Kirsty Clark
Investment specialist, equities
In a few short months – a term, hitherto only commonplace in the scientific community, has become firmly entrenched in our collective dialogue. The rapid spread of information (and misinformation) related to the coronavirus, so named due to the virus’ crown-like structure when viewed under a microscope, has created a fear as infectious as the virus itself.
Consumers have been stockpiling, while governments and healthcare officials have been scrambling to coordinate an effective response to the outbreak. Measures to date have ranged from advice on how best to clean one’s hands to closing schools and cancelling flights, to locking down entire cities and regions, and the jury is still out on whether these attempts to control the virus will ease or exacerbate the public’s concerns.
For now, the uncertainty is leading to a pervading sense of nervousness. Investors are firmly in ‘risk-off’ mode as the number of global cases continues to rise, while the efficacy of the policy response to date remains less than clear. However, this week, we started to see some firmer commitments and further details emerging on proposed packages designed to shore up confidence and provide near-term relief for businesses and consumers.
What support are governments and authorities pledging?
While affected countries are taking varied courses of action to address local outbreaks, the World Health Organisation (WHO) is calling for a coordinated international response to contain, control, delay and reduce the impact of this virus.
In the March 2020 budget, the UK chancellor unveiled a £30 billion emergency fiscal stimulus package and announced a raft of measures to support the economy and deal with the coronavirus outbreak; including suspending business rates, extending sick pay, boosting NHS funding, creating a ‘hardship fund’ for local authorities, and launching a ‘temporary loan scheme’ for banks to lend to small and medium-sized enterprises (SMEs). £12 billion has been earmarked to specifically target the impact of the coronavirus – of which, £5 billion will go to the NHS and £7 billion towards helping businesses and workers. The UK government has also committed an additional £91 million to fight the spread of the coronavirus and support international efforts – investing in research and support initiatives. This stimulus goes hand in hand with the Bank of England’s 50 basis point emergency rate cut.
In the US, President Trump pivoted from initially playing down the impact of the virus to signing an $8.3 billion spending bill and announcing a coronavirus relief package targeting small businesses and hardest hit consumers. Details are still being hashed out, but options on the table include delaying the April tax filing deadline and cutting payroll taxes. The latter has not garnered much support beyond the oval office. This comes on the back of a 50 basis point rate cut by the Federal Reserve.
Japan also plans to spend an emergency ¥270 billion to cope with the coronavirus fallout, and the Bank of Japan has pledged ample liquidity. In Hong Kong, as part of a HKD 120 billion relief fund, the government plans to give each permanent resident HKD 10,000 (US$1,300). Similar measures are being adopted in Singapore via US$4 billion of fiscal stimulus. South Korea aims to bolster SMEs with a KRW11.7 trillion package, while Chinese authorities are waving various government fees and charges, and temporarily relaxing recognition of non-performing loans.
In Europe, France is offering increased public guarantees on loans to SMEs, along with temporary relief from corporate taxes and social contributions for eligible firms, while in Italy – where infection numbers have soared – around €10 billion has been set aside to counteract the impact of coronavirus. Authorities in Brussels are also considering using flexibility in state aid rules to help EU governments cushion businesses from outbreak.
Meanwhile, the UN has released US$15 million to the WHO and United Nations Children’s Fund (UNICEF) to help vulnerable countries battle the spread of the coronavirus.
What do we know about COVID-19?
The novel coronavirus is from a large family of RNA (ribonucleic acid) viruses that can infect many species from rats to bats to beluga whales, but it joins six other coronaviruses in being able to infect humans. Four of which are common cold viruses, which generally only create mild respiratory illnesses in otherwise healthy people, while the new ‘emerging’ viruses that are able to cause severe diseases include SARS-CoV (2003) and MERS-CoV (2012). The clinical severity of SARS-CoV-2 (2019), the virus that causes the COVID-19 disease, is still not fully understood, but has already caused fatalities in patients with other underlying health conditions. The virus is thought to be airborne and can be transferred through cough droplets.
The incubation period for COVID-19 is currently estimated at between two and 14 days. There is evidence suggesting that transmission can occur from an infected person with no symptoms; however, uncertainties remain about the effect of transmission by non-symptomatic people. Symptoms can include a fever, coughing, tiredness, difficulty breathing, muscle pain and tiredness. At this stage, there is no specific treatment for this disease, so healthcare providers are treating the clinical symptoms. More serious cases can develop severe pneumonia, acute respiratory distress syndrome, sepsis and septic shock. The elderly and those with underlying health conditions are considered to be more at risk, while the disease in children appears to be relatively rare and mild.
While case numbers coming out of China appear to be improving, these remain anomalous to the rapid spread, and rising death toll, occurring globally beyond the borders of mainland China.
