2021 is all about vaccine transportation. Piramal, SCHOTT KAISHA are ready with sturdy vials
Synopsis
Unlike the polio-immunisation programme where less than 1% of India’s population gets vaccinated annually, Covid-19 vaccination drive will be truly universal. With the vaccine race intensifying, glass makers in India need to be on their toes to meet a likely demand spike. Are they up to the challenge?
More than 1.5 million people have died and over 65 million have been infected with the novel coronavirus so far. With exception of some 10 tiny island nations in the Pacific Ocean, all other countries, big and small, across the globe are under the shadow of the pandemic. A tight race is on to develop the most effective vaccine to rein in the virus. Four candidates are closest to commercialisation by the year-end, with three already getting
More than 1.5 million people have died and over 65 million have been infected with the novel coronavirus so far. With exception of some 10 tiny island nations in the Pacific Ocean, all other countries, big and small, across the globe are under the shadow of the pandemic. A tight race is on to develop the most effective vaccine to rein in the virus. Four candidates are closest to commercialisation by the year-end, with three already getting orders from countries affected by the pandemic.If 2020 was about the race to discover the vaccine, 2021 will be about transporting it at a never-seen-before scale. The adversity has also opened up an opportunity for glass companies that manufacture vaccine vials.The pre-pandemic era In the last six years, the Indian government, under its various vaccination initiatives, has vaccinated 36 million children and 9.1 million pregnant women across 690 districts of the total 718. The state-sponsored vaccination drive provides vaccines against 17 diseases, with BCG and polio vaccines being the largest initiatives. The entire supply for polio and BCG vaccine vials in India comes from a plant owned by Piramal Glass in the small city of Kosamba in Gujarat. But Piramal isn’t the lone glass maker in the city. Its neighbours include Gerresheimer of Germany and Haldyn-Heinz Fine Glass, a joint-venture company between Germany’s Heinz Glas and its Indian partner Haldyn Glass. 79592498As one zooms out of the small city, which is just 50 km away from Surat, the number of glass factories increases. The boards read global names across the western coast of Gujarat—from Asahi to Schott AG’s and its Indian JV, SCHOTT KAISHA. So, what’s making the coastal belt of Gujarat a favourite among the global glass industry? Large pharmaceutical client base, proximity to the port and raw material providers like GHCL, India’s second-largest soda ash producer, and availability of sand silica through companies like Gujarat Mineral Development Corp.However, pharmaceutical packaging is more of a bulk product when compared to glass used for the packaging of cosmetics and spirits. Pharmaceutical glass of the type-1 kind used for vials and ampoules gets less than 10% margin as compared to glass used in high-end or luxury product packaging, with 20%-plus margin, according to industry sources.“Anything in the luxury segment will always command a better price. In pharma, it is very important to make the set-up cost effective without compromising on quality. The pharma industry also has drug-price control and regulations, so the packaging has to be made feasible for the product,” says Rishad Dadachanji, director at SCHOTT KAISHA.While SCHOTT KAISHA makes products only for the pharma industry, many other glass companies including Piramal Glass have been focusing on catering to the more margin-accretive high-end or luxury glass market comprising cosmetics, spirit bottles, among others.As of FY20, Piramal Glass earned 40% of its revenue from cosmetics and perfumery segment, 37% from specialty spirits market and 23% from pharmaceutical packaging sales as against 30% in the previous financial year. But then the real 2020 happened!Opportunity in adversity First came the pandemic, followed by subsequent lockdowns, leading to a global economic recession. It was only by November that the world finally heard some good news — two vaccine candidates, one from Pfizer-BioNTech and another from Moderna, reported efficacy of over 90% and suddenly the coronavirus turned assailable. With two vaccine candidates ready and around four more in final testing phases, the borosilicate glass single-dose and multi-dose vials were back in demand.Piramal Glass saw a 30% rise in sales of specialty vials used to bottle medicines in the June quarter, due to the surge in demand as more and more drugs were being made to combat the pandemic. The company is one of the major global suppliers of type-1 borosilicate glass, which is primarily used by the pharmaceutical industry due to the product’s low-chemical reactivity.