Coronavirus: The Signals to Watch from Our Health Care Experts
Our investment approach to the COVID-19 crisis
Our global research platform benefits from access to a strong internal sector research team, including analysts with immunology and virology Ph.D.s, that can help track the virus and evaluate possibilities of future outcomes.
- Our medical and scientific backgrounds are helpful, as we seek information from disease experts, including epidemiologists, virologists, ex-FDA officials, and doctors on the front lines treating patients.
- Frequent discussions with company managements remain a key part of our investment process.
- We are in close contact with firms pursuing vaccines and treatments, as well as those focused on testing and other supplies related to the virus.
Coronavirus: more infectious, but less deadly, than estimated
- The fatality rate is inversely correlated with the testing rate.
- In settings where over 10% of the population was tested, the fatality rate has been as low as 0.5% or less, suggesting the true fatality rate is under 1%.
- Given the number of deaths to date and assuming a low fatality rate, only around 1.5% of the U.S. population has been infected.
- This is too low a ratio to count on herd immunity in the U.S., which would imply infection of 60% of the U.S. population and one million fatalities.
- Given the roughly 25,000 fatalities in the U.S. to date, the lockdown steps being taken to curb the outbreak contrast sharply with an estimated 975,000 deaths were no steps to be taken.
- The virus seems to have caused fewer deaths in warmer countries, which fits the pattern of respiratory viruses usually spreading most in cold, dry conditions.
The evolution of the pandemic in coming months
- Countries in Asia that had experience in managing epidemics were able to clamp down on the virus quickly, while much of the West was poorly equipped.
- The U.S. was relatively slow to implement mitigation and widespread testing measures but has started catching up.
- We expect significant loosening of restrictions in the U.S. by June, and by July and August are hopeful that there will be minimal new cases. The U.S., like other northern hemisphere countries, may also benefit from a seasonal downturn in the virus.
- To what extent the virus will return in the fall will depend on the effectiveness and duration of the current lockdown, the availability of testing, new treatments in market by then, and our ability to encourage behavioral changes such as the wearing of masks.
- The “new normal” includes masks, social distancing, remote working, free and frequent tests, and contact tracing through cellphones. The other side of this virus may require shifts to smaller school class sizes and flexible work hours to avoid crowded subways, for example.
- Better testing and mitigation efforts are likely to limit outbreaks, as has happened in Hong Kong and Singapore.
- While previously exposed individuals could be re-infected with the virus, the severity of the illness should be much lower.
- Geographically, peaks are beginning to hit in the western hemisphere. Markets are reacting favorably, yet April has proven to be a difficult month.
The availability of effective treatments and a vaccine
- Many bio-pharma companies are focused on developing treatments, and several are promising.
- There are three basic categories of treatment:
- Remdesivir and other direct-acting antivirals (DAAs) block the replication of the virus and work best in the earliest stages of the disease.
- Antibodies to help fight off the disease can be harvested from the plasma of recovered patients, but companies are also working on scalable approaches using mice that might make treatments widely available to health care workers or other high-risk groups.
- Companies are also pursuing treatments that dampen the immune cascade in the late stages of the disease.
- An effective vaccine is likely given that we are facing a single strain of the viruses, and coronaviruses tend not to mutate much.
- A vaccine that targets a spike protein on the coronavirus—one using a traditional “subunit” approach—appears most likely.
- More than one vaccine is likely to be deployed given the scale of the population that needs to be quickly inoculated.
- The danger of cutting corners on safety on a vaccine given the billions of doses that will need to be procured means that it might take more than 12-18 months to have one widely available.
Investment opportunities and challenges as companies respond to COVID-19
- Many biotechnology firms developing treatments or a vaccine for COVID-19 have attracted keen investor interest and appear to be valued based on hope rather than realistic chances of clinical or commercial success.
- Initially, as the market collapsed, we took advantages of dislocations and inefficiencies created by liquidations and panic selling.
- The pandemic is hurting some therapeutics and medical device makers as patients delay elective procedures and hospitals struggle financially.
- In biopharma, we’ve seen premium values placed on innovative drug platforms, but the accelerating pace of innovation means that investors may be presented with IPO opportunities.
- Diminishing political risk is a tailwind for managed care firms.
- We continue to invest in treatments for a wide range of conditions that improve the standard of care and meet unmet medical needs, as well as services that improve access to and affordability of healthcare.
Lasting changes to the health care sector are likely
- More health care will be conducted virtually now that telehealth has demonstrated its viability and cost savings.
- Likewise, patients are likely to turn to drugs delivered subcutaneously at home rather than intravenously at a medical facility.
- As the public focuses on the value of life-saving medicines, clamping down on drug price increases appears likely to become less of an issue.
- People are turning to pets for comfort and companionship, and companies focused on animal health stand to benefit.
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