At the time of writing, confirmed cases in Italy had topped 12,000, amid nationwide quarantines. The number of cases in Italy is only second to China, the epicentre of the outbreak where 80,000+ cases have been confirmed, and narrowly ahead of Iran with 10,000+ cases and South Korea with case numbers approaching 8,000. Over the past week or so, there have been substantial increases in infections across several European countries – leading to growing concerns about the speed of transmission – and, while comparative numbers remain low elsewhere, previously untouched countries are increasingly reporting infections.
The rapid spread of the virus across countries and regions has prompted the World Health Organisation to now declare the epidemic a global ‘pandemic’. Authorities and healthcare professionals are still assessing the behaviour of the virus and the severity of the disease. While research is underway, and patients are being treated with existing drugs to try and limit the severity of their symptoms, there are currently no vaccines or anti-viral medications available to directly combat the virus.
How have initial country responses differed?
Countries have adopted very different approaches to the outbreak. Hong Kong and Singapore were hit early with the coronavirus, but the authorities acted swiftly and have been praised for their containment strategies, Each now has fewer than 200 cases. Both quickly set up systems to try to identify and treat every case. Hong Kong developed diagnostic tests and rapidly distributed them to laboratories in every major hospital. At one point in February, it had 12,000 people in quarantine.
Singapore has adopted stringent travel and screening processes. The country’s prime minister called for calm and assured residents that all healthcare related to the disease would be free. The country has been preparing for this kind of outbreak since being hit hard by SARS in 2003; upgrading medical equipment and infrastructure, building more isolation wards and creating systems to map and trace the spread of infections. A recent study by Harvard University public health researchers estimated that Singapore was detecting three times the number of COVID-19 cases as other countries.
No other country has released as much detailed information about its coronavirus cases as Singapore. Publicly-available information has been used to develop a comprehensive snapshot of cases with detailed breakdowns of age, nationality, gender, and origin of the virus as well as the stages of development.
While new cases are still being identified, the decisive action looks to have spared these countries the rapid outbreaks being witnessed elsewhere.
Italy and Iran were hit later, but both countries were slower to act and have seen an exponential rise in cases. Three weeks ago, Italy had only three cases, it now has more than 12,000. The US has also seen a pick up in the number of reported cases, now numbering in the thousands along with Germany, France and Spain, but shortages and difficulties with initial testing kits in the US means the number of confirmed cases could be much higher than official statistics suggest.
Identifying and testing the virus is half the battle
As the number of cases globally continues to rise, so too does the pressure to enable faster, more accessible testing. The medical community has been rallying to develop a set of speedy and reliable diagnostic tests to identify cases and monitor the spread. Research groups have worked on identifying and sequencing the virus, sharing several viral genomes (consisting of the virus’ DNA) in open databases. A number of international groups have since been working from these sequence data to design primers for what are referred to as polymerase chain reaction (PCR) tests to support global governments and public health bodies in identifying cases in the absence of an existing commercial test for the SARS-CoV-2 virus.
The quick sequencing of the virus’ genome and distribution of the data early on in the COVID-19 outbreak has enabled the development of a variety of procedures and protocols to diagnose patients based on snippets of the virus’s genetic code.
The full genome of the novel coronavirus was first published on 10 January 2020, just weeks after the disease was first identified in Wuhan, China. A week later, a group of researchers led by German scientists released the first diagnostic protocol for COVID-19 using swabbed samples from a patient’s nose and throat. This PCR-based protocol has since been selected by the WHO, and formed the basis of tests kits shipped to hundreds of laboratories globally.
We’ve seen huge variations in the number of tests conducted by each country. South Korea, for example, has conducted over 200,000 tests (equivalent to 4,000 tests per million people), while tests in the US stood at a mere 8,550 by 9 March 2020 (equivalent to 26 tests per million people), behind at least 15 other countries on a relative (per million) population basis, according to the most recent data.
The effort to combat the coronavirus in the US has been complicated by faulty initial tests kits rolled out by the Centers for Disease Control and Prevention (CDC) – the country’s test kits were separate from the WHO-recommended diagnostic tests. By the beginning of March 2020, the CDC had only conducted a total of 472 tests. For comparison, the UK with a population 5x smaller than the US, had conducted over 13,000 tests. At last count, UK tests stood at 26,261 (equivalent to 387 tests per million people).
US officials have tried to increase testing capacity nationally, with the CDC replacing the faulty kit, but only a limited number of laboratories can use the test, and the turnaround time has been 24-72 hours. With the help of private companies, federal authorities are hoping to ramp up access to new tests. The Food and Drug Administration (FDA) said it would allow some labs to start using tests they have developed and validated on their own prior to federal review, clearing the way for local authorities to start testing and getting results within hours. As of 9 March 2020, Quest Diagnostics, a private clinical laboratory launched its own diagnostic test.
