High risk, high reward: Gavi's investment in Africa vaccine production

The board of Gavi, the Vaccine Alliance approved a new African Vaccines Manufacturing Accelerator at the end of last year, which will make up to $1 billion available over 10 years to the nascent sector.  

It’s yet to formally launch, but the teams involved in its creation are hammering out the final details.

This new financial instrument will provide strategically timed grants to support and incentivize African manufacturers both to enter into vaccine producing and to help in building a broader ecosystem to ensure the sector becomes globally competitive in ways that outlast this initial financial support.

The continent imports about 99% of the vaccines its population uses — leaving countries vulnerable to dysfunctional supply chains when crisis hits. During the COVID-19 pandemic African nations were left at the end of the queue for vaccines due to export bans and wealthier nations hoarding them.

Turning this around has become a leading priority for African leaders who want the continent’s pharmaceutical manufacturers to produce 60% of the vaccines it uses by 2040. But scaling this up in such a profound way isn’t an easy task and requires a myriad of support and thoughtful coordination.

Devex spoke with David Kinder, director of development finance at Gavi, about what’s known about this new financial instrument, what still needs hashing out, and its goals. The vision, he said, is that in a decade, several African vaccine manufacturers are equipped to produce vaccines from scratch to the point when they are packaged into vials.

“Wouldn't it be fantastic if the next time there was a pandemic … the vaccine against the pathogen was produced end to end in Africa?” Kinder asked.

Gavi’s target is to support manufacturers to produce at least 800 million vaccine doses over the next decade through AVMA.

Separately, they also hope the manufacturers supported through AVMA will produce 700 million doses of vaccines during a future pandemic — which may happen through the re-purposing of facilities in a moment of crisis. This would provide for about half of the African population if it’s a one-dose vaccine, and a quarter if it’s two doses.

A global gap

Gavi is a global consortium that provides affordable vaccines to lower-income countries through pooled procurement — and is one of the world’s largest buyers of vaccines. Countries in its network provide co-financing for vaccines but don’t pay full price.

UNICEF, a founding member of Gavi, is the procurement arm — to which manufacturers can apply for tenders to supply vaccines.

When Gavi started its work in 2001, it bought vaccines from only five manufacturers, mainly in western Europe and the United States — supplying six products. Now, UNICEF purchases vaccines from 19 manufacturers producing over 50 products — majority of which are in low- and middle-income countries.

While there has been significant growth in diversifying suppliers, in examining the global layout, Gavi found Africa was behind every other region in vaccine production, Kinder said. The continent only provides about 0.2% of the global vaccine supply.

Gavi has procured from an African supplier in the past — yellow fever vaccines from the Institut Pasteur de Dakar — but isn’t currently.

“I think we've underestimated the importance, not just of having multiple suppliers, but multiple suppliers from different regions, so that each part of the world has adequate local production,” Kinder said.

This, and the ways in which inequity left the African continent in the lurch during the pandemic, are the impetus behind the creation of a dedicated financial instrument to boost the global competitiveness of African manufacturers.

Two ways to cash in

AVMA’s funding is first come, first serve until its depletion — and a single manufacturer is capped at receiving $250 million.

Of the entire pot of up to $1 billion — $750 million is specifically set aside for full drug substance manufacturing — which is the manufacturing of vaccines from start to finish.

Much of the manufacturing on the continent hasn’t been this full process. Instead, it’s fill-and-finish, which is when drug substance is imported from abroad, and the filling and packaging of vials happens in Africa.

This form of vaccine production is less desirable in efforts to ensure the continent achieves health security because producers are still dependent on substance from abroad — and supply chains are unreliable in a crisis.

But Kinder said Gavi is cognizant that manufacturers often start with fill-and-finish and graduate toward producing the end-to-end product — including the actual drug substance. Because of this, $250 million is allocated for fill-and-finish manufacturing.

A manufacturer can receive AVMA payments in two ways.

