Look at the picture of the lady getting a flu shot. She looks so happy. Is that how we will all feel after we get our COVID-19 vaccine?
On Monday the stock market saw a 3% jump to the upside based on a few things, including promising Phase 1 results from a clinical trial that is evaluating a COVID-19 vaccine under development. That’s a big move for the market, the largest in a few months, and I wanted to give my thoughts on how we should be thinking about a vaccine in terms of the stock market and people getting back to their normal routines. I am going to jump right in.
How likely is it for any COVID-19 vaccine at this stage of development to succeed and be available to the public within 12 months?
Bottom line, all of these COVID-19 vaccine candidates are more likely to fail than succeed at this point in development but if they actually work they can get to the market relatively quickly.
I am no scientist but I worked in the biotech industry for a little less than 10 years and was fortunate enough to interact with all types of doctors, scientists, clinicians, product development specialists, etc. during my time in the industry. For several years I was an executive that had the good fortune to be part of discussions on how to bring therapeutic product candidates from the early stages of development to approval and commercialization. The last company I worked for focused on cell therapies, which is much more challenging than vaccine development, but the experience taught me how challenging it is in general to get products approved by the Food & Drug Administration (FDA).
I have a high-level understanding of the challenges to getting a drug approved and commercialized. The challenges can be broken into three categories – 1) clinical timeline and results; 2) regulatory timeline and requirements; and 3) manufacturing scale-up timeline and costs. Clinical timeline and results basically means getting animal and human clinical trials completed and getting positive results that show with some level of statistical significance that the drug works, regulatory timeline and requirements means meeting with the FDA and meeting its requirements for clinical and manufacturing development and safety and efficacy, and 3) manufacturing scale-up timeline and costs means taking a small-scale manufacturing process that has been used to manufacture small quantities of the vaccine for clinical trials and scaling it up to the FDA’s liking so that mass quantities of the vaccine can be manufactured for widespread use.
Usually, tackling all three challenges, if the drug works, takes years because companies want to see how the drug candidate progresses in the clinic before it spends more money on bigger trials and significant costs related to developing a manufacturing process that can supply significant quantities of the drug. However, here we have a lot of companies racing to get a vaccine and willing to place more dollars at risk to speed up the timeline. The drug companies can be heroes at a time they need some good press. Therefore, clinical trials are getting done faster and several companies are spending significant money to get manufacturing ready in case their vaccine works. In addition, the FDA usually has a very rigid process that takes time in order to discuss your results, get their feedback, and incorporate it into next steps of development. Here, the FDA is bending over backwards to give these companies real-time feedback. That further shaves significant time off of the development process. Therefore, if a vaccine works the timelines of the past to get a vaccine to market can be shortened a great deal. Twelve to eighteen months should not be out of the question if one of the vaccines being tested is shown to be effective.
The Big Question on Getting a Vaccine is Proving Efficacy
The big question is whether we can get a vaccine that shows that it works with statistical significance in some large clinical trials. In general, drug product candidates have a less than 10% chance of moving from a Phase 1 trial to being approved and available to patients. Even after getting past Phase 1, which has a primary object of showing safety but not effectiveness, a drug product candidate has less a less than 20% chance of being approved.
I do not have the figures for vaccines but the genetic material for viruses is ribonucleic acid (RNA). Because viruses are made of RNA they can mutate really quickly, which means a vaccine may become obsolete as the virus changes. This makes developing a vaccine for viruses challenging. We still do not have a successfully developed vaccine for any coronavirus, including SARS and MERS. Companies like Moderna are using exciting new technology to develop a vaccine that might work but they have yet to commercialize any vaccine like the one they are trying to develop for COVID-19.
Historically, vaccines have not been a very profitable venture for drug companies so this might be the virus that makes drug companies apply enough resources to develop a successful vaccine or cure. Currently, there are at least 14 vaccine candidates in clinical trials. We will start seeing during the second half of the year whether the Phase 2 and 3 clinical trials for these vaccine candidates can show results that get them closer to getting approved. For context, Phase 2 trials generally have less than a 50% chance of succeeding.
