At this moment, the molecules that form the genetic code of the virus that causes Covid-19 are reshuffling themselves in the cells of millions of people around the world. Much depends on how those molecular cards flop.
Since the Delta variant set off a deadly wave of Covid infections in India six months ago, the fight against the pandemic has been changing. Now, the U.S. is reporting more than 140,000 new cases a day, and hospitals are beginning to buckle in some parts of the country.
What lies beyond the Delta wave is difficult to imagine. Reopened offices, packed industry conferences, and busy downtown restaurants all seem to have been deferred once again, as the speed of the virus’ evolution has reset assumptions.
What is now emerging is a picture of a virus that never quite goes away. At best, that could mean a series of less-dangerous versions of Covid-19 that come and go, more or less like the flu. At worst, it could mean the emergence of one or more nightmare variants that halt the economy one more time and increase the toll of the pandemic even further.
“We don’t know what the bounds are to this evolutionary process,” says Stephen Morse, a professor of epidemiology at the Mailman School of Public Health at Columbia University and a former professor of virology at The Rockefeller University.
The Covid virus, SARS-CoV-2, is far from the most deadly known member of its family of viruses. MERS, a coronavirus that first appeared in Saudi Arabia in 2012, has killed 35% of the people it is known to have infected, while the original SARS virus has killed 10%. The fatality rate of Covid-19 varies from country to country, but in the U.S. it has been 1.7%, says a Johns Hopkins University report.
In a paper in late July, a United Kingdom government research group called it a “realistic possibility” that a variant of Covid-19 could evolve that is as deadly as MERS or SARS. Such a frightening outcome is far from certain. All that is known is that the long-term impact of this virus is still unknowable.
Investors should count on Covid-19 being a lasting threat. This means that a substantial market for vaccines and booster shots could persist for many years. That would help justify the sky-high valuations of companies like
(ticker: MRNA) and
(BNTX) and give support to the
(PFE) bulls who say the company’s shares should be getting more credit for its Covid-19 vaccine.
It also means that there are substantial opportunities for companies like
(AZN), and others that are working on Covid-19 treatments, an area that has seen significant commercial success despite the relatively modest scientific progress made so far.
What’s more, investors should be prepared to live with the risk that, even after the immediate crisis fades, the virus could burst back in a new form that stops the world in its tracks yet again.
“This virus has never seen humans before,” says Vincent Racaniello, a professor of microbiology and immunology at the Columbia University Vagelos College of Physicians and Surgeons. “It’s feeling its way around and seeing what it can do.”
|Variant||Alternate Name||Date First Documented|
|Alpha||U.K. variant, B.1.1.7||9/2020|
|Beta||South African variant, B.1.351||5/2020|
|Gamma||Brazil variant, P.1||11/2020|
|Delta||Indian variant, B.1.617.2||10/2020|
Source: World Health Organization
Viruses are masters at evolution. Every animal and plant species mutates as it reproduces, but viruses replicate faster and mutate like lightning. Most of those mutations go nowhere, but if they offer the virus some kind of evolutionary advantage, they can stick.
That’s the basic biology behind the spread of the variants. In the case of SARS-CoV-2, which until recently probably evolved entirely in bats, there is lots of room for the virus to adapt itself better to infect human cells.
Now, as the virus has spread around the globe, it is running up against immune systems that know how to fight it. “As more and more people get immune, either by natural infection or vaccination, that puts additional pressure on the virus to select out variants that are resistant to immune response,” Racaniello says.
One fear is that evolutionary pressure could result in a version of the virus that can get past the protections offered by the currently approved vaccines. Speaking on an earnings call early this month, BioNTech’s CEO, Dr. Ugur Sahin, said it was “quite possible” that such a variant could emerge within the next year.
A breakthrough variant might not be as bad as it sounds. Nathaniel Landau, a professor in the department of microbiology at the NYU Grossman School of Medicine, acknowledges that a breakthrough variant could appear, but he is not overly concerned. He says that if the virus were to mutate enough to get around a vaccine’s protections, it would effectively defang itself.
“It’s possible, but it may not be the nightmare situation that you would imagine,” Landau says of the emergence of such a variant. “When a virus does that, it becomes less contagious,” he says, because it would have to change so much that it wouldn’t work as well.
“There’s always going to be new strains, but they just may not have any significance for us,” he says. “The virus may be around for a long time, but it’s possible that even the vaccinations that most of us have gotten against the initial strain of the virus, that protection may be very long-lasting.”
