Under the global vaccine "arms race", how far is it from the vaccine surplus?

The global epidemic is still raging, and the vaccine giants are frantically expanding production. Moderna Inc, a vaccine giant with a market capitalization of more than $88.9 billion (576.2 billion yuan), plans to add two new vaccine production lines, tripling COVID-19 's annual production by 2022, from 1 billion doses this year to 3 billion next year. Stimulated by the news, Moderna Inc's share price soared more than 11% for the second day in a row.

In addition to Moderna Inc, other vaccine manufacturers are also very enthusiastic about expanding production. Up to now, the total number of COVID-19 vaccines approved for market or emergency use has reached 16, with a maximum production capacity of more than 15 billion doses.

The current market concern is that once the global vaccination program enters the middle and later stage, the demand for COVID-19 vaccine slows down, and there may be a surplus of vaccines.

However, judging from the current global epidemic situation, the novel coronavirus Delta variant may once again trigger a global infection tide, and COVID-19 's enhanced vaccination has entered the vaccination programs of some countries. It has been reported that Britons will receive a full third dose of the vaccine by the winter of 2021.

Therefore, the vaccine strengthening needle may become a new competitive point for vaccine companies and a new catalyst for vaccine stocks. This time, one of the main purposes of Moderna Inc's production expansion is to produce enhanced needles for COVID-19 vaccine.

570 billion Vaccine Bureau giant's big move: production capacity will be increased by two times

At present, the global vaccination tide is still continuing, the demand for COVID-19 vaccine is still very strong, various vaccine companies have increased their horsepower to expand production crazily.

Moderna Inc, a vaccine giant with a market capitalization of more than $88.9 billion (576.2 billion yuan), plans to add two new production lines at its main plant in Norwood, a suburb of Boston, according to the Wall Street Journal. Production is expected to start in the autumn of 2021 and early 2022, respectively, the overall vaccine capacity of the plant will increase by 50%. In addition, Moderna Inc plans to expand factory capacity outside the United States, with the goal of tripling the annual production of COVID-19 vaccine by 2022, from about 1 billion doses this year to about 3 billion doses next year.

The main purpose of Moderna Inc's production expansion is to strengthen the production of COVID-19 vaccine and enhance its ability to supply to more countries. Currently, Moderna Inc produces 40 million to 50 million doses of vaccine a month in the United States, most of which is at the Norwood plant.

Earlier, Moderna Inc announced that the US government would buy an additional 200m doses of COVID-19 vaccine and possibly other candidate vaccines being tested, including enhanced needles. Of these, 110 million doses will be delivered in the fourth quarter of this year, and another 90 million doses of COVID-19 vaccine will be delivered in the first quarter of next year. With the current production capacity, it is obviously difficult to meet a large number of vaccine orders, so it seems that Moderna Inc is likely to expand production in order to strengthen the vaccine to be put on the market.

It is reported that Moderna Inc is currently conducting human trials on several potential booster needles, one of which uses a lower dose of the existing vaccine, while the other combines the existing vaccine and the mRNA vaccine specifically targeted at the first beta strain in South Africa.

When vaccine sales burst, market expectations for Moderna Inc's performance are very high, but as the global vaccination process progresses, it may gradually decline in the future. Wall Street analysts predict that sales will exceed $17.1 billion this year, fall back to about $16.8 billion next year and to $7.4 billion by 2023.

The performance is also directly reflected in the stock price. Moderna Inc's share price has risen more than 111% so far this year, and Moderna Inc's increase has been even more exaggerated since March 2020, when the epidemic first broke out, with a cumulative increase of more than 1000%.

Spurred by the news of the expansion of the vaccine factory, Moderna Inc's share price rose more than 11% from June 21 to 22, about to challenge the previous all-time high.

If the global annual production capacity of vaccines exceeds 15 billion doses, will there be a surplus?

At present, the expansion of vaccine production is almost a rush, as countries around the world are pushing ahead with vaccination programs, and as the proportion of vaccination population reaches the expected target, the demand for vaccine will decline rapidly, while vaccine production capacity is expanding.

Stephane Bancel, chief executive of Moderna Inc, has said manufacturers should focus on producing as many vaccines as possible this year, as the world faces a potential risk of vaccine overcapacity in 2022.

In fact, in addition to Moderna Inc's crazy expansion of production, the enthusiasm of other vaccine manufacturers is also very high. Up to now, the total number of COVID-19 vaccines approved for market or emergency use has reached 16, with a maximum production capacity of more than 15 billion doses. Among them, the number and production capacity of domestic vaccines are in the first echelon in the world, and the production capacity of COVID-19 vaccine is very huge:

• Beijing Kexing Zhongwei Co., Ltd. disclosed that on April 1, the Ke Laifu original liquid workshop (phase III) of Kexing Xinguan disease vaccine was completed and put into production, with an annual production capacity of more than 2 billion doses of COVID-19 vaccine.

• Yang Xiaoming, chairman of Sinopharm China Biology, said that by the end of June, the two research institutes and five production enterprises of Sinopharm will achieve an annual production capacity of 3 billion doses.

