Summary
The truth about COVID vaccine developments is that they are complex and slow; it may not be possible to develop a useful COVID-19 vaccine.
Treatments remain elusive, although preventing establishment of infection is gaining attention. Mostly success is about avoiding transmission of infection.
Major outbreaks in Europe and the US, with lockdowns in Europe and the US response awaiting election outcome.
The consequence for investors is no miraculous economic recovery and indeed COVID-19 remaining a challenge for the foreseeable future.
Everyone is tired of COVID, but the SARS-CoV-2 virus is not tired of us and therein lies the problem for investors. The Northern Hemisphere winter is emphasising this point. Here I review the latest concerning COVID-19 and its impact on the global economy. It is a time for investor vigilance, especially because the outcome of the upcoming US election will most likely drive very different paths for the COVID-19 pandemic in the US. COVID-19 vaccines
After an exhausting roller coaster ride of “warp speed” action on ending the COVID pandemic, at last sanity seems to be coming to consideration as to what the real situation is regarding COVID vaccines and treatments. This can only help investors consider what is going on in a highly uncertain situation.
A detailed report just out concerning COVID vaccines in the prestigious clinical journal Lancet makes the following confronting point: “..the most important efficacy endpoint, protection against severe disease and death, is difficult to assess in phase 3 clinical trials”. The Lancet review provides insight into the question that most seem to overlook: “Does a particular COVID-19 vaccine work?” The figure below from the Lancet article indicates the complexity involved with answering whether a COVID vaccine is efficacious. The key issue concerning the pandemic is whether a vaccine prevents breakdown of the hospital and health care systems as these are the parameters around which lockdowns are based.
Potential endpoints of an efficacious COVID-19 vaccine Source The Lancet
The report indicates that 44 COVID-19 vaccines are in clinical development and 151 are in pre-clinical development. Strength of the immune reaction produced by a vaccine and safety are important considerations, but the real question is whether a vaccine protects against SARS-CoV-2 infection. We are still some time from getting an answer to even the initial question about safety and immune protection. In the real world it becomes more complex, as is covered in the Lancet article. My point here is not to dig deeply into the science, but instead to indicate that the way a COVID vaccine development has been projected by politicians does not reflect the reality of addressing the COVID-19 pandemic. Simply put, having a vaccine that produces antibodies and is safe (on 30,000 people) does not mean the end of the pandemic. This is what investors need to be aware of. Whether the Astra Zeneca (NYSE:AZN)/Oxford University, Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX), Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX) vaccines or a host of other vaccine programs produce initial positive results is just the start of a long road.
The Lancet has other articles addressing various aspects of vaccine developments, including for example who should be prioritised for COVID vaccines. COVID-19 Treatments
The bright spot on the treatment horizon is that for those who are critically ill dexamethasone is proving to be life saving in some instances. Dexamethasone is a cheap old drug, so this is not of much interest to investors. For hospitalised patients there is not yet a clear treatment that provides substantial and proven improvement, although Gilead’s (NASDAQ:GILD) remdesivir has recently been approved by the FDA for treating adults and children over 12 in a hospital setting. Trial results for remdesivir are not however unambiguous and improvements are limited to reducing time of hospital stay in some trials. The treatment window in hospital is quite short and hence finding a drug that stops the COVID-19 progression in its tracks is proving to be a problem.
Early stage treatments
Recently there has been a lot of focus on initial infection and preventing establishment of the viral infection, with (single or combinations of) monoclonal antibodies prominent in such developments. While it is early days, a Phase 2 trial of Eli Lilly’s (NYSE:LLY) LY-CoV555 (anti-spike protein) monoclonal antibody for patients with mild or moderate COVID-19 has given some interesting results. In particular there is evidence that viral load was decreased and hospitalisation was reduced after treating with LY-CoV555, although the initial findings showed quite small effects. Combining LY-CoV555 with remdesivir seems not to be effective.
Regeneron’s (NASDAQ:REGN) REGN-COV2 monoclonal antibody cocktail seems to give similar results to the Eli Lilly LY-CoV555 formulation. Viral loads were decreased and non-hospitalised patients had improved symptoms in a Regeneron Phase 1/2/3 trial. Both the Eli Lilly and Regeneron antibody products are seeking EUA (Emergency Use Authorization) from the FDA. Note that Regeneron is modifying its trial to exclude very sick hospitalised patients due to adverse findings in the group requiring high flow oxygen or mechanical ventilation.
One established antiviral, Starpharma’s (OTCPK:SPHRY) SPL7013, that I have an interest in as a long term investor, has prospects with repurposing as a nasal spray product for those at risk of infection. Antibacterial and antiviral SPL7013 is the active ingredient in Starpharma’s VivaGel BV product for treating and preventing reoccurrence of bacterial vaginosis. This product has been approved and released in more than 40 countries, so there is a broad path to market (although VivaGel is not yet FDA approved). Starpharma has recently completed a $48.9 million placement and Share Purchase plan to accelerate its COVID nasal program among other projects. Investment consequences
The above comments, plus links to relevant articles for those wishing to better understand what is happening, make clear that COVID vaccine developments have been treated in quite unrealistic terms regarding possible speed of development and timing concerning when we can expect to get back to “normal”. Simply put, COVID is not reaching a turning point and the immediate future could be more confronting than what has been experienced to date. Of course much has been learned in the first wave and this is helping reduce the mortality rate. However there are not effective drug treatments and only one drug, dexamethasone, has proven mortality reduction and this is only applicable when a patient is close to death. Given vaccine delays or even failure to develop an effective vaccine, the only way to prevent overrun of health systems involves measures to minimise infection and to isolate infective people. It is clear that such activities mean substantial curtailment of business activity. So far the economic impact has been softened by Governments providing support. It seems likely that this support will be curtailed sometime in the future with consequent negative economic impact. This is beginning to impact global markets now.
