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equest that the Minister of Finance give an indemnity in favour of
Novavax under section 65ZD of the Public Finance Act 1989
Introduction
1.
Novavax has offered New Zealand 5.36 million courses of its vaccine candidate
(known as NVX-CoV2373) 9(2)(ba)(i) & (ii)
. This is
considered sufficient for broad population cover in New Zealand and Polynesia,
factoring in 15 percent for wastage.
2.
This vaccine will cost
cou
9(2)(ba)(i) & (ii)
rse and, if successfully developed and delivered, will
cost
9(2)(ba)(i) & (ii) million (which requires a total of
9(2)(ba)(i) & (ii) million to be set aside to include
headroom to manage foreign exchange risk)1. 9(2)(ba)(i) & (ii)
3.
The candidate adds an established vaccine type to the portfolio – it is a protein sub-
unit and adjuvant vaccine administered intra-muscularly in two doses2. An adjuvant
enhances the body’s immune response and the combination is long established, and
used, for example, in the hepatitis B vaccine in New Zealand. However, neither the
component that provokes the immune response nor the adjuvant used in this vaccine
are used in any licensed vaccines, so this technology platform is untested outside
clinical trials.
4.
Officials believe there is a strong rationale to sign the purchase agreement because:
a.
From very early information, the vaccine appears to provoke a good immune
response and studies in non-human primates show that it has some potential to
reduce transmission.
b.
This purchase would add an established and sought after vaccine type to our
portfolio, increasing the technology diversity of the portfolio from two to three
vaccine types. A protein sub-unit vaccine was identified by the Vaccine
Taskforce as important for the portfolio and alternatives would not provide
sufficient cover.
c.
The purchase is also for sufficient courses to achieve wide population cover.
There is only one vaccine in the ‘core portfolio’ that could achieve this and there
are no alternatives in the group prioritised by the Vaccine Taskforce that could
provide wide population cover.
d.
While there are inherent risks to the delivery time of all vaccine candidates,
delivery is expected to start from 9(2)(ba)(i) & (ii)
. This timeframe is
suitable for the immunisation programme. 9(2)(ba)(i) & (ii)
1 The sale price is denominated in USD and the vaccine costs 9(2)(ba)(i) & (ii)/course. Using today’s indicative
NZD USD exchange rate of 0.6595 the estimated cost of each vaccine is
.
9(2)(ba)(i) & (ii) There is a
foreign exchange risk because the price is denominated in USD, and the Treasury have
recommended including headroom of
m
9(2)(ba)(i) & (ii)
illion to address that risk
2 The candidate works by presenting an antigen, constructed using part of the COVID-19 virus, to the
immune system. The antigen elicits an immune response to the disease.
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9(2)(ba)(i) & (ii)
.
e.
It is expected to be straightforward to deliver using familiar cold chain systems.
f.
9(2)(ba)(i) & (ii)
g.
We have negotiated terms that we believe are satisfactory, and are in line with
global trends for COVID-19 vaccine advance purchase arrangements.
9(2)(ba)(i) & (ii)
h.
Other advanced economies have purchased this vaccine candidate. Together,
the USA, the UK, Canada, Japan, and Australia have arrangements to purchase
over 270 million courses of this vaccine candidate3. The European Union is in
preliminary talks. Many of these countries have used similar purchase
frameworks to ours, using their experts to interrogate the early science results,
trial designs and manufacturing programmes.
5.
The supplier is an inexperienced pharmaceutical supplier, and therefore the purchase
carries a higher level of delivery risk than previously concluded agreements. However,
we are confident that they will be able to manufacture at scale and deliver the vaccine.
6.
The terms of Novavax’s offer to sell the vaccines to New Zealand are contained in the
legally binding Advance Purchase Agreement (APA) attached as Annex One.
9(2)(ba)(i) & (ii)
7.
As part of the APA Novavax is seeking an indemnity from the Crown 9(2)(ba)(i) & (ii)
9(2)(ba)(i) & (ii)
8.
