can only last so long. As Razat Gaurav said to me at the end of our call, “Thank God for buffer inventory. If it gets depleted, it will create huge demand-supply imbalance in the global landscape.”

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