Cold storage to companies: a stock trader's guide to Covid vaccine rollout

As Covid-19 vaccines start to receive emergency approvals, the race is on to distribute the one product that billions of people across the world will want. That’s creating investment opportunities as traders examine the companies involved in the global rollout.

With multiple vaccine types, the distribution chains involve hundreds of businesses—from airlines to makers of freezers, vials and disposable needles—and thousands of staff working to get shots from laboratory floors to the arms of populations around the world.

The world has never seen such a distribution puzzle: it’s been called the “largest and most complex logistical exercise ever.” Each of the vaccines nearing approval presents different challenges, from the ultra-cold chain required for Pfizer Inc. and BioNTech SE’s shot to the more mundane but equally challenging difficulties in getting inoculations such as AstraZeneca Plc’s across the developing world.


These are some of the sectors and companies in traders’ sights for their roles in the global vaccine rollout:

Cold storage

All of the vaccine candidates require some degree of cooling, with Pfizer’s shot needing storage at around minus 70 degrees Celsius (minus 94 degrees Fahrenheit).

That “will be demanding but not insurmountable in developed markets,” HSBC Holdings Plc analysts wrote in a report last month. “Provision of cold storage facilities will be critical factors.”

That’s made freezers one of the hottest bets. In South Korea, freezer makers Daihan Scientific Co. and IlShinbiobase Co. are both up more than 350% this year, surging Tuesday after the government announced it had secured 44 million doses. Japanese consumer electronics and freezer box maker Twinbird Corp. has soared more than 300% this year, while in India, Snowman Logistics Ltd. is up 52%.

Germany’s Va-Q-tec AG has risen 195% in 2020 amid an agreement to provide thermal containers for vaccines for a “top global pharmaceuticals manufacturer” it didn’t identify.

In the U.S., Trane Technologies Inc. is up 36% this year, while Carrier Global Corp. has more than tripled since it was listed on the New York Stock Exchange in March. The two are “are positioned well to benefit from vaccine-driven cold chain demand,” a team of Citigroup Inc. analysts wrote Dec. 3.

Distribution

It’s not just about keeping them cold: Moving the shots is also a humongous task. FedEx Corp. and United Parcel Service Inc. are adding facilities and refrigerated trucks -- though the two are already struggling to keep up with a surge in demand for deliveries and it’s still unclear how long these cold chains will be required for.

HSBC also expects Turkish Airlines, Air France-KLM, Deutsche Lufthansa AG and the Gulf carriers to be “highly involved” in the distribution chain, sustaining an already thriving cargo business -- but cautioned it wouldn’t be enough to overcome passenger losses in the troubled airline business.

Getting the vaccine down the last mile could also boost demand for truckmakers Paccar Inc., Navistar International Corp. and CNH Industrial NV, as well as engine supplier Cummins Inc., analysts at UBS Group AG wrote.

U.S. pharmacy chains including CVS Health Corp. and Walgreens Boots Alliance Inc. are expected to benefit from partnerships with the government to administer the shots. Both stocks are up more than 20% from the Oct. 30 announcement of the arrangement. Morgan Stanley sees an $8.5 billion sales opportunity for distributors and suppliers.

Among U.S. drug middlemen, McKesson Corp. is likely to see the biggest boost to earnings as the main distributor for most shots. JPMorgan Chase & Co. analysts have highlighted rivals AmerisourceBergen Corp. and Cardinal Health Inc. among companies that could provide support.

And one stock to watch for all vaccine types is Germany’s Gerresheimer AG. The maker of specialty glass and plastic products including vials has risen 33% this year.

Pfizer/BioNTech

Pfizer and BioNTech’s vaccine was the first to report positive data from a late-stage clinical trial. The U.K. has already begun rolling it out, and the U.S. granted an emergency use authorization late Friday. Pfizer has risen more than 20% since the end of October, while BioNTech has added nearly 50%.

Despite the cold-chain complications, Pfizer has first-mover advantage, which is helping to lift its partners. Croda International Plc rose to a record after an agreement to supply Pfizer with the novel excipients used to make its vaccine, while Indian specialty chemical makers that supply Pfizer, including Aarti Industries Ltd. and Suven Life Sciences Ltd., have surged.

Moderna

Using the same messenger RNA technology as Pfizer, Moderna Inc. one-upped its rival with an equally effective that can be stored at regular refrigerated temperatures. A U.S. Food and Drug Administration advisory panel will scrutinize Moderna’s shot at a meeting on Dec. 17.

A key stock to watch is Moderna’s production partner Lonza Group AG. Shares have risen more than 50% in 2020.

AstraZeneca

While the shot developed by AstraZeneca and the University of Oxford is based on more familiar technology, confusion over trial results mean it’s headed for an additional global test.

But the Astra vaccine will still be closely watched as it’s expected to meet the demand of middle- and low-income countries. Oxford Biomedica Plc is set to be the manufacturing partner, with shares up 35% in 2020.

The unknown

As the rollout begins there may still be plenty of swings in stock prices to come. With millions getting injected, how will markets react to reports of sickness or deaths among those who have received the vaccine, even without a link to the shot?

With unknowns like the length of the immunity from these vaccines, it’s unclear if this will be a one-time job or a yearly jab -- and therefore if this is temporary boost to earnings or an ongoing benefit for the companies involved.

And there are further vaccines to come, from China’s Sinopharm, Johnson & Johnson and others, which may open more investment avenues.

(With assistance from Bailey Lipschultz, Abhishek Vishnoi, Heejin Kim, Ronojoy Mazumdar and Chiara Remondini.)