RYK VAN NIEKERK: There is currently a raging debate, even anger, at how the South African government is procuring the desperately needed Covid-19 vaccine. This relates to the delay in placing orders for the vaccine with pharmaceutical companies, and its apparent inability to negotiate a fair price. For example, South Africa is set to pay around R80 per vaccine. That is $5.25, which is more than double the price most European and other first-world countries are paying for the Oxford AstraZeneca vaccine.
Magda Wierzycka joins me now from London. She is the CEO of asset management group Sygnia. What makes her views extremely relevant is that she also owns a venture-capital fund which is invested in two companies involved with the development of the vaccines.
Now the vaccine is being manufactured and distributed in partnership with pharmaceutical company AstraZeneca, and this is the vaccine the South African government is trying to procure. Magda, thank you so much for joining me. In which companies do you invest through your venture-capital firm, and what role do they play in the development of the vaccine?
MAGDA WIERZYCKA: It’s independently of Sygnia, but Sygnia does have investment in the funds, together with a partner in the UK. We set up a venture-capital company called Bravos and, through Bravos, and though those funds the company invests in predominantly spin-outs originating from the IP generator to Oxford University. And one of those – in fact two of those – spin-outs own the IP and have developed the IP associated with Covid-19 vaccines.
The better known one is a company called Vasitech which owns, together with Oxford University, the IP to the AstraZeneca vaccine. We are the larger holders in Vasitech, as well as Oxford Sciences Innovation, which is an umbrella company which sits above Vasitech.
And then, in addition to that, our fund is currently investing in the second company in the kind of Oxford stable of spin-out companies called SpyBiotech, which has also developed a Covid-19 vaccine which is about to undergo Phase 3 trials. So I’ve been exposed to these vaccine debates, the pricing issues, for quite a while.
RYK VAN NIEKERK: Let’s talk about that. First of all, what do you think of the way the South African government has gone about procuring vaccine?
MAGDA WIERZYCKA: I think I’ll take a step back and be a little pragmatic about these things. That is, when you think about Covid, it started in March. Six months ago there wasn’t a vaccine on the table. So June/July last year was the first time certain companies – a couple of pharmaceutical companies in the US, Pfizer, Johnson & Johnson, Moderna and then AstraZeneca, in association with Oxford, started talking about adjusting the vaccine-development platforms in order to develop a Covid-19 vaccine. So it’s a brand-new development.
Typically vaccines take seven to eight years to develop and test. This obviously has been accelerated at a very, very rapid pace. So six months ago we were in a position where there were no vaccines that were vaccine candidates which various pharmaceutical companies were prepared to put forward on a trial basis into accelerated phase-two and Phase 3 trials involving human beings.
At that stage, the rich countries and predominantly developed-market countries took a view that they would take the financial risk and fund in particular these Phase 3 trials, and vaccines in Phase 3 trials. You are looking at about 50 000 people per trial, at an estimated cost of around US$100 000 to run a Phase 3 trial.
So different governments took a risk on different vaccines; certain governments like the US took a risk on every single ……[4:17] company testing a vaccine, and pre-ordered these untested doses without any knowledge whether the vaccine would work or not.
I think the developing markets were not in a position to take huge financial risks. With hindsight, of course it could have been done better. But at that point in time, with absolutely no certainty whether any of these vaccines would actually work, and with the amount of money involved that had to be put on the table in order to fund the trials and pre-order the vaccines, it was a very large financial decision. Clearly South Africa wasn’t in a position financially and fiscally to necessarily take that kind of decision. One can argue whether there should have been foresight.
But I think events have once again overtaken us a little, because the issue right now is not so much the procurement of the vaccine, which obviously is an issue, and pricing is an issue, but a much bigger issue for South Africa right now is whether any of the vaccines that have been developed will actually work for the South African strain of the virus.
There’s a big question mark over that. There are tests being run in South Africa and globally to determine whether the vaccines that have been developed will work against the South African strain.
RYK VAN NIEKERK: When will we know whether it works or not?
MAGDA WIERZYCKA: That is the million-dollar question. Those tests are being run, and I have posed that question – and the answer isn’t that clear. I don’t think it’s a matter of six months, but I think it’s a matter of two to three months before we have an answer. And the answer really is, looking at the vaccine candidates that are on the table at the moment and their level of efficacy or effectiveness, in plain English that we know that the Pfizer and the Moderna vaccines, the modern vaccines here – , the ones that are based on mRNA technology and which have to be stored at minus 70 and minus 20 degrees – are very effective against the plain vanilla Covid-19 virus, with a level of efficacy of 95%. Hence there is an expectation that those vaccines would work against the South African strain, but with a reduced level of effectiveness.
