Once again, the EU has found itself on the back foot when it comes to the COVID-19 vaccination campaign. This time it is in the form of the surprise announcement on Wednesday by the Biden administration in support for the temporary suspension of intellectual property rights for the vaccine.

A waiver would allow any pharmaceutical manufacturer in the world to make 'copycat' vaccines without fear of being sued for infringing intellectual property rights. Share prices in a host of vaccine producing companies took a sharp nosedive following the news.

This immediately struck a tone with Germany, home to the Pfizer/BioNTech partnership, who struck a sceptical tone, arguing that the loosening of trade rules threatens production of Covid-19 therapies. German chancellor Angela Merkel argued that the limiting factors in vaccine supply were production capacities and the high quality standards, not the patents.

The topic is almost certain to feature in tonight’s meeting among EU leaders in Portugal. Ursula von der Leyen, European Commission president, offered a tepid response to the announcement, saying Europe was ready to discuss the issue with global counterparts. The topic is highly sensitive, as Europe being home to a number of vaccine producing companies, will seek to balance the reputational damage from appearing to drag its feet in the global war against COVID-19 versus protecting its’ economic interests. 

Over in the US, Stéphane Bancel, the CEO of Moderna said he didn’t lose much sleep over the matter, despite setting a dangerous precedent which risks halting innovation in the sector. Bancel echoed Merkel’s reasoning in that there were not enough production sites or skilled workers to be able to rapidly increase the supply of mRNA vaccines. He said that the focus should be on expanding manufacturing within companies that already had the technology and knowledge was the fastest and most effective way to supply the world with mRNA jabs.

Indeed Moderna’s share price recovered most of the intraday share price losses as market participants digested the news and mostly do not see significant practical implications from the Intellectual Property (IP) waiver. In practice it would be highly disjointed to force companies like Moderna and Pfizer/BioNTech, who produce mRNA vaccines to train other companies in the practically novel technology.

Furthermore, given that the situation is highly fluid, in that new variants will most likely require tweaks to the vaccine formulae, resulting in seasonal jabs, it would make a highly counterproductive situation in the bio-innovation space. 

After considering all available information, despite ratting investors in the pharmaceutical and biotechnology space, in my opinion there has been an over-reaction to the news. The main issue remains one of capacity, both in terms of physical assets and qualified staff. Even if the IP waiver were lifted within the next couple of months, it would not affect the amount of vaccines practically deliverable within the next two years, being the critical period for bringing the pandemic under control.

Disclaimer: This article was written by Simon Psaila, investment manager at Calamatta Cuschieri. The article is issued by Calamatta Cuschieri Investment Services Ltd, which is licensed to conduct investment services business under the Investments Services Act by the MFSA and is registered as a Tied Insurance Intermediary under the Insurance Distribution Act 2018.

For more information visit https://cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.

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