Vaccine for COVID-19: is the wait finally over?

Biopharmaceutical manufacturers Pfizer/BioNTech and Moderna recently announced encouraging interim data for their COVID-19 vaccine candidates, with efficacy results exceeding expectations at above 90%.¹ We look at the short- and long-term implications of the latest developments and examine how the base case scenario of a Biden presidency and a split Congress might affect future healthcare reform.

The collective sighs of relief that greeted the announcements from Pfizer/BioNTech and Moderna were quickly followed by a flurry of questions relating to the efficacy, safety, and durability of these vaccines, as well as how quickly they might be made available, and how widely. 

Although it’s certainly premature to start celebrating the end of the COVID-19 pandemic, the numbers are highly promising. At 95% effectiveness for the Pfizer/BioNTech vaccine and 94.5% effectiveness for the Moderna vaccine,¹ both exceeded expectations and are consistent with existing approved vaccines—such as those for measles and mumps—which have been in use for decades. 

It may be reasonable to assume that other COVID-19 vaccines currently in the latter stages of development (Oxford University/AstraZeneca, Johnson & Johnson, Sanofi, and Merck) may have similar effectiveness levels because they all target the same part of the virus—the now-infamous infectious spike protein. The data sets for these vaccines are likely to be made available in the coming weeks.

Of course, it’s too early at this stage to properly evaluate the safety profile, durability, and long-term effectiveness of these vaccines, although the initial short-term safety profiles of each offer limited cause for concern. However, we won’t know further until the data is presented at an Advisory Committee on Immunization Practices/U.S. Food and Drug Administration (FDA) Advisory Committee meeting that will be held for each offering once Emergency Use Authorizations (EUAs) are submitted to the FDA.

Another important aspect we need to understand is the durability of these vaccines (the duration of protection offered by the vaccine after receipt of all recommended doses). Both candidates are mRNA vaccines and, if approved, would be the first of their kind to be licensed to treat an infectious disease in humans. Rather than introduce small or inactivated doses of the entire infectious organism, mRNA vaccines induce the body to produce antibodies against a small portion of the viral spike protein genetic material, which then triggers an immune response. In the past, mRNA vaccines haven’t precipitated a robust T-cell reaction, which may be the key to durability.

Additional COVID-19 vaccine considerations

A challenge with mRNA vaccines is that they’re relatively fragile and need to be stored at cold temperatures for transportation (-70 degrees Celsius for the Pfizer/BioNTech vaccine and -20 degrees Celsius for the Moderna vaccine). Logistics are being worked out from two giant cold-store centers—one in the U.S. state of Michigan and the other in Belgium²—but outside of the developed world, cold-chain distribution may pose a significant challenge.

Both the Pfizer/BioNTech and Moderna vaccines require recipients to receive two doses of the vaccine. It’s expected that up to 70 million shots will be produced this year (50 million from Pfizer/BioNTech and 20 million from Moderna), rising to a range of between 1.8 billion and 2.3 billion in 2021 (1.1 billion from Pfizer/BioNTech and 500 million to 1 billion from Moderna). This equates to—potentially—35 million people receiving either vaccine by year end and a further possible 900 million to 1.15 billion people by the end of next year. 

We would note, however, that scaling up mRNA manufacturing from small clinical quantities to large commercial quantities has never been attempted before. The early entrants here will need to successfully navigate uncharted waters to achieve sufficient capacity in order to attain these distribution targets.  

We look forward to seeing the full data sets at the upcoming advisory committee meetings and expect EUAs for both vaccine candidates to be approved by year end. 

U.S. healthcare reforms will likely take a back seat

Indeed, an incoming Biden administration in the United States may likely prioritize the battle against the COVID-19 pandemic to a greater degree than the preceeding administration. 

Broadly speaking, we can expect to see the Biden administration take a more federally focused approach to tackling the pandemic. Measures could include national testing guidelines, mask mandates, and directives over the control of vaccine distribution and allocation.

We think that Operation Warp Speed is likely to continue in its current form, but perhaps with some incremental funding for things such as personal protective equipment and emerging therapeutics. We may also see additional targeted financial support for hospitals, depending on the trajectory of COVID-19 cases. 

Given the likely outcome of the recent U.S. election—a Democratic president, a narrow Republican Senate, and a narrow Democratic House—we expect legislative gridlock to continue for at least the next two years. In our view, this should prove to be a positive for healthcare investors given the diminished prospects for substantive healthcare legislation. Specifically, we believe that gridlock will lower the probability of drug-pricing reform as well as substantive changes to the delivery/payment systems in the United States. Also, gridlock reduces the likelihood of changes to the corporate tax code. 

In short, 2021 is likely to see a new administration focus on the pandemic at the expense of any other sweeping changes to the U.S. healthcare market. Downstream from there, we expect the Biden administration to push for expanded coverage and prop up the Affordable Care Act through legislation and executive action.

