Last Updated on January 25, 2020 by Chris Stang
The recent outbreak of a new viral infection in China has resulted in a large number of headlines and has begun contributing to market volatility. This vaccine has been called the 2019 novel cornonavirus (2019-nCoV). Here at MS Money Moves, we have been following the situation and compiled information to help you understand the situation a bit better. We have sought to include both laymen discussion and more in-depth scientific aspects of the situation.
What is coronavirus (CoV)? CoVs are a family of enveloped RNA viruses part of the Coronaviridae family. CoVs are classified into four main genera Alpha-, Beta-, Gamma-, and deltacoronaviruses. The distinction is based on the sequence of viral genome. Hosts for CoV include avians, swine, and human (HCoV). HCoVs are members of the Alpha- or Betacoronoavirus. CoV was discovered over 50 years ago. For a long time, it was believed to only cause mild, self-limiting respiratory tract infections in humans. Typically, HCoV causes around 15-30% of respiratory tract infections each year (endemic). The be blunt, the normal HCoV is commonly encountered in routine medical care, but often doesn’t cause issues.
Some History: In 2002-2003, in the Guangdong Province of China, the Severe Acute Respiratory Syndrome (SARS) CoV occurred. SARS-CoV was reported to have caused 8098 cases with a mortality rate of 9%. The mortality rate was closer to 50% in susceptible individuals, like those greater than 60 years of age. These patients are often at higher risks for infections as the body’s immune system weans as we age. The culprit for the SARS-CoV outbreak was found to be bats. SARS-CoV is transmitted rather inefficiently and occurs via direct contact with the infected individual after the onset of illness. There are very limited reports of aerosolization of the SARS-CoV, which would have increased the ability of the virus to be spread. Given the low transmission rate, the outbreak was efficiently managed with quarantining affected areas.
With only 5 known HCoV, it wasn’t until 2012 when a new HCoV arose, the Middle East Respiratory Syndrome (MERS) CoV. This outbreak was much smaller and had a reported 855 cases over 18 months with a higher mortality rate of 40%. MERS-CoV was also believed to have been passed onto humans from bats, specifically in humans who had been in contact with bat secretions. Interestingly, the natural host for MERS-CoV was found to be camels.
Diagnosis: Currently, there are PCR applications available to identify the four endemic HCoVs. Often, there is no need to identify the virus in patients that present with mild, self-limited disease. Since the viral genome has been shared, there has arisen a race to develop validated diagnostic tests to correctly identify 2019-nCoV without false positives for other strains of HCoV. At the time of writing this article, the only way to definitively diagnose 2019-nCoV is to send laboratory samples to the CDC. This has its pluses and minuses. First, it can ensure that indeed only confirmed cases of 2019-nCoV are correctly identified by the experts at the CDC to avoid inciting panic should false positive arise. But second, it reduces exposure to the virus at local laboratories while we learn more about the virus and its virulence.
Treatment: There are no antiviral medications that target HCoV infections, limiting management to supportive care (providing oxygen, IV fluids, etc). Antibiotics cannot be used to treat 2019-nCoV. There are some in vitro data to suggest that interferons with ribavirin may provide some benefit in treatment.
Prevention: There are no currently approved vaccinations for prevention of HCoV (including 2019-nCoV). The high recombination rate causes challenges in creating a vaccine that would be efficacious for long periods of time, which will create problems for the companies seeking to cash in on making a traditional vaccine for 2019-nCoV. Furthermore, endemic HCoV infection does not result in a large immunologic memory. This means if you get a HCoV infection, it is likely you will get one again in the future, as the body does not remember the past infection enough to fight it off. Thus a vaccine would need to elicit a larger response that the infection itself in order to prevent an infection, which is again another problem in development of a 2019-nCoV vaccine.
The 2019-nCoV was first reported to the World Health Organization non December 31st, 2019. Having occurred in Wuhan, China, it is reported that cases of the virus were initially seen much earlier in December. It has been reported that this was a new virus that had not been identified before. Initial investigation honed in on Haunan Seafood Wholesale Market as the site for the start of the infection. However, as more cases have been reported in patients without exposure to the market, it is believed that there is likely a component of human to human transmission of the virus. What complicates matters is that 2019-nCoV infection presents very non-descript, just like many other viral infections (fever, respiratory symptoms). So who should be tested for 2019-nCoV? Well based on the data we have, the CDC recommends testing for the following people as outlined below:
There have been confirmed cases of 2019-nCoV in 13 countries to date. The most recent data reports there have been 1,287 confirmed cases of 2019-nCoV worldwide, resulting in 41 deaths (~3% death rate). This is a fairly low death rate compared to SARS and MERS. Furthermore, most of the deaths reported are in older patients with health conditions. What is encouraging is that all of the cases reported have a travel history to China (Wuhan), suggesting there hasn’t been any instances of the virus being exported from China and spread around patients in other countries.
There have been several companies moving on the news of this virus. However, I remain rather tempered in my expectations. Remember the Ebola and Zika virus hype? This spurred a lot of companies to rapidly research vaccines and therapies, but it wasn’t until late 2019 that an Ebola vaccine was approved. Furthermore, there isn’t even an approved Zika vaccine approved presently. These outbreaks were years ago mind you. Many of the issues in development of a vaccine are highlighted in this Stat News piece. Based on the totality of the facts, especially the difficulty in creating a 2019-nCoV vaccine as outlined above, I believe the most likely companies to succeed at Inovio (INO) or Moderna (MRNA). These companies utilize a new approach to vaccination, providing genetic material to convey immunity to infections. This differs from the traditional way of vaccination, where a portion of the virus is injected, stimulating the body to have a response. Since the body’s memory from coronavirus is relatively weak, I believe this method will be ineffective. That being said companies like Novavax (NVAX) are still taking a swing at it. Interestingly, it is rather telling that the Coalition for Epidemic Preparedness Innovations (CEPI) have awarded grant money to Inovio and Moderna with their modern approach, while companies like Novavax are left on the outside looking in. Do I think there will be a 2019-nCoV vaccine in the next twelve months? Absolutely not, I think there is a less than 5% chance there is a vaccine approved. The long term financial payout for such a vaccine is largely dependent on the course of the virus. Should quarantine and containment be achieved, the result could be very similar to the Zika Virus, where there is a limited market left. That being said, the course is unpredictable.
Trading and investing in these companies is akin to buying a lottery ticket and hoping you hit. As of right now, my opinion is there virus will create headlines, but no longer be relevant in a few months. Which in the end, is good news for us humans, as that means the virus is gone and no vaccine is needed. Even if a vaccine is created, its unclear if it would be useful in future HCoV outbreaks, given the mutation rate of change CoV displays. So in my eyes, the risk reward profile based on the hopes of a 2019-nCoV vaccine is not appealing.
Best of luck in your investing and trading ventures, and as always, remember to wash your hands.
I/we have not position in any of the stocks mentioned.
This is in no way a recommendation to buy/sell stocks.
Fehr AR, Perlman S. Coronaviruses: an overview of their replication and pathogenesis. Methods Mol Biol. 2015;1282:1-23.
Lim YX, Ng YL, Tam JP, Liu DX. Human Coronaviruses: A Review of Virus-Host Interactions. Diseases. 2016;4(3):26.