Pandemic Damage And The Vaccine Industry

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Introduction

Think about it: the world is having a health crisis and what do we do? We created the largest global collapse since 1929! And as noted in prior columns, we are now at a point where nobody wanted to go: we must continually ask: do we continue the global “lockdown” or relax these policies and run the risks of more COVID-19 deaths?

The Financial Damage

Consider first the economic magnitude of what has happened. US unemployment was 4.4% or 7.2 million just before the pandemic took hold. In the last 5 weeks, 22 million have filed for unemployment benefits, bringing the total to 29.2 million. The unemployment rate is now reportedly 14.7%.

The Congressional Budget Office (CBO) projects that real GDP at the end of 2020 will be 5.6% lower than it was in 2019. It projects an unemployment rate of 15% in the second and third quarters of 2020, higher than at any point since the early 1930s. By the third quarter of this year, about 28 million fewer people will be employed and about 9 million fewer people will be in the labor force than CBO projected in January.

CBO estimates that after enactment of the $2 trillion CARES Act, the US Federal deficit would be $3.7 trillion this year 2020 and $2.1 trillion in 2021. The CBO projects Federal debt held by the public will grow to 108% of GDP by the end of fiscal year 2021, up from 79% at the end of 2019 and the highest percentage in the nation’s history. If the $3 trillion stimulus package now being discussed is enacted, US debt would increase debt to 122% GDP.

The following table provides data on the economic devastation for the largest countries in the world.

Source: IMF, Focus Economics

Health Damage

In the US, there are more than 98,000 US Virus deaths. Globally, there are more than 345,000 dead.

What Do We Really Know? Was The Man-Made Global Recession Really Needed?

There are all sorts of theories on how the virus will progress. One of my favorites was developed by Nobel prize-winning scientist Michael Levitt, a Professor of Structural Biology at the Stanford School of Medicine. He is a “numbers guy” and notes the COVID-19 epidemic was never exponential.

His observation is a simple one: that in outbreak after outbreak of this disease, a similar mathematical pattern is observable regardless of government interventions. After around a two-week exponential growth of cases (and, subsequently, deaths) some kind of break kicks in, and growth starts slowing down. The curve quickly becomes “sub-exponential.”

The currently popular explanation for this flattening is that social distancing and lockdowns have slowed the curve. But Levitt is unconvinced. He noted that South Korea, Iran and Italy have showed a slowing down soon after the onset and he finds it “very hard for me to believe that those three countries could practice social distancing as well as China.” He sees some degree of prior immunity and large numbers of asymptomatic cases as important in these countries’ trajectories.

He notes that “the total number of deaths we see in places as diverse as New York City, parts of England, parts of France and Northern Italy, all seem to level out at a very similar fraction of the total population. Are they all practicing equally good social distancing? I don’t think so.”

“I think the policy of herd immunity is the right policy. I think Britain was on exactly the right track before they were fed wrong numbers. And they made a huge mistake. I see the standout winners as Germany and Sweden. They didn’t practice too much lockdown and they got enough people sick to get some herd immunity. I see the standout losers as countries like Austria, Australia and Israel that had very strict lockdown but didn’t have many cases. They have damaged their economies, caused massive social damage, damaged the educational year of their children, but not obtained any herd immunity.”

“There is no doubt in my mind, that when we come to look back on this, the damage done by lockdown will exceed any saving of lives by a huge factor.”

Of course, there are many theories offering explanations of virus patterns, changes, etc., but all remains quite foggy. There is hope that a vaccine will save us. So it is worth looking carefully at the vaccine industry.

The Vaccine Industry

Most pandemics did not end with a vaccine. Some ended before a vaccine was developed resulting in significant financial losses for those working on a vaccine. The pandemic paradigm requires multiple activities to be conducted at great financial risk to developers and manufacturers. Some of the companies “in the game” are included in the following table.

Source: Yahoo Finance

The list runs the gamut from well-established pharmaceutical companies to those recently formed to deal with the current pandemic.

The Coalition for Epidemic Preparedness Innovation (CEPI), was funded by the Wellcome Trust, the Bill and Melinda Gates Foundation, the European Commission, and eight countries (Australia, Belgium, Canada, Ethiopia, Germany, Japan, Norway, and the United Kingdom) CEPI was created to support the development of vaccines.

It notes that an ideal platform would support development from viral sequencing to clinical trials in less than 16 weeks, demonstrate elicitation of consistent immune responses across pathogens, and be suitable for large-scale manufacturing using a pathogen-agnostic platform. Ideal platforms do not exist. CEPI works to improve existing platforms with the aim of developing effective vaccines in the shortest possible time.

As soon as China announced that a novel coronavirus had been identified as the cause of the Wuhan outbreak, CEPI contacted its partners that were developing MERS vaccines or working on novel platforms. With the potential for further financial support, they and others began vaccine development as soon as the first gene sequence was posted, and development is proceeding quickly. Moderna’s (NASDAQ:MRNA) mRNA-based SARS-CoV-2 candidate entered a Phase 1 clinical trial on March 16, less than 10 weeks after the first genetic sequences were released. The race is on.

Building manufacturing capacity can cost hundreds of millions of dollars. Furthermore, for novel platform technologies, most of which are unlicensed, large-scale manufacturing has never been done, so facilities capable of producing large quantities of product must be identified, technologies transferred, and manufacturing processes adapted, all without knowing if the vaccine candidate is viable.

CEDI notes that pandemics generate a huge demand for vaccines globally. Clinical and serologic studies are needed to confirm which populations remain at highest risk once vaccines are available. These could form the basis for establishing a globally fair vaccine-allocation system. Some Group of Seven countries have already called for such a global system, whose planning must start while vaccine development proceeds.

Conclusion

Almost all sports have been shut down during the pandemic. Casinos are also closed. But gambling is still available: you can bet on what companies will win the coronavirus sweepstakes.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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