In the latest installment of our video series on the scientific and investment implications of COVID-19, Biotech Analyst, Agustin Mohedas, discusses how efforts to develop treatments and vaccines have accelerated innovation in healthcare. He also provides insight on the potential impact of certain states reopening their economies and what the timeline to develop an effective vaccine could look like.
- Efforts to generate vaccines for COVID-19 highlight the importance of innovation in healthcare and demonstrate how quickly new technologies can be developed.
- These efforts are also helping some companies accelerate their technological capabilities in a rapid and meaningful way. In addition, smaller companies with cutting-edge technology are starting to partner with pharmaceutical giants, which can ramp up manufacturing and distribution.
- A number of vaccines are currently being tested on healthy volunteers to determine the drugs' safety. While larger clinical trials will be needed to gauge the efficacy of these drugs, some vaccines could be approved by early next year and in turn become broadly available in the second half of 2021.
This video was recorded on 13 May 2020.
Michael McNurney: Hi, my name is Michael McNurney. Welcome to Janus Henderson’s ongoing series on the COVID crisis. Today, I’m joined by Agustin Mohedas and Agustin and I are going to talk about the latest updates on the disease and some of the secular themes that have been accelerated through this crisis. Agustin, welcome.
Agustin Mohedas: Thanks, Mike. Yes, happy to give an update on COVID-19 and how we’ve seen it evolve. I’ll focus primarily on the Europe and the US, but I’ll also mention some things about how it’s evolved in Asia as well. Now, in the EU five [European Union five refers to France, Germany, Italy, Spain, UK], the European Union saw the peak of new daily cases actually around mid-March. And that has slowed steadily but surely been decreasing. While it was, while the EU had about 25,000 new cases in the mid-March timeframe, right now, the number of new daily cases is under 10,000 and continuing to decline.
Meanwhile in the US, we’ve been around 25,000 to 30,000 daily new cases since the end of March and are still holding around that level, that number. The case numbers have come down a little bit but not nearly as much as they have in Europe, which suggests that our social distancing measures in the US are not as uniform or as effective as they have been in Europe. And in fact, if you remove New York state, New Jersey and Connecticut, new daily cases in the US are actually increasing.
Now this contrasts with Asian countries such as South Korea, Vietnam, China and others where they’ve effectively shut down the epidemic through very strict lockdowns, contact tracing and widespread testing.
MM: Agustin, it seems to me that we’re trying to strike a very delicate balance between the health of the country and our economic health. What is the biggest threat or what are maybe the indicators that you’re looking for to measure that balance?
AM: Sure yes, so some states that have been particularly hard hit, like New York, New Jersey, Connecticut, Massachusetts, you know really in the Northeast, are still in lockdown while other states that have also seen cases but are much lower number, are starting to reopen their economies. Now, the potential problem is as we reopen the economy and people start going to businesses and interacting more, that the social distancing measures that were put in place are slightly relaxed, causing the R0 of the virus, or the infectivity, to increase and leading to more daily new cases. Now, we really won’t see this effect happen for at least a week, maybe two weeks because there is an incubation period which means a period of time when you have the virus but you’re not displaying any symptoms and, therefore, aren’t going to go to the doctor and get a test for coronavirus.
We also know 80% of cases are asymptomatic and so what will end up happening potentially in the places that reopen their economy is people will start going about their normal lives and maybe going to work and interacting with people and over the next one, two, maybe three weeks, we will probably see the number of new daily cases start to rise.
Now the main question will be how much will it rise? Will we see a doubling of the new daily cases in the states that are reopening, a tripling? It’s really hard to tell at this point. And so, we’re just going to closely monitor the situation in those states and in the rest of the country to see exactly how this evolves. We’re also monitoring things in you know, countries like Germany, which have recently relaxed their social distancing restrictions and have seen a small uptick in the number of cases.
So I guess big picture, as countries and states and cities start reopening their economy, we just have to be very cognizant and careful that this will lead to more cases but hopefully, it will be in a controlled manner and with the availability of testing and isolation and tracing, we will be able to quarantine those people that do test positive while still allowing others to remain active in the economy.
