Covid-19: The race for a vaccine

By
12 mins. to read
Covid-19: The race for a vaccine
Master Investor Magazine

Master Investor Magazine 60

Never miss an issue of Master Investor Magazine – sign-up now for free!

Read the latest Master Investor Magazine

Major countries have committed almost unlimited funds to develop a vaccine to stem the coronavirus pandemic as soon as practically possible. Some players in both big and micro pharma are going to win out, writes Victor Hill. But how long will it take?

A “national retreat”

One of the most striking features of the coronavirus pandemic is how nations have retreated behind their own borders in order to assuage the impact – health-wise and economic. There has been relatively little international coordination. Even in the European Union borders have been re-imposed after decades of free travel and national self-interest has prevailed over communitarian rhetoric. The Germans are even refusing to export face-masks to Italy. The Italian healthcare system, stretched well beyond its limits, is receiving precious little help from European neighbours[i].

While there are differences in government policy as to how to stem the epidemic in each country, one thing that everyone agrees on is the need to develop a vaccine as soon as practically possible. We are assured that scientists in all the major economies which have outstanding medical research bases – the UK amongst them – are working around the clock on this challenge.

Global vaccine sales totalled $54 billion last year and have doubled since 2014. Vaccines generally cost around $400 million to develop and take up to 15 years to commercialise. Here, I want to ask a few simple questions. Is a globally-available comprehensive vaccine against Covid-19 really feasible? How long will it take to develop and deliver? Who are the major players in this quest? What role will governments play? And who will end up owning the patents?

Science first

Amidst the hullabaloo in the mainstream media about loo roll shortages and cancelled football matches, much of the fundamental science has been overlooked. So let’s just re-acquaint ourselves with a few seminal facts.

On 10 January Chinese scientists openly published the genetic sequencing of Covid-19 (even before it had been so named) on the internet. It seems that they knew, even then, that this could become a global pandemic in the manner of SARS and MERS. Chinese scientists mapped the genome of the organism remarkably quickly? Or did they: it’s possible that they were aware of the virus long before Christmas, but that is just speculation.

Even if a tried-and-tested vaccine were to become available in early 2021, that will be too late to save potentially hundreds of thousands of lives. And its effectiveness may be short-lived. We already know that Covid-19 has evolved into two strains known to medical scientists as S- and L-types. The original S-type is milder and has a lower R0 (that is to say it is less infectious). The L-type has a much higher R0 and accounts for an estimated 70 percent of current cases. A vaccine that works against the S-type strain has no guarantee of immunising human beings against the L-type. Further, the virus may very well mutate into additional strains as it envelops humanity.

If all populations were as widely tested as that of South Korea where nearly 250,000 people have been tested at state expense, then vaccine-makers could better target vaccines to the precise organism carried by infected people. But testing rates have already varied widely (and the UK does not come out well in that league). Plus, very wide-scale testing in developing countries like Kenya (which, as I write, is reporting just one case of the virus and no fatalities) is frankly unrealistic.

That is one reason why many medical scientists place more hope in anti- or retro-viral medications than vaccines. The idea is that retro-virals developed to combat HIV, malaria and Ebola (the flesh-eating bug which was rampant in West Africa over 2014-16) might be re-purposed to fight Covid-19. It is said that the Chinese are very active here.

Retro-virals have triumphed over AIDS, which was thought a death sentence until 20 years ago; now it is routinely treated with a cocktail of drugs. On Monday, NHS England announced that it would make a drug available which prevents HIV infection (PrEP – pre-exposure prophylaxis). There are an estimated 103,800 people in the UK living with HIV and apparently about 7 percent are not even aware of it.

Avigan, also known as Favipiravir, which is used to treat flu in Japan, has been effective with no obvious side-effects in helping patients recover from the deadly coronavirus. So Zhang Xinmin, an official at China’s Science and Technology Ministry, told reporters at a news conference on Tuesday (17 March)[ii].

Who are the players?

There are roughly 35 established pharmaceutical companies currently working on a vaccine. As well as Big Pharma, a number of more nimble, niche outfits are applying their skills.

The world’s largest manufacturer of vaccines, the French pharmaceutical giant Sanofi (EPA:SAN), is working on a vaccine and is reportedly repurposing some of its previous vaccine research in relation to the SARS epidemic. As surely are Merck (NYSE:MRK), GlaxoSmithKline (LON:GSK) and Pfizer (NYSE:PFE). Together, these giants account for about 85 percent of global vaccine sales. GSK is working with Clover Biopharmaceuticals of China in this domain.

