In-depth: After a rough 17 years, is Biovac finally on track?
South Africa has struggled to secure adequate stock of urgently needed COVID-19 vaccines. This has raised questions about the state of the country’s local vaccine manufacturing capacity and why, after almost two decades of government support, South Africa’s partially state-owned vaccine manufacturer the Biovac Institute (Biovac) is not better positioned to respond to the pandemic.
What then did 17 years of state investment in Biovac get us? As often is the case, the answer is both more nuanced and more interesting than it might appear at first.
Started as a PPP
Until local pharmaceutical company Aspen Pharmacare’s recent announcement that it had secured a contract agreement with Johnson & Johnson (J&J) to fill and finish their COVID-19 vaccines, Biovac was the only vaccine manufacturer in South Africa and one of only a handful of vaccine manufacturers in Africa.
Biovac was created in 2003 as a public private partnership (PPP) between the National Department of Health (NDoH) and the private Biovac Consortium to prevent the loss of vaccine manufacturing capacity in the country following the closure of the State Vaccine Institute (SVI) in 2001. SVI was closed due to poor performance, decline of its facilities, and redundancy of its products.
National Treasury told Spotlight that the purpose of the Biovac PPP was “to revive the declining vaccine production in South Africa, build domestic capacity for the manufacturing of vaccines and ensure security of supply for government’s Expanded Programme on Immunisation (EPI)”.
Upon its establishment, Biovac inherited SVI’s former manufacturing facilities in Cape Town and secured an exclusive supply agreement with the NDoH for the procurement, storage, and distribution of vaccines used in government’s EPI schedule
The exclusive supply arrangement between the NDoH and Biovac, which was initially only intended to span four years, ended up lasting for 15 years—until the Biovac PPP was terminated in 2018.
Change to a JV
Biovac now exists as a joint venture between its government shareholders-the Department of Science and Innovation and its entity the Technology Innovation Agency (which holds 35 and 12.5 percent of Biovac’s shares, respectively); and its private partner, Immunotek. (The NDoH’s shares in Biovac were transferred to the DSI and TIA in 2014).
While Biovac has lost its PPP status and the exclusive supply arrangement that status provided, it continues to supply the bulk of vaccines used by the Department of Health having successfully secured 85 percent of the NDoH’s most recent R11.4 billion tender for the supply of childhood vaccines from June 2020 through December 2023.
Biovac’s role in responding to COVID-19
The urgent need for vaccines to combat COVID-19 and the country’s challenges in securing rapid and adequate supply have thrust a spotlight on Biovac, its manufacturing capabilities, and potential role in responding to the pandemic.
Media reports and government statements have highlighted Biovac’s efforts towards securing an agreement for local manufacture of COVID-19 vaccines. In October 2020, Reuters reported that Biovac was in discussions with the Coalition for Epidemic PrVeparedness Innovations (CEPI) regarding locally manufacturing components of COVID-19 vaccines for COVAX. Then in November 2020, President Cyril Ramaphosa announced that Biovac was in advanced discussions with an international manufacturer regarding producing components of the company’s COVID-19 vaccine locally.
To date an agreement for local manufacture of COVID-19 vaccine components by Biovac has however not materialised.
While Biovac has not secured an agreement for local manufacture, it has however been appointed by government to store and distribute vaccines imported from the Serum Institute India over the next three months. According to a recent Daily Maverick article, Biovac already distributes 25 million vaccines a year through its contractual arrangements with the NDoH. Utilising this existing capability, Biovac can store COVID-19 vaccines at required temperatures and rapidly distribute them to health facilities across the country.
But what is meant by vaccine manufacturing and what capacity exists within Biovac?
Vaccine manufacturing involves an assembly line of production processes and stages that often take place at different facilities before a final product is ready for delivery to patients.
The first and arguably most critical step is the manufacturing of active ingredients (known as antigens or immunogens) that elicit immune responses to ward off disease-causing pathogens – such as the virus SARS-CoV-2. Besides the active ingredient, some vaccines also contain chemical substances called adjuvants, which boost the body’s immune response, and stabilisers that improve the stability of the vaccine and determine its required storage temperatures and shelf life.
Each component or ingredient that goes into a vaccine may be produced at a different facility. Once all the required components of a vaccine are ready, they are mixed together in a process called vaccine formulation. The formulated vaccines are then shipped in bulk – typically in frozen liquid or freeze-dried forms – to fill and finish facilities which disperse the bulk vaccines into vessels (i.e. vials, injection, ampoules) for delivery to patients. Finally, the vaccines are packaged and labelled before distribution.
After a slow and bumpy start in entering the vaccine manufacturing space (more on this below), Biovac rejigged its strategy to adopt a reverse integration strategy. This approach seeks to progressively build capacity and raise financing for local manufacturing by starting at the end of the production line and working backwards.
As part of its reverse integration strategy, Biovac initially focussed solely on building capacity to package and label imported vaccines and, according to a June 2020 presentation by Biovac’s CEO Dr Morena Makhoana in Parliament, Biovac is now packaging and labelling five vaccines under cold chain conditions.
