Janus Henderson Investors: COVID-19: Understanding the science & investment implications (Part 4)

In this fourth installment of a video series on the scientific and investment implications of COVID-19, Portfolio Manager and Research Analyst Dan Lyons explains the latest drug developments, as well as whether the US can meet its aggressive testing goals to reopen the economy.

Dan Lyons, Portfolio Manager and Research Analyst

Key takeaways:

• The number of COVID-19 tests being done in the US falls far short of what experts say is needed to safely reopen the economy. But one company says it can produce five million tests weekly, suggesting widescale testing may be possible.
• One drug being studied as a treatment for COVID-19, remdesivir, recently delivered positive clinical trial results. Although not a cure-all, the drug could be an important first step towards curtailing the global pandemic.
• Currently, 70 to 90 different vaccine programmes are underway, with the private and public sectors partnering to accelerate research efforts and scale manufacturing

View transcript

Michael McNurney: Hi, welcome to Janus Henderson’s ongoing series on the COVID[-19] crisis. My name is Michael McNurney and today I’m joined by Dan Lyons who is a PhD in immunology and is going to discuss with us today some of the ongoing issues with COVID and in particular, the ways that we find an opportunity to get back to a more normalised environment, which includes both testing and tracing. But also, we’re going to talk specifically about some of the vaccines and therapies that are being tested right now that might help us get back to that environment. Dan, welcome.

Dan Lyons: Thanks for having me.

McNurney: Yes Dan, I think the first thing that we want to touch on is something we have been hearing a lot, and I think that there is a very broad discrepancy in terms of the number of tests that are required in order for us to feel like we have good insight into the disease. What is that range? And then also, we’ve heard the President make some bold statements about our testing capabilities here in the United States. What really are our testing capabilities right now?

Lyons: So just to start off, where we are today you know, we’re seeing roughly 250,000 to 300,000 tests being run in the United States today and that’s in the backdrop of what we’re seeing on a daily basis, but roughly 20,000 to 30,000 new cases of COVID. And what we are seeing across the countries that have been really successful at stamping out COVID has been a very high testing rate, places like [South] Korea and Germany. And so there has been a wide range of estimates out there in terms of where we need to get to for daily testing. Scott Gottlieb, former director of the FDA [US Food and Drug Administration], has put out a roadmap that says maybe 750,000 tests a day would be sufficient to comfortably reopen the economy. More recently, another group has put out a broader range starting out at five million tests a day up to 20 million tests a day, a group from Harvard.

So, there is a wide range of estimates out there and you know the question is, can we even get close to that? I actually think we can meaningfully scale up our testing in the country. One of the companies I work on is Thermo Fisher, and they have said that they can currently make five million tests on a weekly basis - and they are just one of several providers. So, I think we’re going to see a lot more test kits produced in the coming weeks. And then we’re going to try to get through some of the other bottlenecks which have been getting enough operators in the right places, getting the instruments in the right position and making sure that there’s access to all the testing supplies necessary to broaden out a range of testing.

The last thing I would mention is there’s also been progress in terms of how you’d get the samples. The current method is cramming something what looks like inside your brain pretty much, up in your nose. It looks very painful. But there are some people, like a group of rectors, has actually shown that saliva samples can be as good as the results they’re getting with the swabs.

McNurney: So Dan, we talked that testing is the first step and being able to get a handle on this disease, but in order for us to really reopen the economy, for us to get back to a more normalised environment, we need either a vaccine or we need a therapy. I know that there are a number of therapies that are in production right now, I guess in testing right now. Can you walk us through the different modalities that are being developed and then where some of the most promising treatments are today?

Lyons: Yes, just having tests is clearly not enough. There are some good therapies out there and there has been progress made on that front. So, the first area that I would go over would be anti-viral therapies. And the most prominent among these is from a company, Gilead. They have an IV (intravenous) therapy which has to be given in the hospital called Remdesivir. And that therapy has so far, been tested mostly in moderate and severe patients that are hospitalised.

There has been mixed data, but recently, we have actually had some positive trial results that have come out. A US study from the National Institutes of Health has released some preliminary data that shows in hospitalised patients with COVID, a significant reduction in the days in the hospital for patients that were given Remdesivir. In fact, it went down by 30% from 15 days on average to 11 days. The study also showed a trend towards an improvement in mortality going from 11% mortality without Remdesivir to roughly 8% while on therapy. So that’s a meaningful benefit. It’s not a home run. Not everyone is going to be cured by this therapy, but it’s a really important benefit to the hospital system because all of a sudden, you’ve created 30% more capacity in your hospitals and you’ve also saved a good number of lives. So it’s a really important first step and Tony Fauci [Immunologist and Director of the National Institute of Allergy and Infectious Disease] likened you know, this first result to something like AZT in the era of AIDS as one of the first early therapies that was able to show a benefit in helping to manage patients with HIV back in the day.