Any substantive effort at drug-pricing reform is probably going to be a post-2021 event. Both political parties seem cognizant of the fact that we’ll be reliant on biopharmaceutical companies’ efforts around treatments and vaccines in order to move past this pandemic. Accordingly, we expect this circumstance will mitigate any pressures to enact sweeping changes to the industry.

Conclusion

The world has been waiting for this announcement, but it’ll have to be patient for a little longer until COVID-19 is brought under control. Clinically, the initial results are very positive for these vaccine candidates as well as other vaccines in development, and prospects for global distribution in the second half of next year look favorable.

While governments are busy battling the pandemic, healthcare reforms will likely take a back seat. We believe investors in U.S. healthcare particularly should benefit from an incoming administration that seems inclined to place the near-term priority of pandemic crisis management above long-term policy goals until at least the second half of 2021.

 

1 ”Moderna’s Covid Vaccine Found 94.5% Effective in Early Analysis,” Bloomberg, November 16,  2020; “Pfizer and BioNTech’s Covid-19 vaccine found to be 90% effective,” Financial Times, November 12, 2020. 2 “Pfizer and BioNTech’s vaccine poses global logistics challenge,” The Guardian, November 10, 2020. 

 

Important disclosures

A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect portfolio performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other preexisting political, social, and economic risks. Any such impact could adversely affect the portfolio’s performance, resulting in losses to your investment

Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. These risks are magnified for investments made in emerging markets. Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a portfolio’s investments.

The information provided does not take into account the suitability, investment objectives, financial situation, or particular needs of any specific person. You should consider the suitability of any type of investment for your circumstances and, if necessary, seek professional advice.

This material, intended for the exclusive use by the recipients who are allowable to receive this document under the applicable laws and regulations of the relevant jurisdictions, was produced by, and the opinions expressed are those of, Manulife Investment Management as of the date of this publication and are subject to change based on market and other conditions. The information and/or analysis contained in this material has been compiled or arrived at from sources believed to be reliable, but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness, or completeness and does not accept liability for any loss arising from the use of the information and/or analysis contained. The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline, or other expectations, and is only as current as of the date indicated. The information in this document, including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Investment Management disclaims any responsibility to update such information.

Neither Manulife Investment Management or its affiliates, nor any of their directors, officers, or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein. All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment, or legal advice. Clients should seek professional advice for their particular situation. Neither Manulife, Manulife Investment Management, nor any of their affiliates or representatives is providing tax, investment, or legal advice. This material was prepared solely for informational purposes, does not constitute a recommendation, professional advice, an offer, or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security or adopt any investment strategy, and is no indication of trading intent in any fund or account managed by Manulife Investment Management. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Diversification or asset allocation does not guarantee a profit or protect against a loss in any market. Unless otherwise specified, all data is sourced from Manulife Investment Management. Past performance does not guarantee future results.

Manulife Investment Management

Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship to partner with clients across our institutional, retail, and retirement businesses globally. Our specialist approach to money management includes the highly differentiated strategies of our fixed-income, specialized equity, multi-asset solutions, and private markets teams, along with access to specialized, unaffiliated asset managers from around the world through our multimanager model. 

These materials have not been reviewed by and are not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the following Manulife entities in their respective jurisdictions. Additional information about Manulife Investment Management may be found at  manulifeim.com/institutional.

Australia: Hancock Natural Resource Group Australasia Pty Limited, Manulife Investment Management (Hong Kong) Limited. Brazil: Hancock Asset Management Brasil Ltda. Canada: Manulife Investment Management Limited, Manulife Investment Management Distributors Inc., Manulife Investment Management (North America) Limited, Manulife Investment Management Private Markets (Canada) Corp. China: Manulife Overseas Investment Fund Management (Shanghai) Limited Company. European Economic Area and United Kingdom: Manulife Investment Management (Europe) Ltd.which is authorized and regulated by the Financial Conduct AuthorityManulife Investment Management (Ireland) Ltd., which is authorized and regulated by the Central Bank of Ireland Hong Kong: Manulife Investment Management (Hong Kong) Limited. Indonesia: PT Manulife Aset Manajemen Indonesia. Japan: Manulife Investment Management (Japan) Limited. Malaysia: Manulife Investment Management (M) Berhad 200801033087 (834424-U). Philippines: Manulife Asset Management and Trust Corporation. Singapore: Manulife Investment Management (Singapore) Pte. Ltd. (Company Registration No. 200709952G). South Korea: Manulife Investment Management (Hong Kong) Limited. Switzerland: Manulife IM (Switzerland) LLC. Taiwan: Manulife Investment Management (Taiwan) Co. Ltd. United States: John Hancock Investment Management LLC, Manulife Investment Management (US) LLC, Manulife Investment Management Private Markets (US) LLC, and Hancock Natural Resource Group, Inc. Vietnam: Manulife Investment Fund Management (Vietnam) Company Limited.

Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates, under license.

526490

Steven G. Slaughter

Steven G. Slaughter , 

Portfolio Manager, Capital Appreciation

Manulife Investment Management

Read bio