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WorldJanuary 25 2021

The world’s greatest vaccine rollout

A global rollout of Covid-19 vaccines is vital to returning life to something resembling normality, but it comes with many challenges and the world of finance has a key role to play. 
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Vaccine

There is little dispute that the on/off cycle of Covid-19 restrictions seen in economies worldwide in 2020 is unsustainable. Yet, in the short term, lockdowns and social distancing are a vital part of keeping coronavirus transmission under control.

The mass rollout of Covid-19 vaccines is seen as essential for ending this highly disruptive cycle. In January, the World Bank’s forecast of 4% global economic growth in 2021 was contingent on a ‘widespread’ rollout of effective vaccines.

Vaccine programmes are now underway in many countries, particularly among developed economies. However, for a truly global and sustainable economic recovery there will need to be global vaccine access.

Research by policy think tank Rand Europe, published in October 2020, estimated that if the world’s lowest-income nations did not have access to Covid-19 vaccines, it could cost developed economies dearly, even if they vaccinated their own populations. The report estimated an annual loss of $16bn in gross domestic product for the US and a loss of $40bn for the EU in this scenario.

Putting aside the clear moral considerations, there are also more practical concerns. Marco Hafner, a senior economist at Rand Europe, says: “If you’re only vaccinating populations in, let’s say, the western world, and you have other regions without vaccinations taking place, it leaves open the possibility of the virus mutating — and we have seen that this virus is mutating relatively quickly. There would be a risk of importing a new strain which doesn’t respond to the vaccine.”

If you’re only vaccinating populations in the western world... it leaves open the possibility of the virus mutating

Marco Hafner, Rand Europe

However, despite clear rationales for ensuring global rollout, vaccine hoarding remains a real concern. In a January media briefing, Dr Tedros Adhanom, director general of the World Health Organisation (WHO), commented: “There’s a clear problem that low- and most middle-income countries are not receiving the vaccine, yet … rich countries have bought up the majority of the supply of multiple vaccines. Now we’re also seeing both high- and middle-income countries, that are part of Covax, making additional bilateral deals.”

Vaccine collaboration

Covax is a global initiative being managed by the vaccine alliance Gavi, the Coalition for Epidemic Preparedness Innovations and the WHO, with the aim of ensuring global equitable access to vaccines.

The idea is that Covax pools purchasing power of promising vaccines between countries while supporting countries that may otherwise be excluded from supplies. Via its self-financing arm, high- and some middle-income nations can pay for vaccines allocations; then, through the separate Advance Market Commitment (AMC) funding mechanism, lower-middle and low-income countries can receive doses supported by donations from higher income countries and other donors.

To date, 190 countries have signed up to Covax, with 98 countries on the self-financing side and 92 on the AMC side. The initiative has already raised more than $6bn, with the aim of raising a further $2.8bn, and is aiming to provide AMC countries with enough vaccines doses to immunise 20% of their populations by the end of 2021.

While concerns have been raised about Covax, including to the extent it risks being undermined by countries securing vaccines doses bilaterally, Gavi is clear that it is on target to hit its goals and although “bilateral deals should not be at the expense of Covax”, it is grateful to its donors and believes it is “heading in the right direction and extremely optimistic”.

It also emphasises that this is the first time a collaboration of this nature, to supply vaccines globally, has ever happened. “Covax is on track,” says a Gavi spokesperson. “Thanks to unprecedented international collaboration and from vaccine manufacturers that share its ambition for global, equitable access, Covax is now ready to start delivering doses in the first quarter of 2021. We’ve signed deals for almost two billion doses of vaccines, and are negotiating more; we’ve secured pledges of over $6bn already; and we’ve also published our ‘Principles for dose-sharing’ that facilitate donations of additional doses beyond the two billion we’re targeting.”

Jay Collins, vice-chairman for banking, capital markets and advisory at Citi, which is financial adviser to Gavi on Covax, echoes these sentiments, saying that “the order of magnitude and scale of this undertaking is unprecedented outside of a world war,” adding that “it is on track both in terms of fundraising and in securing the doses it needs”.

