UPS (UPS) will have doubled its health-care facilities footprint by 2023, as a result of unprecedented demand for mRNA vaccines, and the company is making a long-term bet that demand for cold chain storage in medicine will only grow in coming years.
The logistics giant began building out millions of square feet of space as a result of its partnership with Pfizer (PFE)/ BioNTech (BNTX), according to UPS Healthcare and Life Sciences President Was Wheeler, but that only sped up a strategy the company was pursuing before the pandemic.
"Health care at UPS was part of its matrix organization. It was not a business unit like it is today. It was not given the kinds of priorities that we've been given since I took the role," Wheeler told Yahoo Finance in a recent interview.
Pandemic aside, the market for health care logistics has been growing in recent years, as more targeted treatments, known as biologics, takes hold.
Cold chain storage, in particular, has become increasingly important as a result, with some projections estimating the market will surpass $225 billion by 2026. UPS is among the top players, and market share only figures to grow as it targets new global hubs.
The company was already on track to expand by roughly 1 million square feet per year, but in the past two years, UPS has added about 4 million square feet, Wheeler said.
That will put the company at about 15 million square feet by the end of 2023, compared to about 7.5 million square feet when Wheeler started in 2020.
And with companies like Pfizer and Moderna (mRNA) focused on mRNA as a base technology for future vaccines, which requires minus 80 or minus 70 degrees Celsius transport, there is opportunity to capture a new market.
"I think it's here to stay, and I think we're planning on that," Wheeler said of mRNA, at the company's Innovation Summit in June.
"Which means we have to secure these cold chain supply routes all around the world from now on," he added.
The company appointed Wheeler to be the head of a more structured health care unit at the end of 2019 — just before the pandemic began.
The company had seen its health care segment leading growth quarter over quarter, as a result of the health industry's increased use of time and temperature sensitive treatments, among other critical patient needs, and had just launched a more high-tech solution in October 2019.
Soon after coming on board, Wheeler was tasked with the sudden surge in need to build out cold chain facilities and routes in partnership with Pfizer, to prepare to deliver hundreds of millions of doses of a COVID-19 vaccine out of Kalamazoo, Mich.
While that was nowhere near where UPS had identified a need for new space and routes, the company invested in Michigan and Louisville, Ken., to build out freezer farms, warehouse space and routes to ensure timely distribution.
"Because of the pandemic, we shifted gears from what would have been a longer term, very specific strategy of building out our capability. So we built a lot of capacity ... We built supply routes out of places we would not normally have prioritized. For example, Michigan would not have been our first choice. But we moved, we pivoted, and we started to build capacity," Wheeler told Yahoo Finance.
The same goes for Louisville, where the company created a dry ice factory to help transport the new, ultra-cold-needing vaccines, and built out storage for PPE and test kits.
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