 Hey everyone, this is Dan. Let's talk about the COVID vaccines and patent waiver. The White House announced on May 5th that the U.S. would support COVID vaccine patent waiver in discussions with the World Trade Organization. This news is supposed to be great for many developed nations that so far have not secured enough vaccines for their citizens. In the meanwhile, stop prices of Moderna, BioNTech, Novavax and CureVax dropped significantly in the last few days. Let's break down what's happening and let's try to understand what it means for the world and for the stop prices of the vaccine makers. First of all, let's look at the stop prices for a few vaccine makers. From May 3rd to May 7th, just in a matter of four or five days, the standard import index went up by 0.84%, pretty much flat. And I'm using SPY, the ETF, that's paid to the S&P 500 as an indicator. And then if you look at the Pfizer stock, it's about the same, increasing about 0.8%, 0.9%. It's hardly moved at all even though Pfizer does produce the vaccine together with BioNTech because the vaccine revenue is only a small percentage of Pfizer's total revenue. That's why vaccine-related news has not been affecting the Pfizer stock price too much. In the meanwhile, BioNTech, being a small company and the main product, being the COVID vaccine, saw their stock price went down by almost 7%. Whereas Moderna, the price went down by 10%. In fact, at one point it was down almost 18%, then it recovered by last Friday. And then CureVac, which is developing a vaccine now, saw its stock price went down by 15.7% in a matter of three, four days. And Novavax went down by 28.7%. That's a very significant drop. Is it going to get worse? Are the vaccine makers going to be decimated because of the patent wafer? I will talk about that in the next few minutes. Let's look at this very important table that I just developed. The main source of the information is from the website Statista.com and I modified some of the numbers based on the latest news announcements. For example, the UK increased their 2021 contract with BioNTech to 100 million doses. And I'm assuming that China would be self-sufficient with their Sinovac and Sinopharm vaccines by the end of 2021. And with these numbers, I came to the conclusion that based on the announced contracts now, from all the vaccine makers that are in either phase 3 of development or already received emergency approval from major countries, that we have enough capacity for 55% of the world population. In my estimate, not everybody in the world would want to receive the vaccine shot. And I say 80% or 75% demand among the world population as a reasonable assumption. Currently, we are at 55%. That's why we still have a 20% deficit out of the total world population of 7.8 billion people for 2021. Now, for 2022, the picture gets a lot better. My conclusion is that based on the announced capacities for 2022, we will be able to fulfill 87% of the world population. I believe that is more than enough. Again, not everybody will want to receive the shot. And that's why 87% will be enough. Why is your such a jump from 55% to 87%? That's because BioNTech and Pfizer announced that they have planned 4 million doses of capacity of 2022 and Moderna announced that they have planned 3 billion doses of capacity of 2022. Basically, BioNTech, Pfizer and Moderna have preemptively come up with the added capacity to meet the requirement of the entire world by the end of 2022. That turned out to be excellent for humanity, but also in the meanwhile, it is a very smart move on the part of BioNTech and Moderna from a commercial standpoint. And I'll explain why in the next few minutes. If you like what you've seen so far, I'd like to encourage you to click on the like, subscribe and notification button that'll encourage me to produce more videos like this. And it is also for the sake of the YouTube algorithm. Thank you very much. Let's move on. Let me show you a few key news articles that I've been using to come up with this video. On May 8th, Reuters reported that the German Chancellor Angela Merkel said she was opposed to waving patent protections. In the meanwhile, French President Emmanuel Macron also said he's opposed to patent wafer. Quite a few EU countries expressed their objections to patent wafer. Why? Because they believe waving the patent is not the fastest way to fulfill the requirements of vaccines among the world population. And then on May 4th, there was a very long but thorough article published by the Stanford Law School Professor Lisa O'Led analyzing pros and cons of patent wafer. I'll summarize some of the key points later on. And then on December 16, actually quite a few months ago, the Cato Institute published a white paper analyzing the pros and cons of vaccine patent wafer. On May 7, Reuters reported some of the lawyers are saying that the discussion of patent wafer will effectively put pressure on drug companies to bargain. Basically to pressure the drug companies to produce more vaccines and also maybe offering licensing agreements with other drug makers. That way they can offer the vaccines at lower prices to developing nations. On April 28, 2021, BioNTech released a statement saying that waving the vaccine patent is not a solution because of various reasons. And I'll summarize the reasons why later on as well. On May 6, Reuters reported that Moderna was of the opinion that running the clinical trial, getting the data, getting the production approved and scaled, manufacturing. These are the things that generic drug makers will have to go through even if they can use the patents for building the COVID vaccines. And this process will take at least 18 months. And that's why the patent waiver is not the fastest way to resolve the vaccine shortage for the world. On October 8, 2020, actually quite a few months ago, Moderna already released a statement that they will not enforce the COVID-19 related patents against those making vaccines. Intended to combat the pandemic. And that's why any discussion about patent waiver is really a move point as far as Moderna is concerned. Because there's more than just a patent, but there's also to know how the raw materials and equipment that the drug makers will need to produce additional vaccines. And finally, on May 8, Reuters reported that the Biden administration is having second thought about patent waiver because they don't want to hand sensitive U.S. buyer pharmaceutical technology to China or Russia. And then after the EU leaders met during the weekend on May 8, they said that the U.S. must export vaccine doses