Likely Winners & Losers in the Covid Vaccine Tornado
March 30, 2021
Every day since late last year the media has reported on Covid vaccine rollouts to a global audience anxious to gain protection against Covid-19. The early running indicated that the Oxford-Astra Zeneca alliance, would grab the lead, with the pure-play MRNA companies, Biontech (backed by Pfizer) and Moderna following close behind. Then there’s J&J, which employs a similar technology to that of Oxford-AZ. Which vaccine technology and which company stand to win out in the end? I know where I’m putting my money...
For the past year the world has waited anxiously for confirmation that newly developed Covid vaccines will help restore some level of normalcy to our daily lives. Clearly there’s nothing like a major existential threat to concentrate the minds of scientists, microbiologists, chemists, pharmaceutical companies, execs, healthcare systems, and governments – let alone each one of us citizens – to find a solution to a global pandemic that to date has infected 125m people and killed almost 3m.
In the past six months or so we’ve seen astounding progress in vaccine launches and initial vaccination programs in certain countries, particularly in Israel, the UAE, the UK and the U.S. Every day brings a new surprise – for example, in recent days Chile has suddenly risen up the charts in terms of percentage inoculated per 100 inhabitants. But although an impressive total of 475 million or so vaccinations have been administered, this is still only just above 6% of the global population.
Which vaccine alliance will come out on top? And what can we learn from this evolving “B2G2H2C” ecosystem – business-to-government-to-healthcare-to-consumer - to apply to help management teams in B2B tech businesses to develop their market adoption strategies?
Clearly, it’s still very early in the game but by applying technology adoption thinking to this mammoth challenge, I think it’s possible to make an initial assessment of which vaccine alliance is likely to gain the most sustained and widespread adoption as vaccinations are administered to larger percentages of the world’s population.
One note of qualification: The lens I am using in this analysis involves four key sets of questions on (1) the leading types of Covid vaccine and critical adoption dynamics, (2) the key players, (3) target markets, vaccine manufacturing and distribution, and (4) critical execution factors. This exercise should help us to gauge how each player compares with the others in terms of their intended strategy and their execution record thus far.
The Category and Current Adoption Dynamics
Question: What is the category, what technologies comprise it, and how does current adoption behavior inform the appropriate market strategy for makers to adopt?
The broad category of Covid vaccines encompasses a number of different technologies, two of which appear to be early leaders – viral vector and mRNA. Viral vector technology is less disruptive than mRNA which, although having “been around” as a technology for a decade or more, has never before been widely deployed in a critical vaccine.
The process for launching anti-Covid vaccines has broken all prior norms related to the speed of vaccine development, clinical trials, manufacturing schedules and distribution logistics, effectively compressing the normal stages of Early Market to mainstream adoption. In some countries Covid vaccine programs have raced across the chasm, cruising through certain niche markets in just weeks rather than months or years. A full mass-market tornado, where the essence is speed of application into as many arms as possible, seems inevitable and imminent.
After a year of exponentially increasing cases and deaths from Covid, successive lockdowns and severe economic shocks around the globe, many if not most people of all ages and health states are anxious to get inoculated, provided that they can believe in the safety and efficacy of the vaccine, and governments are desperate to recover their economies.
If you think about it, despite the understandable rush to vaccinate, it’s not such a bad thing that we aren’t yet in full tornado mode because neither governments, nor health systems, nor individuals are yet quite ready for the prime-time pressure of distributing and vaccinating everywhere at once. There will inevitably be hiccups with manufacturing, distribution, application, post-vaccination effects, and so on. So the best approach is to deploy the Covid vaccine in niche segments – exactly as many governments and health systems are doing.
It’s important to remember that the phenomenon of a mass-market tornado as defined by Geoffrey Moore in his 1995 book, Inside the Tornado, is really framed around technology adoption in competitive business markets. The budding Covid vaccine tornado differs markedly in that as Moore says it is a tornado by allocation regulated by government and healthcare policies - as opposed to a tornado in a free marketplace in response to unconstrained consumer demand. Nonetheless, many of the dynamics and rules are similar.
For example, one critical consideration for success in the tornado is embodied in the mantra “just ship, no returns”. In other words, the cardinal sin for a vaccine maker is to suffer recalls or government vetoes because of issues with efficacy or side-effects – as has happened recently with the AZ vaccine in a number of countries. More on this issue below.
Key Players and their Strategies
Question: Who are the key players today, and what are their respective differentiation strategies?
Early thoughts based on indications thus far include these:
The AZ-Oxford vaccine pursued an aggressive first-to-market strategy based on operational excellence – get the vaccine out fast, make it cheap (even sacrificing profits for a time), and spread it out to as many countries as possible.
Pfizer-Biontech and Moderna have been pursuing a product leadership strategy based on a disruptive innovation – claiming an astounding 90%-95% efficacy. The mRNA technology has massive beneficial implications in treatments beyond its use in a Covid vaccine. However, it remains to be seen whether their operational characteristics to prevent against Covid will enable them to establish overall leadership positions or condemn them to “chimp” status – i.e. number 2, 3 or 4 in any market, but not number 1.
J&J has pursued a fast-follower strategy which looks like combining product leadership in viral vector with operational excellence. In contrast with the Oxford-AZ alliance which has consistently sought and garnered media attention, J&J has been relatively discreet while readying its vaccine for rollout. Due to this “Steady Eddie” approach, its simpler operational characteristics and relative affordability, J&J looks to be positioning itself to become the gorilla, especially in the U.S. and other western countries. This possibility looks even more likely in view of the recent announcement of the alliance with Merck to accelerate its production ramp-up.