In the UK, testing for COVID-19 is being done by a range of accredited laboratories across the country. A diagnostic test developed by Public Health England (PHE) was rolled out to laboratories across the UK in February 2020, and diagnostic capacity continues to increase to accelerate the country’s testing capabilities. Using the test, scientists can look for evidence of the presence of any type of coronavirus and then hone in on specific genetic clues that identify the novel coronavirus associated with this outbreak.
By looking for genetic material of the virus, for instance in saliva or nasal swabs, using the PCR tests, they can give a positive result when the virus is still present. However, they are unable to identify people who went through an infection, recovered, and cleared the virus from their bodies.
Researchers are still working on developing experimental antibody tests, also called serological tests, that can confirm (usually via a blood test) whether someone was infected even after their immune system has cleared the virus that causes COVID-19. Among the front-runners here looks to be a group at Duke-NUS Medical School in Singapore, although the test would still need to be validated before it is taken into production and deployed widely. These tests have been used in the past for other coronavirus outbreaks, but have been time- and resource-intensive to create.
The race to find a cure
The race is now on to find treatments and vaccines to help limit further spread of the virus and prevent more widespread global exposure. While the path from research to development to mass production and distribution can be a slow one, a number of companies are leading the charge; directing funding into new research, while also looking to repurpose existing drugs to tackle the virus.
The National Medical Products Administration of China has approved the use of Favilavir, an anti-viral drug, as a treatment for coronavirus. The drug has reportedly shown efficacy in treating the disease with minimal side effects in a clinical trial involving 70 patients. China has also approved the use of Roche’s Actemra for the treatment of severe complications related to coronavirus.
The table below highlights some of the key players looking to develop licenced treatments and vaccines:
Other companies throwing their hat in the ring include Japanese multinational Takeda Pharmaceutical, who plans to develop a plasma-derived therapy against coronavirus. Taking antibodies derived from plasma of recovered patients that have the potential to generate an immune response when injected into a new patient. US biopharmaceutical company Harbour BioMed is also partnering with Mount Sinai Health to develop antibodies targeting the virus.
Pfizer announced that it has identified certain under-development antiviral compounds that may be effective in treating coronavirus. The company is planning to partner with a third party to screen and identify potential compounds by the end of March and begin testing in April.
US company BioCryst Pharmaceuticals say an experimental antiviral called galidesivir, developed for treating Ebola, is active against coronaviruses and it has already passed safety tests in people. The company is in active dialogue with relevant US public health authorities to ensure that the drug is available to them.
Two drugs given together to treat HIV – called lopinavir and ritonavir – could also hold promise in treating the novel coronavirus, and are already approved for human use. In small trials they seemed to reduce disease severity and fatalities in people infected by the SARS or MERS coronaviruses. Doctors in Wuhan, the centre of the outbreak, have already started a randomised controlled trial.
Meanwhile, Mastercard’s Impact Fund charity, the Wellcome Trust and the Bill and Melinda Gates Foundation have teamed up to contribute $125 million seed funding to develop treatments for the coronavirus. The project will work with governments, the WHO, and the private sector to support the development of an anti-viral drug as well as a licenced treatment specifically for coronavirus infections.
…and for the rest of us?
The scale and pace of the outbreak has caught many off guard. Share prices have tumbled, with the S&P 500 Index falling nearly 10% yesterday, on the back of President Trump’s surprise move in announcing a 30-day travel ban on citizens from the European Schengen area going to the US. It was the largest one-day drop for the index since the crash of 1987. Investors have been seeking safety in risk diversifiers such as gold and traditional safe havens including 10-year government bonds, which has driven yields to record lows. Markets stabilised somewhat on Friday morning, as governments’ globally stepped up the supportive rhetoric, but we are unlikely to have seen the last of the market wobbles.
With the WHO declaring the outbreak a ‘pandemic’ on 11 March 2020, panic appears to be spreading faster than the virus itself. We’ve seen a run on surgical masks and anti-viral gels, leaving hospitals and healthcare workers in danger of shortages, and supermarkets are restocking empty shelves at a clip, following the stockpiling of consumer goods as the threat of lock downs and travel bans increases.
The uncertainty is also illustrated in corporate filings and earnings calls, as analysts and executives try to calculate the impact of the pandemic. Analysis of company transcripts by Sentieo, shows a spike in the mention of associated words and phrases such as ‘coronavirus’, ‘outbreak’, ‘decelerated’, ‘postponed’, ‘black swan’, ‘working from home’ and ‘supply chain’.
Governments and central banks have been called to action to shore up confidence and curb the impact of the outbreak, and we are increasingly seeing a ramp up in response to the continued rise in cases.
The public health response is likely to be ratcheted up in line with the growing severity at a country and local level – with an increase in screening and contact tracing, along with potential social distancing measures. Hopefully, researchers will begin to better understand the virus in the coming weeks to enable them to develop targeted treatments.
Certainly, any evidence of slowing spread and rising recovery rates across countries will go some way to providing the assurances many are looking for.
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