In terms of AstraZeneca and the Oxford vaccines and, below that, Russia’s Sputnik vaccine, which have much lower levels of efficacy, there the big question mark is the extent to which that effectiveness is reduced in the presence of the South African virus because the Pfizer vaccines and the Moderna vaccines, the minus-70-degrees storage vaccines, when you actually think about the higher cost and the delivery – and the logistics associated with delivery of that kind of a vaccine in a country like South Africa or Africa as a continent – it’s just logistically almost impossible to imagine.
But the real test is whether the vaccines that can be delivered under normalised conditions – AstraZeneca, Oxford – whether the effectiveness of that vaccine is sufficient to protect the South African population. I suspect that we will have an answer to that question within the next couple of months.
RYK VAN NIEKERK: But that raises the question whether the government should now proceed with procuring vaccines.
MAGDA WIERZYCKA: It does. And I think it’s a very problematic question because obviously I’m observing the press. I can see the public [outcry]. People have placed so much faith in the vaccines that it’s a very difficult message to hear, that potentially the vaccines that are on the table right now might not work.
But let me also then add to it a bit of positivity.
With each one of these vaccines, the manufacturers of the vaccines and the scientists behind the IP of the vaccines have said that with not minor, but with tweaking; each vaccine can be tweaked, they believe, to be effective against various strains, including the South African strain.
But it will take both tweaking of how that vaccine is actually constructed; if you think of a baked cake, what is the recipe? And then the manufacturing processes have to be, again, tweaked to manufacture the vaccines that will be specific to, for instance, the South African strain or, for that matter, the Brazilian strain, which is now the 10th strain that has emerged in the UK.
So it is a huge moral question, because you are now mixing hope, morality and finance into this equation in terms of asking should South Africa be procuring anything until such time as we know.
And, once we know, obviously if the vaccine is sufficient, well then you engage full-scale into negotiations, both in terms of volume and price as quickly as you possibly can. And if it’s not effective, you’ve got to negotiate as hard as you possibly can with the companies who would actually have developed the IP of the recipe behind the vaccine to tweak the vaccine to work against the virus.
RYK VAN NIEKERK: Let’s talk about the pricing issue. Anban Pillay, the South African deputy director-general of health said that a price of $5.25 was quoted for the AstraZeneca vaccine, which is more than double what European countries and other first-world countries are paying for it. Why should there be a price difference?
MAGDA WIERZYCKA: Well, it’s not quite like [that]. I mean, it is that and it isn’t that. So the first thing is that as South Africa, we have ordered 1.5 million doses of the AstraZeneca vaccine on a hope and a prayer that it works. And obviously that was also ordered before the new strain emerged, but on a hope and a prayer that it works and protects our medical frontline personnel. And I think it’s money well spent.
Now the pricing difference has to do with the fact that the developing markets, for instance a company in the case of the AstraZeneca vaccine, funded the Phase 3 trials, and pre-ordered the vaccines and took the risk. Obviously, when you are taking risks and when you are funding Phase 3 trials and facilitating things, then you are in a very strong negotiating position. So that negotiating position existed in May/June last year, where effectively you were putting money at risk. And, for instance, using the AstraZeneca vaccine as an example, it might not have worked at all. So you might have just wasted all that money. That gave you the negotiating power to ensure that you’re funding the trials in exchange for your negotiating a particular price for something that might or might not work.
RYK VAN NIEKERK: But this is a national pandemic. So we are in a situation now where the first world has paid for the development, and now the emerging markets such as South Africa must pay a margin and obviously deliver profits to those pharmaceutical companies.
MAGDA WIERZYCKA: The theory is, for instance, on the AstraZeneca vaccine, that Oxford University has stated quite clearly that they do not want to make a profit. And that’s specific to AstraZeneca, by the way, not to the others. Oxford University has stated very clearly that they do not want to make a profit out of the IP associated with the AstraZeneca vaccine until such time as the pandemic is no longer classified as a pandemic.
My understanding is that pricing, once you are in a position to start, once you know that the AstraZeneca vaccine is effective, then the South African government can start negotiating both in terms of volumes and in terms of pricing, because we thought of 1.5 million doses. It’s nothing – but no negotiating power. I mean, what are you? You’re a price taker.