How will the stock market react to any positive Phase 2 or Phase 3 data from any of these vaccine candidates?
The stock market went up 900 points after early but promising Phase 1 trial results from a trial that included only 48 patients. At this point, that vaccine and any other vaccine being developed for COVID-19 has a much greater probability of failing and never seeing the light of day in terms of the market. Still, we saw a big jump in stock prices from Phase 1 results. So, if we do have a vaccine candidate that demonstrates positive Phase 2 or Phase 3 results this year, thereby increasing the odds of a vaccine that is available to the public in 2021, then the market should really jump on the news. I can’t imagine the overall market has already baked in the successful results of any of these vaccines based on the well-documented challenges with getting most drugs, including vaccines, approved.
On the flip side, we are going to have vaccine candidates show negative Phase 2 and 3 results this year. We have plenty of data to know that most drug candidates fail at some point during clinical development. The market could really slide if some of the more promising vaccine candidates, like the one from Moderna, do not make it through the next stage of clinical development and the market starts to believe that the prospects of vaccine and therefore a full and safe reopening in 2021 start to dwindle. If we have hotspots start to develop in states that are reopening combined with publicized clinical trial failures then we could see the stock market bulls run for the hills and the bears of the stock market come back with a vengeance.
Is any vaccine that is successfully developed the Holy Grail to getting back to normal?
The weird thing is that approved vaccines are not all that successful at stopping viruses. The Center for Disease Control (CDC) conducts studies every year to determine how well the influenza (flu) vaccine protects against flu illness. Recent studies show that flu shots reduce the risk of flu illness by about 50% among the overall population during seasons when most circulating flu viruses are well-matched to the flu vaccine. That means over half of the time vaccines do not work and you still feel the effects of the flu if you get it.
I have not heard anything that makes me expect a COVID-19 vaccine will be more effective than a flu vaccine. Therefore, a COVID-19 vaccine would only be expected to help 50% of the population from falling ill to the virus. The other half would still be susceptible to the issues caused by the virus if they get infected. Anyone that takes the vaccine would still be susceptible to new mutations unless a modified vaccine is developed. That is why we have to take a flu shot every year and why we might be looking at a COVID-19 vaccine every year for a while.
A 50% reduction in COVID-19 illnesses is great but that still means a lot of people could get sick from the virus even after we have a vaccine approved and in place. I sort of scratch my head on why a vaccine is considered the cure all for returning to our normal daily lives and the thing that will make people feel comfortable to go out again. I guess I get it – My wife feels so much better after she gets the flu shot and she yells at me all the time because I am usually the last person in my family to get my flu shot. I guess the American consumer might feel a whole lot better after he/she gets his/her COVID-19 shot and we probably shouldn’t tell anyone that it only works part of the time. That would be an inconvenient truth.
The human race has, until recently, relied on things like herd immunity to deal with viruses. Now, that is not the best answer if a virus is wide spreading and extremely deadly but we have not experienced something like that yet. COVID-19 is not that virus because it is not deadly enough. HIV is not that virus because it was not contagious enough. A virus that combines the two is the one that should cause our daily lives to change but that time is not upon us yet.
Regarding COVID-19, some researchers have already pointed to evidence, albeit far from conclusive, that the virus is more prevalent in our communities than we think and that combined with the fact that we have not seen our hospitals overran with COVID-19 patients means the risk of the disease has not been worth the destruction of our economy. It’s sort of crazy that this virus, although much more deadly to a certain high risk group of people, has caused all this destruction to our economy.
From the stock market perspective, we are going to see some wild swings after clinical trial results, good and bad, come out over the next few quarters. However, the virus is likely not going to be our undoing whether or not we have a vaccine by next year. Our potential undoing will be the actions we have taken and continue to take that are, day-by-day, increasing the chance that we inflict long-term damage to our economy. If we, for any reason, shut down the economy again because of this virus then that’s when I recommend buying that gun for home protection and getting out of all your stocks until we see a new bottom that is below what we saw in March.