How the Morrison government passed over an Australian company for a US pharmaceutical giant

Australia’s audit office will probe the Morrison government’s $2 billion deal with US pharmaceutical giant Moderna to set up vaccine manufacturing in Australia as the firm races to meet its promised timeline while a spurned local rival begins shipping COVID jabs overseas.

Sources familiar with the project told this masthead that Australian vaccine manufacturer CSL had offered to make inoculations here for a much cheaper price but lost out on the contract to Moderna, which does not yet have regulatory approval to produce the vaccines in its Melbourne factory. The Coalition promised vaccine production would start in 2024.

Greg Hunt and Scott Morrison led Australia through the pandemic.Credit: Alex Ellinghausen

MRNA vaccines came of age during the COVID-19 pandemic, when jabs manufactured by Pfizer and Moderna proved close to 95 per cent effective at preventing symptomatic infection, far better than vaccines made using traditional techniques. Scientists heralded those results as the dawn of a new age of vaccine technology, with pharma companies racing to turn mRNA against other infectious diseases – even cancer.

Labor ministers have used the deal as a way of defending their conduct in a contentious $470 million quantum computing investment, with both cases involving accusations that ministers in effect front-ran tender processes to pick a winner.

On May 13, 2021, under intense pressure over Australia’s vaccine supply, then-health minister Greg Hunt announced the government would test the market to determine if a firm could make new COVID vaccines in Australia.

But Hunt had to acknowledge in the press conference that his government was already negotiating separately with Moderna about a new facility, which the firm had disclosed to its investors the day before.

This masthead can reveal only two credible bids emerged from the tender process: CSL and Moderna, a pandemic darling whose stock price is now about a 10th of its 2021 peak.

Initial proposals from Moderna were more costly than the final price tag and were knocked back by the Morrison cabinet in a round of talks led by an Australian independent negotiator, according to Coalition government sources unable to speak publicly about the talks.

Seven months after Hunt’s press conference, the government selected Moderna to build a factory at Monash University in Melbourne capable of producing up to 100 million doses a year. Its price was initially confidential but revealed to be $2 billion by Finance Minister Katy Gallagher in June.

CSL insiders, not permitted to speak publicly about confidential procurement talks, said the company offered to create mRNA jabs for well below $500 million at a site in Melbourne it was already building.

A spokesman for the $138 billion company said CSL “would have welcomed an open and competitive process”.

In defending his government’s actions on a quantum computing deal, Industry and Science Minister Ed Husic has questioned the Moderna deal.Credit: James Brickwood

“CSL believed the inclusion of additional technologies within an existing facility would be more cost-effective than a greenfield site, whilst leveraging the expertise of a global company with a proud Australian heritage,” the spokesman said in a statement.

The Australian National Audit Office has opened an inquiry into the “effectiveness of the procurement and contract management of onshore vaccine manufacturing facilities” to report by September 2025.

Labor has come under fire from the opposition for opening an expression of interest in a quantum computing ambition after talking to one firm – PsiQuantum, which was eventually selected – for months beforehand.

Industry and Science Minister Ed Husic said in October the Morrison government used the same practice on the Moderna deal.

“They were criticising us on the grounds of the way we worked, which is exactly the way they worked when they brought Moderna to Australia,” Husic said.

“They consulted and negotiated with Moderna while doing a call for an expression of interest in building mRNA manufacturing. They criticised us, saying we backed PsiQuantum instead of local firms, and yet they chose Moderna over CSL, an Australian firm. They did that.”

In June, Gallagher said, “not one detail was made available” about the Moderna deal when it was negotiated and announced.

Senior Morrison government figures, who spoke anonymously to be frank, emphasised that CSL did not have an approved COVID mRNA vaccine at the time the deal was done and refused to commit to producing mRNA vaccines.

“Their own team conceded they were a long way from guaranteeing any capacity,” a person central to the deal said.

CSL has made major strides in the technology in the years since the pandemic. It has developed so-called self-amplifying mRNA: vaccines that contain genetic code that essentially allows the body to make more vaccine, allowing for smaller doses.

CSL’s mRNA COVID vaccine has been approved for use in Japan and is under review in Europe. Data released from a phase-three trial last month showed CSL’s jab was superior to Pfizer’s mRNA shot, the company claims.

It has two other mRNA vaccines, for flu and bird flu, in early trials.

“We proposed to include industrial-scale mRNA manufacturing capability at the Tullamarine vaccine facility, which was already under construction at the time,” a CSL spokesman said.

“CSL has since registered a sa-mRNA influenza vaccine, which we have developed under a licensing agreement with a partner.”

A spokesman for Hunt said the process to select Moderna was exhaustive, subject to independent advice and received backing from both the public service and cabinet.

“The clear advice was that Moderna was the only proponent which both had proven mRNA vaccine technology and proposed to manufacture mRNA Covid vaccines in Australia,” the spokesman said.

Despite its ministers’ remarks about the process leading to the Moderna deal, Labor has continued with the project. “This significant deal will protect Australians and Australian sovereignty,” Prime Minister Anthony Albanese said in August 2022.

Moderna’s local general manager Michael Azrak said several countries had approached Moderna to try to secure a manufacturing facility, and it was “definitely a competitive process”.

The facility is now operational, Azrak said, and was producing test-batches of vaccine while it waited for final regulatory approval.

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