Topic of The Week: Covid-19 Variants
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While the rush to vaccinate Americans has seen immense improvement and scaled to roughly half of the population, Covid-19 infections and hospitalizations are curling back up. This frustrating news is being widely met with confusion after Pfizer and Moderna tout 90%+ efficacy rates with their vaccines. If millions of people are getting vaccinated, why are cases rising in pockets across the nation?
Early data suggests that vaccines are still effective against many variants, but there is a high degree of uncertainty due to lack of long-term data as to how durable the protection truly is. Some speculate that Johnson & Johnson displayed lower effectiveness due to the trial timing overlapping with the emergence of several variants. While the available vaccines are largely seen as effective, experts are keeping a close pulse on new variant developments. Moreover, major vaccine developers such as Pfizer have stated publicly that a booster shot will likely be needed within 12-months.
The US has observed 5 variants of Covid-19 as of April 2, 2021. For the most up-to-date information on variants, please click here.
- B.1.1.7: First observed in December 2020 in the US, this variant is believed to have originated in the U.K.
- B.1.351: First detected in the US in January 2021, this variant was initially detected in South Africa.
- P.1: This variant was also first detected in the US in January 2021 and was found in travelers from Brazil after being screened at an airport in Japan.
- B.1.427 and B.1.429: These two variants were first detected in California in February 2021 and classified as variants of Covid-19 in March.
Outside of the US, the CDC is closely tracking other potential variants and their potential impacts on our communities. To view the most recent information on this, click here.
People Are Getting Vaccinated so Why Are Cases Up?
Last week marked the fourth week which observed a rise in Covid-19 cases. While the US has administered vaccinations to 200 million people, experts are beginning to shift focus to booster shots and other methods of addressing variants. In a recent article in Scientific American Dr. Danny Altmann, an immunologist at Imperial College London was quoted saying:
“I believe that this virus is going to change and that the vaccines we have approved right now are just not going to be as effective as we think they are…SARS-CoV-2 has already evolved several new variants—including the ones first identified in the U.K. and South Africa, which are more transmissible (though not—for now, at least—more deadly).”
“We’re thrilled with the vaccines that we have… But ”we can improve further,” she said. “I think, well into 2022, we’re going to see the emergence of improved vaccines…We need to continue to support the research and development of more vaccine candidates, especially as the need for ongoing booster immunization of populations is still not very clear at this point.”
With this in mind, we must consider the implications for the COVID-19 vaccine landscape and how we might capitalize on it. In our view, there will be the need for a booster shot in most adults; even those that have already contracted and recovered from the virus. Equally important, we believe there will be a need for second-generation COVID-19 vaccine regimens that provide more complete protection against existing and new variants that will inevitably evolve as the virus mutates. Several pharma players globally have already started programs aimed at fulfilling emerging immunization needs via booster shots and second-generation vaccines.
Probably one of the more exciting opportunities we see is with Gritstone Oncology (Nasdaq: GRTS). While GRTS originally applied its next-generation vaccine technology to treat cancer, the company pivoted earlier this year to also target infectious diseases starting with COVID-19. Like its peers Moderna (Nasdaq: MRNA) and Pfizer (Nasdaq: PFE)/BioNTech (Nasdaq: BNTX) GRTS is developing an MRNA-based vaccine. What differentiates GRTS, though, is that its vaccine uses a Chimpanzee Adenovirus (ChAd) vector for the first jab (prime) followed by Self Amplifying RNA (SAM) (boost) for the second. The idea is that this will enable a robust antibody response similar to the first-generation vaccines but also a T-cell response against highly conserved viral proteins. Something that is striking to us is how tiny GRTS’s market cap is at ~$400M relative to other vaccine players with valuations. For instance NVAX which prior to COVID had a market cap under $1B and now trades with one north of $16B. MRNA which had a market cap of ~$5B when it started Phase 1 of its vaccine program is valued over $65B today. While we appreciate key differences that warrant significantly greater market caps, we see GRTS as an attractive buy considering the potential for it gain market share.
In less than a year after MRNA embarked to develop a COVID-19 vaccine, it secured FDA emergency use authorization (EUA) on 12/18/20. This first-generation vaccine conferred protection against COVID-19 in 95% of participants in the Phase 3 clinical trial. This two-dose MRNA-based vaccine encodes for part of the classical Spike protein displayed on the virus surface. While this is seen as a success the company recognizes the need for improved vaccines from a production standpoint. On 3/15/21 MRNA announced that the first individuals had been dosed in a Phase 1 study of its second-generation vaccine candidate. The key add on to the first-generation vaccine is the potential for the new vaccine to be refrigerator stable mitigating distribution challenges
GSK/CVAC and Imperial College London
These players are also intriguing to us as they are applying similar technology as GRTS in developing a second generation COVID-19 vaccines. That is, GSK/CVAC are leveraging Self Amplifying RNA technology. In a 2/3/21 press release unveiling their multi-valent next-generation RNA-COVID-19 vaccine strategy GSK/CVAC stated 2022 as their target for commercial availability. This aligns with developmental timelines of the first gen vaccines and our assumed developmental timeline for GRTS.
Like their peers discussed above PFE and BNTX are jointly developing a second-generation RNA-based COVID-19 vaccine and booster shot. Similar to MRNA, the PFE/BNTX vaccine generates an immune response against the Spike protein. Unlike GRTS it is not designed to elicit a T-cell response against other highly conserved COVID-19 proteins. On 2/25/21 the duo jointly announced the initiation of this program.
After more than a year into the Covid-19 pandemic, a lot has improved. Over 200 million Americans have received a vaccine dose, infections compared to 2020 have decreased and the summer is quickly approaching. While the story appears to be improving, variants are beginning to pose renewed threats of lockdowns as Michigan is witnessing. Cases begin to improve in one part of the country and begin to trend up in another part of the country. One of the primary culprits behind these headwinds is credited to variants. Variants pose a threat to our vaccination, social distancing, reopening, and other progress. On a bright note, we know a lot more about COVID than we did in 2020. Additionally, biotech companies are racing to address the growing concerns and anticipate booster shots to be ready and approved by this fall.
Stay tuned for due diligence on our favorite variant vaccine play.