Among the other major pharmaceutical corporations, Glaxo-SmithKline, Merck, and Sanofi have apparently remained largely on the sidelines largely because their Covid vaccine projects didn’t pan out. Recently, however, Merck has announced an alliance with J&J to partner on manufacturing greater volumes of their new vaccine in order to satisfy exploding demand.
Other significant vaccine makers include the Russian Sputnik, and Chinese-made Sinopharm and Sinovac vaccines. Although I’m not paying much attention to them in this article, they should definitely be included in future worldwide surveys.
Key Target Markets, Vaccine Manufacturing and Distribution
Question: What are each player’s key target market strategies today, to accelerate adoption of their vaccines? What different requirements do each vaccine have?
Although there appear to be no constraints on demand for credible Covid vaccines, whether viral vector or mRNA, there are real supply constraints to resolve in order to further refine the complex lab-to-trial-to-factory-to-distribution supply chain for each vaccine. Consequently, health systems everywhere are breaking their populations into niche markets by factors such as age, race (where this is relevant to vulnerability to Covid), occupation, co-morbidities, and other demographic considerations. Among other benefits these delays should provide time to iron out critical kinks and glitches – more on these below.
According to a recent New York Times article citing information from the Our World in Data website, the AZ (Astra Zeneca) vaccine has been administered in 89 countries thus far, Biontech in 79, Moderna in 34, J&J in just 2 (the U.S. and South Africa). Sputnik is prevalent in Russia and present in 20 countries altogether, while Sinofarm, and Sinovac dominate in China and in another 13 countries in Asia and Latin America. However, the number of countries is of less relevance at this stage than how each alliance is faring in the larger theatres such as the U.S., China, and India.
The AZ and J&J vaccines, along with Chinese made vaccines are expected to gain massive adoption across the board in their areas of influence, with the AZ vaccine favored globally due to its low price per dose. However, J&J’s single-shot vaccine is a more attractive proposition logistically than any of its main competitors, which required two jabs several weeks apart, in order to achieve their stated efficacy.
Due to their more complex storage and transport requirements, and their (much) higher cost per dose, I would expect the Biontech and Moderna vaccines to be highly successful in richer countries as well as with wealthier segments of developing countries, but less widely adopted in countries with weaker infrastructure for storage and rapid application.
Question: How are each of the main players faring in terms of their ability to execute – the speed, scale, and focus of their decisions and actions?
The main execution factor that has attracted my attention is the repeated unforced errors committed by AZ, with confusing clinical trial results, conflicting information on efficacy, and production glitches, resulting in resistance among certain countries to adopt it, and a nerve-wracking stop-start process of approvals, delivery, and application.
Otherwise, most of the makers and alliances seem to be executing to a level of proficiency that is hard to believe, considering how novel the Covid vaccine is as a general offering and how complex the manufacturing, distribution, and storage of the mRNA vaccines especially.
As vaccines become more widely available and the tornado winds start blowing with full force, every one of the alliances, their distribution partners like Fedex and major airlines, and the health systems themselves, will be tested to the fullest extent. As most of us know by now there has never been a global vaccine campaign of this magnitude, with every single government straining to inoculate its entire population and rescue their economies.
Clearly this Covid vaccine phenomenon is not your typical business competition even though we’re already seeing nation-to-nation squabbling – tagged in the media as “vaccine nationalism” - as countries in Europe and elsewhere vie for their contracted and purchased allocations from AZ and other makers.
But elements of this budding public health tornado are indeed relevant to the business world. The fact is that the very complexity of this new Covid vaccination ecosystem makes it imperative to gain adoption in “bowling alley” segments – i.e., niche markets.
The half-dozen or so vaccines approved to date progressed rapidly through clinical trials (one part of early market adoption) added to a short phase of early adoption by more aggressive countries – Israel comes to mind, as do the Seychelles and other smaller-population countries – and, due to their much-touted efficacy and safety as a category, have raced across the chasm.
Make no mistake, it’s actually a positive that, with very few exceptions such as Israel where 80%+ of the population has been vaccinated, health systems have had to prioritize initial programs for older and more vulnerable people as well as frontline health workers. Despite the massive, repressed demand among most of the 7.7bn people in the world, vaccinations are still in relative scarcity and the kinks in the supply chain need to be ironed out before we can see the percentage of vaccinated people rising from 6% to 30% and higher – at which point the global “mass-market” tornado will get into gear.
And the demands of the tornado – “Just ship, no returns!” – means that every company will need to be on its best operational behavior if they want to play an important role in ridding the world of this disease.
On this note, AZ’s repeated missteps in how they’ve handled and reported on their clinical trials, and recent disruptions in fulfilling their supply contracts are a worrying sign of a company that might just not be able to withstand the extreme rigors of such a demanding all-out rush of demand as occurs when tornado winds blow. To my mind these are failures of management, not of science or any other discipline, and hopefully the can be avoided in future.
Which is why on current performance I favor J&J to become the most widely used vaccine – unless for whatever reason the Chinese and Russian vaccines win in the developing countries of Asia, Latin America, and Africa. As for the highly promising and extremely exciting mRNA breakthroughs, Biontech and Moderna, I expect them to be hugely successful in their niche markets, richer countries and wealthier segments in developing countries.
That’s my story and I’m sticking to it. Comments welcome.
NOTE: For the purposes of this article, I’ve limited my survey to the principal known players from western countries, but over the long haul we need to consider the role of Chinese-made, Russian-made, and Other-made vaccines that will inevitably play an important part in the complete picture and may even come to dominate in terms of volume produced and distributed around the globe.