In a world with companies like Walmart sitting on inventories of more than $46 billion, it’s hard to imagine that 2020 will become known as the “year of shortages.”
Back in March and April, we all know the story; you couldn’t get your hands on toilet paper.
By May and June, odd shortages popped up in things like yeast for an unexpected breadmaking fad sweeping the world.
Now, we face a different and potentially much direr set of shortages.
With three different vaccines coming to market in the next month or two, specialty medical products have been in focus. First, stories about special freezers for storing the vaccines started popping up.
Now, as we near crunch time, it’s the vials themselves in severe shortage.
It seems like a relatively easy task to just make a few million extra glass vials to put these vaccines in. But regular glass won’t do.
For the last 100 years, borosilicate glass was the only approved material to store such things. And there’s a shortage of those.
But as 2020 is the year of the shortage, it is also the year of innovation.
One of the world’s largest medical vial makers recently got a new material approved.
Corning Inc. (NYSE: GLW) launched the “Valor Vial” and has already been applauded for this development.
Back in May, the company signed a deal with Pfizer to use those new vials, which are made through a brand-new strengthening process with unique chemical compounds, for the eventual vaccine.
Since Pfizer is among the early winners of first-to-market vaccines for COVID, it stands to reason Corning hit the jackpot.
So, what does this mean for investors?
While the vaccine doesn’t need to be stored in this new type of vial, the rest of the market isn’t prepared either.
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In fact, there’s a huge shortage of medical vials of all sorts. The vice president of strategy at Schott, the largest medical glass producer, was even shocked that demand is so high.
As of right now, all of the majors, including GLW, Schott, West Pharmaceutical Services and upcoming SiO2 are entering crunch time. SiO2, a much smaller private company is on the verge of launching its own new type of vial using plastics with just glass coatings.
In any event, this is a situation where the competition these companies face isn’t with each other. Instead, they are all competing against time.
Just yesterday, Pfizer reported supply chain problems limiting the number of vaccines it can produce this year. It planned on making 50 million doses by the end of the month. Now, it looks like it will fall far short.
Not all of this supply bottleneck is due to vials. But it is likely one of many issues the “Operation Warp Speed” program will face.
Corning and its counterparts are now entering a panic mode to produce more vials.
Some, like Schott, seem desperately behind the game. It is spending $1 billion to ramp up production. But experts expect that will take years, not the months we have.
Corning, for its part, seems like the best viable play here. Along with its supply contract with Pfizer and its new patented glass vial, Corning was also granted $204 million in government money to get things going under Operation Warp Speed.
The company isn’t cheap. It has already had a stellar year, doubling from its March lows.
But in the short term, with the pressure on and shortages hitting headlines, there’s still room for it to double again.
I can’t recommend you hold this play long term. But in the immediate landscape, it is a strong emerging profit opportunity to play yet another 2020 supply shortage.