Novavax is seeking an indemnity because:
(a)
they are developing the vaccine in accelerated clinical trials that are less likely
than non-accelerated trials to detect uncommon adverse effects or possible
contraindications;4
3 The USA has purchased 50 million courses, the UK has purchased 30 million courses, Canada has purchased
48 million courses, Japan has purchased 125 million courses, and Australia has purchased 20 million courses.
4 Novavax will provide Medsafe with full clinical trials information when they apply for regulatory approval. Study designs and
regulatory approaches will vary between COVID-19 vaccine applicants, but most trials will be shorter in length and study fewer
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9(2)(ba)(i) & (ii)
9.
This document sets out the business case for the indemnity that we have negotiated,
taking into account advice from our external legal adviser Bell Gully.
Background
10. It is not unexpected for pharmaceutical companies to seek indemnities from
governments in circumstances where clinical trials are restricted, or approval is
granted before full trials are completed.
11. The Minister of Finance granted an indemnity in favour of Pfizer/BioNTech on 5
October and signed a deed of indemnity in favour of AstraZeneca on 7 December,
both as part of purchase agreements for COVID-19 vaccines.
12. Indemnity clauses are also common in APAs between pharmaceutical companies and
governments internationally for the supply of pandemic influenza vaccines. The
Minister of Finance has given an indemnity in relation to influenza vaccine on four
occasions.
Our aim in negotiations on indemnity is to minimise the Crown’s liability
13. In order to minimise the Crown’s liability, in negotiations with pharmaceutical
companies we are seeking 9(2)(j)
9(2)(j)
Scope of the indemnity
people than what is typical. The impact is a reduction in the known safety profile of the vaccine (noting that there is some risk
in this area even with comprehensive trials).
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9(2)(ba)(i) & (ii)
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9(2)(ba)(i) & (ii)
17. Bell Gully has provided the following explanation of the provisions:
9(2)(h), 9(2)(ba)(i) & (ii)
5
9(2)(h), 9(2)(ba)(i) & (ii)
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9(2)(h), 9(2)(ba)(i) & (ii)
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9(2)(h), 9(2)(ba)(i) & (ii)
24. A table comparing the Novavax, Pfizer, Janssen and AstraZeneca indemnities is
attached at Annex Two.
9(2)(ba)(i) & (ii)
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9(2)(ba)(i) & (ii)
Exposure, risk and mitigation
9(2)(h), 9(2)(ba)(i) & (ii)
ACC wil cover most of the Crown’s liability for adverse effects associated with use of the
vaccine
28. ACC can cover personal injuries arising from the administration of a vaccine by a
registered medical professional.6 Costs to ACC related to use of the vaccine in New
Zealand will arise regardless of the provision of contractual indemnity.
The liability associated with claims not covered by ACC is relatively low-risk
29. Bell Gully has advised that “overall, the risks associated with claims
9(2)(h), 9(2)(ba)(i) & (ii)
which would not be covered by the AC Act
seem likely to be relatively low (particularly when assessed against the risks of not
accessing a vaccine), with the Crown able to take certain steps to protect its position
as far as possible. However, the exact risk in each case will depend upon the nature
of the vaccine (including its efficacy and side effects) as well as how widely the
vaccine is ultimately used in the population.
9(2)(h), 9(2)(ba)(i) & (ii)
6 Access to cover depends on the circumstances of the injury – including that there must be a clear causal link between the
treatment and the injury, and the injury must not be a necessary part or ordinary consequence of the treatment.
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9(2)(h), 9(2)(ba)(i) & (ii)
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9(2)(h), 9(2)(ba)(i) & (ii)
9(2)(h), 9(2)(ba)(i) & (ii)
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9(2)(h), 9(2)(ba)(i) & (ii)
9(2)(j)
9(2)(j), 9(2)(ba)(i) & (ii)
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9(2)(j), 9(2)(ba)(i) & (ii)
38. Bell Gully advises that it is not possible at this stage to estimate the maximum potential
liability the Crown could incur under the Novavax indemnity because “there remains
too great a range of uncertainties, including around the risks associated with the
vaccine and its side effects, its physical properties and how it will be deployed in New
Zealand.”
