Financial markets are expecting a Covid-19 vaccine with flu-like efficacy and are depending on trial outcomes, according to Fidelity International’s Judith Finegold, but markets could go either way.
Normally, a timeline for a vaccine to get to market is five-to-10 years, by which time enough work has been done on the vaccine that the chance of success is much higher than most late-stage trials.
However, because there are so many companies working on a Covid-19 vaccine to be ready in less than a year, the dynamic changes slightly.
Finegold – co-manager of the £1bn Fidelity Global Health Care fund –said the US Food & Drug Administration expects around a 50 per cent efficacy for the Covid-19 vaccine, compared to flu vaccines which have an efficacy of about 60 to 70 per cent, and other types of vaccinations that have over 90 per cent efficacy.
She said the market is expecting a vaccine with flu-like efficacy in the 60 to 70 per cent range, as well as a reasonable safety initial signal.
The market is also expecting efficacy updates from the first vaccine candidates before year-end, as several companies in the last few days have publicly announced that they’re on track for.
“Given some of the larger messenger RNA vaccine trials have gone on and haven’t stopped for any safety issues, that seems reasonable,” she said.
If there is a vaccine with an initial efficacy of 80 to 90 per cent, she believes it could be the cause of potential upside surprise for financial markets.
“I definitely think that the market will respond very favourably because actually that is then changing our conversations from living with coronavirus to eradicating coronavirus much faster than expectations are,” she explained.
However, because markets are expecting vaccines in early 2021, if any of the trials are not successful in clearing the initial efficacy hurdle, or if efficacy is closer to the 50 per cent, she believes markets will respond poorly.
“Similarly, I think any other significant safety concerns in any of the vaccine trials that would lead to market downside,” she added.
The four furthest along vaccines are from Pfizer, Moderna, AstraZeneca, and Johnson & Johnson, noted Finegold.
“The vaccines that we can develop the fastest are the vaccine modalities that are completely new,” she said. “In the case of Pfizer and Moderna, this is a type of vaccine modality which has never been approved before.
“We need to keep that in mind and understand why we need more in terms of safety before we talk about the broad roll-out of them.”
Indeed, safety, more so than efficacy, is the big unknown when it comes to the new vaccine modalities.
Finegold explained: “We don’t have what we have with the conventional type of vaccines, which is these very large sets of databases.
“We’re going to see snippets of 30,000 plus patients per trial, and we’re going to see snippets of two months’ safety and then six months’ safety and then longer-term safety, but this is obviously going to take a long time to read up.
“So, to be perfectly frank, I think that that long-term safety question is not going to be answered in the next few months when we see the first efficacy, and this is definitely something which I feel warrants watching.”
However, she noted that there are more conventional types of vaccines being developed, going into pivotal trials for potential data by the end of 2021, so backups are in the pipeline.
But beyond safety and efficacy of the vaccines, the logistical considerations could be a more difficult hurdle to overcome.
She said: “I really hope that governments globally have been focusing on this ever since the first time they heard of a coronavirus because we have never had to do a global vaccination strategy like this so it's completely untested.”
Additionally, certain mRNA vaccines could be potentially facing an immediate logistical barrier.
“The Pfizer vaccine needs to be cold-stored at minus 80 degrees Celsius, and realistically, that means it’s going to be near impossible to get into rural areas, and especially less economically developed countries,” she said.
Furthermore, the majority of the vaccines that are closest to being developed require two shots, requiring one vaccine and another a month later.
The manager said whilst this may sound easy on the surface, there is a risk that if people do not come in for the second shot there will not be enough vaccine efficacy to get through to the whole population.
Finegold co-manages Fidelity Global Health Care fund with Alex Gold – having been appointed managers in 2019 and 2017 respectively – and invests across the broad healthcare industry in businesses such as pharmaceuticals, biotech, medical devices, and health insurance companies. Its largest positions are in Thermo Fisher Scientific, United Health Group and Roche.
Performance of the fund vs sector & benchmark over 3yrs
Source: FE Analytics
Over the past three years, it had a total return of 50.09 per cent compared with 40.46 per cent from the MSCI AC Health Care index and 24.76 per cent from the average peer in the IA Global sector. It has an ongoing charges figure (OCF) of 1.06 per cent.