Recently, we have discussed the dichotomy in the equity markets and that markets are anticipatory, so they look through the present crisis. Currently, markets are anticipating a vaccine for COVID-19 which should help bring an end to this crises. To speed up progress and fund trials, the Trump administration set up Operation Warp Speed to develop treatments for COVID-19 at an unprecedented pace. The initiative is a partnership with the Department of Health and Human Services, the FDA and other federal agencies to deliver 300 million doses of a safe, effective vaccine by January 2021.
According to The New York Times, there are over 100 vaccines in development around the globe, with more than 40 already involving human clinical trials. The speed at which these vaccines are being developed could reduce the typical timeline by years. So let’s take a quick look at a few of the more advanced stage candidates which are fueling market optimism. The three vaccines that are currently in advanced stage clinical trials in the US are from Pfizer (PFE), Moderna (MRNA) and AstraZeneca (AZN). Early trials, based on stimulating the production of potentially virus-killing antibodies and triggering T-cell responses, have shown promising immune responses for all three candidates.
Pfizer, working with BioNtech (BNTX) and Fosun Pharma (SFOSF), is testing vaccines using messenger RNA to produce antibodies. Phase II/III trials were launched on July 27th in the US, and include up to 30,000 participants. Pfizer says, if approved, it will be able to produce millions of vaccine doses in 2020 and hundreds of millions in 2021. The US government has placed an initial order for 100 million doses, paying $1.95 billion and can acquire an additional 400 million doses if needed.
Moderna, in partnership with the National Institutes of Health, launched a phase III trial of its vaccine also on July 27th, with an expected 30,000 volunteers. Before the phase III trial was launched, Moderna announced that every person who received its vaccine developed an immune response to the virus with no significant side effects.
AstraZeneca (AZN) and the University of Oxford conducted an early study on monkeys and found that the vaccine provided protection. The United States awarded the project $1.2 billion in support. The vaccine began phase II/III trials in England and India, as well as phase III trials in Brazil, South Africa, and the United States; however, on September 6th, AstraZeneca halted trials to investigate one volunteer, who developed inflammation in the spinal cord. Because of the large number of participants in these trials, some volunteers have health issues that arise which are independent of the trials. It is important to determine whether these issues are caused by the trials or coincidental. An independent investigative committee in the UK concluded that the trials are safe to resume. Phase III trials resumed in the UK and Brazil on September 12th, but remain on hold in other countries for now.
Outside of the US, researchers around the world are also racing to find a vaccine. In China and Russia, vaccines have already been approved for limited use, despite any conclusive evidence that they are safe or effective.
To note, it is not uncommon for candidates to show promising results in early trials but then fail at the last hurdle. A 2018 study from the journal Biostatistics found that two out of three vaccine candidates ultimately fail to be approved. In the US, for any vaccine to be approved, it will need to prevent infection or decrease its severity in at least 50% of the people vaccinated. The goal is to inoculate enough people so that immunity spreads through a community. For COVID-19, some experts say about 60% to 70% of the population would need to develop antibodies, whether from a vaccine or getting and recovering from the virus. In other words, once approved, enough people will have to get vaccinated if we are to achieve the required results.
Let’s hope that the markets are correct and that one of these candidates, or a combination of the candidates, proves to be effective quickly. The sooner we find a vaccine, the sooner we can return to normality.
Washington Trust Bank believes that the information used in this study was obtained from reliable sources, but we do not guarantee its accuracy. Neither the information nor any opinion expressed constitutes a solicitation for business or a recommendation of the purchase or sale of securities or commodities.
Rick Cloutier, PhD, CFA is the Chief Investment Strategist for Washington Trust Bank with over 25 years of portfolio management and investment experience. He is responsible for directing the portfolio management, research, and trading activities for the bank’s multi-asset class strategies. He is also responsible for overseeing the client portfolio manager team and portfolio analytics team. Rick has written numerous articles for Investopedia and wrote a weekly column for the Fall River Herald News in Massachusetts. His research has appeared in numerous journals, including the Journal of Investment Management and Financial Innovations, the Journal of Business Management and Economics, and the International Journal of Revenue Management. He provided a nightly commentary on WALE radio and authored the novel Caveat Emptor. Rick earned his BS from URI, MBA from Boston University and PhD from SMC University.