MM: Agustin, one of the things that Janus Henderson is known for is our differentiated research and not just taking the consensus view on things. So, can you talk about some of the ways that you’re measuring and tracking this disease?
AM: Yes, sure Mike. You know, as COVID-19 started becoming apparently a problem in China and then other parts of Asia and we know it was an eventuality that it would come to the US and impact our country and other countries like in the EU, we’ve been tracking it very carefully and creating models to try to predict both what the peak number of cases would be, the peak number of deaths and when we might be able to see the number of cases come down to a point where reopening the economy would be safe.
So we’ve been tracking that, and I’ve created multiple models particularly focused in the US where we are predicting between 1.6 and 1.8 million cases and 100,000 deaths by the end of June. Now these models, however, are all based on kind of how the epidemic evolved in other countries. So, I’m using those examples in modeling the US based on them. However, as countries begin to open up, we can see the rate of daily new cases start to increase in which case all of these models will have to be revised.
So I think that’s why we’re really at a really important moment here in May and early June where we’re going to really start to see what the impact is of reopening the economy on the epidemic and the pandemic worldwide. So it’s a really important time, an inflection point perhaps, and so we’re monitoring very closely and are adjusting our models accordingly.
MM: And obviously, that has a huge impact in terms of the healthcare world, but also other investors at Janus Henderson are using this information to try to get a sense for the economic impact and the duration of this impact. Is that true?
AM: Yes, absolutely. Look, if the epidemic you know, let’s say we have a second wave or another flare [up] of the epidemic in the US, I think that’s going to impact consumer behaviour; going to restaurants, movie theatres, even how we shop. It’s all going to be impacted and so other investors at Janus Henderson are closely following our models and our updates in order for them to be able to make better investment decisions.
MM: Now Agustin, one of the things that we’ve seen particularly within technology is this acceleration on some of the secular themes that we’re investing in through the course of this crisis and in particular, because of the measures that we’re putting in place to try to curtail the spread of the disease, is something similar to that happening within the healthcare space?
AM: That’s absolutely what we’re seeing. We’re seeing technologies for example, mRNA-based medicines. This is a new type of medicine that is, there are no approved products that use mRNA* as a form of medicine, but it is basically delivering the message to create a protein to the body and then the body and the cells within the body actually serve as a factory to produce that protein or that medicine. Now this is particularly useful for generating vaccines. And so we have companies like Moderna and others that are actively engaged in developing mRNA‑based medicines and one of their best applications is for use in vaccines because you can very quickly generate a development, what we call a development candidate, and start phase I testing. So, we now see multiple mRNA‑based vaccines in the clinic and we will have data from those towards the middle of this year and then potentially, billions of doses available by sometime next year. So that’s just one example of some of the acceleration that the COVID-19 pandemic has caused in terms of technology development in biotech.
MM: Agustin, one of the things that you’ve mentioned is the fact that we’ve got a lot of companies working on potential vaccines or therapies. One of the things that we’ve noted is that there’s been this pickup in terms of collaborations that are happening, trying to fight this disease. Is that something we’re seeing more of right now?
AM: Yes, actually I think it’s been a theme like as you’ve mentioned where small companies, so these innovative smaller companies that have really the leading cutting-edge technology, they are partnering with more established pharmaceutical firms. So, for example, BioNTech, which is also developing an mRNA‑based vaccine, they actually have two different vaccines for COVID-19, they did a large partnership with Pfizer. Pfizer has a very large vaccines division and obviously, a huge supply chain worldwide and could get this medicine distributed widely. So, we’re seeing companies that have really cutting-edge technology partner with large pharmaceutical giants that can ramp up manufacturing and ramp up distribution in a way that just wouldn’t be possible for the small companies. So, we’re seeing kind of the best of both worlds in the healthcare space team up together to really find a solution for this crisis. And I think that is going to be looked at favourably on the sector for a long time.
