(18th November 2020)
By AXA IM Biotech strategy portfolio manager, Linden Thomson, and AXA IM healthcare strategies portfolio manager, Peter Hughes.
A year ago, SARS-CoV-2, the virus responsible for the disease COVID-19, was unheard of. Today it dominates our daily lives. Its impact is unparalleled, having caused unprecedented levels of disruption to the global economy and everyday life.
Since the start of the pandemic, the scientific community has been in overdrive researching the virus in a bid to find a vaccine. As a result, the sector is enjoying renewed attention given its demonstrable ability to rapidly innovate, collaborate and hopefully develop potential solutions to tackle COVID-19. Presently there are some 3,600 trials linked to COVID-19 and circa 150 possible vaccines in all stages of development.
Speed of innovation
The current pace of innovation in the sector is not something we expect to slow down anytime soon. This focus on speed of development has not been lost on investors, as performance data highlights. Over the year to the end of October, the Nasdaq Biotechnology TR Index is up 8.72%, while the MSCI World NR is down -1.42%. In addition, over 12 months the broader MSCI ACWI Health Care Index is up 10.79%, while the MSCI World has edged ahead by just 4.91%.
The world over is pinning its hopes on a vaccine. The recent headline data from BioNTech and partner Pfizer certainly didn’t disappoint, and we would expect positive data from Moderna and AstraZeneca with their respective candidates before year end too.
This is clearly very positive news, but we believe a mass rollout will take longer than perhaps expected – we could potentially be looking at the second half of 2021. However, a vaccine isn’t the only solution. There are numerous biotechnology and pharmaceutical companies with, and currently developing treatments, which can reduce the severity of COVID-19 for those that become infected. Presently there are approximately 100 plus credible treatments being investigated.
The spectrum of research into beating this pandemic can seem complex, but researchers are simply mining for solutions that can either prevent the infection from taking hold or stop the collateral damage that the infection can induce when the immune system becomes overactive.
The focus of COVID-19 therapeutics can be divided into two distinct strategies - reducing the amount of virus in patients and modifying the immune response.
In terms of the former, we would highlight California-based biopharmaceutical firm Gilead Sciences. The group’s antiviral Remdesivir has garnered an abundance of column inches this year having been the first treatment to show positive clinical trial data. Remdesivir helps reduce the viral load by working inside cells to prevent the virus from replicating.
The final report on its phase three trial was recently published in the New England Journal of Medicine and it showed that Remdesivir can shorten the time patients take to recover from COVID-19. Remdesivir was authorised for emergency use in multiple countries after the US first approved its use in May. Despite this milestone, researchers continue to investigate different technologies that could provide further improvements in the standard of care.
Some of the most exciting recent results have come from antibodies and antibody cocktails. Notably, US President Donald Trump was treated with an antibody cocktail being developed by New York group Regeneron very soon after he received a positive COVID-19 test result. The fact that the President’s physicians were willing to administer the drug, which is not yet approved for use anywhere in the world, underlines the potential of this therapy.
Normally, it takes time for our immune systems to analyse a new threat and develop a bespoke response by producing antibodies to identify and help clear infections. This is essentially the basis of how a vaccine works, training our immune systems to produce such antibodies.
However, researchers hypothesised that we might be able to accelerate an immune response if we delivered antibodies that we know target COVID-19 into patients as soon as they test positive for the infection - or even before an infection occurs for those in close proximity to COVID-19 patients.
Regeneron is investigating its therapy in the non-hospitalised and hospitalised patients, but also non-infected patients who share a household with someone who has contracted COVID-19. This suggests that antibody cocktails could be used not only to fight off infections, but also to prevent those who are in close contact with infected people for long periods of time from getting sick.
Other therapies are in development, for example AstraZeneca has secured a substantial $486m investment from the US government to help the development and manufacture of its own antibody cocktail, and phase three trials of the therapy dubbed AZD7442, are expected to begin imminently.
Overall, the speed of development of these antibody cocktails has been extremely rapid. The WHO declared SARS-CoV-2 a pandemic on 11 March and in June, Indianapolis-based pharmaceutical group Eli Lilly announced human clinical trials of its own antibody cocktail. By October, the company had announced it had filed for Emergency Use Authorisation of one component of its cocktail in the US – and market authorisation was granted on 9 November.
However, despite this progress, ensuring widespread use of these potential drugs is challenging from a manufacturing perspective – for example, on 7 October, Regeneron stated it currently had enough supply for 50,000 patients but at the same time, the US reported almost 53,000 new COVID-19 infections.
UK biotech company Synairgen has developed a formulation of interferon-beta delivered to the lungs via a nebuliser. It is like the antibody approaches, in that it is intended to stimulate an increased antiviral response, but in contrast to antibodies, it is not a targeted therapy. Interferon-beta is a molecule which the body naturally produces early after it identifies a viral infection. It is hypothesised to have antiviral activity by stimulating cells to mount their natural antiviral defences. Synairgen’s drug therefore increases the amount of this signalling molecule.
While the hunt for therapeutics is focusing on ensuring a robust immune response to the infection, later in the disease’s course, some patients may start to get an overactive immune response which can damage the body – with potentially life-threatening consequences.
In July this year a study reported positive data for the steroid dexamethasone as a potential treatment. This cheap, widely available therapy with more than 60 years of experience, significantly reduced mortality for those on ventilators and oxygen support. Steroids are hypothesised to impact many physiological pathways, but an important aspect of their activity is downregulating i.e. controlling the immune response. Dexamethasone is now used routinely in severe COVID-19 patients.
Acute respiratory distress syndrome (ARDS) has been observed in many severe cases of COVID-19 infection and is an example of the damage an overactive immune response can cause. In ARDS, excessive inflammation causes fluid to leak into the lungs, preventing patients from drawing enough oxygen into their bloodstream. Given these observations, researchers have been investigating the use of anti-inflammatory drugs to depress overactive immune responses.
Anti-inflammatory drugs, such as so-called JAK inhibitors, have so far reported positive data. Numerous JAK inhibitors are already approved for use in other inflammatory conditions such as rheumatoid arthritis. Recently, in partnership with the US National Institute of Allergy and Infectious Diseases (NIAID), Eli Lilly and Incyte demonstrated that their JAK inhibitor Baricitinib, in combination with Remdesivir, improved clinical outcomes for hospitalised COVID-19 patients compared to Remdesivir alone.
Even with a successful vaccine, a mass roll-out will face logistical challenges and could take longer than the market is expecting. However, the current backdrop of unprecedented speed of innovation will hopefully deliver the solution the world so desperately needs right now – and bring the current health crisis to an end.
This mission has brought together and galvanised the combined efforts of academics, governments and biopharmaceutical industrialists in a way never witnessed before. The ‘new normal’ has redefined and reshaped the biotechnology and pharmaceutical sectors, and what they are capable of. In this respect, we also believe that for active investors, the present environment represents a revamped wealth of potential long-term investment opportunities.
(All stocks mentioned are for illustrative purposes only and should not be considered as advice or a recommendation for an investment strategy)
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