The battle against the Chinese flu has taken a new turn with the approval of the two vaccines in India. The Drug Controller General of India (DCGI) has the approved the emergency use of the two vaccines Covishield developed jointly by AstraZeneca and Oxford and licensed to Serum Institute for production apart from the indigenous vaccine developed by the Hyderabad based Bharat Biotech. While the former uses the adenovirus causing cold in chimpanzees as a vector, the latter uses the time tested method of attenuated virus as its vector. The former has demonstrated efficacy between 60-90% while the latter is in the final stages of the Phase III trials. There are of course controversies stoked by the political opposition on Bharat Biotech vaccine, yet aside of that it represents a significant achievement. While Pfizer-Biontech is a joint effort of US and German companies, AstraZeneca and Oxford are British based. Moderna is US based. The other vaccines are based either in Russia like Sputnik or China like Sinovac. Apart from these countries, India becomes a part of the select club that have developed vaccines for the Chinese flu induced by the coronavirus originating in China. This is something very significant and needed to be understood at more depth.
To understand why the American and European brands continue to flourish despite the production getting shifted to Asia, Stan Shih of Acer came up with the concept of Smiley Curve. His exposition of the same lay on the value addition that happens at each stage of production. To him, the maximum value addition happens at the research and development (R&D) stage. This is where the competition is global and everyone tries to outperform others. They seek to be the first to achieve something and thus reap the spillovers. Once the product is conceived and designed, the next stage would be the prototype following which the production will start. With the blueprint of the product in hand, it is relatively easier to the produce the goods. It was difficult to conceptualize and come with an iPhone rather than in producing an iPhone with a blueprint in hand. Thus the idea of production as a low value add activity takes root. Once the production happens, it has to find its way in the market. The market is not global but series of local markets. Each of those markets witness rigorous competition not easy to succeed. It is more of a hand to hand combat necessitating lot of resources to be diverted to succeed here. Therefore, the activities under the marketing mix occupy significant value addition and thus generate tremendous margins. Therefore, the production per se will not add to the margins and thus there would be little gain by expertize in production itself. Moreover, the economies of scale actually make production cheaper thus low share of overall contribution that makes a product a blockbuster if one might term it so.
The vaccine process for the Wuhan flu too follows the similar pattern. The global race is almost kind of winner take all or at least the early birds take all. The reasons are not far to seek. The late entrants will find it difficult to finish the trials due to paucity of volunteers. There is no reason why someone would seek to receive a placebo when the vaccine is available in the market. The only option then would be comparison of the new candidate with the efficacy of the existing vaccine. Producing a vaccine is an easier job. The tougher job again would be convincing the authorities that the vaccine is safe, immunogenic and efficacious. While the population is around six billion, the number of vaccines that might be in market would still be relatively few. Those early birds will make up decent profit. The development of vaccine is again a product of instantiation and thus while the first copy will take a large resources to develop and produce in an environment of implied demand uncertainty, the reproduction is very simple.
The vaccine produced by Serum Institute is developed by AstraZeneca in collaboration with Oxford thus relatively low value add by the Indian firm. However, the vaccines produced by Bharat Biotech and the one in process by Cadilla both are indigenous vaccines and thus contribute significantly to the value addition by the domestic firms. The vaccines of Bharat Biotech and Cadilla are on the higher side on the Smiley Curve giving higher margins relative to the Serum Institute. While Serum would perhaps command greater sales given the backing of Western powers, the ones developed within India would go miles in building Indian pharmaceutical competency in vaccine development. The ones being developed by Gennova Technologies and Biological E too add to the significant margins since they are at least partly being developed by Indian companies. They might or might not be able to leverage the markets currently since they are in the early stage of development, but the technology they are seeking to master will go substantially a long way in Indian medical development in the future. The success of Pfizer has to do much with the platforms already available having been built during vaccine development for SARS a decade and half ago. They were able to build on the learning curve and thus release vaccines on m-RNA platforms, the first time, the vaccine being developed and succeeded commercially in the world on this platform. Bharat Biotech has used the time tested method of attenuated virus. Therefore, the success of Bharat Biotech is something to be celebrated.
The second part consists of marketing angle. In the context of vaccines, it depends on the regulators and seeking to get those approvals first. While Pfizer or Moderna or even Johnson and Johnson would be dependent on US or UK or EU or Japan, given their cold chain requirements, it is unlikely others will be able to afford the same. It is in this context, the other vaccines open up. Russia or China through their vaccines rather than targeting European or North American markets are targeting the vast population that is outside these circles. Indian vaccine makers too must look towards targeting these markets. Indian approval system has credibility in many countries and thus would be in a position to leverage for their vaccines. Thus Bharat Biotech or Zydus Cadilla would be in better position to harness India’s soft power relative to Serum Institute. This opening would go in consolidating India’s power in helping countries cope with the COVID crisis something it has been doing as pharmacist of the world since the beginning of the pandemic. Therefore, in this context, given the credibility of Indian firms in these markets outside the first world, the credibility of the Indian regulators, India is well poised to emerge as the vaccine provider of the world. This is the time to capitalize and consolidate the soft power.
The global superpower won’t come easy. It would be mastery of the arts in every facet of life. Russia sought to compete with the US at every level. China is making its entry in every field. India cannot remain an exception. It has to demonstrate its competency. Combating the pandemic is one such critical area. India has to rise up to the occasion. It has so far with distinction and with today’s approvals, it will enhance its power even higher.
Thoughts on Theory and Practice 