Investment accounts

Authorised and regulated by the UK’s FCA to provide investment accounts, we are bound by CASS rules to segregate and protect client assets.

March 2021 investment update

Our March investment update is now available to download.

The cyber security skills gap

The cyber security skills shortage has been making headlines for years, but the Covid-19 pandemic has made it more critical than ever.

Thematic ideas | The vaccine race

Investment outlooks / Q4 2020

Vaccinating the economy

As economies emerge from their lockdown at the onset of the Covid-19 pandemic, the emergence of a second wave in Europe has stressed the importance for a form of “herd immunity” to be developed – with many countries desperately crying out for a vaccine. The race for a Covid-19 vaccine appears to be entering the final stretch, with research accelerated by just under USD 10bn worth of funding from mainly governments and supranational organisations. Already, the Russian health ministry has registered the first vaccine against Covid-19, named Sputnik V, on August 11 with deliveries to the public planned shortly.  However, whilst a vaccine is on the horizon, there are concerns that the vaccine is being rushed without appropriate safeguards (leading to potential take up issues) and production of any vaccine may be limited due to facilities not being ready to mass produce in quantities needed. Unless production can be ramped up and people can be encouraged to take the vaccine, then it is likely that economies will continue to struggle.

With 170 potential vaccine candidates, it is likely a vaccine will be developed

In total, more than 170 vaccine candidates were in research development in August, and these efforts are being tracked by the World Health Organization. There are currently seven in phase-three trials (excluding the Russian vaccine). Typically, 85% of phase three vaccines are approved,  which implies that there could be six viable vaccines by year end.

There are typically four phases to develop a vaccine: Pre-clinical, Phase 1, Phase 2, and Phase 3. Under normal circumstances, these phases take around three years to go through. But given the global pandemic impose both direct death and economic tolls the great effort from researchers and government regulatory bodies applied to fasten the process as such there are reasonable hopes and commentaries that the process can be shortened and an effective Covid-19 vaccine can be done within 12-18 months. However, this speedy development does come with potential pitfalls; the long term health effects of any approved vaccine are unclear, the efficacy of a vaccine remains uncertain, and many people may refuse to take any such vaccine.

To cut the typical vaccine development timeline requires significant government intervention. As an example, in the US the Trump administration introduced Operation Warp Speed (OWS) which is a public-private partnership to assist more timely development, manufacturing, and distribution of Covid-19 vaccines. It will promote mass production of multiple vaccines based on preliminary evidence allowing for faster distribution if clinical trials confirm one of the vaccines is safe and effective. The United States Food and Drug Administration (FDA), for example, has released specific safety and effectiveness standards, works directly with developers, analyzes interim results, and can issue Emergency Use Authorization as soon as studies have demonstrated safety and effectiveness.

Click table to expand. Source: : Dolfin, WHO, Milken Institute School of Public Health, US CDC, US FDA, UKRI Medical Research Council.

Who is the closest to developing a fully approved vaccine?

Most vaccines plan to be available for limited and/or emergency use by this fall so we will likely hear feedback on effectiveness and side effects by November. We have summarised in the table below the description of each, their current clinical phase, the estimated primary completion date of phase 3 (when available), and what the organisations have communicated.

According to Citi research, based on public statements made by companies engaged in vaccine development the global Covid-19 vaccine supply targets 0.4-0.5 million doses by end of 2020 and 10.1-10.7 billion doses by end of 2021. There are risks to achieving these ambitious targets.

The 7 vaccine candidates in Phase 3:

Click table to expand. Source: WHO, Bloomberg, company press releases.

Production will need to be ramped up to meet global demand

Demand is likely to far outweigh potential production capacity in the early stages and thus the mass distribution of a vaccine will raise significant challenges. First, any rapid scale-up of global production will need to balance the protection of intellectual property rights with the global interest in having a vaccine available. Second, manufacturing and delivery of vaccines can be complex, particularly given the need for vaccines to be kept within a certain temperature so they don’t lose their potency or efficacy .

To assess the potential total addressable market (TAM), we need to identify such inputs as population, vaccination rate, number of doses per person per year, and a price per dose. For the US, the typical flu vaccination rate is equal to 40 percent and we can reasonably expect a higher percentage (50-60 percent) for Covid-19 as it is more contagious. It remains unknown whether there is a need for a lifetime or annual vaccination. For example, a study from King’s College London showed recovered patients’ antibodies declined significantly within months of infection. We are assuming for the purpose of this analysis that there is a need for vaccination once per year. As to price per dose, most likely there will be different pricing for developed and emerging markets. According to Goldman Sachs research, the price per vaccine is assessed in a range of USD10-40 per dose depending on the market. We are not including China as we expect that its market will be closed for companies from abroad. Overall, we are assessing a TAM for a Covid-19 vaccine for at least USD 24 billion. This is a rough approximation, but it helps to give a sense of the potential size of the market.

Click table to expand.

