Morgan Stanley
  • Thoughts on the Market
  • Oct 1, 2020

COVID-19 Vaccine: Trials and Tribulations

Andrew Sheets and Matthew Harrison


COVID-19 vaccines are navigating through the last stage of clinical trials, but hurdles still lie ahead for efficacy, distribution and FDA approval.

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Current Episode Transcript

Andrew Sheets: Welcome to Thoughts on the market. I'm Andrew Sheets chief cross asset strategist for Morgan Stanley.

Matthew Harrison: And I'm Matthew Harrison, equity research analyst covering biotechnology.

Sheets: On this special episode of the podcast, we'll be talking about the road to a COVID-19 vaccine and the implications for global markets. It's Thursday, October 1st, at 2 p.m. in London.

Sheets: Matt, great to have you back on the podcast.

Harrison: Thanks, Andrew. Great to be back again.

Sheets: Let's start with a question that's at the top of a lot of investors minds-- the race to find a vaccine. Can you give us an update on where things stand at the moment and a point I also want to touch on here, which I at least feel in my conversations is a little bit underappreciated, is what are the actual logistical challenges of distributing this vaccine and how are you thinking about those as you look at your sectors?

Harrison: Andrew, as you might remember, we also did a deeper dive on this topic with Ricky Goldwasser, who covers a lot of the distribution stocks in the US to speak about how intricate the distribution networks are. I'd encourage listeners to take a look at that if they're interested.


Harrison: So currently there are three leading companies that have phase three clinical trials, which is the last stage of clinical development for vaccines. And our expectation is the two leading companies, we would expect to have data towards the second half of November. It is possible to have a read out in October, but our base case expectation is the second half of November.

Harrison: So I think the first thing to note is there are multiple vaccines in development. Some of those vaccines require normal refrigeration to distribute them. That is what is required for annual flu vaccines and a lot of childhood vaccinations. And so there is global infrastructure, including in emerging market economies, to be able to distribute those kinds of vaccines. However, many of the leading COVID vaccines require colder temperatures than normal refrigeration. Some require them to be frozen. In the US and Europe, that infrastructure to support very cold or frozen vaccines is being built right now. And I would think would be available once those vaccines are in mass distribution sometime next year. However, for emerging market economies, if none of the vaccines that are in development that have normal refrigeration requirements were to make it to market, it may be very difficult to distribute those vaccines which are required to be frozen.

Sheets: So Matt, this discussion of a vaccine seems especially relevant as case numbers appear to be rising again in Europe and in a number of U.S. states. I'd also note that I've been encountering very different projections from investors, from epidemiological models about where cases could be heading as we look from now into the end of the year. What's your current thinking about case trajectory and what are you watching?

Harrison: So that's right, Andrew. Definitely a lot of different views on spread and I think there are two things that I would note: as we see continued increased mobility, whether that's returning to school, returning to the workplace, or other factors, you're starting to see an increase in cases that probably should be expected  My view near-term is that Europe has probably reached sort of a peak in terms of number of cases that we're starting to see here. The question is, as we get into colder temperatures, especially in the U.S., where universal masking is not happening, I think my question will be how that's going to play out, because colder temperatures are bringing more people inside. It's easier for the virus to spread in small spaces inside. And so, I continue to be worried in our forecasts at least that as we get into November and December we would to see a more sustained increase in the number of new cases.

Sheets: These case numbers are clearly tragic, with incredible human cost. But if there's one silver lining that I pick up from people looking at these higher numbers is that some people are reading them a little bit more optimistically, saying, well, this is a sign that we're closer to so-called herd immunity, where enough people have had the virus where it can really slow overall spread. How far do you think the U.S. currently is from herd immunity? And when you hear people talking about this measure of prevention, say, relative to how a vaccine might prevent the spread the virus, what are the issues with herd immunity that you think we should be aware of?

