It’s been three months since the first vial of Pfizer’s COVID-19 vaccine boarded a United Airlines charter flight, but the logistical operation to distribute the drugs that will end the pandemic is just getting started.
With more than 280 million doses already administered globally, a third vaccine just approved in the US, and trillions more to go to get to herd immunity, the pace and the opportunity in vaccine transport is as unprecedented as the rollout itself. The major distribution work can be covered by the existing players, but newcomers can make their mark in areas ripe for innovation like cold storage and technology.
Late last year, when the first vaccine approvals looked near, carriers like DHL, FedEx, and UPS, along with freight-focused airlines, started putting pieces in place.
“We were ready for this as we had reserved capacity in our network,” said Carol Tomé, CEO of UPS on an earnings call in early February. The CEO said UPS had delivered roughly 225,000 shipments, or 36.5 million doses of vaccine, at the time.
Logistics capacity, though constrained across the industry amid growth in e-commerce and a flood of imports at West Coast ports, has not been a major issue in vaccine distribution for two reasons. First, pharmaceutical shipments generally run in a dedicated supply chain, even within the major all-purpose carriers. And second, these carriers have been prioritizing vaccine shipments over other volume.
“It’s still building, in my mind,” Larry St. Onge, president of Life Sciences and Healthcare at DHL said, predicting a clear picture within 60-90 days. DHL is considering what a future with a higher frequency of vaccination (think annual COVID-19 boosters) would require.
Carriers have been building capacity for months, but the financial opportunity across the companies moving vaccines is less certain than their resolve to meet the challenge.
“The way logistics players will view this financial opportunity will ultimately depend on how the vaccine plays out over time,” Omar Chane, partner at PwC specializing in vaccines, said.
The real size of the opportunity will depend on vaccine efficacy and virus — if annual boosters are required, for example, the capacity-building may prove worthwhile.
“These businesses are generally very asset intensive (i.e. trucks, planes, warehouses, etc.) so logistics providers are most interested in on-going business and multi-year contracts that they can rely on to maintain high utilization of those assets,” Chane said via email. In other words, you need long-term benefits to require a ramp-up.
But there are business opportunities for companies that can find holes or weak points in the vaccine logistics fabric. The first and middle mile of the vaccine rollout may be tougher to break into. In the last mile delivery, cold chain and storage, sensors and tracking, and packaging innovation, though, experts say there’s room for new entrants and need for innovation.
Room for new players in the last mile
Exacting standards combined with the “fluid” nature of the information coming from manufacturers means the vaccine transportation business, at least in developed markets, is largely reserved for established players. But, there are corners of the world without thorough coverage by existing players.
The last mile is the most expensive leg of any product’s journey, but in nations without modern infrastructure — roads and internet for example — the challenge is about more than cost. Here, new players seeking to specialize in life sciences transport could make their mark, according to St. Onge. In Ghana, for example San Francisco-startup Zipline is delivering vaccines by drone.
It’s not for the faint of heart.
“Execution has to be flawless,” said Andrew Boyle, co-president of Boyle Transportation, a Boston-based trucking firm specializing in life sciences cargo. Boyle works with multiple vaccine manufacturers.
“It’s got tremendous quality requirements, and it takes specialized packaging, and it takes real understanding of the nuances of how to create a bulletproof standard operating procedure at the lane level, so that you’ve got contingency and backup, because you just can’t afford to miss,” St. Onge said.
Cold storage is hot
A segment of the vaccine supply that has been heating up since last year is cold storage.
Temperature sensitivity, especially, has been a sticking point for Pfizer’s vaccine, which is kept between minus 60 and minus 80 degrees. (New research suggests this strict requirement may be able to relax eventually.)
Even if Pfizer’s vaccine is approved to be stored at slightly higher temperatures, tools that enable cold storage across freight modes and at vaccine administration sites are essential. Demand for ultra-low temperature freezers on industrial sourcing platform Thomas spiked initially in October, and in the last week of February was up 991% year over year, according to Tony Uphoff, CEO of Thomas.
