For financial professionals in Denmark

Understanding the impact of delta

Agustin Mohedas, PhD

Agustin Mohedas, PhD

Research Analyst


Daniel Lyons, PhD, CFA

Daniel Lyons, PhD, CFA

Portfolio Manager | Research Analyst


7 Sep 2021

Although the Delta variant is testing the efficacy of vaccines, hope remains that COVID-19 will become an endemic disease, possibly as soon as next year. In the latest video from our ongoing COVID-19 series, Portfolio Manager Dan Lyons and Research Analyst Agustin Mohedas explain why, as well as how the effort to end the pandemic is impacting biopharma.

Key takeaways

  • Delta is particularly good at getting into host cells and can evade some antibodies provided by vaccines, making this variant of COVID-19 particularly problematic.
  • The virus that causes COVID-19 will continue to mutate as it replicates, but as more people become vaccinated and/or infected, the more resistance there will be to the disease. That should reduce the odds of future substantial outbreaks such as Delta.
  • As the pandemic wanes, it remains to be seen how durable demand for COVID-19 vaccines and therapeutics will be. But in the near term, the vaccines are expected to be a windfall for pharma sales, while longer term the technology could be applied to other infectious diseases.
View transcript Expand

Michael McNurney: We began the series nearly a year-and-a-half ago with the intent of providing our investors with not only valuable insights from our experts on how the markets are going to be affected by the pandemic, but also the nature of the disease itself. Sadly, we must continue to consider the impact of COVID on the markets and, not only the markets, maybe more importantly, on each of our lives.

My name is Michael McNurney, and today I’m joined by two Ph.D.s: Dan Lyons, who received his Ph.D. in immunology from Stanford [University], and Agustin Mohedas, who earned his Ph.D. in medical engineering and medical physics from the Harvard-MIT Program in Health Sciences [and Technology]. Agustin and Dan provide valuable insights to our investment teams as analysts, and today they’ll share those insights with you.

Dan, I’d like to start with you. How is Delta different from other variants of COVID-19? And why, in particular, is this variant rendering existing vaccines less effective?

Dan Lyons: Yes, that’s a good question, Mike.

The things that make Delta particularly bad are that it has an increased rate of transmission. It’s particularly good at getting into our host cells. It also can evade some of the antibodies that our body makes against the virus, and that can diminish the activity of vaccines and some of the therapeutic antibodies that have been developed over time. It’s not known for sure – it seems that Delta has some degree of increased severity for people that are severely sick with it, and, basically, it seems to be able to transmit between unvaccinated people the most because they’re the least protected. But unfortunately, it can also hit people that have been vaccinated with symptomatic infections, in some cases. However, the one good thing to keep in mind about vaccines, we’re still seeing really strong vaccine efficacy against severe disease yielding hospitalizations, with over 90% activity. And so the one key message there to protect yourself from Delta would be to get vaccinated.

McNurney: Dan, are you at all surprised by the rate of the emergence of novel variants? And should we expect any more problematic variants in the future?

Lyons: Yes, so like most viruses, there are errors that occur as the virus is trying to replicate itself and those accumulate over time and create these different variants. And basically, there are some viruses like the flu that end up with a brand-new strain every season. Luckily, our bodies remember some aspects of the flu from season to season, which protects us from most of these variations, and it’s likely that COVID will probably eventually become like that, where we have a pre-existing immunity that recognizes most aspects of the virus. So over time, as we have more people vaccinated or, unfortunately, naturally infected, we’re going to build up a larger population of people that will be resistant to some of these variations. And so, I think it’s likely that we’ll see fewer substantial waves of COVID like Delta in the future.

McNurney: Dan, how will booster shots improve immunity to Delta and COVID-19 broadly?

