Janus Henderson Investors: COVID-19: What will it take to reopen the economy?

Key takeaways

• Practices such as social distancing and contact tracing appear vital to containing the spread of the COVID-19 coronavirus. In countries that have aggressively used these measures, the number of daily new cases has dropped dramatically. In areas that have not, case levels are, at best, holding steady.
• New data indicate that the infection fatality rate for COVID-19 is between 1% to 1.5%, making the coronavirus roughly ten times more deadly than the flu.
• Early clinical data for several vaccine candidates look promising, with results showing that the vaccines can generate neutralising antibodies that kill the virus.

View transcript

Michael McNurney: Hi, this is Mike McNurney with the next in Janus Henderson’s ongoing series on the COVID crisis. Joining me today is Janus Henderson Global Life Sciences Portfolio Manager Andy Acker as well as Biotechnology Analyst Agustin Mohedas. Today we are going to talk about an update on the course of the disease in different regions around the world as well as some vaccines that are under development.

Agustin, I want to start with you. In Asia, in Australia and New Zealand, they acted very swiftly, and it seems to have helped those countries manage the disease a little bit better. Can you give us an update of where those countries are today?

Agustin Mohedas: Now obviously, the virus originated in Asia, and those countries that have a better kind of pandemic awareness really quickly instituted social distancing measures and really robust testing and tracing capabilities, which allowed them to reduce their overall case count significantly. Whereby now, in countries such as South Korea and places such as Hong Kong and Australia and New Zealand, the number of new daily cases is very, very low, sometimes even in the single digits. And so what those countries have now been able to do is reopen their economies in a safe way and, using their robust testing infrastructure, they can make sure to find any clusters of coronavirus cases that might exist and then rapidly contact trace those clusters and isolate all those individuals.

McNurney: Agustin, we have seen a very different reaction in Sweden, where they didn’t implement some of those measures that you discussed that were implemented in Asia and in Australia and New Zealand. So, what are they seeing in that country, and have they developed any kind of herd immunity?

Mohedas: Yes, Sweden has taken a really different approach to the COVID-19 epidemic, deciding to not institute a lockdown in an attempt to not adversely affect the economy in such a significant way, and while maybe their economy isn’t as adversely affected, they have paid a price for it. Now the number of cases in Sweden has remained between 500 and 700 new cases per day and that has been flat since late March. Whereas a country like Norway, which is a peer country to Sweden, they peaked at around 300 cases per day and have subsequently declined to fewer than a handful of cases per day. Sweden now has a death rate that is almost ten times higher than Norway when you adjust for population; and so, while yes, they have been able to keep their economy more open, they have paid a price in terms of more deaths and more cases.

I think by my calculations, far fewer than 10% of the population of Sweden has tested positive for coronavirus and, therefore, one would expect if they just keep their current policies in place that the number of new daily cases will remain flat until the introduction of a vaccine or the introduction of some other therapeutic can reduce the number of cases. They wouldn’t be at herd immunity for a very long time. Herd immunity, given how infectious the coronavirus is, would require between 60% and 80% of the population to be infected, and they are not anywhere near there yet.

McNurney: Andy, can you give us an update on what we are seeing in the United States and in Europe?

Andy Acker: Sure, so in Europe we are seeing a continued decline in the number of new cases, and I would say the stay-at-home methodology has really been quite effective.

In the United States, we have seen, really, a plateau in the number of new cases. The one thing that has been improving is the testing, it has been improving recently to more like 300,000 or 400,000 tests a day. Importantly, the actual number of those tests that are coming back positive has been declining, so we are getting down to a mid-single-digit level from around 20% back in April. So, things are getting better on the testing front. What can other countries learn from Iran’s reopening?

McNurney: Now, a little over three weeks ago we saw that Iran opened the country in terms of their response to coronavirus, and now we have seen a bit of a spike and a return of the disease to that region. What can we learn from that in terms of what we are doing here in the United States?

Mohedas: Yeah, that is really interesting, Mike. So, Iran peaked at about 3,000 cases per day in late March, a little bit earlier than in other parts of the world. They implemented lockdown measures like many other countries also implemented, and by late April, the number of new daily cases was down to 1,000. So, still not into the single digits like some countries but a much lower level. Then in early May, they reopened parts of their economy, including houses of worship, like mosques, and what we saw subsequently is the number of new cases increased, and now it is around 2,000 per day. So, we have seen a doubling in the number of new daily cases, which, you know, goes to provide a kind of warning that when you ease the social distancing measures, I think it has to be done in a phased approach; it has to be done with the kind of direction to the population that even though we are reopening the economy, there are still some aspects of social distancing that need to remain in place until we have a vaccine, which is really the ultimate kind of solution to the problem here.

McNurney: So, Andy, let’s transition to that very topic, let’s talk a little bit about the vaccines. We have got a lot of news this week in terms of some development on the vaccine front. Can you give us an update there?

Acker: Sure. So, recently, we have had some positive updates on the vaccine front. Really, we have seen now positive preclinical and early clinical data for several vaccines that are looking, actually, quite promising. We are showing that these vaccines can generate antibodies, but not just that – these are neutralising antibodies that can actually kill the virus. We have also seen some progress in terms of clinical studies that are actually happening even faster than we expected. And so, we are seeing companies start to move into late-stage – what we would call pivotal phase 3 studies, that we believe are going to start probably late this summer and into the fall. And that is at least a few months earlier than we expected.

We are also seeing that the leading companies are able to scale their manufacturing more quickly than we expected. So, at this point we expect that the earliest approvals could come by late 2020 or early 2021. We expect them to scale up to tens or even hundreds of millions of doses over the course of 2021, with originally the availability for high risk people, who are elderly or have comorbid conditions or are frontline physicians that are highly at risk, and then over the course of 2021, probably moving into the middle to second half of the year, we think it could be available for a broader population.

McNurney: Now as we look to generate that vaccine, I think one of the other questions that are on people’s minds is really, is this the big killer that everybody thought it was? Agustin, maybe you can touch on that: what are you seeing in terms of the mortality rate of this disease?

Mohedas: The mortality rate has really been all over the place, and in part, that is because of the confusion in terminology. So, you have the case fatality rate, which is the number of deaths divided by the number of confirmed cases, so that is one number; and that number has really varied depending on the country. In Italy, it has been as high as, you know, 15%, whereas in the US, that number is closer to 6% right now. The more robust studies that have really tried to identify what we call the infection fatality rate, or the number of deaths divided by the total actual number of infections, or the true infection rate, those studies have tended to lead to much lower numbers. So, for example, in South Korea, which did a much better job of testing its population, their case fatality rate was closer to 1.6% and that more closely approximates the true infection fatality rate.

Now recent serosurveys – a serosurvey is a study where you randomly select people in a population, and you test for antibodies; you basically test if they have been exposed to the disease in the past. Now a very large serosurvey recently came out of Spain, which indicated approximately 5% of the Spanish population has had coronavirus infection. And if you take the number of deaths in Spain and divide it by that 5% of the population, you get an infection fatality rate of about 1.2%. So, we have now multiple data points pointing to an infection fatality rate of between 1% and 1.5%. And to put that into context, the infection fatality rate of the flu is often less than 0.1%. So the coronavirus is now, I think we can quite reliably say, quite a bit deadlier than the flu, probably about tenfold deadlier than the flu, and just as infectious, if not more infectious, which is why, you know, experts and public health officials have been so concerned about this virus.

McNurney: Andy, Agustin, thank you very much for your time today.