INTRODUCTION 1
 

OBJECTIVES 2
 

Production of Caprivax 2

Production Costs 3

Sensitivity Analysis 5

Competition for Machinery with Contavax and Rindervax 8

Buyers of Caprivax 9
 

CONCLUSIONS AND RECOMMENDATIONS 11
 

REFERENCES 13
 
 

We are grateful for the collaboration of the Kenya Veterinary Vaccine Production Institute (KEVEVAPI), and the Veterinary Field Services Office in Kenya. Both institutions are involved with the production and delivery of animal health services in Kenya. There support is greatly appreciated.

This publication was made possible through support provided by the Office of Agriculture and Food Security, Global Bureau, United States Agency for International Development, under the terms of Grant No. DAN 1328-G-00-0046-00. The opinions expressed herein are those of the authors and do not necessarily reflect the views of the U.S. Agency for International Development.

Introduction

Contagious Caprine Pleuro pneumonia (CCPP) is a disease of major economic importance and imposes a significant constraint upon goat production, resulting from high mortality and morbidity rates. The F38 Mycoplasma strain has been demonstrated to be cause of this disease in Kenya (MacOwan and Minnete 1976) and Sudan (Harbi et al 1981). It has been reported as the most serious infectious disease of goats in Kenya (Rurangirwa and McGuire 1991).

Research by the Kenya Agricultural Research Institute (KARI) and the Small Ruminant Collaborative Research Support Program (SR-CRSP) scientists contributed to the development of a vaccine against CCPP. This vaccine, created during the 1980's, and available in the market in liquid form since 1987 (Lipner and Brown 1995) was improved through an additional production stage, the process of freeze drying (lyophilized form). This process increases the shelf-life of the vaccine and eliminates that need cold storage chains (the liquid form requires storage at 4C), which are expensive to maintain, especially in areas where CCPP is prevalent. The CCPP vaccine (Caprivax, its commercial name at the Kenya Veterinary Vaccine Production Institute KEVEVAPI) is produced at the production unit Muguga, together with two other vaccines, namely, Contagious Bovine Pleauropneumonia (CBPP) vaccine (Contavax) and the Rinderpest vaccine (Rindervax). KEVEVAPI is the only institution in Kenya with the mandate for Caprivax production and fourteen other vaccines. Apart from Muguga production unit, the two other centers where KEVEVAPI produces vaccines are Kabete and Embakasi.

Information obtained from KEVEVAPI and The Veterinary Field Services Office indicate that the demand for Caprivax is low. This viewpoint appears to be corroborated by the low production and sale figures observed in the past. For instance, in the period 1992-1995, production and sales figures have never reached 200,000 doses per year. This contrasts sharply with the national goat population which stands at about 15,000,000.

This means that use and adoption of Caprivax is low. There is need to identify the factors that contribute to this low use and adoption, to inform decision makers both in the production and distribution processes of the constraints and possibilities for disease prevention through vaccine use. What are constraints at the users end, and the constraints at the production end? The SR-CRSP Social Science research is carrying out research to identify these constraints to the use and adoption of the vaccine. This study investigates the economic efficiency, and institutional constraints and opportunities for the production of Caprivax.
 

Objectives

The purpose of this research is to study the production and sale of Caprivax by KEVEVAPI for the past five years. The question of whether there exists competition for use of machinery between Caprivax production and the production of other vaccines has been raised by Lipner and Brown (1995) and Mbabu and Nolan (1993). This study addresses the issue of competition and how it may impact on Caprivax production. The study also estimates the cost of production for the both the liquid and the lyophilized forms of Caprivax. Such estimates are important in appraising the economic viability of the production process.

The specific objectives of this study:

a) to estimate and compare the production costs of both types of CCPP vaccines, liquid vs. Lyophilized using Caprivax as the formula for cost estimation,

b) to establish whether there is competition for machinery between Caprivax and the two other vaccines that are produced at the Muguga production unit, namely Rindervax and Contavax,

c) to identify the buyers of Caprivax at KEVEVAPI from 1991 to 1995.
 

