Team,apologies for the lenght of this post but it makes for...

Team,
apologies for the lenght of this post but it makes for interesting reading on some predictions when the infection rates are likely to peak and drop. My advisor sent it to me this afternoon so not sure if anyone has already seen it.

While points 1 to 3 are technical they make interesting reading on estimation of when infection numbers are likely to peak in the US & Australian (estimated to be mid-April).

Point 4 goes into detail on other anti-viral drugs and their progress – this is a very encouraging read.

Peak Virus:Forecasting the Peak in COVID-19 Infections in the US and Australia

Authoredby Kai Lin and Christopher Joye, Coolabah Capital Investments

As we move through “peak virus”, our team has spent time reflecting onsignificant trigger points that might precipitate fundamental changes in futuremarket sentiment. In this note, we publish preliminary internal forecasts forthe distribution of COVID-19 infections in the US and Australia focussing onthe time intervals during which we are likely to observe a demonstrablereduction in infection rates after the application of more expansive testingand containment policies. We offer a range of scenarios, conditioning off thereaction functions in a number of different countries, including Italy, SouthKorea and China, with various discounts to proxy for inefficient or impairedcontainment in the US and Australia.

A clear deceleration in US infections and fatalities is likely to be anecessary condition for more constructive global market sentiment. We find thatit is reasonable to expect US and Australian infection numbers to peak in earlyto mid April with a decline evident 10 to 20 days thereafter, although thereare risks to these forecasts.

There is also emerging evidence of a game-changer for the treatment ofthe COVID-19 disease and the observed fatality rates, which is the advent of aneffective and cheap anti-viral drug that kills the virus in the form ofhydroxychloroquine. This has been aggressively promoted by President Trump in recent days. We discuss this at some length at the conclusion of our forecasting analysis.

(The image above is a screen-shot taken from our real-time globalinfection and fatality rate tracking system, which automatically updates every15 minutes.)

1. Forecasting Possible COVID-19 Infection Distributions

The objective is to forecast country (especially US) daily case counts,eventual case count, and time to peak daily new cases. This is done by firstvisualising the case growth trajectories, the changes in case growth rates overtime, then modelling this growth rate and applying it for case forecasts.

1.1 Case Growth Trajectory

Thefirst observation is that cumulative total confirmed case counts in countriesaround the world mostly follow an exponential growth curve, once the infectionhas taken hold within the country (arbitrarily defined as having at least 100confirmed cases). See plot ‘Case Growth Trajectory’. A straight line on thisplot, where the y axis is on a log scale, means we have exponential growth. Ofcourse, government intervention can change the trajectory. In this plot,vertical dotted lines indicate the beginning of major intervention policies,defined as mass closures of services, or extremely comprehensive testingregime.

1.2Evolution of the Case Growth Trajectory

Next we investigate the evolution of the above case growth trajectory.As seen above, the trajectories are rarely a single straight line. Most have aslight trend towards being a less steep line. Some appear to have bigger dropsin steepness in response to intervention measures.

One measure of infection rate is the number of daily new cases as apercentage of the number of outstanding active (ie, infectious) cases. In theplot “Trajectory of New Cases Around the World”, we plot this against the dayssince 100 cases. We see that this percentage mostly holds constant in countrieswithout intervention measures (eg, Australia and US), indicating uncheckedexponential infection growth.

Countries with extreme intervention measures, such as China and SouthKorea, have a curve with steep negative slope, indicating the process ofbringing the infection under control. There is visual suggestion thatintervention measures reduce the slope of this line. Many European countriesalso exhibit a slightly negatively sloped line even before major interventions.

What is useful about this curve is that once plotted in this manner withthe y axis in log domain, the curves appear piecewise linear. This allows thecharacterisation of countries’ trajectories via a single coefficient, thatbeing the slope of the line in this plot. This allows us to do what-ifanalysis, by applying the coefficients of other countries (eg, countries withsuccessful containment strategies such as South Korea) to countries still inthe earlier stages of applying intervention (eg, the US).

In the plot below, blue lines are extrapolated from the country’sobserved past data (eg, the US itself and the global average effect ofinterventions), while the grey lines are taken from applying the coefficient ofother countries from today (eg, applying coefficients from South Korea, China,Italy etc to the US from today onwards).

Forcompleteness, the curves below are all fitted via a linear mixed effect model,which includes fixed effects for global intercept, global slope for days since100 cases, global slope for days since intervention, plus random effects forthese mentioned variables (by country).