There are measures in place to mitigate the risk of injuries
39. As noted above, ACC cover is likely to be available for most injuries caused by the
vaccine. Injuries could also, however, result in claims not barred by the Accident
Compensation Act – for example claims for 9(2)(ba)(i) & (ii)
– though as noted
above, Bell Gully considers these risks to be relatively low.
40. Measures to mitigate the risk of injuries include:
Medsafe will be undertaking a
risk-benefit assessment as part of the regulatory
approval process to ensure the vaccine meets internationally accepted criteria for
safety, quality and effectiveness. Medsafe will also be seeking its own independent
expert advice and will work with regulators globally (eg the US Food and Drug
Administration, European Medicines Agency and Australian Therapeutic Goods
Administration) to assess the safety and efficacy of the vaccine.
9(2)(ba)(i) & (ii)
Medsafe is developing a strategy for
monitoring the vaccine once it is being used.
This may include adverse reaction reporting, active monitoring (via SMS text and real
time analysis), requirements on companies to provide adverse reaction information
globally, and sharing monitoring data with other regulators to identify safety issues.
This monitoring will allow Medsafe to take timely action if a safety issue emerges.
Replacement of the National Immunisation Register with a new
National
Immunisation Solution (expected in Q1 2021) to monitor who has received doses
of the vaccine.
Requirements on the supplier to have a
risk management and post-marketing
surveillance programme 9(2)(ba)(i) & (ii)
We are working to mitigate additional risks associated with the indemnity
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41.
A key aspect of our communications and engagement approach is to
acknowledge
that public expectations of potential vaccines may be unrealistic, and to
actively
manage these expectations as part our stakeholder and public communication. This
will help to mitigate the risk of any claims relating to an ineffective vaccine or negligent
misstatement.
42. The indemnity could
reduce public confidence in the vaccine and therefore reduce
uptake. This might cause a flow-on in
reduced public confidence in vaccines in
general, potentially reducing immunisation rates for other diseases. This could
ultimately result in reduced public confidence in the government and the health
system.
43. To mitigate this risk, which will apply to all indemnities in APAs, we are seeking to limit
the scope of indemnity provisions as far as possible. In addition, we will develop key
messaging that provides context around the potential issue of indemnity in the event of
public or media interest (noting that the indemnity will be public knowledge at some
stage because the Minister of Finance is required to table a statement about the
indemnity in the House as soon as practicable after giving the indemnity. Such
statements have already been tabled in relation to the APA with Pfizer and our
participation in the COVAX Facility).
9(2)(ba)(i) & (ii)
47. Relative to the suppliers of the other target candidates, Novavax, a late-stage
biotechnology company, is
smaller, less well-resourced and has less experience in
the global pharmaceutical market. It has no prior experience in the New Zealand
pharmaceutical market. They plan to produce one billion courses of the vaccine for
global distribution from mid-2021 by re-establishing their global supply chain and
outsourcing manufacturing arrangements.
48. However, Novavax’s international partnerships provide assurance of its ability to
develop and manufacture the vaccine. Novavax has:
secured US$2 billion in funding from Operation Warp Speed (a United States
government programme) and the Coalition for Epidemic Preparedness
7 9(2)(ba)(i) & (ii)
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Innovations (CEPI) for late stage clinical development and to establish large-
scale manufacturing;
engaged the Serum Institute of India to manufacture one billion doses in 2021.
9(2)(h), 9(2)(ba)(i) & (ii)
9(2)(h), 9(2)(ba)(i) & (ii)
Termination Arrangements
53. 9(2)(ba)(i) & (ii)
Necessary or Expedient in the Public Interest
54. The Public Finance Act says that the Minister of Finance may grant an indemnity if it
appears to the Minister to be necessary or expedient in the public interest.