The future
France has just made clear what those with their heads in the sand may have missed. The pandemic is back in full force in the Northern hemisphere as winter approaches. With 1.47 million cases and 37,435 deaths (573 deaths/million population) and burgeoning cases and deaths (today 52,518 new cases and 416 deaths) France is in crisis as these numbers represent the highest infection rate since April. President Macron has announced a hard lockdown (including night curfew) until at least the end of November. This means residents can only leave home for essential business or for medical reasons. While schools and factories will stay open, non-essential businesses (restaurants, bars) will be closed. Macron indicates that this second wave will probably be harder than the first.
Germany starts from a better controlled situation (128 deaths/million) but it had 14,089 new cases and 84 deaths today. It has chosen a less severe lockdown although restaurants, gyms and theatres will be closed.
The UK is in real trouble with Boris Johnson repeating the same mistake he made last time. He has waited until his experts indicated that the UK health system could breakdown before implementing a very tough lockdown. COVID is relentless and if you don't stay on top of it, getting back from an outbreak is tough. The UK now has 1.05 million cases and 46,853 deaths (689 deaths/million) and today had 18,950 new cases and 136 deaths.
Fear of a worsening situation and the above economy disrupting measures are impacting the markets both in Europe and in the US. The US election is critical
While European countries are taking urgent action to curb the pandemic, the US is facing diverging approaches (or lack of them) depending on who wins the election. The situation in the US is critical, with cases now at 9.5 million and 71,801 new cases yesterday; deaths have reached 236,477, with 402 deaths yesterday.
President Trump has stated in a tweet that the pandemic has turned the corner and after 4th November the pandemic will disappear. An expert view is that things need to change to address the problem. This is addressed in an article in the prestigious science journal Nature, which explains why COVID-19 outbreaks are going to worsen this winter.
Joe Biden is promising to immediately get a plan together for addressing the US COVID-19 crisis. Even should he be elected, the death toll in the US is probably going to double before he could make any impact.
My take on the impact of the COVID-19 pandemic is that the trajectory of the US economy will be different depending on which party wins government. However, this view is clouded by what the market sees as a bigger issue, that of instability if there fails to be a decisive winner. Some pundits suggest a 20% market slide if the result is inconclusive. Notwithstanding this short term risk, which will be clear within a week, I suggest that investors need to consider what they will do should either party achieve a clear mandate, as Biden’s campaign prioritises decisive action on COVID, while Trump plans to continue to be optimistic that the worst is past. Conclusion
No matter how much one wishes things to be different, reality has a way of intruding and this is what is beginning to happen currently in relation to the COVID-19 pandemic. No matter how fed up people become, the consequences of ignoring reality do become apparent. For the US, the binary result of the election will most likely play out quite quickly. A Biden administration would quickly provide an economic stimulus which would help stabilise the market, and also enact a major spending program ($2 trillion over 4 years) to address climate change and decarbonisation of power and transport. And a major focus would be to develop a national program to address the COVID crisis, as the death toll is likely to be above 400,000 (or more?) by February. The future is much less clear for a second Trump term as the goal is to open up the economy. Europe is making clear that this is rapidly ceasing to be an option at least for the winter period.
On treatments and vaccines, clearly the early winner is Gilead, with remdesivir now approved by the FDA. However, the evidence that remdesivir is effective remains quite elusive. The vaccine programs remain opaque as to who (if anyone) will win, so investment in vaccine makers is pretty risky. For emerging vaccine companies (eg Moderna, BioNTech, Novavax) failure would have major consequences. These companies have been largely treading water since September although a diligent trader might have had some success trading on volatility. Established big pharma companies (eg Astra Zeneca (NYSE:AZN), Pfizer (NYSE:PFE)) have a lot of other programs that ensure their success should their vaccine programs not be successful.
Mostly my take on the COVID-19 pandemic is that this is not over and it is unlikely to be over for some time. The market at first anticipated a short sharp V-shaped recovery early in 2020, then it moved to expecting 2021 to be back to normal (and the IEA still expects that outcome, eg for natural gas), with now 2022 coming into view as a time of recovery. When thinking about your investments it might be useful to include an even longer time horizon and also to contemplate the new normal to be different from how we entered the COVID-19 pandemic.
I am not a financial advisor but I do have a background in biotech and I follow closely how the pandemic is playing out, especially from the point of view of an investor. If my commentary provides some clarification as to what is going on, please consider following me.
Disclosure: I am/we are long SPHRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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SPL Price at posting:
$1.35 Sentiment: Buy Disclosure: Held
