On Dec 23, 2020, the government of Singapore announced that Singapore vaccines from Moderna, Pfizer-BioNTech and Sinovac Biotech have been purchased. The Pfizer-BioNTech vaccine needs to be stored at temperatures of minus-70 degrees Celsius (–70°C), which cannot be attained by ordinary freezers. Moderna’s vaccine is a little less demanding and can be stored in freezers of –20°C.
These vaccines need to be transported and stored in ultra-freezers and freezers. On the other hand, the AstraZenecaOxford vaccine can be stored at a regular refrigerator temperature of between 2°C and 8°C, just like flu vaccines. That means they can be transported in cool containers. They are more affordable than the Pfizer and Moderna vaccines and are probably more appropriate for emerging markets.
Even then, shipping these vaccines is a challenge, and logistics companies will have to rely on temperature-controlled unit load devices to meet Iata’s strict temperature control regulations. Used properly, these cool containers prevent the cargo from exposure to higher or lower temperatures than permitted.
For investors, while Covid-19 play has focused on the biotech or pharmaceutical companies producing the vaccines, that is just one part of the vaccine value chain. Logistics and ultra-low freezers are important components as well.
This is evident in the Biden administration’s five-point plan to vaccinate the US population. President Joe Biden has said he would use the Defense Production Act to increase production of items related to vaccine distribution, such as syringes and protective equipment. Hence the value chain of vaccination can be quite extensive.
First off, the pharmaceutical industry transports a vast range of products around the world every day. These are: biologics (eg, vaccines, blood, genes and tissues); prescribed drugs (eg, opioids and stimulants); over-thecounter medicines; and raw materials and bulk pharmaceuticals.
Temperature-controlled containers are key as many pharmaceuticals can be damaged by temperature changes, sunlight or humidity. Biological products, especially vaccines, require careful handling, and cold chain management and ultra-low temperature freezers are able to keep these items stable.
Bringing vaccines to Singapore
According to the government announcement on Dec 23, the planning group for the vaccines collaborated with the vaccine producers to ensure that delivery schedules were met, including roping in national carrier Singapore Airlines (SIA), so that there were flights from airports near where the vaccines were produced.
When the vaccines arrive in Singapore, they will be kept in cold chain facilities, where they can be stored for months. Following that, the vaccines will be transported to the sites where they will be administered.
“There are also ongoing efforts to establish vaccine production facilities in Singapore. Thermo Fisher Scientific (ThermoFisher), one of the world’s largest life sciences companies, recently announced that it would establish a new US$130 million ($173 million) facility in Singapore in 2022. Several other companies are also in the final stages of talks to invest in new vaccine production plants here,” the government announcement said.
The government statement highlighted two companies involved in the vaccine value chain, SIA and ThermoFisher. In addition to SIA, SATS owns cold chain facilities at various air hubs, but largely for its food business. Unlisted ST Logistics is also likely to own cold chain facilities. Most likely, the vaccines will be stored in specialised cold facilities. So far, no locally listed company owns only cold facilities, or produces ultra-low temperature containers or freezers.
According to a Dec 30 report by Cushman & Wakefield, a cold storage facility in Buroh Lane was acquired by a real estate fund for $194 million in 2017, translating into $301 psf on gross floor area (GFA). The property has a GFA of 645,538 sq ft. In 2019, a food factory with cold storage was acquired for $32 million or $325 psf.
Among the S-REITs, ARA Logos Logistics Trust owns Alog Cold Centre, which spans 344,681 sq ft. It contributed $11 million or 9.7% to total rental revenue of $113 million in FY2019. In December 2020, Alog acquired two cold storage facilities as part of its $404 million acquisition of logistics properties in Australia which will be completed at end-January. Of these, the Brisbane property is still under development and will be leased to Teys Australia, while a property in Victoria is leased to Lineage Logistics.