before waiving patents. And that they're frustrated at what is perceived to be the U.S. attempting to claim moral high ground on the vaccine issues. Definitely the EU countries are still opposed to the vaccine patent waiver. Earlier this year, UNICEF published an article saying that the initiative COVAX under the UN has already secured over 2 billion doses of vaccine. And that's a good progress towards fulfilling the demand of the world population. And I incorporate this number also in my tables that I showed you earlier. This is a summary of what I gathered from these articles. First of all, when did it all get started? That was on October 4, 2020, when India and South Africa asked the World Trade Organization to waive the patent rules on COVID vaccines. So then it's being debated in the World Trade Organization. And then on May 5 of this year, Biden announced that he would support IP waiver. Three days later, Pope Francis offered his backing for patent waiver because of humanitarian reasons, certainly. And then Macron, Angela Merkel, Mario Draghi and the European Commission President all expressed their objection to IP waiver. So far, the EU has exported nearly half of the roughly 400 million doses it has produced. On the contrary, U.S. has exported much fewer doses. And U.S. has deployed the Defense Production Act to force manufacturers to fulfill domestic contracts ahead of other orders. The UK's contract with AstraZeneca also prioritizes UK requirements to the disadvantage of the rest of the world. And there are fast ways to make vaccines available to other countries. For example, expanding production capacities from the existing vaccine makers such as Moderna and BioNTech and Johnson & Johnson as well as AstraZeneca and specializing agreements for developing nations at lower prices. And without help from the leading COVID vaccine makers, the generic makers will have to develop and know how to scale up production. They will have to run trials and build supply chains from the ground up. It will take more than 18 months. Moderna and BioNTech recently scaled up the production plans for 2022 to actually not just three billions each, but I just read that it's four billion doses for BioNTech and three billion doses for Moderna. And that's a significant increase from the current capacity. The World Trade Organization will take months or even years to reach a consensus on how to waive the IT protection. Moderna already announced back in October 8th of 2020 that they will not pursue the COVID patent claims during the pandemic period. Main bottlenecks of vaccine production are not related to IPs. They are related to manufacturing equipment and source materials. Trials and errors by generic drug makers will waste essential materials that are already constraining production of more vaccines. And the continued WTO patent waiver discussions will pressure actually Moderna and BioNTech to scale up the production capacities faster. And that's why they already announced a significant increase in production capacity for 2022. My conclusions. First of all, if you have been watching some of my videos, you might have seen my videos on Moderna and BioNTech stocks. And in those videos, I only assumed 20.5% of the world population will be covered by the two vaccines with 2021 prices and some price reduction for 2022 and 2023. In fact, the new capacities planned by Moderna and BioNTech for 2022 will cover almost 40% of the world population. And that's why Moderna and BioNTech valuations won't be affected. If anything, my evaluation of Moderna and BioNTech will go up when this whole patent waiver discussion starts to settle down in the next few weeks. Now, stock prices, however, related to vaccines that are still in phase 2 or phase 3 developments and so far without emergency approvals from major countries will be more affected. For example, stock prices of CureVac or Novavax. Because at this point, the leading producers for Moderna and BioNTech, they have pre-emptively announced their capacity expansion, basically taking a big chunk of the market share away from these other emerging vaccine makers. Everybody now is racing against time. The discussion of patent waiver will put pressure on Moderna and BioNTech and auto-vaccine makers to license auto-vaccine makers so that they will increase production capacity quickly and to offer vaccines at lower prices for developing nations. And they need to do that within 6 to 12 months. Otherwise, once the patents have been waived, then many generic drug makers will be able to clear up for production within 18 months or 2 years. And it is therefore to Moderna and BioNTech's advantages to pre-emptively step up their production capacity and also secure the raw materials from making vaccines as a way from keeping the other drug makers from entering the mRNA sphere of technology. Now I'm assuming there will be a two tier pricing structure with tier one for developing nations at higher prices and tier two for developing nations at lower prices. As we already talked about, BioNTech and Moderna already stepped up their production plans in 2022 and they probably already secured raw material contracts in 2022. Because the raw materials are also a major bottleneck in the production process. There will be enough vaccines produced for 87% of the world population by the end of 2022 or sooner, as I have shown in my earlier table. And not everyone in the world will want to take the vaccine if 87% coverage will be more than enough. This is a point that none of the news articles has found out about yet. I only realized that when I put the numbers together, the most sought after patent wafer will be related, of course, to the mRNA technology. And it is therefore to their advantage for BioNTech and Moderna to step up the production capacity preemptively as a barrier to entry for their competition. Thank you for watching all the way to here. If you like what you've seen so far, please click the like, subscribe and notification button. And also if you're watching this video a few days after May 9th, I'd like to encourage you to look at the update section below this video in case I've entered any update notes. As usual, I will very much welcome your comments, questions and suggestions. I'd like to say that I'm not a financial advisor. I share my stock analyses and trading strategies for educational purposes only. You should make your own decision with regard to buying or selling stocks, and you should probably consult with your financial advisor before you do so. Just about wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.