RYK VAN NIEKERK: In any case, even if we order 80 million doses, we are in a very weak negotiating position. It’s like standing next to the road without petrol. You’re going to pay whatever it takes to get enough fuel to get to the filling station.
MAGDA WIERZYCKA: I think we are in a stronger negotiating position than the general public is necessarily led to believe. So again, what I don’t necessarily put much hope in is Covax as an initiative, because …… of what we are just seeing, and that was predictable behaviour. And that is that, because this crisis has hit every single country in the world, it’s every man for himself and countries will negotiate their own side deals. So negotiating as a grouping sounds like a great idea until you realise that there is a limited supply, and suddenly people start breaking away from collective agreements and negotiating their own deals.
But South Africa is in a position to negotiate. It’s just that I think we are in this really difficult position of not knowing what we’re negotiating for, so we are negotiating for the AstraZeneca vaccine with the risk that it doesn’t work, because you’re only negotiating.
I can tell you right now that we are in a position to negotiate a supply of 100 million doses of the AstraZeneca vaccine, available within the next six months. But that knowledge gives you nothing if the AstraZeneca vaccine is not going to be effective against the strain.
I know that people’s psychology is such that everyone is just clutching at this concept that this vaccine will get us out of trouble. And a vaccine will get us out of trouble, but it’s almost begging for a little bit more patience. We need to know that the vaccine will work and then we engage in whatever negotiations need to be engaged in, as hard as we possibly can.
Some of those preliminary negotiations have already started. So it’s not necessarily as chaotic as it appears on the surface. There’s a lot of noise behind the scenes.
It’s a little bit more organised than appears on the surface.
RYK VAN NIEKERK: I’m a neoliberal, I really believe in the free market system, but there’s a massive ethical issue at play here. At $5.25 do you know what the actual profit margin is?
MAGDA WIERZYCKA: I don’t, and it’s not insignificant. That’s why I do believe that there’s scope to negotiate that price down.
So let me just tell you. The price for the AstraZeneca vaccine is for what’s called Gavi [Global Alliance for Vaccines and Immunisation] countries. So Gavi countries are the lowest-income countries in the world. The price of AstraZeneca vaccine for Gavi countries is $3 a dose. And that has a small profit margin built in. We sitting at $5.25 for this one. Forget this one and a half million doses. It really is a gesture. When we start negotiating in volumes, then the pricing will be somewhere between – let’s look at this range – somewhere between $3 and $5. But when you actually look at the other vaccines, AstraZeneca is the cheapest vaccine at the moment. When you start looking at some of the other vaccines, particularly the Moderna vaccine, that’s around $20 a dose, and it’s a double-dose vaccine. But again, Johnson & Johnson is around $12 in terms of pricing. Pfizer is around $10 in terms of pricing. Again, I’ve seen different comparatives and different pricing structures.
So the most effective option on the table right now, taking into account effectiveness and pricing, remains AstraZeneca. But really the holy grail is a much cheaper vaccine.
So the one company that we have invested in, which I mentioned right at the beginning, this SpyBiotech vaccine, aims to deliver a much lower [dose] and obviously there’s a question mark. They haven’t gone into Phase 2 trials. But, should that vaccine work, then that would be the cheapest of the cheap options because it’s a very cheap vaccine to manufacture.
So right now, strategically South Africa is in a bit of a Catch-22 situation – and I’m not here to defend government and their policies and their practices and their strategies, don’t get me wrong. I’m simply looking at it from a perspective of being involved in these vaccine companies and seeing some of the things that are happening at the back end of this. And, knowing that it is a bit of a Catch-22 situation because you really can’t right now sign an agreement with the Serum Institute of India, for instance, for a hundred million doses of AstraZeneca vaccines with delivery dates of April, May, June and July if you don’t know if this thing is going to work or not. And then there are the negotiations you must be having is with the Vasitechs of this world, which owned the IP or the recipe to start negotiating adjustments to the recipe, and then negotiations with Serum around adapting their manufacturing processes to develop maybe a South Africa strain-specific vaccine, – and then negotiate the cost and the volumes.
RYK VAN NIEKERK: I think there’s an escalating distrust from South Africans into the way the South African government is handling this. But what you’re saying is that, behind the scenes, it seems to be on track?