Production of Caprivax

Production of Caprivax involves culturing Mycoplasma F38 in broth media and it takes up to 45 days to produce one batch. There is a protocol for preparing the broth media and another one for the production process. Materials used in blending the media are all purchased and constitute the largest proportion of variable costs in Caprivax production. Mature Mycoplasma F38 are inactivated using saponin to reduce its pathogenecity and the inactivated form is then packaged and sold as Caprivax. Based on current capacity (plant and equipment) 60 litres of materials can be processed in one batch.
 

Production Costs

An estimation of costs of production of the Caprivax was carried out using data for the period 1992-1995 (Appendices). Variable inputs used in vaccine production were identified by the KEVEVAPI staff. Price data was also gathered from KEVEVAPI. As expected, fixed costs were more difficult to estimate. Items that were identified as constituting fixed costs are housing of the factory where production takes place, permanent labour and the durable equipment employed in Caprivax production. Labor was valued at its current market value. Capital recovery cost (CRC), the annual payment that will repay the cost of a fixed input over the useful life of the input and will provide an economic rate of return on the investment, was computed to estimate fixed cost. Capital recovery cost estimates both the depreciation and the opportunity costs of the investment. The relevant CRC formula (Pearson and Monke1982) is:
 

R =  Z(1+i)ⁿⁱ
         (1+i⁾ⁿ-1

where:

R = capital recovery cost,
Z = initial outlay on an investment,
n = useful life of the investment,
i = opportunity cost of the investment estimated to be equal to the market rate of interest.

A spreadsheet was used to develop the calculations and analyze the data, as well as undertake sensitivity analysis.

Since production levels varied from year to year, two approaches were used to estimate unit production cost for the Caprivax. One approach was to estimate this component year by year, to determine variations year to year to analyze productivity and changes in levels of production. The second approach was to average production data for the period 1992-1995, and use this average, to compute the expected average production cost for the vaccine for period. The latter approach allows us to judge how year to year variations have deviated from the mean. Table 1 summarizes the results of the computation.
 

Table 1: Estimation of average cost of production for Caprivax
 

Year	Total  batches	Effective batches		Doses produced	Average  Yld/batch	Cost/unit (liquid)	Cost/unit (freeze)
		Total	%
1992	17	9	53%	66,100	3889	11.60	16.20
1993	31	30	97%	180,450	5821	5.50	8.34
1994	43	25	58%	171,500	3989	7.21	10.20
1995	22	9	41%	67,800	3082	11.83	17.30
Average	29	19	66%	121,463	4300	7.59	11.16

Developed with data gathered from KEVEVAPI during 1996.
 

Table 1 indicates that on average, it costs about Ksh 7.60 to produce one dose of the liquid form of the Caprivax. It would cost about Ksh 11.20/dose to produce the freeze dried one. At the average yield of 4300 doses per batch, it is estimated that one dose of the liquid Caprivax would have to be sold at about Ksh 4.80/dose to cover the variable costs alone. Therefore, the current price of Ksh 4.00/dose does not even cover the variable cost of production. In economic terms, it means that the current production process is not viable and that production of the vaccine has only been possible because of cross-subsidization by the other more profitable production lines (that is Rindervax and Contavax). However, in an improved production process where higher yields/batch are possible, unit production cost would decline and hence give economic viability to Caprivax production. This phenomenon will be pursued further in the sensitivity analysis section.

Another observation that is apparent from the table is that there is a very high rate of loss occasioned by contamination of the broth media. When other microorganisms (other than Mycoplasma F38) grow in the broth media, the media is said to be contaminated and is therefore discarded. In economic terms, the cost of the elements that are used in the preparation of the broth medium constitutes the most important component of the variable costs in Caprivax production. Therefore, the loss of the medium through contamination represents a major cost in vaccine production. Table shows that on the average, 34% of the runs will fail because the broth medium has been contaminated.
 
 

1. The authors are Research Associate Kenya Small Ruminant Collaborative Research Support Program (SR-CRSP), Principal Investigator SR-CRSP, Kenyan Veterinary Vaccine Production Institute, and leader Socioeconomics Division Kenyan Agricultural Research Institute and Resident Scientist Social Sciences SR-CRSP, respectively. Any inquiries please address to C. Valdivia, Department of Agricultural Economics, Social Science Unit, University of Missouri-Columbia, 200 Mumford Hall, Columbia, MO 65211, USA.
 

This technical report is circulated prior to full review. Please send comments to C. Valdivia. Contents of this collaborative research may be further revised.