“The demand for high-quality perfume flacons was down in the last few quarters relative to the prior year due to Covid-19. In the latest quarter, Gerresheimer has been able to offset the lower revenues from cosmetics packaging with higher revenues from drug packaging and drug-delivery devices,” said the German glass vial maker in October. Other companies like Japan’s Nipro also reported a substantial increase in glass tubing, vials, and sterilised syringes, mainly to Europe and the US.Big relief in a small package Unlike the polio-immunisation programme where less than 1% of India’s population gets vaccinated annually, Covid-19 vaccination drive will be truly universal as the goal would be to get everyone vaccinated. The world population is estimated to be around 7.704 billion people. Factoring in two doses per person and a 30% wastage rate, observed during earlier vaccination drives, the world will need over 20 billion doses. These doses will be delivered to end-users either via single-dose vials or multi-dose vials. Apart from the scale of operations, another level of complication is added due to the cold-chain factor, especially when it comes to the Pfizer-BioNTech vaccine BNT162b2. This vaccine requires ultra-cold storage requirements of over minus 70 degree Celsius. According to reports, BNT162b2 will be transported in special boxes comprising five trays that will hold up to 195 vials per tray. Further, the frozen vaccine will be packaged in 2 ml glass vials, each of which will hold five doses that will have to be diluted while administering the vaccine. Every shipment will be surrounded by 50 pounds of dry-ice pellets and GPS temperature monitors. The company is aiming to produce 50 million vaccine doses in 2020.Transporting Moderna’s mRNA-1273 is slightly less complicated as the vaccine will use standard vaccination infrastructure and can be stored for six months at temperatures between minus 20 degree Celsius and minus 4 degree Celsius. It can also be stored in a refrigerator at temperatures of 2-8 degree Celsius for up to a month. According to Moderna, there will be no need to dilute the vaccine while administering it. By the end of 2020, the company will produce around 20 million doses. “All products are not the same, hence demand is not the same. In addition to the cold temperature, there's a certain amount of handling involved -- moving the product from factories, loading it onto the plane, and transporting it all the way to vaccination centres. So, the vial has to be able to withstand it and not every material of the glass vials can (be used)… So, an allocation needs to be made of the appropriate glass vials for the appropriate vaccine,” says Nada Sanders, distinguished professor of supply-chain management at Northeastern University in the US.In 2021, the scale of vaccine production and supply is expected to ramp up significantly with just these two vaccine makers expected to produce close to 2.3 billion doses. Some of the other vaccine candidates like Russia’s Sputnik V, one from Gamaleya Research institute, Astrazeneca-Oxford vaccine, China’s candidate developed by Wuhan Institute of Biological Products and Sinopharm are also close to final testing.According to Piramal’s German peer Gerresheimer, there will be a global requirement of 2 billion - 3 billion units for Covid-19 vaccination during 2021 and 2022. Of these, the German company expects to deliver at least 800 million units over the next two years. The competitive edge The global pharmaceutical packaging is little over USD90 billion industry and by 2027 is expected to touch USD142.59 billion, according to market estimates. The borosilicate type-1 glass vials come in two varieties — moulded, the kind which Piramal, Gerrisheimer and SGD Pharma make; and tubular type, made by Schott AG, Nippon Electric Glass and Corning of US. 79592522 79592525For now, tubing companies have an edge with both Schott and Corning receiving orders. But as the commercialisation ramps up, others will join the race too. Given that Schott already makes 11 billion pharma containers per annum, it is obvious that is more widely available. However, Vijay Shah, vice-chairman, Piramal Glass, says that moulded has its own benefits — lower breakage due to thicker walls of the vial, better ability to withstand cold temperatures and better affordability in large or multi-dose sizes.Some tubing companies like Corning and Nipro are even marketing improved pharma glass variants — Valor and Vialex respectively, which offer improved strength. Given that the vaccination drive will be widespread, and the vaccine will have to travel to rural areas across the globe, the tilt seems to favour moulded players unless vaccine makers decided to use freeze-drying techniques which leans towards tubing.“Wherever and whoever is working on the vaccine they are also doing stability studies of the tubular as well as moulded vials. As and when the vaccine is ready, parallelly they also have vial options ready with them. So far, nobody has placed any order yet, but all the vaccine candidates have got our vials in stability studies,” Shah says. Preparing for the future demand, Shah says that within a span of 15 days, Piramal can add 80% more capacity to its existing 45 tonnes per day borosilicate glass capacity in Kosamba. The current capacity roughly translates to 1.2 million vials a day. Another Gujarat-based company, SCHOTT KAISHA, is also ramping up its capacity. The company currently makes 3.2 billion pieces per annum of vials, ampoules, syringes and cartridges, but by the end of next year, its capacity will increase to 3.5 billion pieces, says Dadachanji.According to glass industry reports in June, Piramal Glass has been in talks with France's Sanofi and Indian firms Cadila Healthcare, Bharat Biotech, and state-run BIBCOL (Bharat Immunologicals and Biologicals Corporation Limited) for possible deals, though Shah did not confirm any names with ET Prime.The way forward As the vaccine race intensifies and countries begin to vaccinate large swathes of the population, the glass vial makers will most likely see a sharp rise in demand. It is a little surprising then, that big global private-equity giants like Bain and Blackstone are reportedly chasing Piramal Glass despite steep valuations. Even the valuations of listed global peers — from Germany’s Gerresheimer AG to US-based Corning to China’s ChongQing Zhengchuan — are on the rise quarter on quarter anticipating the demand surge next year.All eyes are now vaccine makers.(Graphics by Abdul Shafiq)