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The Health Care Credit Beat: U.S. Herd Immunity By Midyear Is Possible With Additional Vaccine Approvals


U.S. State Ratings And Outlooks: Current List


COVID-19 Impact: Key Takeaways From Our Articles


The Hidden Risks Of Supply Chain Financing And Partial Asset Selldowns


Global Actions On Corporations, Sovereigns, International Public Finance, And Project Finance To Date In 2021

The Health Care Credit Beat: U.S. Herd Immunity By Midyear Is Possible With Additional Vaccine Approvals

Issue 14

We are roughly a month and half into the U.S. COVID-19 vaccination rollout and thus far it has been far from smooth. As of the end of January, 44.4 million shots have been administered, with 33.3 million patients having received at least their first dose, or just 10% of the total U.S. population. The number of vaccinations per day in the U.S. has been improving, to over 1.4 million per day on average for the past week, and manufacturing capacity improvements should address supply issues. S&P Global Ratings believes that continued improvements in vaccination rates, along with some further key positive developments--specifically the approval of additional COVID-19 vaccines such as Johnson & Johnson's candidate--could enable the U.S. to achieve herd immunity (70% vaccination rate, or about 230 million individuals immunized) by near midyear. However, it remains difficult.

Near Midyear Herd Immunity: Possible But Behind Schedule

The fact that the U.S. vaccination program ran into some early snags is not totally surprising, given the complexity of rolling out a vaccine on such a large scale in such a short timeframe. And the vaccines themselves add challenges: both the Moderna and the Pfizer Inc. (developed in conjunction with BioNTech) treatments have two-dose regimens that need to be given 21-28 days apart, and Pfizer's requires deep freezing for transport and storage. Furthermore, it is not one vaccination program in the U.S. but 50 different ones, given that the federal government has largely left each state to manage its own program.

Table 1

U.S. Vaccines In Circulation Today
Pfizer-BioNTech Moderna
Technology mRNA mRNA
Dosing regimen 2 dose 2 dose
Second shot 21 days later 28 days later
Effective after second shot 7 days 14 days
Total time to immunity 28 days 42 days
Effectiveness 95.00% 94.50%
Shipping -70 Celsius -20 Celsius
Good for: 5 days after thaw 30 days after thaw
Price $19.50 $25.00
Status Shipping Shipping
Production capacity 2 billion 1 billion
Allocation to U.S. 200 million 200 million
Final delivery July 2021 June 2021

We believe three obtainable (but elusive) conditions are critical to achieving herd immunity in the near term:

1. Improved logistics.   The Biden administration has made improving the pace of vaccination a priority, announcing a goal of 1.5 million vaccinations a day, an increase from the roughly 1.4 million average achieved over the past week, which was a dramatic increase from the 750,00-800,000 just several weeks earlier. The Biden administration has also suggested that vaccines that are currently held in inventory, partly for second doses (roughly just under half of shipped vaccines according to some reports) be used as initial doses, in order to accelerate the vaccination program. However, we believe this is risky, given the lack of visibility on supply deliveries and the current logistical challenges.

2. Greater manufacturing capacity.   Pfizer recently announced it increased production capacity to 2 billion doses in 2021 from a previous guidance of less than 1.3 billion, and Moderna has raised its estimate to 1 billion from its original 500 million to 1 billion range. The U.S. has contracted for 200 million doses of the Pfizer vaccine (up from the initial 100 million), to be fully delivered by July 31, 2021. Moderna anticipates 200 million delivered by midyear. At that rate, there should be enough supply to support the one million doses a day goal. Further manufacturing improvements would enable increased allocations to the U.S. market, and we note that both the Pfizer and Moderna vaccines are based on newer mRNA technology, which may enable the pharmaceutical companies to more easily scale up manufacturing.

3. More vaccine approvals.  If the U.S. is reliant on just Pfizer and Moderna vaccines, those companies' production guidance suggests 400 million doses (or 200 million arms getting two doses) will be in circulation by July--60 million shy of the requisite amount for herd immunity. If the next potential vaccines are approved as expected, the vaccination rates could climb significantly. Johnson & Johnson and AstraZeneca PLC's vaccines would also be less complex from a distribution and dosing standpoint. The AstraZeneca vaccine has been delayed in the U.S., pending additional trials due to mixed clinical trial results, but a spring 2021 approval is possible. Johnson & Johnson's vaccine could reach the market by March 2021, based on preliminary data. A vaccine from Novavax could reach the market in the second half of 2021.

Table 2

How Can We Get There? A Theoretical Vaccine Delivery Schedule
U.S. Allocation Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
Pfizer 200 30 30 30 30 30 30 20
Moderna 204* 34 34 34 34 34 34 0
Total 64 64 64 64 64 64 20
Shipment Schedule
Pfizer/Moderna Number of doses shipped this month 64 64 64 64 64 64 64 64 64 64 64
Initial doses administered (shipped this month) 32 32 32 32 32 32 32 32 32 32 32
Second doses administered (shipped last month) 32 32 32 32 32 32 10 32 32 32 32
Immunity 32 32 32 32 32 32 32 32 32 32 32
Cumulative immunity 32 64 96 128 160 192 224 256 288 320 352
*Includes 4 million we added for the purpose of our projections.