The largest manufacturer of vaccines by the number of doses produced – about 1.5 billion shots per year – is Serum Institute of India (SII). It produces vaccines in vast quantities at its plant in Pune near Mumbai for measles, polio, hepatitis, mumps, pneumonia and flu. The founder and Chairman of SII is Indian billionaire Cyrus Poonawalla. Last month, SII agreed to a joint-venture with Codagenix, a US drug company backed by Jim Simons, which is working on a vaccine using algorithms to analyse the genome of the coronavirus. SII owns Dutch vaccine maker Bilthoven Biologicals.

US pharmaceutical innovator Gilead (NASDAQ:GILD) (a stock long-since favoured by our Chairman, Jim Mellon) developed Remdesivir to fight Ebola. This may be efficacious in combating covid-19 – but it is not a vaccine.

Master Investor Magazine

Master Investor Magazine 60

Never miss an issue of Master Investor Magazine – sign-up now for free!

Read the latest Master Investor Magazine

Pennsylvania-based Inovio Pharmaceuticals (NASDAQ:INO) is also doing great things. They have already worked on vaccines for Ebola, Zika, SARS and Lassa fever. HVIVO (a subsidiary of Open Orphan (LON:ORPH)) is recruiting volunteers to test out a Covid-19 vaccine. Boston-based biotech start-up Moderna is said to have applied to the FDA to commence human testing for a vaccine.

Others of note include DistrubutedBio, headed by Founder-CEO Jacob Glanville. They are reported to be searching for an antibody which reacts against Covid-19. Another niche player on my radar is NanoViricides Inc. (NYSE:NNVC). According to a press release they put out on Monday (16 March) they already have a candidate prototype vaccine.

The problem is that while the minnows might achieve breakthroughs in technology, they would be unlikely to be able to produce a vaccine at huge scale without collaboration with one of the majors. The last blockbuster money-spinner vaccine was Merck’s Gardasil, developed to treat Human papillomavirus (HPV). This continues to generate over £1 billion in sales for Merck annually.

World-class academic universities which are working on the problem include Imperial College London where, reportedly, Professor Robin Shattock has taken 14 days to get from the genetic sequence of the virus to a proto-type vaccine. At Oxford University’s Jenner Institute another prototype vaccine has been developed which might soon be available for clinical trials. Also in oxford the Nuffield Department of Medicine is applying the same techniques that they used to generate a prototype vaccine for MERS in 2012. Nuffield is apparently collaborating with Italy’s IBRM.

The MIGAL Research Institute in Israel claims to be ready to start human testing of a vaccine within ten weeks. The University of Toronto is also a centre of excellence in the development of anti-virals. They have a vast library of molecules that just might contain the essential protease inhibitor against Covid-19.

Will it get there in time?

Even in California – the richest State of the richest country in the world – is predicting that its healthcare system will be overwhelmed by this virus. The consensus is that a vaccine is probably a year to 18 months away.

Last Sunday (15 March) the German weekly Welt am Sonntag reported that Germany and the USA had become embroiled in a diplomatic battle to gain the patent for a Covid-19 vaccine currently under development by a biotech company called CureVac in collaboration with the Paul-Ehrlich-Institut. Welt claimed that President Trump had offered CureVac $1 billion to secure exclusive rights for the USA.

The UK: Evaluating the response

I don’t think it would help anyone to get into a blame game around the UK government’s response to the pandemic. But it is reasonable to reflect on how things could be done better.

The South Koreans (and the Japanese) have been successful in containing the spread of the virus through the application of tracking technology. Everyone with whom a new patient had come into contact with in the previous weeks was confined selectively. And the Koreans have rigorously tested people. Their mortality rates are coming in at less than one percent as against Italy’s nearly eight percent.

It is alleged that NHS medics are not being tested to determine if they have contracted the virus (reportedly many have now got it); and, if so, whether they have recovered from it (i.e. their bloodstream displays the relevant antibodies). If that is true then the rate of contagion could accelerate. Unlike their South Korean counterparts, NHS staffers do not even have hamzat suits. If the virus spreads amongst NHS staff, then the NHS will become less able to cope with the tsunami of new hospital admissions.

Some clinicians are aghast at Sir Patrick Vallance’s citing herd immunity as a health strategy – it is a notion that is normally used to access the efficacy of a wholescale vaccination programme. Even a tiny proportion of the population catching the virus would overwhelm the UK hospital system which only has about 4,000 ICU beds. Already routine operations and treatments are being cancelled or postponed.

The UK government has decided – thus far – that the British state cannot impose the restrictions on its citizens that the Italian, French and Spanish states have imposed on theirs – let alone roll out a Chinese-style iron lockdown. So citizens are cautiously invited not to go down the pub – but the pubs remain open, so that regulars can infect themselves if they so wish. Meanwhile, the pubs cannot claim on their business interruption insurance because technically they remain open for business.