Citi has thrown its weight behind the initiative in a big way with a 29-person team, comprised of individuals with a range of skillsets including in public sector, healthcare and structured products. The team is advising on how to ensure effective and just distribution of the vaccines, and the processes in place to support that, as well as on risk mitigation, with Covax throwing up several challenging risks — contract risks, risks around purchased vaccines becoming available when needed, gaining necessary regulatory approvals, and sovereign credit risks.  

While Mr Collins acknowledges the significant complexity involved in Covax, he believes the issues can be overcome if addressed methodically. He says: “As you go into any situation as complex as this, you would expect to lay out what the initial risks are, and to size them upfront. An enormous amount of time has been spent on successful implementation of risk mitigation strategies. And as complex as they are, they can all be broken down into relevant buckets and workstreams, and talent can be put against them. Importantly, we have managed risk so as to confidently sign large contracts fast and early … so, are the challenges complex? Yes. Are we confident that they can be managed? Absolutely.”

Global supply chain pressure

Although Covax is a particularly ambitious programme, the scale and urgency of global vaccine rollouts across the board pose challenges.

HSBC has created a vaccine working group, led by its Europe, the Middle East and Africa (EMEA) head of global banking, Philippe Henry, including relevant people from across its global banking and commercial bank divisions to advise and provide financing solutions to governments, pharmaceutical companies and logistics firms.

Surath Sengupta, HSBC's global head of financial institutions group, portfolio and distribution, and guarantees, trade and receivables finance, says: “Normally, pharma companies get three, four, five years to develop vaccines and then start distribution. So, you have a significant amount of time to create the supply chains and the distribution network. Here, there is a double impact of volume and speed, which is a big challenge.

Surath_Sengupta-38 (2)

Surath Sengupta, HSBC

“What needs to happen, as we saw with personal protective equipment, is that existing supply chains need to be reconfigured to be able to meet this demand,” he continues. “And this is not just the pharmaceutical production processes of the actual vaccine — this could be things like glass vials, which are coming from Sweden, or it could be syringes from another country. Or potentially some very specific stuff, like an ingredient which comes from the Chilean soap bark tree, which is there to increase the efficacy of these vaccines for older populations. So, it’s a very complex supply chain which is having to be built at a record speed, and that will result in some pain points.”

Jon Connor, global head of transport and logistics, global banking and markets at HSBC, shares the view that the volume and speed of requirements “will put pressure on what is a finely balanced global supply chain”.

In particular, he highlights the need to expand cold-chain capabilities to enable delivery of vaccines, such as Pfizer/BioNTech’s and Moderna’s vaccines, which need to be kept at very low temperatures.

“The logistics supply chain within pharmaceuticals [did] already have cold-chain capability, roughly 20% of global pharma logistics pre-Covid was cold-chain related. Cold-chain tends to be temperature controlled, but not ultra-cold, except in a very small number of instances. So ultra-cold capability will be a small subset of that 20% that exists out there.”

He points out that there will need to be a series of ongoing changes to global supply chains, as available vaccines and global demand shifts. It won’t just be a case of adapting to immediate issues, as “further doses and vaccinations will be required for years to come on a global scale”.

As Matthew Harrison, head of biotech research at Morgan Stanley, points out, the highly novel nature of some of the vaccines means this is the first time these types of products have been produced at scale. He comments: “The raw materials continue to be an issue, especially for the mRNA vaccines. Before 2020, maybe 1000 doses of mRNA vaccines were being produced a year, globally,” compared to this year when, between Pfizer and Moderna, they are aiming to “produce close to three billion doses”. However, he believes that production is less likely to be a limiting factor than the processes around “getting the jabs in arms”.

New vaccines

According to the New York Times’s Coronavirus Vaccine Tracker, there are currently 68 vaccines undergoing human clinical trials and at least a further 90 at an earlier stage of exploration. Therefore, additional vaccine options are likely to become available in the coming months.

For instance, at time of press, clinical trial results for the Janssen (the vaccine arm of Johnson & Johnson) vaccine are eagerly awaited. Joe Cerrell, managing director for global policy and advocacy at the Bill and Melinda Gates Foundation, says: “If that vaccine is effective, it could be a real game changer. The fact that it is a one-dose vaccine can ensure protection from just one jab. It also doesn’t have the same cold-chain requirements as some of the other vaccines.”