2.Forecast of Cases

By utilising the trajectory evolution predictions from above, we canforecast case numbers. As a technical note, the above trajectory evolutionsrequires an estimate of recoveries and deaths. This is estimated as theconfirmed case count from 14 days ago, as the disease is known to run itscourse over roughly 14 days. Back-tests show this method is sufficient for itsusage, as minor errors will not affect end results much.

Below we plot the forecasted cumulative case counts for the US. Onemethod (light red line) extrapolates off US trajectory curve and uses theglobal average effect of interventions on the trajectory. The second method(light blue lines) uses the trajectory evolution curves from substitutecountries, such as Korea, China and Italy, at 25%, 50%, 75% and 100% of thesubstitute country’s effectiveness.

For example, the light blue line from bottom right corner shows that ifthe US has 100% of South Korea’s efficiency in driving down the case trajectoryfrom today, there will be 139.6k cases eventually. Similarly, in the top rightcorner plot, the light blue line shows that if the US has 100% of Italy’sintervention response efficacy, the eventual case count would be around 1.2million. Otherwise, if the US only has a global average effectiveness ofintervention, then the eventual case count will be around 383k. Note thatdotted lines in the plot denotes projections.

Themarket is known to somewhat irrationally focus on the hump in daily new cases.We would, however, recommend viewing the data in the log domain as shown inFigure ‘Trajectory of New Cases Around the World’. However, for visual ease, wehave also plotted the forecasted daily new cases. If the US has 100% of SouthKorea’s efficiency in driving down new cases, then the peak will be aroundMarch 25 (ie, very soon) and April 3 if at 50% efficiency. Similarly, if the UShas 75%-100% of Italy’s efficiency, then the peak will be around mid-April. Wehave also extended this analysis to Australia (final two charts).

3.Key Forecast Findings

In this exercise, we explored the infection trajectory of countriescurrently with the highest Covid-19 cases. We found that, in the log domain,the daily new cases as a percentage of outstanding cases form clear piece-wiselinear trends. This facilitates the modelling of each countries’ casetrajectories using linear coefficients, thus enabling the forecasting of cases,both based on each country’s own fitted trajectories with average globalintervention effect, as well as via substituting in other countries’trajectories.

For example, by substituting in the South Korea intervention response tothe US trajectory to date, and conservatively taking a 50% reduction inefficiency compared to the South Koreans, the US is forecasted to experiencepeak daily new case count around April 5. A demonstrable decline in USinfections should on this basis be observed by mid April. Similarly, bysubstituting the Italian intervention response to the US trajectory to date,the forecast peak will arrive at around mid-April if we assume 75% to 100% ofthe Italian response’s efficacy. Again, a clearly declining trend in infectionsmight only be evident by late April. Applying the same assumptions to a countrylike Australia, infection rates are likely to peak around early to mid Aprilwith a decline in cases observed in the second half of the month.

Withinour analysis and forecast of cases, we used the assumption that each country isa homogeneous entity, and that a single coefficient is used to model thetrajectory of each nation’s case growth. One potential source of inaccuracystemming from this is that if a country, such as the US, adopts interventions afew states at a time, as opposed to a coordinated nation wide effort, then thetime to peak daily new case count could be substantially elongated. In thisscenario, much like the game whack-a-mole, the US government may be makingintervention decisions based on the goal of keeping the national daily casecount manageable but constant until a vaccine is ready, in which case the timeto peak daily case count may be, by construction, the time to a vaccine (eg, 12months). This would be highly sub-optimal.

4.The Game-Changer: A Near-Term Anti-Viral Solution?

In addition to a clear decline in infection and death rates, there areseveral other event risks that could impact market sentiment. Arguably one ofthe most interesting is the near-term availability of a tractable anti-viralsolution.

It would appear that there are two cheap, publicly available, andscalable drugs that have existing FDA approvals for other purposes: chloroquine(C), which is an anti-malarial drug; and its much safer derivative, hydroxychloroquine(HC), which is used to treat auto-immune disease and arthritis.

Based on the available data, it would seem that HC in particular has areasonable probability of being able to kill the virus in the first couple ofweeks infection (before it has permanently damaged lung capacity and triggeredan immune system response).

