R&D World Index: More vaccine and battery R&D coming

The R&D World Index (RDWI) for the week ending January 29, 2021 closed at 4,182.63 for the 25 companies in the R&D World Index. The Index was down -3.07% (or -132.45 basis points) from the week ending January 22, 2021. The stock of four R&D World Index members gained value from 0.12% (Oracle) to 2.66% (Microsoft). The stock of 21 R&D World Index members lost value from -0.26% (Johnson & Johnson) to -8.59% (Ford Motor).

The International Monetary Fund (IMF) last week projected that global output is expected to grow 5.5% in 2021, up from the IMF’s October 2020 forecast of 5.2%. Last year’s initial estimate in October 2020 of a 4.4% 2020 overall global contraction was also revised by the IMF to 3.5%. China was the only major economy to grow in 2020, expanding by 2.3% driven by effective COVID-19 containment and strong economic support. The IMF expects the U.S. economy to grow by 5.1% in 2021 and Japan’s by 3.1%. Private-sector R&D investments are strongly linked to economic (GDP) growth and these data imply that R&D growth will see similar increases in 2021.

RDWI member General Motors announced last week that it will phase out all of its gasoline- and diesel-powered vehicles by 2035 which will be replaced by electric vehicles (EVs). GM’s petrochemical-powered vehicles currently account for 98% of all of its production. Research firm LMC Automotive predicts EVs will only account for 20% of global automotive sales by 2032. Approximately 3% of all global automotive sales in 2020 were EVs, according to EV Volumes. GM announced in November 2020 that it would raise its R&D investment in EVs by a third to $27 billion by 2025. GM also stated that the company would be completely carbon-neutral by 2040.

The dramatic transition to EVs has numerous companies investing in the R&D of battery-making capacities from 60-GWhr in 2020 to more than 400-GWhr in 2030, according to Benchmark Mineral Intelligence. South Korea’s LG Chem and SK Innovation are building large factories in the U.S. to expand American production of EV batteries. LG Chem is building its factory in a collaboration with GM in a now-closed GM automotive assembly plant in Ohio. Tesla is also expanding its battery production capabilities to reduce costs and shorten its supply chain by making some materials in-house. Tesla has also delayed the production of its large truck products indefinitely, citing the lack of batteries, which they don’t currently have the ability to supply. Each of their initially proposed electric long-haul trucks would need about five-times as many batteries as their average EV.

Moderna and Pfizer — the two leading suppliers of COVID-19 vaccines in the U.S. — have both issued statements that the current COVID-19 variants identified in the U.K. and South Africa had only small impacts on the effectiveness of antibodies generated by their vaccines. These statements are consistent with other preliminary results reported in recent weeks by several R&D groups examining the effectiveness of the vaccines against the new variants. These initial results do not indicate the need for new vaccines to address the emerging variants. The South African variant, B.1.351, had stronger reactions than the U.K. variant, B.1.1.7, and therefore R&D is continuing to evaluate these results.

RDWI-member Johnson & Johnson expects to submit the results of its 45,000-person COVID-19 vaccine Phase 3 clinical trials to the FDA this week for emergency approval. If approved and authorized J&J could deliver 100 million doses of the vaccine by the end of June. Potential advantages of this vaccine are that it only requires one inoculation, compared to two each for the Moderna and Pfizer vaccine, and it can be stored at standard refrigerator temperatures, compared to the ultra-low temperatures required for Moderna/Pfizer vaccines.

RDWI-member Apple sales surged in Q4 2020 to $111.4 billion, the first-time quarterly sales exceeded $100 billion, according to International Data Corporation (IDC). By doing this, the company also became the number-one global seller of smartphones, surpassing Huawei Technologies. Huawei sales collapsed under the weight of recent U.S. trade restrictions. Apple’s iPhone sales led the surge — a 22% quarterly increase — and the highest number of device shipments (90.1 million) by any vendor on record according to the IDC. In the same quarter, Huawei’s smartphone shipments fell by 42%, following a Q3 fall of 22%. Restrictions on Huawei’s ability to buy semiconductor chips and use American software has curbed supply of the company’s smartphones, prompting consumers to abandon the brand.

In similar news last week, RDWI member Facebook warned of challenges of friction with Apple, which Facebook is increasingly seeing as one of its largest competitors. While the current competitiveness focuses on add sales/tracking, Facebook sees future issues such as immersive computing and messaging, especially those that will be seen in Apple operating system updates in early 2021.

About the R&D World Index

R&D World’s R&D Index is a weekly stock market summary of the top international companies involved in R&D. The top 25 industrial R&D spenders in 2019 were selected based on the latest listings from Schonfeld & Associates’ June 2020 R&D Ratios & Budgets. These 25 companies include pharmaceutical (10 companies), automotive (6 companies) and ICT (9 companies) who invested a cumulative total of nearly 260 billion dollars in R&D in 2019, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D World’s 2021 Global R&D Funding Forecast. The stock prices used in the R&D World Index are tabulated from NASDAQ. NYSE, and OTC common stock prices for the companies selected at the close of stock trading business on the Friday preceding the online publication of the R&D World Index.