Image Credit: Norbert Nagel, Mörfelden-Walldorf, Germany
During the last week, Pfizer and Moderna have both announced vaccines that have been developed with 95% effectiveness in preventing coronavirus. With this information, it seems we have finally found the turning point of Covid-19 and the world is firmly treading the path back to normality. But, will Pfizer and Moderna become the saviours they appear to be and revive our economy and, in particular the stock market, in the short term?
Are there enough doses of the vaccine to satisfy the worldwide population?
Although Pfizer and Moderna have made the vaccines that could cure Covid, it wouldn’t have much effect if the vaccines are not applied to most people. Pfizer stated that they expect to produce up to 50 million vaccine doses in 2020 and up to 1.3 billion doses by the end of 2021, while Moderna expects to have 1billion doses to be manufactured by the end of 2021. Since the total potential amounts of vaccines to be produced by the end of 2021 are about 2.3 billion doses, with 2 doses for each person, there are only about 1.5 billion people that would be able to be injected with the vaccine before 2022. Given the world’s current population stands at 7.8 billion people, that’s only slightly over 19% of the total population that can be protected against coronavirus by the end of the next year. We are still a long way off the endgame, Covid-19 will not be fully controlled in the next year. Therefore, we cannot expect that our lives will return to normal so soon, social distance and quarantine may still linger in the background. Firms would not be able to operate at full capacity, people would remain unemployed and consumers are likely to prefer to save their money. It is unlikely that there will be a significant recovery in the business cycle as well as the stock market in the short term.
How efficiently can we deliver the vaccine to people?
Besides the number of doses of the vaccine, the second major concern is the cost at which to deliver the vaccine to the whole world. Since the vaccine from Moderna is expected to remain stable at standard refrigerator temperatures of 2° to 8°C for 30 days and at standard freezer temperatures of –20°C for 6 months for shipping and long-term storage purposes, it is not difficult to ship the vaccine around the world. However, the vaccine from Pfizer has a much higher standard for shipping and storage. It requires the vaccine to be stored at about –70° C to get 6 months expiry, only hospitals and pharmacies have storage with such low temperatures. To operate this kind of freezers would cost over $10,000 and require high energy usage, not many hospitals and pharmacies can afford this cost. Thus, the vaccine can only be stored at normal refrigeration temperatures for 5 days, this drastically increases the difficulty in delivery. With such high costs in storage and delivery for Pfizer’s vaccine, we cannot expect it would be delivered to people around the world immediately after production.
Firms financial status has already decreased
We know that the vaccine gives us the opportunity to return to normality in the long run, but will firms be able to recover in that period? Based on data found by Janus Henderson in June 2020, total global corporate debt is expected to increase by 12% to about $9.3 trillion. There has been an 8% increase in the last year, but this was mostly driven by investment purposes, such as mergers and acquisitions, which can generate a higher profit in the long term. While the increase in debt for this year is mostly derived from Covid-19, it has also dealt a severe blow to companies’ operating performance, making them unable to gain enough profit to repay their liabilities. It will be a long journey before companies can kick their balance sheet back into shape.
Pfizer and Moderna’s success in developing an effective vaccine must not be understated, but it is unlikely to have a significantly positive impact on the economy in the next year. There are still some uncertainties with the vaccines themselves, given the danger of side effects in the long term. Add to this the fact, Pfizer CEO Albert Bourla sold $5.6 million of his stock in the US pharmaceutical company just right after the announcement of the fabulous result of the vaccine. Does it mean he has a better investment plan? Does he know something worse is under the table, or maybe he is just behaving irrationally, we will never know. Therefore, given the current information, it’s not enough to make investors truly confident in the stock market at this moment.