The indemnity is in the interest of the New Zealand public because its benefits
outweigh its risks
55. The meaning of “public interest” depends on the circumstances and can be
multi-faceted, but it is generally accepted that it is broadly equivalent to the public good
or what is in the best interests of society. In the context of the Public Finance Act the
public interest can be viewed as the interest of the New Zealand public.
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56.
We judge that the indemnity is in the interest of the New Zealand public because the
benefits that it will bring to New Zealand (outlined below) outweigh the relatively low
risks to the Crown that Bell Gully has identified (described in the “exposure, risks and
mitigation” section).
The key benefit of the indemnity is that it will allow New Zealand to conclude a
bil
ateral APA with Novavax
57. An APA with Novavax will in turn bring the below benefits to the Crown and to the New
Zealand public.
58. An APA with Novavax will contribute to our portfolio of APAs for promising vaccine
candidates.
59. A portfolio approach is intended to manage a range of risks and provide safe and
effective vaccines to choose from for early deployment as part of New Zealand’s
immunisation strategy. This improves the chances of acquiring vaccines that can
support achieving population cover from COVID-19 in a timely manner. The
construction of the portfolio therefore requires the selection of vaccine candidates that
ensure diversity across technology platforms, vaccine characteristics, suppliers, and
timeframes, and that are suitable for use in the Realm of New Zealand and other
Polynesian countries.
60. The vaccine could play an important role in the portfolio by providing broad population
cover and limiting the risk of technology failure:
a.
The Novavax vaccine is the only protein sub-unit candidate being considered for
the portfolio. This is one of the three vaccine types that we expect the ‘core
portfolio’ to contain in order to mitigate development risk. Unlike mRNA vaccines
(Pfizer’s candidate), and viral vector vaccines (Janssen’s and AstraZeneca’s
candidates), protein sub-unit vaccines are a well-established vaccine type, albeit
the exact technology in this vaccine is unlicensed.
b.
Similar to Janssen’s and AstraZeneca’s vaccine, the Novavax vaccine could
offer broad population cover. This provides significant benefit to the portfolio as it
reduces the need for multiple candidates to succeed before we are able to
achieve wide population cover. On the other hand, the vaccines that could offer
broad coverage all have different drawbacks that could prevent their widespread
use. This is why we are building a portfolio of vaccines: to maximise options for
the immunisation programme, and increase our chances of having safe and
effective vaccines for population-wide deployment. This reflects the approach
taken by other countries using similar purchase frameworks to ours.
61. Early non-human primate studies suggest that there is potential for the Novavax
candidate to reduce infectiousness. The developers have indicated that there is
potential for the vaccine to be stable at room temperature. There would be significant
portfolio benefits in terms of effectiveness and ease of deployment (including in
Polynesia) if these characteristics are confirmed.
62. The vaccine could bring economic and social benefits to New Zealand if it is
successful and Medsafe judges it to be safe and effective for use in New Zealand, and
it is rolled out as part of the immunisation programme.
63. Immunisation could help reduce severity of illness among those who are vaccinated,
ensure our health system is not overwhelmed, and provide a level of immunity from
COVID-19. Achieving population immunity from COVID-19 and reducing transmission
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rates will also reduce and potentially eliminate our reliance on blunter tools like border
controls and lockdowns.
Economic impacts
64. The main economic impacts of a successful vaccine roll-out would be to reduce the
risks of entering high alert levels and the economic costs associated with those levels,
and to enable a relaxation of border restrictions. Immunisation is the only public health
tool that would reduce the level of threat posed by COVID-19, rather than shielding
against the disease as our other tools (e.g. isolation, testing, restrictions on movement)
are designed to do.
65. If a successful vaccine or therapeutic sufficiently reduced the level of threat posed by
COVID-19, and thus contributed to a relaxation or eventual removal of border
restrictions, we do not anticipate an immediate recovery in international travel to levels
seen prior to the COVID-19 pandemic. This reflects negative impacts on household
income and a possible change in traveller behaviours, while it may take some time for
capacity on international air routes to be re-established.
