Considerations
for Commercially
Viable Vaccine
Manufacturingin Africa
A PUBLICATION JOINTLYAUTHORED BY BDO USA
AND KROLL

Calls to enhance African vaccine manufacturing
capabilities have been amplified in recent years as inequity
in vaccine access during the COVID-19 pandemic exposedconstraints of the current supply landscape.
Stakeholders have responded by considering whether governments, non-governmentalorganizations, and/or charitable organizations should complement private investment
and facilitate the development of African vaccine manufacturing capabilities. A key
aspect of assessing commercial viability of African vaccine manufacturing is cost.
Specifically, it is necessary to understand whether facilities in Africa could produce
vaccines that may be sold at a price that is both sustainable for the manufacturer andaffordable for developing markets.
In the global public health context, a per-dose cost difference of just a few cents canimpact procurement decisions, especially considering that vaccine volumes can reachhundreds of millions of doses. Various stakeholders have commissioned studies toanalyze questions around cost and whether effective, quality assured vaccines producedin Africa can be cost competitive with existing offerings, which for certain vaccines may
include products sourced from experienced, commercial-scale manufacturers in low-costlocations (e.g., China, India).
Pursuant to these questions, Kroll and BDO have developed a series of economic models
aimed at estimating fully loaded production costs for several vaccines in Africa undera range of hypothetical scenarios. The analysis concluded that it is possible for vaccine
production in Africa to be cost competitive in the long term but only if certain strategies
are employed and certain circumstances are met. The below outlines the considerations
for achieving cost competitive manufacturing in Africa and the potential pitfalls that
may lead to excessive cost premiums.

2CONSIDERATIONS FOR COMMERCIALLY VIABLE VACCINE MANUFACTURING IN AFRICA

Maximize Facility Scale while Maintaining High Utilization
For certain established vaccines, existing commercial
scale manufacturers are producing upwards ofhundreds of millions of doses per year and have set
a low-cost benchmark. Many of these manufacturers
benefit from substantial domestic demand (e.g., India,China, Indonesia) in addition to export demand. Cost
competitiveness with such manufacturers will therefore
require similar economies of scale (and/or realizing
relative savings through other means).
All else equal and assuming traditional methods ofvaccine production, costs such as labor and depreciationof capital expenditures typically scale at less thana one-to-one ratio with increases in facility capacity;
for example, it might be the case that the primarydifference between a facility designed to produce 50M
doses per year (Scenario 1) and a facility designed toproduce 300M doses per year (Scenario 2) is just the sizeof the equipment (e.g., bioreactors) and the associatedinfrastructure (e.g., utilities, warehouses) and that theprocess itself would otherwise be identical. In such acase, there would be limited increases in labor (because
effectively the same functions would be required) andcapital expenditure, but the associated costs would
be spread over several times as many doses, leading
to a lower cost per dose at capacity. As such, larger
scale facilities will always be cheaper than otherwise
equivalent smaller scale facilities assuming production
at sufficiently high utilization.

3That said, it is important to construct a facility that aligns with a vaccine’s demand. The 300M facility in the above
example would be more expensive to construct and operate on an absolute basis (as opposed to per-dose basis),
so if demand is only 50M doses per year, the per-dose cost for this facility would be significantly more than anotherwise equivalent facility designed for 50M doses per year (Scenario 3). This effect is demonstrated in the table below:

OTHERWISE EQUIVALENT FACILITIES AT 50M AND 300M DOSE/YEAR CAPACITIESSCENARIO 1

SCENARIO 2

SCENARIO 3

Facility Capacity

50M

300M

300M

Annual Depreciation

$3.0M

$5.0M

$5.0M

Production Volume

40M

240M

40M

Facility Utilization

80%

80%

13%

Depreciation Cost Per Dose ($)

$0.08

$0.02

$0.13

CONSIDERATIONS FOR COMMERCIALLY VIABLE VACCINE MANUFACTURING IN AFRICAAs shown, the potential savings from a larger facility is contingent on there being
sufficient demand such that the facility is well utilized. When under-utilized, vaccine
doses from a large production facility can be more costly than doses from smaller
but highly utilized facility. As a point of comparison, UNICEF’s purchase price formeasles was under $0.50/dose in 20221, so the magnitude of the cost fluctuations
between the three scenarios presented has potential to create significant premium
on a relative basis.
To best realize economies of scale, African production would be most suitablefor vaccines with current unmet (or available) demand such that the facility canconsistently achieve high utilization while producing at a capacity that rivals (orexceeds) that of existing competitors. In a paper published in November 2022,
Gavi identified cholera, measles-rubella, yellow fever, and malaria among thediseases with clear market health need for additional vaccine manufacturers.2
Further, over-diversification of suppliers will not allow any one manufacturer tocapture sufficient demand to realize economies of scale. For example, if in theabove table there is initially 250M of unmet demand, the lowest cost result would
be concentrating demand to align with Scenario 2 rather than splitting demand
between multiple manufacturers that would then align with Scenario 1 (or Scenario
3). To mitigate potential cost premia, it might be cost effective to concentrate
manufacturing capabilities in fewer manufacturers that each supply vaccines
beyond their national borders (e.g., regionally, through the continent). Additionally,
if new market entrants capture too much of the market share currently held byexisting vaccine manufacturers, it could create a circumstance in which all market
participants forgo economies of scale (i.e., if competition pushes all manufacturers
represented by Scenario 2 towards Scenario 3) and vaccine costs increase globally.

1 https://www.unicef.org/supply/media/6986/file/Measles-vaccinesprices-30092021.pdf
2 Expanding sustainable vaccine manufacturing in Africa: Priorities for Support.
Gavi: The Vaccine Alliance. November 2022.