Chart 1


Chart 2


As things stand, the 70% target for herd immunity is not what it seems. About 20% of the U.S. population is under 16 (about 66 million), and thus too young to be vaccinated at this time; although children have much lower incidence of sickness and death from COVID-19, they are still able to transmit it, and their inability to be vaccinated complicates the path to herd immunity. With Pfizer's COVID-19 vaccine the only one currently authorized in the U.S. for 16 and 17 year-olds, and with late summer/early fall the best-case scenario for a vaccine for ages 12-15--and early 2022 for children 11 and younger--the burden of herd immunity will overwhelmingly fall on adults to get vaccinated. A 70% immunity rate actually requires about 87.5% of adults (16+) to be vaccinated. Recent polling data from Gallup shows only 65% of American are willing to take a COVID-19 vaccine. This number has wide variance according to political identification, with 83% of Democrats reporting a willingness to be vaccinated, versus 59% of political Independents and 45% of Republicans. This has economic implications, suggesting a differentiation in economic recoveries state by state, county by county, according to party loyalty. Even without supply and distribution concerns, herd immunity requires a change in mindset.

This does not mean a midyear recovery is off the table. Because the vaccines have been targeting the most at-risk portions of the population, death rates should decline significantly and rapidly. Even moderate immunization rates will slow the spread of the virus, provided basic safety measures are maintained. Warmer weather in the spring and summer may also contribute to slowing the spread. As these factors combine, it is likely governments will ease or eliminate restrictions and businesses will begin or accelerate a return to normalcy. Certain sectors will recover more slowly. Businesses that cater to children, in particular, may lag in their recovery as immunized adults may remain cautious with their unimmunized children.

Table 3

Vaccines In The Pipeline

Johnson & Johnson

AstraZeneca PLC

Vaccine Ad26.COV2.S Covishield NVX-CoV2373
Technology adenovirus-based adenovirus-based nanoparticle
Dosing regimen Single dose One or two dose regimen Two dose
Efficacy N.A. 62%-90% N.A.
Status Late-stage Phase III Approved in U.K. and India Late-stage Phase III
Target February FDA approval submission Potential application in Spring Estimate 2nd half 2021 approval
Availability 100 million doses 2 billion dose production 100 million doses
N.A.--Not available.

The two next COVID-19 vaccines likely to be approved by the FDA are from AstraZeneca (Covishield) and Johnson & Johnson (ad26.COV2.S), both of which will simplify the distribution and administration process. AstraZeneca's U.S. approval has been delayed but it has been approved in other countries such as the U.K. and India. The data suggests that Covishield has a 62% efficacy for patients that received two doses, higher than the 50% efficacy target for all vaccines. However, the efficacy jumps to 90% for patients receiving 1.5 doses (a half dose followed by a full dose) during the trial. AstraZeneca is conducting an additional trial, with an estimated spring 2021 submission to the FDA for approval.

Meanwhile, preliminary data on Johnson & Johnson's late-stage one-shot COVID-19 vaccine is promising, with 90% of clinical trial patients developing antibodies within 29 days. We expect the company to submit for FDA approval in February and for the vaccine to become available by March.

Either Johnson & Johnson's or AstraZeneca's vaccines being added to the COVID-19 vaccine arsenal would be a significant step toward 70%, and both being added would largely resolve the supply issues.

Additional vaccines are also in the pipeline, albeit further off, with Novavax, which recently announced promising clinical data, potentially being available late in the second half of 2021. However, we believe the growing availability of the approved vaccines makes it more difficult to recruit volunteers for the clinical trials of unapproved vaccines, at least in the developed countries. Moreover, the vaccines approved earlier have the perpetual benefit of a longer track record. Therefore, we think the vaccines that are earlier in the pipeline will have successively less viability, notwithstanding demand exceeding supply in developing markets through 2021.

Five Things To Watch In The Near Term

1) Increased production/allocation to the U.S.   Both Pfizer and Moderna have raised their production capacity estimates since the beginning of 2021 and we believe there will be further increases and allocations to the U.S. market. This will be critical, especially until additional vaccines are approved.

2) Pace of U.S. vaccinations.   President Biden has made increasing the pace of vaccinations a main goal, especially given that sustained improvement in the U.S. economy may not fully happen until widespread vaccination is achieved. One and a half million vaccinations a day is a significant improvement from average levels earlier in the year, but it will have to be significantly higher than that, at around the two million vaccinations-per-day mark. Indeed, it will need to be even higher to compensate for the slower start. The longer we run behind, the more difficult it will be to catch up.