Harrison: First, the most recent studies we have around the U.S. suggests about 10 percent of the U.S. population has been infected previously. Now, there are pluses and minuses associated with that number. So, you know, that number may be a little bit higher, but maybe even if we call it 15 percent-- that seems to be the number in the U.S.-- which is well below the 60 percent threshold that we think about with herd immunity. The second question related to herd immunity is, even if we achieve herd immunity, how long do the antibodies that people generate last and actually offer protection? And what we've started to see is there have been real cases of reinfection. And so what that means is there will be this issue where antibodies in people who have gotten the disease may not last for multiple years. And so the risk of reinfection after a year or so may go up a lot. So long story short here. I don't think herd immunity is going to be the way we solve this, and I think people should expect to have annual vaccinations that they get when they get their annual flu shot for COVID for the foreseeable future.

Sheets: As you look at these vaccine trials, one, I guess, are there things that you're looking for that are more indicative that these vaccines will really work? We're going through a somewhat unprecedent process of building out vaccines this quickly. And secondly, obviously, I think a lot of the focus is on treating the virus via vaccine, but there are other therapies, other approaches that are under investigation as well. Maybe you could talk a little bit about that.

Harrison: So first, vaccines work by creating an antibody response. And those antibodies can block the virus from entering your cells. So here's an example of a piece of data that recently came out. In the study, they looked at patients that didn't get any treatment at all. And there was a group of patients that started to generate their own antibodies against COVID very quickly early on. And then there was a group of patients that did not generate their own antibodies, so had a poor immune response to COVID. And in the group that generated their own antibody response very early on, the severity of their disease and the time to clear their disease was much faster compared to the group that didn't. And the group that didn't had much more severe disease and it lasted for much longer. And that is basically replicating exactly how a vaccine would work. It would already have those antibodies on board that would stop the infection. And so I looked at that data and I think as people think about whether or not vaccines can succeed, that data point to me speaks to the fact that the likelihood that vaccines can succeed is actually quite high.

Harrison: The second question you ask is about what are the other treatments that are out there. And these synthetic antibodies which are essentially saying, oh, you've gotten infected, but we're going to infuse you with a bunch of the most potent antibodies we can find against COVID. And you've started to see inklings that that's going to work. Now, it's been in patients that don't have very severe disease. And we're going to start to get data from patients who have severe disease later on. But that data is also encouraging and could be used as a bridge to a vaccine.

Sheets: One other area that ties together both the timeline on the vaccine, but also what you mention on the importance of people really taking that vaccine is the regulatory path. So what does that look like and what are the different mechanisms that the regulators can use to balance both the urgency of this public health crisis with reassuring the public that all of the proper steps are being taken?

Harrison: It's an important question and a question I get pretty often. So the regulator has two approaches: they can use what's called an emergency use authorization, which has never been used for a vaccine and doesn't really have a defined process, and then they have a traditional approval process called a biologics license application, or a BLA. There have been a variety of publications which have suggested what the FDA may require for an emergency use authorization, and the key things are that they're going to want two months of safety follow up, as well as a certain number of infections in the elderly and a certain number of severe infections.

Harrison: Based upon what we know around the enrollment in these trials, we would expect the median two months safety follow up to happen sometime in the second half of November, which coincides with our expectation around when you may get data. From that point we would expect the regulator to at least take about a month to be able to review that data and then be able to potentially grant an emergency use authorization, but that authorization would likely be limited to certain portions of the population. Maybe those in nursing homes, maybe first responders, maybe hospital workers. In the U.S. we're likely to have less than a hundred million doses of vaccine by the end of the year.

Harrison: The second piece to follow up on that would be the full approval or the biologics license application. The FDA has previously published a guidance document on that, and the biggest piece there is that they would require six months of safety follow up. So that points to some time at the end of the first quarter or the early second quarter for when you could expect broad availability of a vaccine in the US.

Sheets: Matthew, thanks for taking the time to talk!

Harrison: Great speaking with you, Andrew.

Sheets: Thanks for listening. If you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people find the show.