Dry ice demand on the Thomas platform was up 700% by the end of 2020 compared to the year prior and was up 1,141% year-over-year in the final week in February. And even the most sophisticated frozen packaging solutions for transporting pharmaceuticals still require dry ice.
The vaccine rollout has also put additional pressure on industrial real estate.
“While e-commerce remains on top, the vaccine added pressure on supply chain networks this quarter and pushed leasing from Logistics & Distribution users up to 15.2 million square feet, making it the top leasing industry of the quarter,” wrote JLL analyst Mehtab Randhawa in a Q4 report.
Cold storage warehouses are a small subset of industrial real estate (less than 2% of total supply) and the pandemic-driven increase in grocery e-commerce and delivery already drove down vacancy rates. With strapped supply, development in cold storage will more than likely meet plenty of demand even after the rollout.
Case in point: Ohio’s Rickenbacker International Airport is building out a $1.5 million facility dedicated to handling pharmaceutical air cargo — the first of its kind in the state — scheduled to open in the third quarter.
Tracking tech and sensors keep it safe
All of this cold storage is traced and verified by technologies that track the temperature and location of vaccine shipments. And it’s a good thing: More than 80 people had to be re-vaccinated when a vaccination site staffer at New York’s Jones Beach noticed the temperature reading on one cooler of vaccine was off the target. Real-time temperature readings allowed the mistake, caused by a hand warmer in the cooler, to be caught and corrected. Stories like this have played out in local news broadcasts since the rollout kicked off.
But, temperature tracking and sensing is one area where tech companies can, and have, pivoted into the pharmaceutical industry.
Sensors made by the company Varcode, which before the pandemic were mostly used in the food industry, track how much time a container has been outside of a designated temperature range. Roambee makes a pallet-level sensor that tracks temperature, humidity, and vibration, and provides live location data. Cloudleaf sensors track those same metrics, and feed it all into an AI algorithm to predict when intervention is needed. Temptime, within Zebra Technologies, makes labels that change color in response to temperature change.
FourKites, a cargo-tracking supply chain tech startup, is also developing a platform that provides in-transit information to the vaccine supply chain. In its recent partnership with Tive, a supply chain visibility services provider based in Boston, Fourkites created an integrated platform for their shared customers that monitors estimated arrival times, location, temperature, and light exposure.
All of these are working within COVID-19 vaccine supply chains to reduce mishaps, supplementing the vaccine packaging in keeping vaccines viable until they can make it into arms.
No vaccines without packaging
The speed and ferocity of the coronavirus vaccine rollout has created an opportunity for packaging firms with expertise in medical and temperature stabilizing packaging.
Just as important as the carriers ferrying the vaccines from point to point in the supply chain, packaging with various levels of temperature control ensures that vaccines stay viable, hand-off after hand-off. This is an area where existing players are ramping up capacity and shifting focus for the COVID-19 vaccine.
COVID-19 therapies, test and reagents, and vaccines are all within Pelican BioThermal’s packaging purview, but before the pandemic frozen shipment demand was relatively small.
“Pre-COVID, there were only seven high volume pharmaceutical products that had transportation and storage condition with frozen requirements and these were produced by only four companies and of those seven, three of those were vaccines,” said Dominic Hyde, vice president of Pelican BioThermal in a presentation earlier this month. Pelican launched a frozen shipping cube in November designed to suit the needs of the COVID-19 vaccine. German manufacturer va-Q-tec is building a fleet of temperature controlled containers too and both shipping containers require dry ice to maintain frozen temperatures.
Sealed Air, which makes packaging for food and beverage as well as packing materials for shipping boxes, expects its temperature assurance line of business, to grow from 4% of its revenue in 2020 to double digits this year, according to a company spokesperson.
It’s rare that the end of a lucrative business opportunity could be good news for everyone involved. The vaccine will boost the business of specialists who make, pack, carry and handle vaccines almost as much as it will boost the global economy when the rollout is complete.