3) Additional vaccine development news.   Besides development and approval timelines on the nearer-term Johnson & Johnson, AstraZeneca, and Novavax vaccine candidates, Pfizer is working on a new freeze dried formulation of its vaccine that would add to the available vaccine supply and, more importantly, greatly simplify distribution. Additional vaccines are also critical to diversify the technology base, as each vaccine may have varying levels of effectiveness versus the different evolving strains of COVID-19.

4) Going against the clinical trial data.   In the rush to reach a critical mass of immunity, we have heard discussion of using Pfizer and Moderna vaccines as a single dose, delaying the second dose to when available, or patients being treated with mismatched doses. We believe these suggestions, if put into practice, would be risky from a safety and efficacy standpoint. Also, they indicate a continued expectation of supply and distribution issues. Thus far most short-term expediencies of this sort have been rejected, but should they be reconsidered it would clearly indicate a more desperate situation.

5) Developments on the treatment, testing, and hospitalization front.   Vaccines are only a part of the strategy for battling the COVID-19 pandemic. Researchers continue to develop effective COVID-19 treatments and diagnostic tests. Wide availability of these treatments and tests, as well as increased hospital capacity, will spur a return to some new normal level of economic activity.

ESG Ramifications

COVID-19 vaccines shine a light on pharmaceutical manufacturers

The development and rollout of the COVID-19 vaccine puts into focus how many stakeholders of health care innovations there are outside of direct creditors and equity holders. It also highlights key social issues that stakeholders can be sensitive to: product safety, affordability, access to medicine, and the underlying information ecology, to name a few.

Before the first vaccines were approved, the general public scrutinized the safety data gathered during the clinical trials almost as soon as regulators did. The low incidence of safety events during the trials and rollout were, and remain, keys to the success of the widespread vaccination effort. Since the first approvals, and despite some reports of severe allergic reactions, major adverse events appear to be rare. However, concern about vaccine side-effects, even if incidents are rare or minor, are having an effect on uptake and delaying the achievement of herd immunity.

Controversy, particularly in the U.S., surrounds the affordability of health care and drugs. COVID-19 vaccines will likely be distributed at no cost to the patient in the U.S. thanks to actions taken by Congress and regulators, but this action is an exception to the rule; most vaccines require a co-pay. Therefore, effective public communications will minimize the number of people who opt out for fear of a surprise bill.

The pharmaceutical industry's involvement in vaccine development highlights the role that industry plays in public health and, we believe, improved its reputation. Still, the rollout of the vaccine highlights some of the inequities in health care. Americans living in rural and urban communities, particularly people of color, often lack access because they either live far from hospitals or clinics administering the vaccine or live in "pharmacy deserts." Pharmaceutical manufacturers, distributors, retailers, and others could face a backlash or significant legal action if they are perceived as impeding access or even not doing enough to improve access to the vaccines, tests, and treatments.

Widespread adoption also hinges on effective patient education and engagement. Patient hesitancy is another barrier to overcome. A December poll from Pew Research(1) showed that nearly 40% of Americans say they would either definitely or probably not get a COVID-19 vaccine. Another poll(2) showed only 40% of respondents in France would be willing to get the vaccine. There are likely many root causes of this hesitancy, but misinformation is both a main contributing factor and one of the most difficult issues to correct.

Wealthier countries such as the U.S. were the first to roll-out COVID-19 vaccines. Many of these countries provided funding for the research and development of the vaccines and placed tens or hundreds of millions of orders for the vaccine before they were approved. This could make it difficult for lower-income countries and disadvantaged communities to access or afford vaccines. The multi-dose and cold storage requirements of both the Pfizer and Moderna vaccine also make distribution and storage a challenge, especially for areas with limited infrastructure. There are organizations working to improve equitable access. COVAX, an organization launched by the World Health Organization, has agreements with pharmaceutical manufactures for 2 billion dosages (both approved vaccines and unapproved candidates).

S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research here: As the situation evolves, we will update our assumptions and estimates accordingly.

Given the dynamic/fluid circumstances associated with the coronavirus pandemic, we will continually evaluate and update this disclaimer as warranted.

(1) Pew Research Center: Intent To Get A Covid-19 Vaccine Rises To 60% As Confidence In Research And Development Process Increases, Dec. 3, 2020

(2) Euronews: Why Do So Few People In France Want To Take The COVID-19 Vaccine? Jan. 19, 2021

Related Research

This report does not constitute a rating action.

Primary Credit Analyst:Arthur C Wong, Toronto + 1 (416) 507 2561;
Secondary Contacts:Tulip Lim, New York + 1 (212) 438 4061;
Patrick Bell, New York (1) 212-438-2082;
Thomas Englerth, New York + 1 (212) 438 0341;
Ji Liu, CFA, New York + 1 (212) 438 1217;
David A Kaplan, CFA, New York + 1 (212) 438 5649;

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