The coronavirus pandemic is ushering in a wave of innovation across industries, and it's not just the vaccine makers who are trying new things. Now that Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX), Moderna (NASDAQ:MRNA), and AstraZeneca (NASDAQ:AZN) have announced positive results from clinical trials, the next step is figuring out how to get their vaccines to patients. Venerable glass-maker Corning (NYSE:GLW) is one company that will be stepping up in the rush to get a vaccine to every corner of the globe.
Glass has been a problem for awhile
Medical glass is more difficult to manufacture than regular glass; Schott, Corning, and Nipro Pharma Corporation control the bulk of market share for the material used to make the special vials and syringes that are so critical to vaccine distribution. But since at least May, experts including Bill Gates, the CEO of AstraZeneca (NASDAQ:AZN), the head of the Coalition for Epidemic Preparedness Innovations (CEPI), and the director of the Biomedical Advanced Research and Development Authority (BARDA) have been warning that a shortage of medical glass would pose a serious problem when it came to the global distribution of a coronavirus vaccine.
Schott, the largest medical glass producer, has committed $1 billion to increasing capacity by 2025, but the virus is on a different schedule. And while the company's vice president of strategy and innovation said he was "surprised [a glass shortage] has been an issue," management elsewhere has been less sanguine. The chief business officer at SiO2 -- a small producer of vials and syringes -- reports many customers calling them after being turned away from the leading suppliers. SiO2 would certainly benefit from a shortage. The company holds a patent for a not yet approved substitute -- plastic containers with a microscopic pure glass coating. Corning confirms the shortage, saying they have been sold out for those without existing contracts for the past 18 months.
What is being done about it
SiO2 and others have been working on alternatives to the traditional borosilicate glass that has been the standard for so long. Borosilicate glass can shed microscopic fragments into a liquid at high temperatures, and invisible imperfections on the outside of the glass could potentially cause jams in high-speed production lines (say, for vaccines).
Corning's answer to these challenges is the Valor Vial, so named because the product is made from Valor Glass -- an entirely new category of glass with a unique chemical compound and strengthening process. It was the first new glass to be approved by the U.S. Food and Drug Administration (FDA) in over 100 years. Pfizer, maker of one of the most promising vaccine candidates, signed a purchase agreement for Valor Vials in May, and BARDA, under the Operation Warp Speed (OWS) program, granted the company $204 million to ramp up production. Management hopes to quadruple its output by the end of the year.
SiO2 is also getting funding. The company received $143 million as part of OWS to boost production of its vials and syringes. The additional demand has business booming. SiO2 has doubled its sales forecast this year and seen the number of clinical trials with its vials jump from seven before 2019, to 41 today.
How are things shaping up?
Companies in the medical glass industry seem generally confident they can meet the demand. But that was also the case regarding personal protective equipment (PPE) early in the pandemic, and since then we've seen shortages across the country and the world.
When vaccines begin rolling off of production lines in the next few months, we'll know for sure whether the capacity is there. Schott, Corning, and others will certainly be tested, as will stopper manufacturers like West Pharmaceutical Services.
Although the challenges will be great, I believe Corning (and others) are in a solid position. Corning's shares would be at an all-time high right now if not for the peaks they reached during the dot-com bubble. Last year, sales reached an all-time high in 2019 of $11.5 billion, but operating income matched the lowest total since the Great Recession. Despite the rocky history, investors should keep their chins up. The market is anticipating strong demand for Corning's innovative medical glass for the foreseeable future.
I believe this stock could be a good buy for healthcare investors today. Coronavirus vaccines (and plenty others) will continue to be produced and distributed for years to come, and Corning is set up to help pharmaceutical companies curb the pandemic, and replace a century-old part of the global vaccine supply chain.