Elsewhere, Mapletree Logistics Trust owns four cold storage facilities, one each in Hong Kong and China, and two in Korea. ESRREIT owns 6 Chin Bee Avenue with 324,166 sq ft which is master-leased to a food company for cold storage.
The only pure-play cold storage and coldchain logistics owner is New York Stock Exchange (NYSE)-listed, Atlanta-based Americold Realty Trust. It owns and operates 185 temperature-controlled warehouses, with over one billion refrigerated cu ft of storage, in the US, Australia, New Zealand, Canada and Argentina as of Sept 30, 2020. For Singapore- or Asian-based investors, there is a 30% withholding tax on distribution.
Ultra-low temperature freezers
Manufacturers such as NYSE-listed ThermoFisher produce ultra-low temperature freezers. Some of the models have storage capacity of 40,000 to 60,000 2mL vials. However, in April 2019, ThermoFisher launched its range of ultra-low temperature freezers with specific models getting to temperatures of as low as –86°C, and these are able to safely store products at between –50°C and –80°C.
Ultra-low temperature freezers are categorised based on their degree of cooling, from –41°C to –86° C freezers, and –87°C to –150°C. Among these, –41°C to –86°C freezers form the largest segment due to the growing technological advancements in these types of freezers. The –41°C to –86°C freezers are safe for long-term storage for the pharmaceutical products and samples, according to Market Research Future.
Demand for ultra-low temperature freezers has increased in recent years due to increasing demand for temperature-sensitive biological products storage, says Market Research Future. Factors such as the presence of major healthcare manufacturers, R&D facilities and rising healthcare spending in the industry have opened up new opportunities for the ultra-low temperature freezers manufacturers, according to Market Research Future.
“Global ultra-low temperature freezers’ market is expected to register a CAGR of 5.67% from 2020 to 2027 and reach US$989.44 million for 2027,” it says. Avantor — also listed on NYSE — has a presence in Singapore, following Avantor’s acquisition of VWR Corp in 2017. VWR’s products include ultra-low temperature freezers of down to –86° C.
Carrier Global Corp — which is better known for its heating, ventilation and air conditioning (HVAC) products — is present in important aspects of cold-chain management, including the manufacture of transport refrigeration and commercial refrigeration.
Carrier’s sales of US$5 billion for 3QFY2020 ended Sept 30 were up 4% y-o-y, including 3% organic sales growth. The growth was largely driven by record demand in North America residential HVAC, which was up 46% y-o-y, according to the company. Most businesses saw sequential improvement from the second to the third quarter, Carrier adds. Operating profit in the quarter of US$1.08 billion was up 72% q-o-q and adjusted operating profit of US$867 million was up 6% q-o-q.
“Carrier is well-positioned across key trends in healthy, safe and sustainable building and cold chain solutions, and we continue to lean into the opportunity to be the leading one-stop shop,” says Carrier CEO Dave Gitlin.
Dry-ice makers
Linde is a gas producer offering a range of dryice solutions. Dry ice is made from carbon dioxide. Linde sells the Icebitzzz brand in many countries, used for transport cooling, event catering, special effects at events, courier services, in-flight catering and cleaning. Linde also supplies a range of refrigerants. In 3QFY2020 ended Sept 30, excluding acquisitions, Linde’s adjusted income from continuing operations rose 8% y-o-y to US$1.14 billion, and 13% q-o-q.
Adjusted earnings per share rose 11% y-o-y and 13% q-o-q to US$2.15. Air Liquide, the second largest global gas producer after Linde, also makes dry ice as part of its product base. Its revenue for 3QFY2020 ended Sept 30 fell 0.9% y-o-y to EUR4.98 billion ($8.03 billion). Linde’s share price is up 46% in the last 12 months, outperforming Air Liquide’s share price which has gained just 4% during the same period. Elsewhere, ThermoFisher’s share price is up 41%, while Carrier has gained 39% in the past 12 months. The best performer is Avantor, up more than 51%.