MM: Agustin, it sounds like there are a number of modalities that are being used to try to treat or find a vaccine for this disease which is going to result in an increasing pace of innovation. But also, aren’t we going to see some goodwill generated for the entire industry because of the fight against COVID-19?
AM: Yes, I think what really this is showcasing, what COVID-19 is showcasing, is just a, how important the biotechnology and healthcare innovation ecosystem is and it’s also showcasing just how rapidly new technology can be developed. And for the companies that are developing cures, treatments and vaccines for coronavirus, while they may not necessarily profit directly from those vaccines or cures — especially if they’re sold at cost of just slightly above cost — they are accelerating their technological development in a very rapid and meaningful way that will then apply to the rest of their pipelines.
And then the sector more broadly is going to experience a lot of goodwill especially from the political front for, really, coming to the rescue here with treatments and vaccines. And so I think what you’ll end up seeing is that there will be a lot less pressure for example, from a drug pricing point of view or a lot less pressure politically on these companies that have really faced a lot of criticism over the last few years especially with respect to drug pricing. And I think politicians and the rest of the country will realise you know, this is a really important sector that we want it to be as innovative and thriving as possible and so we need to keep it going. And so, we’re going to want more of it and not less of it. So, I think in general for the investors, it’s going to be very positive for the sector for many years to come.
MM: Agustin, how is it that we’re able to evaluate the effectiveness and the safety of these medicines if they are so nascent in terms of their development?
AM: Yes no, that’s a great question. You know luckily for mRNA-based vaccines, the safety has already been shown with some of the other clinical programmes that different companies have developed and so they do appear to be quite safe. The efficacy is another question. We’ll have to see if these vaccines are able to generate sufficient antibodies to be protective in the real world. And so, the companies that are developing these vaccines are testing them now in healthy volunteers and so we’ll be able to see how many antibodies are generated. And so, those are called antibody titers, so how high those titers are. And then they will run large phase II/maybe phase III studies with thousands of patients, thousands of healthy volunteers that will receive either placebo or the vaccine and then go about their daily lives and at some point, they will see okay, the people that get placebo, were they more likely to get COVID‑19 versus those that had the vaccine? And then we’ll be able to have our efficacy signal.
Now in general, flu vaccines for example, are between 30% and 50% effective, meaning they reduce the rate of getting the flu by between 30% and 50%. And then if you do get the flu, you actually have a much less severe form of the flu. So, the flu vaccine is a pretty effective vaccine, but it’s not as effective as let’s say the measles vaccine, which prevents almost 100% of infections. So, we’ll have to see where these coronavirus vaccines lie in terms of their effectiveness.
MM: So, then I guess the natural follow-up question is when is this going to happen?
AM: So right now like I mentioned, these vaccines are in phase I studies, healthy volunteers. Those are typically just safety studies, but we will be able to get neutralising antibody titers and that data will be available in June from a few different companies. And then by the second half of this year or early next year, we will have data from the larger what we call field studies where you give the vaccine or placebo to thousands of people and then actually measure how many people get the disease versus those who don’t get the disease.
So, you know, towards the end of the year, we’ll have that. I expect some of these vaccines to be approved maybe by the end of the year or early next year. And then become broadly available towards the second half of 2021.
MM: Well Agustin, thank you very much for sharing your information today and thanks for all the information that you’ve provided to all of the investors at Janus Henderson. I know it makes us much more informed investors as we look to make investment decisions. Thank you very much for joining us today, Agustin.
AM: You’re very welcome.
*mRNA, or messenger RNA, carries the genetic information copied from DNA to other parts of the cell for processing. The mRNA approach to fighting COVID-19 uses the mRNA to elicit an immune response to build immunity.
Janus Henderson Investors makes no representation as to whether any illustration/example mentioned in this document is now or was ever held in any portfolio. Illustrations shown are for the limited purpose of highlighting specific elements of the research process. The examples are not intended to be a recommendation to buy or sell a security, or an indication of the holdings of any portfolio or an indication of performance for the subject company.
Unless other stated, source is from Janus Henderson Investors, as of 13 May 2020