• In addition, Zhifei will produce 500 million doses of vaccine this year, CANSINOBIO's national production capacity is expected to reach 700 million doses, and Kangtai's annual production capacity of inactivated vaccine will be 200 million doses, up to 600 million doses. The annual output of inactivated vaccine of the Institute of Biology of the Academy of Medical Sciences will reach 5 to 1 billion doses.

Looking at the production capacity of foreign vaccine giants, according to public data, Pfizer Inc's mRNA vaccine may reach 3 billion doses by 2022, with 1.3 billion doses ordered in 2021; Johnson & Johnson has a production capacity of more than 1 billion doses in 2021; AstraZeneca PLC expects a production capacity of 3 billion doses in 2021; and Novavax vaccine production capacity is expected to expand to 2 billion in 2021.

As a result, it is estimated that in 2021, the total production capacity of COVID-19 vaccine in Europe and the United States is expected to exceed 8 billion doses, while India's total production capacity is 2 billion, while Russia's annual production capacity is up to 500 million doses, with a total of more than 10 billion doses, which will be even higher by 2022.

In the face of such rapid capacity expansion, some analysts pointed out that the market originally expected that COVID-19 vaccine would not be in surplus until next year or even the year after next, but now it seems that it may face surplus in the fourth quarter of this year or the first quarter of next year.

In addition to the capacity factor, the timing of COVID-19 's vaccine surplus also depends on the global vaccination process. As of June 22, the cumulative dose of COVID-19 vaccine in the world was 2.13 billion doses, with an increase of about 3000 million to 4000 million doses per day. China ranked first in the cumulative vaccination volume, with 1.05 billion doses and about 20 million doses added daily.

China may restart the second round of vaccination at the beginning of the third quarter. Zhong Nanshan, academician of the Chinese Academy of Engineering, predicts that novel coronavirus vaccine coverage in China will reach 80 per cent by the end of this year. The vaccination process in Europe and the United States has also gradually entered the middle and later stage, therefore, the follow-up demand for COVID-19 vaccine will probably slow down.

Capital markets also showed some concern. Zhifei, a domestic vaccine giant with a market capitalization of more than 270 billion, fell nearly 9 per cent at one point and was still down nearly 6 per cent by the close of the day. In addition, most COVID-19 vaccine stocks have been relatively weak recently, with Kangtai Biology, Watson Biology and Shanghai Fosun Pharmaceutical falling 36%, 21% and 17% respectively since their highs.

Two expected differences in the vaccine sector

Judging from the current global epidemic situation, the Delta variant of novel coronavirus may once again trigger a wave of global infection. The latest data disclosed by World Health Organization (WHO) show that the Delta variant has spread to 92 countries around the world, and is still spreading rapidly around the world.

Even in the UK, where the vaccination rate is close to 80 per cent (adults), the number of new confirmed cases has exceeded 10,000 for three consecutive days, and the third wave of outbreaks in the UK may have begun.

In addition, the US Centers for Disease Control and Prevention warned that the Delta strain currently accounts for about 10% of the new confirmed cases of COVID-19 in the United States. The Delta strain may soon become a major strain of transmission in the United States.

More worryingly, the "Delta +" mutant has emerged. According to the overseas Network on June 22nd, Indian media said that at present, India has found cases of infection with novel coronavirus mutant "Delta +" in three states, including Maharashtra, Kerala and Madhya Pradesh. The first case is a 65-year-old woman from Madhya Pradesh. It is considered to be the most dangerous variety.

It was also reported that the first case of the Delta + variant was a 65-year-old woman from Bambopal, Central, who had previously recovered from COVID-19 and had received two doses of vaccine. Her samples were collected on May 23, and the National Centers for Disease Control and Prevention (NCDC) of India reported on June 16 that her "Delta +" test was positive.

In the face of novel coronavirus's continuous variation, COVID-19 's enhanced injection of vaccine may have entered the vaccination programs of various countries. It has been reported that Britons will receive a full third dose of the vaccine by the winter of 2021.

Zhang Yuntao, vice president of China Biology of the National Pharmaceutical Group, said that judging from the preliminary results, strengthening needles can effectively improve the titer of neutralizing antibodies, effectively improve the persistence of antibodies and improve the anti-mutation ability of vaccines.

Therefore, the vaccine strengthening needle may become a new competitive point for vaccine companies and a new catalyst for vaccine stocks. This time, one of the main purposes of Moderna Inc's production expansion is to produce enhanced needles for COVID-19 vaccine.

Another expected difference in the vaccine plate is that COVID-19 vaccine is an one-time vaccination? Or will there be continuous and regular vaccination in the next few years?

Wu Shaxin, founder and CEO of BioNTech in Germany, said that the effectiveness of the vaccine may decrease over time, so vaccinators had better receive the third dose 9 to 12 months later. He also predicts that people may need to learn to coexist with novel coronavirus for a long time and get a dose of vaccine every other year to a year and a half.

Considering that less than a year and a half since the outbreak of COVID-19 's epidemic, the phase III clinical trials of most approved COVID-19 vaccines have lasted only more than half a year, so it is impossible to clearly judge the duration of COVID-19 's vaccine effectiveness.

However, if COVID-19 vaccination is needed every other year or a year and a half in the future, the investment logic of the current vaccine sector will change greatly, and the problem of overcapacity will be greatly delayed. The sustainability of the performance of vaccine companies may be re-evaluated by the market.