So this is a very important first advance. Not all the data on Remdesivir has been positive. In a patient from China that was also published recently in The Lancet, there was actually no benefit in really severe patients. So I think the key message here is you have to give Remdesivir early enough for patients to benefit and unfortunately, it has to be given in the hospital setting so there’s a narrow window when you should start the therapy. But it would seem like it will provide a substantial benefit for patients if given within 10 days or less of symptom onset, which could help a lot of patients.

McNurney: So Dan, if this isn’t the answer, if anti-virals aren’t the solution, I know you’ve talked about therapeutic antibodies as maybe something that you have a little bit, that maybe has some promise. Can you tell us more about that?

Lyons: Yes, there are a range of other therapies that can then be added on top of Remdesivir and I expect Remdesivir probably to become the standard care among severe patients and the roughly several hundred thousand doses that Gilead currently has available, will probably be prioritised at first for patients with comorbidities or elderly patients that are at the highest risk of mortality. But we feel they need more options and so there are several things that are being tested.

One that I’m really excited about and I think is probably the most promising would be therapeutic antibodies. And this area has a long history actually, going back to other viral infections from the past including SARS, MERS and other viral infections. And where the idea comes from is something called convalescent plasma and this is where you basically take patients that have recovered from a viral illness, you can take their blood and separate out the plasma and then concentrate the antibodies within the plasma and then take that fraction and put it back into patients with severe disease. And what has been shown across several different illnesses – including SARS, MERS and Ebola – is that you can take this convalescent plasma and help some patients get better. Obviously, this is a highly variable process and it’s not really very scalable because sometimes, you might only get enough treatments for a couple of patients out of an individual.

So what several companies, including Regeneron, Eli Lilly, Amgen and Vir, have all got an idea to basically commercialise this process and make it at a mass scale. And what all these companies do, with varying methods, is basically pull out a really good antibody that is good at neutralising the virus and stopping it from getting into the host cells. They then can manufacture this [antibody] at scale and then give it to patients to ‘neutralise’ the virus and stop it dead in its tracks.

The companies are just going into the clinic over the summer with these programmes. I think Regeneron and Vir may be in the lead here. And by the fall [autumn], we could have clinical data that will show whether or not these therapeutic antibodies actually can provide benefit. These also probably need to be given fairly early on in disease course and they’re going to test them first off in the treatment setting, but also as a prophylactic which could be used for healthcare workers. And the good thing about using these as a prophylactic would be that the dose required might be a lot lower so you could spread it out amongst many more people that way. The capacity will take time to ramp for these products, but by the end of the year into early next year, I would guess that there could be a significant number of doses available to start helping people that have severe COVID disease.

McNurney: Dan, I’m certainly not a PhD, so I’m probably over my head in talking about this, but from what I understand, the most deadly aspect of this disease is something called cytokine storm [which is an overreaction of the body’s immune system leading to increased inflammation] and so there are treatments being worked on to be able to temper the body’s immune system from what I understand, but those are very early in the development. Let’s maybe shift our focus to vaccines. Are there any vaccines that show any promise at this point or is it too early to tell?

Lyons: What we’ve heard so far is that there are roughly 70 to 90 different vaccine programmes in development today. So as a starting point, I feel some degree of comfort just from the scale of the effort. The other aspect of this is across these different programmes, there are five different modalities that are being tested all of which have some promising evidence that they could provide a real vaccine. As a starting point, we have learned a ton over the last several decades for work in vaccines in some related viruses like SARS, MERS and Ebola. And a lot of these modalities have been tested exactly in those diseases. They can be translated into how to best design a vaccine against COVID.

So the five modalities in development right now span a wide range. The first one is the most old-school. It is basically taking the virus itself and inactivating it and then injecting it into people, basically after making sure that it can’t come back at all. And this is actually shown really early promise. The company Sinovac is working on this.

The second approach is what is called adenoviral vaccine. And what is done here is parts of the COVID are put inside of an adenovirus and then you use that to boost the immune system against COVID. So, companies like J&J are investing a huge amount in this programme, also in Oxford and the Jenner Institute in the UK have a large programme. And CanSino, a company in China, is already in the clinic with this and has really promising preclinical data.