Lyons: Yes, so at a recent advisory committee meeting, the CDC recommended boosters for immunocompromised people, basically taking note of several studies that have shown [that] over time the antibody titers tend to wane after vaccination, and this is particularly noticeable for Delta. And recently, we’ve seen the Biden administration come out and say that this fall there actually is going to be a campaign to provide booster doses for the U.S. population later this fall. And there’s really good data using the mRNA-based vaccines showing that boosters can provide a really massive boost in antibody titers that are active against both the original strain of COVID but also against the Delta variant as well. And this is 12- to 15-fold higher titers of antibodies, which should be really protective against infection. So, we think this approach will likely stop Delta in its tracks, and there’s also evidence that combination approaches between using like an AstraZeneca adenoviral vaccine and an mRNA vaccine also seemed to work in the same setting to boost the immune response. So, regardless of which type of vaccination people have had up front, there seems to be good options for boosting to combat things like Delta and future variants.

McNurney: Great, Dan, thank you very much. Agustin, turning to you. Is Delta proving that the market for COVID-19 vaccines and treatments is large, durable and growing? And maybe a second part of that question: Can you foresee a scenario where some of these mRNA-based therapies that Dan just talked about could be used for other viruses?

Agustin Mohedas: Yes, well certainly Delta has highlighted the need for vaccination as people are becoming infected at a rapid rate, given how infectious that variant is. And the market for COVID vaccines is actually very large. Obviously, we have 7 billion people on the planet, so assuming two doses per person, that’s 14 billion doses at an average price of about $10 a dose. So that’s about $140 billion just for one treatment regimen across the globe. And just to put that into context, total pharmaceutical sales are about [U.S.] $1 trillion per year, so that could be almost a 15% boost in pharmaceutical sales in just one year.

The key question is how durable are these potential revenues and how often will we need potential booster shots? I think Delta is highlighting that COVID-19 can mutate in a way that potentially starts to escape immunity from vaccines and previous infection. However, the vaccines are still protecting us from hospitalizations and death, which is ultimately what we need to enter a more endemic phase. And so, I think the durability of these revenues still remains a question that is yet to be answered. I think boosters are likely to be needed for people that are immunocompromised, the elderly, maybe even everybody, but you know how often we will get these boosters still is a question that remains to be seen. However, clearly, the market for these vaccines is very large as the whole globe needs to be vaccinated eventually.

In terms of mRNA technology and its use for other areas, I think it’s proven quite effective for infectious disease vaccines. And so, we’ll see companies like BioNTech and Moderna probably move forward with trials across multiple indications of infectious diseases, including influenza or the flu, RSV, and other areas of high, unmet medical need, and I think those vaccines will be effective in other areas with respect to infectious diseases. Now in areas outside of infectious diseases like cancer immunotherapy or rare diseases, I think mRNA technology still has a lot to prove, and so we will be keeping a close eye on that.

McNurney: Now the question on most investors’ minds is what will it take to get to a point where COVID-19 is a manageable disease and not a pandemic, no longer determining the trajectory of the global economy?

Mohedas: Yes, this is all lasted a lot longer than we’ve probably all hoped, and you know, unfortunately, the virus continues to evolve and evade our collective immunity. That being said, I think we’re reaching a point where the disease will become endemic eventually. Now everyone has to remember when COVID-19 kind of came onto the scene, nobody had any pre-existing immunity. And so, we had to gain that over time, and we’ve done it through natural infection – unfortunately, it’s unavoidable -but also now through vaccination. And as we’re vaccinating the world and providing even booster shots, we will build up a worldwide immunity against this virus such that novel strains have much lower impact. We will see cases likely in the winter just like every other respiratory virus like the flu or RSV, but those cases won’t lead to the significant hospitalizations and deaths that we’ve seen in the past because of the collective immunity we will have built up through natural infection and vaccination eventually. You know, we think we are on track to kind of reach that point in 2022, but it’s going to require a significant expansion of vaccination across the globe.

McNurney: Well, gentlemen like I said at the outset, thank you very much for your insights. I know they’re very valuable to our investment teams and to our shareholders as well.

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Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

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Agustin Mohedas, PhD

Agustin Mohedas, PhD

Research Analyst


Daniel Lyons, PhD, CFA

Daniel Lyons, PhD, CFA

Portfolio Manager | Research Analyst


7 Sep 2021