Before a manufacturer can supply Gavi with vaccines, it must receive prequalification from the World Health Organization — a stamp of approval signifying it’s reached required thresholds of quality control.

If they achieve this for the production of vaccines Gavi has deemed priority  — such as against Ebola or cholera — AVMA provides a grant of between $10 million and $25 million. Kinder said these vaccines are a priority because Gavi believes having a new African supplier of these vaccines would be good for the health of the overall global vaccines market.  

This payment is intended to support manufacturers in offsetting costs of reaching that threshold, as well as helping them bridge the gap between this point and production.

The payments are higher for the use of vaccine production platforms considered “pandemic ready” including messenger RNA and viral vector vaccines. These platforms are flexible so they can easily pivot to producing vaccines against a pathogen causing a pandemic when needed.

And manufacturers involved in fill-and-finish will receive the lower end of the spectrum, $10 million.

The second set of payments comes if that manufacturer secures a UNICEF tender to sell its priority vaccines. For every dose a manufacturer provides during the duration of that tender, they receive a top-up of between $0.30 to $0.50 — in addition to the designated price outlined in the tender.

For example, if a tender was for $1 a dose, a manufacturer in India would receive $1 whereas a manufacturer in Africa may receive $1.50.

Manufacturers involved in end-to-end production in a “pandemic ready” platform will receive $0.50, whereas manufacturers involved in fill-and-finish will receive $0.30. 

For these top-up payments, priority vaccines receive a higher subsidy, but any vaccine in Gavi’s portfolio — which currently has 20 vaccines —  is eligible.

There’s a higher cost to producing vaccines on the African continent, and so this mechanism is intended to help local manufacturers remain competitive against well-established markets that have driven down prices due to economies of scale.

But Gavi was cautious when designing these top-up payments to provide support to incumbent African manufacturers but not create a situation that will drive away existing suppliers.

“If incentives are too generous, or they do not drive the localisation of technology in Africa, AVMA will carry significant reputational risk,” said a document from Gavi’s December board meeting.

The AVMA payouts will be unpredictable over the course of the 10 years because it’s unclear how many facilities will receive WHO prequalification and successfully win UNICEF tenders. But modeling tells Gavi that payments for manufacturers receiving WHO prequalification could commence at the end of this year or some point next year.

Gavi expects disbursement of funds will be weighted more heavily toward the second part of AVMA — the last five years — because setting up vaccine manufacturing is time consuming and receiving WHO prequalification could also be a multiyear process. But there are incumbent producers already en route in this journey, whereas others are just beginning.

A risky business

Vaccine production is expensive, complicated, highly regulated, time consuming, and risky — a combination that can sway investors to place their money on safer bets.

“You have a single batch failure of a particular vaccine, and your site can be off for a long time,” Kinder said.

Gavi is not involved in the development of vaccines nor the building of manufacturing facilities. The strengths of the alliance, Kinder said, is in influencing markets by sending clear signals on what vaccines are needed and by providing financial incentives for producers.

And the building of markets for vaccines in Africa has not been simple. While the demand for vaccines in Africa is valued at over $1 billion a year, African manufacturers aren’t guaranteed a steady buyer at prices justifying their investment. This becomes a challenge for investors that pump large amounts of money into a project, but don’t have strong assurances these investments will pay off.

The two AVMA payments are structured to help provide long-term funding commitments and  lessen the financial burden on investors. It’s also a de-risking method — helping to create stronger business cases for the manufacturer which may help them to bring in other types of finance, such as low interest rate loans.  

Gavi has convened a working group with global development finance institutions that are examining how AVMA could impact their own lending terms and how much finance they make available to African vaccine manufacturers.

“We know that the existence of this mechanism is helping open doors with financers,” Kinder said.

These efforts are also dependent on African countries choosing locally produced vaccines. For the most part, countries have a choice of which products they choose from Gavi’s portfolio. Gavi is working closely with the Africa Centres for Disease Control and Prevention to ensure this collective demand for African-made products exists.