4

CONSIDERATIONS FOR COMMERCIALLY VIABLE VACCINE MANUFACTURING IN AFRICA

DEVELOP LOCAL LABOR CAPABILITIESTARGET REGIONS WITHOUT PRACTICAL CONSTRAINTS

Vaccines differ in their labor intensity, but for certain
vaccines the cost of labor can be a significant driverof costs. Labor costs in Africa vary widely but in certain
cases, African manufacturing has the advantage of lower
cost labor compared with incumbent manufacturers.
However, the benefits of this are only realized if thefacility can be staffed predominately with local labor.
If a facility is forced to rely on expat labor (i.e., importing
employees from other regions) it is likely that these laborcosts will be significantly more expensive given that
expat labor would need to be sourced from a separate,
likely costlier, market, and require a relocation premium.

Supply chain and infrastructure constraints should be considered. These can impact the procurement prices
of input materials, transportation of those materials, as well as utilities (water, electricity, natural gas, etc.).
The impact of these constraints can also be magnified if they require the manufacturer to incur incremental costs(e.g., material importation tariffs) or a process change. For example, without reliable access to potable watera manufacturer may need to use disposable (rather than stainless steel) equipment or incur significant costs
to generate high-quality water required to clean the equipment. For certain vaccines, disposable processes
cannot be operated at the same scales as stainless processes and thus would require duplication ofsmaller-scale lines to achieve the same capacity (i.e., scaling out vs. scaling up), leading to higher
fixed costs. As such, when comparing manufacturing costs across regions, it is important toconsider not just differences in cost inputs but also whether practical considerations
would lead to new cost categories or even wholesale process changes.

A feasible solution for regions where qualified local
staff is limited could be a hybrid approach in which thefacility is staffed with a mix of local and expat laborthat increasingly shifts towards more local labor ascapabilities are developed. Under such an approach,a facility in a region with low labor costs could eventuallyrealize a savings from relatively lower annual laborcosts compared to competitors once the facility is able
to be staffed with a largely local workforce and avoid thecost premia associated with a staffing model reliant onexpat labor.

5CONSIDERATIONS FOR COMMERCIALLY VIABLE VACCINE MANUFACTURING IN AFRICA

Harness Manufacturing Advances toCapture Economies of Technology
Advances in manufacturing technology can offer the opportunity for comparative cost savings due to higher-yielding
processes, smaller footprints, or greater automation. Leveraging cost saving technology is a potential means of offsetting
premia (e.g., caused by differences in scale, expat labor) compared with low-cost incumbent manufacturers that use
established technology. The example in the table below presents the results of two cost models for the same vaccine
but where one assumes a larger scale with traditional technology and the other assumes a smaller scale with novel
technology that is more productive (e.g., reducing raw materials per dose), more automated (e.g., reducing laborand overhead per dose), and smaller in footprint (e.g., reducing depreciation):

NEW TECHNOLOGY CAN OFFSET COST ADVANTAGES FROM ECONOMIES OF SCALEHIGHER SCALE - EXISTING TECHNOLOGYSMALLER SCALE - NOVEL TECHNOLOGY

300M

50M

VolumeTotal Cost

Cost per Dose

Total Cost

Cost per DoseRaw Materials
and Consumables

52.5M

$0.18

4.8M

$0.10Labor

6.6M

$0.02

2.3M

$0.05

Depreciation

2.2M

$0.01

1.3M

$0.03

Overhead

2.7M

$0.01

2.3M

$0.05

Total

64.0M

$0.21

10.7M

$0.21

As shown above, the novel technology can offset the benefit of economies of scale realized by the facility with theexisting technology.

6CONSIDERATIONS FOR COMMERCIALLY VIABLE VACCINE MANUFACTURING IN AFRICA

Conclusions
Developing commercially viable vaccine manufacturing capabilities in Africa is notwithout its challenges, but there are steps that can be taken to avoid pitfalls and achieve
cost competitiveness. The following should be considered:
Production at similar high utilization of large-scale facilities will benecessary for cost competitiveness, even if that means limiting the scopeof Africa manufacturing to vaccines where sufficient demand exists andconcentrating manufacturing.
Lower-cost labor, which may exist in certain jurisdictions in Africa,
can reduce production costs, but it will require predominantly employing
a trained local workforce at least in the long-term.
New technologies can reduce production costs compared to existing
technology being used by mature commercial manufacturers and can help
mitigate other premia from production in Africa.
There may be practical constraints to establishing manufacturing
capabilities in certain regions in Africa (e.g., unreliable utilities, lack ofclean water, tariffs/taxes) that should be considered when selecting
facility locations.
With these steps taken, sustainably priced local manufacturing capabilities
in Africa can be a reality.

7

CONSIDERATIONS FOR COMMERCIALLY VIABLE VACCINE MANUFACTURING IN AFRICA

BDO AUTHORSKROLL AUTHORSRICK STOCK
Director
rstock@bdo.com

STEFANIE PERRELLAManaging Director
stefanie.perrella@kroll.com

ALEXA KOPF
Managerakopf@bdo.com

ZACHARY HELD
Directorzachary.held@kroll.com

CLAYTON POWELLManagerclpowell@bdo.com

JOE STEMPEL
Vice President
joe.stempel@kroll.com

TAD THOMASManaging Director
tcthomas@bdo.com

JAMES PARKAnalyst
james.park@kroll.com

NEAL GORDON
Independent Contractor
ngordon@bdo.com​​​​​​​ BDO, our purpose is helping people thrive, every day. Together, we are focused on delivering exceptional and sustainableAt
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Disclaimer
This article is based on research funded by theBill & Melinda Gates Foundation. The views
expressed herein are solely those of the authorsand do not necessarily reflect the views of theBill & Melinda Gates Foundation.