Probably, the “experts” around Mr Johnson imagine that the lockdowns in France and Italy are not sustainable – and that 2-3 months in their publics will tire of confinement with the risk that the virus then comes back. In China, the two-month total lockdown of Hubei Province and elsewhere seems to have stopped the spread. China reported just 21 new cases on Tuesday (17 March) as compared with 3,526 in Italy. The key variable is how many new cases will occur in China after the lockdown is eased.

Global recession is now inevitable

It is almost by way of an afterthought to this conversation that I observe that it is now clear that global recession is inevitable. The economies of most advanced nations are going to record reductions in GDP this year unrivalled in the modern era. Though, I think that underestimates the extent to which we can work and consume from home these days (so long as the internet holds up – don’t get me going on TalkTalk in Norfolk…). 50 million jobs could be lost globally in the travel sector alone.

Even two weeks ago we could not have imagined that a largely non-lethal virus could be so extraordinarily disruptive to the world economy. It is as if, like Alice in Wonderland, we have fallen down an unsought rabbit-hole into an alternative reality. In this strange world the French can no longer eat in restaurants and the British can no longer go to church.

Master Investor Magazine

Master Investor Magazine 60

Never miss an issue of Master Investor Magazine – sign-up now for free!

Read the latest Master Investor Magazine

New Black Monday was followed a week later by the sequel – New Black Monday II. There is really no point in predicting how long the bear market will last – except to say that, historically, bear markets last a minimum of nine months and a maximum of three years. We can’t complain: the bull market just gone lasted for nearly 11 years. Anyone who bought into the US markets when Mr Trump was elected and sold at the end of January would have nearly doubled their money.

But in the last bear market, starting in 2007, the zenith-to-nadir fall was 57 percent. This one could easily be of that magnitude – and we are only 18 days in. Even gold has fallen in value, suggesting that in times of panic the pricing mechanism itself breaks down.

“No company, of any size, will be allowed to go bankrupt.” That was French president Emmanuel Macron on Monday night (16 March), as he declared six times that France was at war with the coronavirus. The next day Chancellor Sunak announced that the British government would do whatever it takes to keep the wheels of business turning – including, inter alia, a £330 billion business loan guarantee fund. I’ll evaluate the impact of these fiscal stimuli shortly. What is clear now is that government finances everywhere have been blown out of the water. The world will never be the same again.

Making the best of things

William Shakespeare wrote King Lear (1605-06) and Antony & Cleopatra (1607) while in “self-isolation” during plague years – which were fairly regular in those days. Perhaps we shall learn to make a virtue of necessity (an idiom which first appears in English in Chaucer’s Canterbury Tales) and dedicate this time to doing things we always wanted to do but never had time for.

I was moved the other day by the closing lines of Keeping Quiet by Chilean poet Pablo Neruda (1904-73):

If we were not so single-minded
about keeping our lives moving,
and for once could do nothing,
perhaps a huge silence
might interrupt this sadness
of never understanding ourselves
and of threatening ourselves with death.
Perhaps the earth can teach us
as when everything seems dead
and later proves to be alive.

Now I’ll count up to twelve
and you keep quiet and I will go.

Victor.Hill@masterinvestor.co.uk


[i] See: https://www.gatestoneinstitute.org/15752/coronavirus-comes-for-europe

[ii] See: https://www.dailymail.co.uk/news/article-8125513/Drug-used-treat-flu-Japan-clearly-effective-Chinese-officials-say.html?ito=push-notification&ci=10708&si=1341905

Take part in our poll

Of the stocks covered by Master Investor in the weekly Small Cap Round Up, which ones do you hold?


Comments (1)

  • Andy says:

    Just a small point, Victor. Very few insurance policies would provide cover for Covid under the business interruption section. The only cover for infectious diseases would be if the premises had been infected and was closed under Govt order for cleaning etc.
    Why? Because insurers are v wary of giving cover where they could be overwhelmed by multiple claims on policies resulting from the same cause. For perils such as storm, earthquake, flood etc, they can model their exposure & buy suitable reinsurance.
    For pandemics, it would be virtually impossible to model, pretty much all policies would be affected – and far to susceptible to political decisions re quarantine periods & extends.
    There’s no point in insureds buying / insurers selling policies where the insurer would be financially unable to meet the claims

Leave a Reply

Your email address will not be published. Required fields are marked *

YOUR FREE INVESTMENT MAG

Get real investment insights from some of the best minds in the business - with our free Master Investor Magazine.