The third approach uses messenger RNA vaccines. And this is a new area that’s been pioneered by the US company called Moderna, but is also in development with BioNTech and Pfizer in collaboration and another German company called CureVac. And what this approach does is it basically takes the message of the virus, of the COVID virus, and uses just a portion of the virus, the spike protein, to be expressed and ultimately to generate a good antibody response. And this approach has been used successfully in some other areas like CMV (cytomegalovirus) by Moderna, so there is some precedent that this could be beneficial.

The fourth modality is basically expressing proteins from the COVID [virus] and using those proteins along with adjuvants to boost the immune response and develop a good neutralising antibody response. Companies like Novavax and Sanofi and GSK are using this approach.

The last approach is a DNA-based vaccine and this is being pioneered by a company called Inovio. This is an approach that may be less scalable but it has shown ability to generate antibodies in patients.

McNurney: Dan, we have talked about maybe the biggest obstacle is actually producing vaccines in enough quantities to be effective. So, are there programmes under way to help that development?

Lyons: Yes, we’re seeing companies already stepping up to this. J&J, for example, has said they are already building a massive medical capacity at risk hoping to be at a capacity of a billion doses per year by the end of 2021, with that ramping over the course of the year. But we’re also seeing a lot of both private and public efforts [in the US]. One example would be Project Warp Speed which the Trump administration has talked about with the goal being to create a Manhattan-like project for vaccine development in the US. And the goal of this would be to streamline the development process through use of master protocols that all companies could follow to make vaccine development more efficient. But more importantly to your point, also to really ramp the manufacturing capacity at risk. So, to basically make the US federal government responsible for some of the risk that companies have to take when they build huge plants.

Also, we’ve seen Bill Gates commit US$1-2 billion for vaccine production at risk. And basically, being willing to invest in whatever the most promising vaccine platform that develops is.

McNurney: The question on everybody’s mind is when. And you know, I know that’s a very difficult thing to predict, but do we have any sort of sense for timelines?

Lyons: Yes, so Tony Fauci has pretty consistently been saying you know, 12 to 18 months is the most accelerated path you can imagine for vaccine development. However, this ‘warp speed’ effort is trying to challenge that and basically what they’ve said is hope to shorten the timeframe by up to eight months. That is a very ambitious goal and there is a lot that has to be done. But some of the timelines that have been put out there by the companies are also similarly really aggressive. You know, J&J has said that they could have early availability of some vaccine as early as early 2021. The group in Oxford has also similarly said that they hope to have several hundred million doses available in a similar timeframe.

So people are talking about getting it out there really quickly. I don’t think it would be widely available to the whole population because normally, vaccines go through a much longer safety development process. But importantly, the vaccine could reach the people most in need, healthcare workers and other high-risk parts of the population and then expand over the course of time. So there are a lot of efforts to accelerate it. Normally, vaccine development is more on that matter of five years or more. And so these are already accelerated timelines. But I am optimistic that over the course of the next couple of years, we certainly should have some vaccines available.

McNurney: Well Dan, I want to thank you for your time today. I think the insights that you provided us have been very helpful in being able to understand the trajectory of the disease and especially some of the vaccines and therapies that are under development in order to curtail the disease. I know that this information is invaluable to the investors here at Janus Henderson. Thank you very much, Dan.

Lyons: Thanks a lot.

Any securities, funds, sectors or indices mentioned in this video do not constitute or form part of any solicitation to buy or sell them.

Footnotes

Anti-viral therapies: a class of medication used for treating viral infections

Antibody: a protein that is produced in the blood when exposed to a harmful bacteria or virus that fights disease by attacking and killing it. Therapeutic antibodies can be developed in large amounts and used to treat diseases.

Comorbidity: one or more illnesses at the same time in a person. Comorbidity is associated with worse health outcomes and more complex clinical management.

Prophylactic: a medicine or course of action used specifically to prevent infection.

Adenovirus: a group of common viruses that commonly cause fever, coughs and sore throats. In this case, an adenoviral vaccine uses the adenovirus as a vector to insert small components of the COVID-19 virus into the body to allow the body to build immunity against COVID-19.

Messenger RNA: carries the genetic information copied from DNA to other parts of the cell for processing. The mRNA approach to fighting COVID-19 uses the mRNA to elicit an immune response to build immunity.

Spike protein: a key protein found on the outside of a virus that enables the virus to enter a host cell.

Adjuvant: a substance that modifies the effect of other agents. An adjuvant can be added to a vaccine to boost the immune response.