COVID-19 AND THE REST OF THE YEAR
In the aftermath of the lockdown markets focused on data suggesting the early signs of a “V-shaped” recovery while postulating on the likelihood of a “second wave” – where an outbreak that has been brought under control sees a stark resurgence in cases. Summer didn’t kill the virus and it increasingly looks like fears of a second wave have ceded to recognition that the first wave never left. The jump in cases since reopening in the United States suggests that the optimism around a problem-free return to life as normal was significantly premature.
According to an analysis of Johns Hopkins data, while utilizing the White House’s “Opening Up America Again” guidelines, 14 states as of August 20 do not meet the criteria for reopening. Nationally, 9 states are seeing a rise in cases of Covid-19, while 18 are seeing rising positivity rates in administered tests, but 30 states have decreased the number of tests conducted. This suggests that a large degree of the recent uptick is due to both increased testing and rising prevalence of the virus. As a result, at least 21 states, representing about 55% of 2019 GDP, have paused or rolled back reopening plans with Texas and California at the forefront.
As cases have grown exponentially over the last month, deaths have not yet kept pace the way they did in the early stages of the pandemic in the United States. Deaths are a lagging indicator as severe Covid-19 cases typically don’t have an outcome for 3-6 weeks, and daily fatality reports have picked up meaningfully in recent days.
Florida, California, and Texas are all currently reporting record 7-day average death numbers, although significantly below the levels seen in New York. Standards of care have improved nationwide with the emerging viability of a limited number of therapeutics at certain stages of infection, but early death numbers are also skewed by New York’s early state directive which sent over 4,500 recovering patients to nursing homes – the demographic most “At Risk” from fatality due to Covid-19. New York is only 10% of total cases in the United States, but over 18% of deaths and has the highest Case Fatality Rate of any state.
Texas and Florida, which saw their outbreaks occur much later have had more success at limiting deaths to the disease so far, though it is still early and deaths will continue to rise. Given the widespread nature of the outbreak relative to the initial stages, deaths will likely hit records again as we proceed into the fall.
Of the 3 states with significant outbreaks at this time, there are early signs of progress in California, the nation’s largest state – both in terms of population and economic activity. Florida and Texas are both reporting lower daily cases but the number of tests conducted in each state has dropped substantially while positivity rates remain elevated and deaths continue to increase. Florida likely has a way to go but if Texas or California can drop their infection rates in a timeframe similar to New York that would do substantial damage to the idea that lockdowns are necessary. Especially considering that in the late stages of New York’s shutdown, one of the strictest in the country, 66% of new hospitalizations were from people following quarantine guidelines and staying at home.
On the vaccine front, over 140 candidates are in development globally, 5 of which have entered Phase III trials this summer. Moderna and Pfizer both have vaccines currently starting phase 3 trials with plans for 30,000 participants. AstraZeneca’s vaccine, developed jointly with Oxford University, is scheduled for August, while Johnson & Johnson’s is slated for September. Phase I/II results from all have been released and have shown neutralizing antibodies at similar levels to recovered COVID-19 patients.
Considering the variety of the lineup and the urgency of governments worldwide there will likely be a vaccine approved in some fashion – officials have signaled that a vaccine that simply reduces symptoms may be enough for now. The FDA has released guidance outlining conditions for approving a Covid-19 vaccine, including that any vaccine be at least 50% more effective than a placebo in preventing the disease. This benchmark is used routinely for flu vaccines and appears achievable considering early trial results.
Given the steps that still need to be taken, the earliest we would likely have access to a vaccine is January and, even then, it would likely be for emergency use only or for the most at-risk groups. The German government doesn’t expect wide availability of a vaccine until mid-2021. There are also concerns about the length of immunity – recent studies suggest less than 6 months, in line with other coronaviruses – and possibility that the vaccine could make individuals more susceptible in the future and with a potentially more serious recurrence of the disease. This phenomenon, known as Antibody Dependent Enhancement (ADE), has been observed in a number of mosquito-borne flaviviruses, HIV, as well as with both severe acute respiratory syndrome coronavirus (SARS-CoV) and Middle East respiratory syndrome coronavirus (MERS-CoV).
It’s unlikely that we have a medical solution before the end of the year and investors should plan on this environment continuing. Seven months into the pandemic, however, we have significant science with over 18 million data points on which to base a response. A number of recent studies have shown T-cell activity in significant proportions of individuals who had no prior exposure to SARS-CoV-2, the virus that causes Covid-19. This suggests some level of cross-reactivity from existing pathogens and helps explain why so many people exhibit such different immune responses to infection. The virus doesn’t spread well in outdoor conditions. In fact, a study of 318 outbreaks outside of Hubei province in China found that only 1 occurred outdoors and the risk of immediate reinfection appears low given immune responses shown in previously infected monkeys. Reports to the contrary have largely been attributed to flaws in how PCR-based diagnostic tests function.
Since the turn of the 20th century, there have been 4 other pandemics – the H1N1 “Spanish” Flu (1918-1920), the H2N2 “Asian” Flu (1957-1958), the H3N2 “Hong Kong” Flu (1968-1970), and the H1N1pdm09 “Swine” Flu pandemic of 2009-2010. Every single one of these pandemics had a second wave, and all of them have a lower reproduction number than is currently estimated for Covid-19. However, all of these pandemics also saw significant diminishment in terms of impact over time. The “Hong Kong” flu still circulates every year as a seasonal virus with limited impact, and the low death rate of the 2009 H1N1 pandemic (which also still circulates on a seasonal basis) is attributed in some studies to antigenic similarities to the 1918 Spanish flu.
There are simply two keys to bridging the pandemic: Testing and Time.