“There's a lot of effort being made with heads of state, with health ministers, to talk through the benefits of Africa acting together and producing certain products,” Kinder said.

Preparing for launch

Gavi’s board approved about 90% of AVMA’s operations last December, Kinder said, in areas such as the financing available, the incentive payments, and eligibility. Gavi is still hammering out the remaining details around operationalization, such as legal definitions, governance, monitoring, and clarity on how payments are made.

“Now we're just crossing the t's and dotting the i's and making sure we have everything right,” he said. 

The simplicity of the two payments means AVMA’s management is relatively straightforward.

“It's not necessarily an initiative that has many, many changes — and actually, that's really important, because you want to have certainty for investors,” Kinder said.

But they still need the ability to periodically course-correct.  

“We would need to do that very carefully so that it doesn't remove the long-term certainty of the instrument,” Kinder said.

AVMA will formally launch at an event in Paris in June, hosted by French President Emmanuel Macron, the African Union, and Gavi. This launch will happen simultaneously with the launch of Gavi’s upcoming five-year investment from 2026 to 2030.

AVMA’s financing will come from a reallocation of funding for vaccines from the COVID-19 pandemic. Because of this, no additional fundraising is needed but Gavi is still in the process of confirming exact amounts available for AVMA with Gavi donors.

“There's very, very significant support for this. So we're very confident of getting support for that full amount — and that will be reported on and made public after we finalize the instrument,” Kinder said.

The long game

There’s a lot going on across Africa working to create a vibrant African vaccine manufacturing sector.  

The AVMA instrument is a necessary but not sufficient effort for realizing this vision, Kinder said. It’s just one piece in a puzzle of building a broader ecosystem — and these other pieces of the puzzle also influence the success of AVMA.

“When we've put [AVMA] to our board, we've been really explicit that it is a high-risk, high-reward financial instrument, and it is dependent on the other bits of the ecosystem coming together,” Kinder said.

The AU’s Partnerships for African Vaccine Manufacturing serves as the overarching body for setting goals and coordinating efforts. Gavi has worked closely with the AU’s Africa CDC in developing AVMA to ensure the goals are aligned. And its design has also been in consultation with civil society organizations, development partners, and the pharmaceutical industry.

Regulatory bodies are currently disjointed across the continent and many need help in strengthening. The African Union is in the process of setting up the African Medicines Agency that is aimed at improving this.

This is a crucial part of the process of manufacturers receiving prequalification from WHO for vaccine production. The actual manufacturer must reach thresholds of quality, and the country’s systems should regulate that the manufacturer must reach it.

And the continent is also still dependent on foreign companies granting it rights to intellectual property because there are limitations around the amount of research and development of vaccines happening on the continent.

When a foreign company transfers the knowledge on the product and how it's made, it’s called a technology transfer — and there are efforts to scale this up on the continent, including the new African Pharmaceutical Technology Foundation, which was launched by the African Development Bank and formally started work in January.

Gavi expects the benefits that AVMA is able to offer can help African manufacturers enter into conversations with international companies from a more financially sustainable position.

“What AVMA does is give African manufacturers more financial incentives, more ability to enter into those conversations, plus helps bring the trust, obviously, that the industry will be around for longer to make those types of transactions worthwhile,” Kinder said.

AVMA’s goal is longevity — after the money runs out, African manufacturers would be in the position to continue producing for Gavi, becoming staple parts of its vaccine portfolio. This includes serving not only African countries, but potentially becoming so competitive in their production that they serve populations in other parts of the world.

Not all of the new vaccine projects popping up across Africa will succeed, Kinder said, adding that consolidation is needed, because vaccine manufacturing is a “volume game.”

Because of this, Gavi would consider it a success if by the end of 10 years at least four African manufacturers are able to successfully win UNICEF tenders for vaccines.

“The key, key thing at AVMA is that when we leave … we leave things in a good place,” Kinder said.

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