In its next step up the manufacturing value-chain, Biovac developed its capabilities to fill and finish vaccines locally through a technology transfer agreement with Sanofi for the fill and finish of Hexaxim. Hexaxim is a six-in-one childhood vaccine developed by Sanofi that provides protection against diphtheria, tetanus, pertussis, haemophilus influenza B, polio and hepatitis B. Biovac is currently the only company in the world with which Sanofi has undertaken a technology transfer arrangement for Hexaxim manufacturing.
Biovac received the required approvals from the South African Health Products Regulatory Authority for locally manufacturing (fill and finish) of Hexaxim in 2018 and began production of the product at its Cape Town facilities in November 2020. Makhoana explained to Spotlight “the Sanofi product comes in already blended 100L tanks, we then fill the product into vials under aseptic conditions”.
Following the launch of its first locally filled product, Biovac plans to introduce its first locally formulated product during 2021. Biovac has developed the capacity to locally formulate Prevenar-13 (which prevents childhood pneumonia) through a technology transfer arrangement with the pharmaceutical company Pfizer.
“The Pfizer product will come to Biovac in the form of API i.e. raw materials., we call them conjugates,” Makhoana told Spotlight. “Biovac will then blend each of the 13 ‘raw materials’ into one large formulation, test it and ensure that it passes the required criteria. We will then take the tank (same day or a few days later) and start filling the product into pre-filled syringes.”
The launch of locally manufactured Hexaxim, and the anticipated launch of locally manufactured Prevenar-13 shows that Biovac has made at least some concrete progress in recent years towards meeting its mandate of boosting local vaccine manufacturing capacity.
Yet, South Africa still does not have the capacity to produce the active ingredients for vaccines.
“We would have to start from scratch”
Stavros Nicolaou, Chairman of the B4SA Health Working Group and Senior Executive at Aspen, told Spotlight “we will never have true security of supply without vaccine active ingredient (antigen) manufacturing capability”. Nicolaou explained that South Africa does not have the capability to manufacture active ingredients for vaccines at this point. “It is something we would have to start from scratch.”
Makhoana noted that while South Africa has some know-how for active ingredient manufacturing within Biovac and at universities, as well as some physical infrastructure for this manufacturing, it does not currently have the capacity to produce active ingredients for vaccines on a commercial scale. He added that this is just not where South Africa is as a country and that, even for regular medicines, South Africa is almost entirely dependent on imports for active ingredients.
He said that building active ingredient manufacturing capacity for vaccines in South Africa will require substantial investments – in the billions of Rands – as costed in a recent feasibility study undertaken by Biovac.
Nicolaou said that the current length of NDoH tenders (which typically run from two to three years) are too short to incentivise the level of investment needed to develop these capabilities in the country.
A further challenge faced by any player seeking to enter the active ingredient manufacturing space is that vaccines encompass a broad and diverse array of products with different products and platforms requiring different technologies and capabilities.
Biovac’s pandemic readiness
Besides a lack of capacity to produce the active ingredients for vaccines, Biovac also does not have the capacity to produce vaccines at the scale required for pandemic response.
Makhoana told Parliamentarians in June 2020 that Biovac could potentially formulate, fill and finish 10 million vials and 12 million pre-filled syringes of COVID-19 vaccines in the next 12 to 18 months on the condition that it secured a technology transfer arrangement with an international vaccine manufacturer. (Although, he noted Biovac could not produce viral vector vaccines as it does not have the required biosafety levels).
Makhoana added that with “investment in a larger, flexible, containment facility required for pandemic readiness and possibly future HIV vaccines”, Biovac could potentially increase its annual production up to 50 to 100 million doses annually within the next four to seven years.
Makhoana told Spotlight that while investment is needed to expand manufacturing capacity to ensure pandemic readiness, seeking loans for financing this expansion presents a risk to the company. He questioned how loan repayments would be made in years when the excess capacity developed for pandemic readiness went unused. Government grants may therefore provide a more feasible pathway towards developing local capacity to respond to emerging pandemic threats.
Minister of Higher Education, Blade Nzimande during a media briefing on 18 January said, “We want to use this opportunity of acquisition of [COVID-19] vaccines to also put in place measures so that we can actually build our own local capacity for at least the production of vaccines and this is very important because our scientists are telling us that in fact we have entered the age of pandemics [and] that it’s very possible that even before the next 10 years we may be faced with another virus.”
Aspen pulls ahead
While Biovac has not yet secured an agreement for local manufacturing of COVID-19 vaccines, Aspen has emerged as a new player in the vaccine space having announced a contract with J&J to fill and finish their COVID-19 vaccines.
Unlike Biovac, Aspen already can fill vaccines at large scale. Nicolaou told Spotlight that the company was able to rapidly move into the vaccine formulation and filling space “because we have invested heavily in developing strong global sterile platforms”. Aspen has reportedly invested over R3 billion into building its sterile manufacturing capacity.
Nicolaou told Spotlight that, while Aspen has not yet agreed on what volumes of J&J vaccine candidate it will produce, the company has capacity to fill and finish up to 300 million vaccine doses a year.
But what about local supply?