66. The Treasury estimates that nationwide Alert Level controls have the following impacts
on GDP:
Level 4
25%-30%
Level 3
15%-20%
Level 2
6%-10%
Level 1
3%-5%
Note the estimated economic costs of different Alert Levels are based on historical
data, and do not reflect how firms and households adapt behaviour, nor do they
reflect the changes in Government policy.
67. The Pre-election Economic and Fiscal Update (PREFU), assumes a combination of
Alert Level 3 and 2 restrictions lasting approximately four weeks in the September
2020 quarter. Alert Level 1 restrictions are then assumed to apply until 1 January
2022.
68. The main scenario in PREFU assumes that border restrictions are to be lifted on 1
January 2022. However, travel services exports, including tourism and international
education services, are assumed to start recovering from the September 2021 quarter
onwards, reflecting the possibility of safe travel arrangements being agreed. This will
allow some services exports and non-New Zealander net migration to resume.
However, the effects of COVID-19 will continue to be far-reaching and the pace at
which services exports such as tourism and international education will recover
remains uncertain.
69. 9(2)(ba)(i) & (ii)
70. In August the Minister of Foreign Affairs agreed in principle that Official Development
Assistance could be used to reimburse the cost of vaccines passed on to Polynesian
countries.
71. Earlier this week, Cabinet agreed that up to $75 million be allocated from Vote Official
Development Assistance to support Pacific and global access to COVID-10 vaccines,
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and that New Zealand should actively seek to purchase up to 360,000 additional
doses of at least one suitable COVID-19 vaccine candidate specifically for Polynesia.
The purchase should be funded from within that allocation [CAB-20-MIN-0504].
72. We are working through the issues that provision of vaccine to Pacific countries would
raise, which 9(2)(ba)(i) & (ii)
include distribution of vaccine doses,
additional support required, ensuring the vaccines are appropriate for the Pacific
environment, and how the transfer of funding and/or cost-sharing might be
operationalised.
Granting the indemnity to Novavax is expedient in the public interest
73. The word “expedient” is not defined in the PFA but Crown Law has advised that there
is authority in differing contexts that it means “fitting”, “suitable”, “desirable” or
“convenient”.
74. Granting the indemnity in order to conclude an APA with Novavax is expedient
because it will help us achieve our Vaccine Strategy objective of securing enough safe
and effective vaccines for New Zealand and Polynesia, 8 in the current circumstances
where:
we have to move quickly and pragmatically to secure APAs in an environment
of unprecedented global demand;
all pharmaceutical companies are seeking indemnities in APAs.
75. In order to achieve our Vaccine Strategy objective, we need a portfolio containing at
least four candidates with diverse technology platforms and characteristics, in
quantities sufficient for broad population cover.
76. To have the best chance of achieving population immunity from COVID-19 as soon as
possible, we need to purchase vaccines through bilateral APAs. This route offers
faster access to vaccines than others would (eg purchasing vaccines solely through
the COVAX Facility, which is capped at doses for 50 percent of our population with an
uncertain end date for delivery; it is also not yet clear whether the Novavax vaccine
candidate will be available through COVAX). Domestic manufacturing of COVID-19
vaccines is also not viable in the short term, because vaccine developers we have
been in negotiations with have already made manufacturing arrangements for the
vaccines they intend to produce in the next year or two.
77. At this stage our portfolio is still under construction. So far we have two vaccine
candidates that can offer broad population cover: five million courses of the Janssen
vaccine candidate, a viral vector vaccine, and 3.8 million courses of the AstraZeneca
candidate (another viral vector vaccine), which we are seeking to supplement with a
top-up purchase through the COVAX Facility (briefing MBIE-2021-0858 refers).
78. An agreement with Novavax would populate the portfolio with a third candidate in
sufficient quantities to provide broad population cover, on a different technology
platform.