MAGDA WIERZYCKA: Behind the scenes there are realities that have been put on the table and are being recognised. And literally it’s very difficult to criticise what is being done, because you are in a Catch-22 situation. But, even if we had unlimited financial resources – and I’m not, I’m not saying that that should be a consideration, money versus lives – what should be taken into consideration is, let’s assume we have unlimited financial resources and we should work with that assumption – if we, right now, the government, took a decision to pre-order all these doses of AstraZeneca vaccine and started inoculating people, vaccinating people – and then, two months down the line discover that actually the effectiveness of this vaccine is 30% or 40%, which falls below the kind of minimum threshold of efficacy, which is 50% effectiveness, what do you do then in terms of moral dilemma? Because let’s assume we then have a vaccine which does work against the South African strain, but you have vaccinated all these people with something that doesn’t work, are you going to be doubling down and injecting people with more stuff that incidentally doesn’t have a seven-year-safety track record? Or do you write off those people that you have already vaccinated with something which has a low level of effectiveness, and now only vaccinate those you haven’t vaccinated?
RYK VAN NIEKERK: Yes. Government has not communicated that position very clearly, and I think that adds to the debate. But how does a country negotiate with a grouping or a company like AstraZeneca? Who negotiates? Is it through a middleman? Do you just phone the head office and ask for sales?
MAGDA WIERZYCKA: [Laughing] You negotiate with the companies. Negotiations officially should happen and would happen via the Department of Health engaging with the manufacturers. So, for instance, the AstraZeneca vaccine in terms of developing markets is being manufactured and sold via Serum Institute of India, so you negotiate with the top executive management of Serum Institute of India. And really there’s a vaccine task force, but it’s the Department of Health, Minister of Health, who would then engage with Serum Institute of India, and negotiate a transaction. Potentially you use people in the middle who might or might not have contacts in that field.
Similarly, it is a little bit like phoning the CEO of Pfizer and saying: “Can we talk? We would like to pre-order.” So there is a process for it and it should be driven and will be driven by the Department of Health.
RYK VAN NIEKERK: Have you been involved in any shape or form?
MAGDA WIERZYCKA: No comment. No, only in providing advice. Nothing official, nothing formal. Only in providing advice, just because we happen to have this investment and we happen to know some of the players involved.
RYK VAN NIEKERK: Have you had the vaccine?
MAGDA WIERZYCKA: No, no. I’m actually in the UK and I’m weighing up my options, because I am deeply immunosuppressed. I do take medication for rheumatoid arthritis, which means that I have almost no immune system left. So I do qualify on some priority list for a vaccine in the UK, but I’m on Tier 9, I think, so I have to wait for my turn. So I don’t get any preferential treatment. I know that there are options of it in the UK. You can pay £65 000, I think, and fly to Dubai and have the vaccine. But no, I’m not on any priority list beyond my medical condition, which places me in somewhere in March or April for getting the vaccine in the UK – you know, the ordinary NHS system.
RYK VAN NIEKERK: That’s interesting. Johann Rupert apparently received the jab in Switzerland before anyone else.
MAGDA WIERZYCKA: I heard so. Look, I think the issue with the vaccines – and using UK as an example – they are rolling out the vaccines by age groups. So they started with, in all their towns, people above the age of 80. Now they are vaccinating people over the age of 70. Then they’re going to move on to the age of 65. And then eventually they’ll hit my age grouping with co-morbidities and an immunosuppressant position which places me in a category which is a little bit preferential relative to my normal age group.
Or, you know, Johann Rupert under the Swiss regime qualified. I wouldn’t necessarily attribute it to his wealth. He potentially just qualified on the basis – and he probably won’t like me saying it – probably qualified in Switzerland on the basis of his age group, because I think that that is a fair system. I mean, apart from these absurd schemes, which can only be run in countries like Dubai.
In most countries this is actually quite an equitable vaccine-distribution system. So really I haven’t seen or been exposed to anything, apart from the Dubai scheme, which gives you preferential access to the vaccine.
RYK VAN NIEKERK: Even if you’re a shareholder in some shape or form?
MAGDA WIERZYCKA: Even if I’m a shareholder in some shape or form – absolutely not. Absolutely not. And of course, even if that was on offer, morally I would decline.
RYK VAN NIEKERK: Magda, thank you so much for your time. Please stay safe. And even if you don’t want to comment on your involvement, hopefully you can provide some sound advice.
MAGDA WIERZYCKA: Minimal, minimal. But I am kind of keeping a close watch and providing advice where my advice is wanted.
RYK VAN NIEKERK: Magda Wierzycka is the CEO of asset management group Sygnia.