Others are far less sanguine. “You can’t say for sure what the virus is capable of,” says John P. Moore, a professor of microbiology and immunology at Weill Cornell Medicine.
Asked about the theory that a version of the virus that can evade the antibodies induced by the vaccines would be less threatening, Moore says the situation is uncertain. “They’re not necessarily wrong, but you can’t say they’re definitely right, either,” he says. “It’s all speculation, to an extent.”
If no nightmare variant emerges, Columbia’s Morse says that one optimistic scenario would have the world eventually experiencing Covid-19 as it does the seasonal flu.
“Variants come; some of them are more severe, some of them are less severe, but hopefully none of them are as bad as what we initially experienced,” he says. With surveillance of the virus, companies would be able to make vaccines to counter strains as they arose.
In that scenario, the Covid-19 booster vaccine market could continue virtually indefinitely. Shares of Moderna, BioNTech, and latecomers like
(NVAX) seem to have already priced in highflying assumptions about the booster market. Shares of Pfizer, however, may still have room to grow. Analysts are now boosting their expectations for Pfizer’s Covid-19 vaccine sales.
In a recent note, Bernstein analyst Ronny Gal wrote that he expected $35 billion in vaccine sales for Pfizer in 2022, vastly above the FactSet consensus estimate of $18.8 billion. “This is bigger than you think, at least near term,” he wrote. Gal maintained his Market Perform rating on the stock, saying that he expects shares to fall as fears over the Delta variant subside.
A persistent, if low-level, threat from Covid-19 would also imply an enduring market for therapeutics. Only a few therapeutics have been authorized or approved in the U.S. so far, and most are either inconvenient or ineffective. Still, they have demonstrated that substantial demand exists.
“The small number of approved and authorized products still managed to achieve collective [first-quarter 2021] sales of more than $3 billion,” Jefferies analysts recently wrote. “An effective and convenient treatment could potentially achieve peak annual sales in excess of $10 billion.”
The analysts noted that an oral antiviral that could be given to people newly diagnosed with Covid-19 would be ideal. Roche is working on such a product, as is the Japanese drugmaker
(4507.Japan), which is testing an oral antiviral in a Phase 1 study.
The prospect of a nightmare variant still lingers, however.
One worrying thought, outlined by Morse, is that the very transmissibility of the Delta variant means that a strain that made people sicker might still be evolutionarily fit enough to replicate and spread.
“If something is highly transmissible, it can afford to be very virulent,” Morse says. “We don’t talk about this, because you don’t want to frighten people. There’s no guarantee that it will continue toward greater transmissibility, but not be as virulent.”
The best odds of keeping that possibility at bay, the virologists agree, is vaccination.
“The key is to reduce transmission,” Racaniello says. “I do think that the current vaccines reduce transmission enough so if you vaccinated, say, 80% of the population, you would then substantially cut down transmission, and you would also cut down variant emergence. But that is a big number.”
Today, 24% of the world’s population is fully vaccinated, according to data compiled by Our World in Data, a website edited by researchers at the University of Oxford. Those doses have been distributed largely to wealthy countries. In low-income countries, only 1.3% of the population has received even a single dose.
That could change in the coming years. Moderna says it expects to make between two billion and three billion doses of its vaccine next year, while Pfizer and BioNTech say they will make four billion doses. Many of those doses are already earmarked for developed nations, including 1.8 billion Pfizer doses bought by the European Union for delivery into 2023, and 400 million doses the U.S. bought from Pfizer and Moderna to be delivered this year and next.
Still, billions of doses will be headed to poorer countries. Bernstein expects emerging markets to receive 1.2 billion Pfizer doses, 500 million Moderna doses, 500 million AstraZeneca doses, and one billion Novavax doses in 2022.
The growing demand for booster shots from developed nations will put pressure on supply, and the World Health Organization has condemned the prioritization of booster shots.
In the U.S., that critique has been ignored, and the Biden administration plans to begin a rollout of boosters in late September. That could be the beginning of an adjustment to a new normal in the U.S., where restrictions gradually ease over time, with periods of increased concern as new variants circulate.
Morse says that, at best, people will eventually get bored with Covid-19 and accept the risk it poses.
“If it doesn’t get any worse than it is now, we’ll decide we can do what we do, essentially, with the seasonal flu, which causes many deaths,” he says. “I hope it doesn’t get worse.”
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