Although no vaccines have been approved yet, there has already been significant investment by countries and organizations to assist the pharmaceutical companies with vaccine manufacturing. The Bill and Melinda Gates Foundation has started building factories for seven of the most promising vaccine candidates.  The US government has disbursed funds to manufacture potential vaccines from AstraZeneca, Moderna, Emergent BioSolutions, and Johnson & Johnson. China’s CanSino and Sinovac are building manufacturing plants to produce 100 to 200 million doses. Meanwhile, Serum Institute of India is under agreement with AstraZeneca to produce one billion vaccine doses if phase 3 trials are a success, with 400 million of those doses due by the end of 2020.

It is likely that the distribution could be unequal across countries, possibly contributing to a new divergence between developed and developing economies. The bulk of vaccine pre-orders is coming from Developed markets: US – 800 million doses, EU – 800 million doses, Japan – 490 million doses, and UK – 340 million doses.

Potential issues with any new vaccine

As a word of caution, it should be noted that no one has ever tested or used a coronavirus vaccine at scale. In addition, no vaccine is 100 per cent effective. According to the World Health Organisation (WHO), most routine childhood vaccines are effective to 85-95 per cent of recipients, and the US Centre for Disease Control says the ‘flu vaccine is regularly under 50 per cent effective. There are also unanswered questions about the ability of the Covid-19 virus to mutate and reinfect.   The seasonal flu is a good example of this, as a new strain every year requires a new vaccine, so whilst we may be developing a vaccine for the current strain, Covid-19 mutation may render the current proposed vaccine less effective. In addition, the risks to developing any vaccine on a short timescale have been highlighted by the adverse reaction encountered by one participant on the AstaZeneca trial. This has prompted the trial to be put on hold, leading to a potential one month delay in vaccine development and roll out at best.

Another big unknown is how many people will be willing to take a successful vaccine.  In order to achieve herd immunity, depending how contagious an infection is, usually 70% to 90% of a population needs immunity (through a vaccine or having been infected previously). Many people are reluctant to use vaccines under normal circumstances, and given the speed with which the Covid-19 vaccines are being developed these concerns will likely be even more widespread (with long term side effects the big unknown). If too many people wait for others to try it first in order to see what side-effects the virus might have, it may take several years (unless vaccination is made mandatory) for herd immunity to be developed. Governments may be forced to make vaccinations mandatory for all – a move that could prove to be unpopular.

A vaccine will be developed, but social distancing will have to be maintained

Various scientists believe resurgences in Covid-19 could persist until 2025, with different strains emerging and requiring different vaccines.  As such, there may be a possible trade-off between allowing a certain level of Covid-19 to spread and being able to maintain a certain level of economic activity.

Since any useful vaccine will inevitably be in short supply, national governments have been signing bilateral supply agreements with manufacturers, providing financing for clinical trials and pre-manufacturing in return for locking in pre-orders. In the scramble, however, they have ended up with fairly diverse ‘vaccine portfolios’, placing their eggs in different baskets. Some economies could thus enjoy a significant head start depending on which candidate makes it first.

Even within G10, there are significant differences across the large vaccine portfolios built by the US, the EU, the UK, Japan, and Canada. The UK may have the largest and best diversified portfolio, but it has no deal with Moderna. Broadly, a Moderna vaccine would give North America a head start.

It is also significant that developed countries have also gained over developing nations in securing access to the major vaccine candidates. A successful Sinovac or other Chinese vaccine may be better news for emerging markets than for advanced economies. A number of governments—Brazil and Indonesia–have signed substantial supply agreements with the Chinese manufacturer.

As it stands, G10 economies have a head start compared to Emerging Market (EM) economies for vaccinating their economies. It may be that going forwards, EM will have to accept a combination of immunity conferred by infection and higher mortality rates. Sweden has shown a way forward without a vaccine and it may also prompt EM and some developed countries to adopt this approach in future. In any case, going forwards, we may see a divergence of economic performance between vaccinated economies and those unable to obtain supply.


Even under the most optimistic scenario, the global threat of new pandemic waves will persist. The mass production of vaccines should start at the end of 2020 and ramp-up in H1 2021. Target addressable market for Covid-19 vaccines is equal to around USD 25 billion per year and this represents a meaningful business opportunity. Among the most advanced players, AstraZenica, Sinovac, Sinopharm, Moderna, BioNTech, Pfizer are six public companies that should be watched to capitalize on the Covid-19 vaccine business opportunity.

Beyond the development and production hurdles outlined above, even the winners in this race may fail to reap large rewards for shareholders. As development was supported by governments, at least in the beginning, we can expect that the vaccine market will be heavily regulated to secure enough vaccine supply to most vulnerable groups of the society. That may take form of price and export controls. And, of course, uncertainty will persist as to which of those companies will ultimately be the winners. Overall, as vaccine development will help spur recoveries in sectors hit hardest by the global pandemic, having such sectors in a portfolio might prove to be a less risky way to profit from a successful vaccine.


Past performance is not a reliable indicator of future returns. Forecasts are not a reliable indicator of future returns. If the information is not listed in your base currency, then the result may increase or decrease due to currency fluctuations.

If not otherwise indicated, all graphs are sourced from Dolfin research, October 2020.

For more information please read our disclaimer.

Up next:
Thematic ideas | Healthcare and ESG
Read more
To continue reading please enter your email address

    Subscribe me to your updates; I want to be the first to know about your news, investment research, diary articles and events
    I agree with the terms and conditions