79. We also have 750,000 courses of an mRNA vaccine candidate from Pfizer Inc.
9(2)(ba)(i) & (ii)
8 Cabinet agreed to the COVID-19 Vaccine Strategy in May 2020. The objective is to secure access to sufficient quantities of
safe and effective COVID-19 vaccines to implement a preferred immunisation programme at the earliest possible time.
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9(2)(ba)(i) & (ii)
80. 9(2)(ba)(i) & (ii)
we will investigate the purchase of another high-volume
candidate and continue to consider smaller purchases, including through the COVAX
Facility.
81. Not purchasing the Novavax candidate would have the following implications for the
portfolio:
We would need to consider purchasing two different vaccine candidates to
build the core portfolio of four candidates with wide coverage. There are no
other protein-based vaccines currently in late-stage clinical trials. Sanofi/ GSK
is developing a protein based vaccine but is unwilling at this stage to enter into
a bilateral agreement (though some courses may become available through the
COVAX Facility).
If we did not pursue an alternative to the Novavax vaccine candidate, the
portfolio would only have two vaccine candidates with wide population
coverage – both using viral vector technology. Broad cover using only one of
the three main vaccine types would result in little optionality for the
immunisation programme. 9(2)(ba)(i) & (ii)
Overall judgement
82. We judge that the benefit of the APA to New Zealand outweighs the risk and justifies
granting the indemnity.
83. 9(2)(ba)(i) & (ii)
the risks associated with claims 9(2)(ba)(i) & (ii)
which would not be covered by the AC Act seem
likely to be
relatively low;
9(2)(ba)(i) & (ii)
Risk Management
84. The Ministry of Health and other agencies are putting in place the risk management
measures as outlined in the “Exposure, Risk and Mitigation” section above.
Other considerations
85. The business case reflects specific legal advice (legally privileged) from Bell Gully and
Crown Law as referred to in the text. Bell Gully has also reviewed this document.
Responsible Minister Briefing
86. We are briefing responsible Ministers in parallel with submitting the business case to
the Treasury, in order to conclude the agreement with Novavax as quickly as possible.
Novavax’s offer is time-limited, and the purchase agreement needs to be concluded
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without delay because New Zealand’s vaccine allocation is held temporarily from the
global allocation.
Notification Requirements
87. We have provided a draft notice for the indemnity because the exposure is
unquantifiable. This statement is intended to be tabled in the House of
Representatives once the indemnity is given, and the Definitive Agreement is signed.
Statement of Indemnity given under the Public Finance Act 1989
Pursuant to section 65ZD(3) of the Public Finance Act 1989, the Minister of Finance makes
the following statement:
On [date] I, Grant Robertson, Minister of Finance, on behalf of the Crown, gave an indemnity
in favour of Novavax, Inc and specific associated persons in an Advance Purchase
Agreement for the supply of NVX-CoV2373, a vaccine intended to prevent SARS-CoV-2
(“COVID-19”) in humans.
Dated at Wellington this [insert date of month] day of [insert month] [insert year].
Hon Grant Robertson
Minister of Finance
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R
ecommendation
The Ministry of Business, Innovation and Employment and the Ministry of Health recommend
that the Minister of Finance approve the giving of the indemnity in favour of Novavax on the
terms contained in the supply agreement in Annex One.
Peter Crabtree
Delegate of Chief Executive Carolyn Tremain
Ministry of Business, Innovation and Employment
Maree Roberts
Deputy Director-General, System Strategy and Policy
Delegate of Director-General and Chief Executive Dr Ashley Bloomfield
Ministry of Health
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A
nnex One: supply agreement
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Annex Two – indemnities comparison (supplied by Bell Gully)
Pfizer Indemnity
Janssen Indemnity
AstraZeneca Indemnity
Novavax Indemnity
9(2)(ba)(i) & (ii)
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Pfizer Indemnity
Janssen Indemnity
AstraZeneca Indemnity
Novavax Indemnity
9(2)(ba)(i) & (ii)
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Pfizer Indemnity
Janssen Indemnity
AstraZeneca Indemnity
Novavax Indemnity
9(2)(ba)(i) & (ii)
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