While Aspen’s capacity to manufacture vaccines at scale dwarfs Biovac’s, a key shortcoming of Aspen’s agreement with J&J is that it does not include provisions for local supply. J&J retains control over who will receive vaccines manufactured in Aspen’s Port Elizabeth facilities. It was only after an outpouring of public anger and pressure that announcements were made that up to nine million J&J vaccines produced by Aspen may be retained in the country for domestic use. This, however, remains dependent on government securing an agreement with J&J for the procurement of these vaccines.
Biovac told Spotlight that unlike Aspen’s manufacturing agreement with J&J, it is seeking a licensing and technology transfer agreement. This type of agreement would not only build skills and capacity within Biovac but also enable the company to ensure that locally produced vaccines are retained and used locally and regionally.
A bumpy start
While Biovac has recently made significant advancements in developing local manufacturing capacity, its slow progress in building manufacturing capacity since its inception has frustrated stakeholders and damaged public trust in the entity.
Makhoana acknowledged to Spotlight that there is a public perception that the company has not delivered on its local manufacturing mandate, but stressed that this was due to a lack of public knowledge regarding progress made by the company, as well as a lack of understanding and tolerance for delays typical in the vaccine manufacturing space.
He told Spotlight that after Biovac moved into SVI’s old facilities in Cape Town “it became very clear after twelve months that we had to start from scratch”. “No authority would approve those facilities.” He added that raising financing for capital investments takes time, and the need for this was not anticipated prior to 2003.
According to Makhoana, the initial agreement with the NDoH was “way too ambitious” and significantly underestimated the capital investments required to make Biovac a viable vaccine producer.
In an evaluation of Biovac’s performance, the University of Pretoria’s David Walwyn and Adolph Nkolele argue that the early partnership between NDoH and Biovac (before government’s shares were transferred to the DST and TIA) resulted in tensions between the two parties and impeded progress towards local manufacturing.
Walwyn and Nkolele in an article published in the journal Health Research Policy and Systems write that “the NDoH has been openly and frequently critical of the [Biovac]-PPP”. The NDoH has previously raised concerns about the cost of vaccines procured through Biovac and the premium charged by Biovac for its services. It has also argued that the cost of building local manufacturing capacity should not be extracted from the budget for health service delivery.
As part of its exclusive supply contracts, Biovac has been permitted to charge a premium for its services (procurement, distribution, labelling) of between 10 and 20 percent of the purchase cost of vaccines. According to Walwyn and Nkolele, the net value of this premium was US$85.7 million between 2010 and 2015. They note however that funds raised through the premium were used to finance Biovac’s operations, and that Biovac’s net profit has typically been small and, in some years, even negative.
A further source of tension between the NDoH, National Treasury, and Biovac was the initial expectation that public procurement and the premium charged by Biovac could be leveraged to enable investment into developing manufacturing capacity.
For the most part, this has not occurred as Biovac’s premium has chiefly been used to pay for its services in delivering EPI vaccines, and the company has had to seek grants and loans to finance capital investments.
According to Walwyn and Nkolele, “The reluctance of the NDoH to make funds available, or to dilute its shareholding as a consequence of equity investments from other potential partners, was a major stumbling block to the realisation of the PPP’s undertakings.”
Biovac and the NDoH’s relationship was further strained in 2015 when the NDoH updated its EPI schedule to replace the stand-alone hepatitis B vaccine and the combination five-in-one Pentaxim vaccine with the six-in-one Hexaxim vaccine (which provides protection against the same diseases as Pentaxim, in addition to hepatitis B). This change effectively undercut Biovac’s years’ long effort toward local manufacturing of a hepatitis B vaccine.
In 2014, the NDoH’s shareholding in Biovac was transferred to the Department of Science and Technology and the Technology Innovation Agency and, in 2018, Biovac’s exclusive supply agreement with the NDoH ended.
The recent success of Biovac in securing the bulk of NDoH’s open tender for the supply of EPI vaccines from 2020 through 2023, may signal a new era of voluntary and synergistic collaboration between the two bodies.
Investment, governance, and transparency
Currently there is little information about Biovac’s governance, board, or finances in the public domain. And other than Walwyn and Nkolele’s hugely informative analyses, no other independent evaluations or performance assessments of the company could be found in the public domain.
In response to a request for Biovac’s annual reports, Spotlight was told, “Biovac is not a publicly traded company, these reports are not available to be shared.” And, in response to a request for access to Biovac’s recent feasibility study on API manufacturing, Spotlight was told the document could not be shared as it was proprietary to Biovac.
It seems that after a difficult start, Biovac is now making significant strides in building local vaccine manufacturing capacity in line with its mandate. At the same time, COVID-19 has renewed awareness and urgency regarding South Africa’s lack of preparedness and capacity to respond to pandemic threats and the country’s ongoing and risky reliance on other countries to supply critical health products.
Substantially expanded public investments into Biovac may now be merited and necessary to build local vaccine manufacturing capacity and improve South Africa’s pandemic preparedness. However, expanded public investment should be coupled with enhanced public transparency of Biovac’s affairs, which is necessary to ensure the company is held accountable for delivering on these public investments.