So much is reliant on an almost perfect execution of the vaccine rollout and clearly that will be very challenging

Ludovic Subran, Allianz

Nonetheless, it is clear that very little in this global process will be straightforward. Ludovic Subran, chief economist at Allianz, which published the paper ‘2021–2022: Vaccine economics’ in December 2020, says: “This is going to be a full 2021 story, because so much is reliant on an almost perfect execution of the vaccine rollout and clearly that will be very challenging.” For instance, he believes governments may need to consider incentivising people to have vaccines if programmes begin to falter, and that a “false sense of security” may develop once virus transmission rates begin to fall but before adequate numbers of people have been vaccinated.

Overcoming mistrust

Vaccine scepticism, fanned by spurious information shared online, could also prove to be a significant issue. According to an Ipsos Mori survey in mid-December, just 62%, 60% and 40% of people in Italy, Japan and France, respectively, said they would take a vaccine.

Mr Cerrell says, “I am really concerned about vaccine scepticism. There has been a lot of money put towards vaccine R&D — notably the US’s Operation Warp Speed, which it deserves credit for — but if even a fraction of that level of spending had been invested into communication and information programmes to prepare and reassure people about the rollout, I think that could have really helped."

Yet, there remain causes for optimism. The fact that there is little alternative to vaccines as a long-term solution to the Covid crisis is clearly a strong motivator to resolve issues. The urgency of addressing the impact of Covid-19 has also produced some interesting side-benefits and innovations within the world of finance.

For instance, MUFG recently led on a notable $520m facility, raising finance from Japanese investors for Afreximbank to use as part of its pandemic trade impact mitigation facility. The transaction received coverage by the Japanese state-owned Nippon Export and Investment Insurance — the first time this has happened for a transaction not explicitly supporting Japanese exports or commercial activity in some manner.

Joe Cerrell photo

Joe Cerrell, Bill and Melinda Gates Foundation

Christopher Marks, head of emerging markets at MUFG EMEA, says: “In this season of Covid, there has been an obvious imperative and urgency to broaden out the range of tools that development partners, such as multilateral development banks (MDBs), can provide. This has created a really interesting season of innovation.” He adds that he expects to see more blended finance approaches, of the sort MUFG has been developing, “to be able to bring in liquidity from other parts of the world via these credit enhancement tools, [as] a feature of the next wave of Covid support. We hope to see MDBs being flexible and innovative in the way in which they work with partners of good intent like MUFG.”

Indeed, this has also been a period of innovation for MDBs, who in engaging in efforts to combat the impact of Covid-19 and, latterly, assist countries to meet their vaccine needs, have been broadening their focus. For instance, Tomoyuki Kimura, director general for the strategy, policy and partnerships department at the Asian Development Bank, which in December launched its $9bn Asia-Pacific Vaccine Access Facility, comments: “Traditionally, our focus has been on infrastructure. We have been engaged in the health sector, but this has been selective and certainly not in relation to vaccines.” He observed that due the urgency of responding to the pandemic, the bank also looked to streamline processes where it could, while also maintaining a strong focus on quality.

On the other side of the world, the Inter-American Development Bank (IDB), which in December announced $1bn in vaccine financing for Latin American and Caribbean countries, is also seeking to be flexible. Benigno Lopez, vice-president for sectors and knowledge at IDB, says: “Not every country is on the same page. Some countries are in need of the vaccines themselves, or need to develop the vaccine deployment capacity, or ensure their healthcare personnel are protected. Whatever a country needs to get the vaccine to their population, we are here to help them.”

Citi’s Mr Collins is also hopeful that the collaboration to solve this global issue will have a longer-term impact, “laying the groundwork for systemic collaborative mechanisms” that can be used to solve future significant international challenges. “The thought processes and collaborative tools that we are using will not just serve us through the next few years of the Covid crisis, but through future pandemics, and future macroeconomic, social and sustainability challenges,” he says.

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