In recent days President Trump has actively promoted HCuse in combination with an anti-biotic known as azithromycin or Z-Pak in hispress conferences and online. The FDA has confirmed they are allowing US hospitals to employ HC and Z-Pak on a compassionate basis until formal FDA approval for COVID-19 use is secured, which is expected soon.

We do know that both C and HC kill the virus in vitro. A leading global infection disease expert working in French hospitals has published results of a non-randomised and relatively small clinical trial of his patients that has shown encouraging findings (see the paper here and a detailed video with the key author here). There is also this video interview with a US physician who is treating 100 patients with HC at an east coast hospital who claims they have had similar success with the drug and no fatalities.

It would appear that the Chinese figured some of this out inmid-February, and have since been prescribing C as a standard therapeutic for COVID-19 patients. A Wall Street Journal article published by two senior practicing doctors on 23 March provides a good summary:

A flash of potential good news from the front lines of the coronaviruspandemic: A treatment is showing promise. Doctors in France, South Korea andthe U.S. are using an antimalarial drug known as hydroxychloroquine withsuccess. We are physicians treating patients with Covid-19, and the therapyappears to be making a difference.

Hydroxychloroquine is a common generic drug used to treat lupus,arthritis and malaria. The medication, whose brand name is Plaquenil, isrelatively safe, with the main side effect being stomach irritation, though itcan cause echocardiogram and vision changes. In 2005, a Centers for DiseaseControl and Prevention study showed that chloroquine, ananalogue, could block a virus from penetrating a cell if administered beforeexposure. If tissue had already been infected, the drug inhibited the virus.

On March 9 a team of researchers in China published results showinghydroxychloroquine was effective against the 2019 coronavirus in a test tube.The authors suggested a five-day, 12-pill treatment for Covid-19: two200-milligram tablets twice a day on the first day followed by one tablet twicea day for four more days.

A more recent French study used the drug in combination withazithromycin. Most Americans know azithromycin as the brand name ZithromaxZ-Pak, prescribed for upper respiratory infections. The Z-Pak alone doesn’tappear to help fight Covid-19, and the findings of combination treatment arepreliminary.

But researchers in France treated a small number of patients with bothhydroxychloroquine and a Z-Pak, and 100% of them were cured by day six oftreatment. Compare that with 57.1% of patients treated with hydroxychloroquine alone,and 12.5% of patients who received neither.

What’s more, most patients cleared the virus in three to six days ratherthan the 20 days observed in China. That reduces the time a patient can spreadthe virus to others. One lesson that should inform the U.S. approach: Use thistreatment cocktail early, and don’t wait until a patient is on a ventilator inthe intensive-care unit.

A couple of careful studies of hydroxychloroquine are in progress, butthe results may take weeks or longer. Infectious-disease experts are alreadyusing hydroxychloroquine clinically with some success. With our colleague Dr.Joe Brewer in Kansas City, Mo., we are using hydroxychloroquine in two ways: totreat patients and as prophylaxis to protect health-care workers from infection.

We had been using the protocol outlined in the research from China, butwe’ve switched to the combination prescribed in the French study. Our patientsappear to be showing fewer symptoms.

Our experience suggests that hydroxychloroquine, with or without aZ-Pak, should be a first-line treatment. Unfortunately, there is already ashortage of hydroxychloroquine. The federal government should immediatelycontract with generic manufacturers to ramp up production. Any stockpilesshould be released.

There are probably several reasons why we have not heard more about HCuntil the last week or so. First, a national leader promoting HC as a curewould create a run on the drug, denying it to the sick suffering from lupus andother auto-immune diseases, and those with rheumatoid arthritis. This hasalready happened in Australia and the US following Trump’s advocacy. Second,even with scalable production capacity, it will take time to ramp-up.Encouragingly, this process has already started. One US journal reports:

Novartis has pledged a global donation of up to130 million hydroxychloroquine tablets, pending regulatory approvals forCOVID-19. Mylan is ramping up production at its WestVirginia Facility with enough supplies to make 50 million tablets. Tevais donating 16 million tablets tohospitals around the U.S.

Thisbrings us to a third insight, which is that you still need containment toflatten the infection curve and massively reduce reproduction rates, or ROs,ideally below 1.0, if you are to avoid mass infections within any givencommunity. If national leaders start promoting cures, there is a risk thatthere will be widespread resistance to containment, massively increasingtransmission rates, and the need for more drugs that may have capacityconstraints.