The COVID-19 pandemic continues to evolve from four fundamental aspects: the health impact and response, the economic and market impact and the policy action from both central banks and governments worldwide.
Global confirmed cases of COVID-19 have now exceeded 29 million. Despite the rise in cases, the number of new cases in the US continues to decline while the pickup in cases across western Europe, albeit concerning, is still below the elevated levels recorded last spring.
Governments have so far managed to take a less economic harmful approach to contain the spread, opting for compulsory face masks and travel restrictions instead of nationwide economic lockdowns. From a market perspective, improvement in market sentiment over the past six months, has been boosted by a better than expected second quarter earnings season.
Even so, the market rally from March lows, was largely driven by the significant amount of stimulus, both from the monetary and fiscal front. In the US, for instance, the $2.6 trillion worth of fiscal response alone amounts to approximately 12 per cent of the US’s GDP value, the highest globally.
While the world continues to battle the COVID-19 pandemic, the biopharmaceutical industry has joined efforts to develop COVID-19 vaccines and treatments. The World Health Organisation documents 35 candidate vaccines which are currently in clinical evaluation, and 145 candidate vaccines in pre-clinical evaluation. Given the significant effort in developing a COVID-19 vaccine or treatment, tracking the health care response has become equally important as tracking the COVID-19 case growth and economic response.
Over the past few weeks, there has been an increasing focus on the clinical trials in relation to developing a COVID-19 vaccine, as we near the timeline for potential key updates from several phase 3 trials that are currently underway. These include trials carried out by Pfizer, Astrazeneca and Moderna. The findings are expected to increase insight on vaccine efficacy and safety, and also the understanding for other COVID-19 vaccines or treatments.
This week kicked off with a positive announcement from Pfizer, an American multinational pharmaceutical corporation which has partnered with BioNTech to develop a COVID-19 vaccine. Over the weekend, CEO Albert Bourla announced that it is “likely” that a COVID-19 vaccine will be distributed to the US public before the end of 2020, if found to be safe and effective.
The company has also submitted its proposal to the FDA to increase the late-stage trial participants to 44,000 and is expecting to have key data from its phase 3 trial by the end of October. AstraZenca also made the headlines recently after deciding to temporarily pause dosing in the ongoing COVID-19 vaccine trials, in partnership with University of Oxford. The company announced that a standard review process had been triggered by an unexplained illness that occurred in the UK Phase 3 trial.
The pharmaceutical company paused the trials to allow an independent committee to review and evaluate any potential link between the illness and the vaccine. In less than a week, AstraZeneca announced that the clinical trials have resumed in the UK following confirmation by the Medicines Health Regulatory Authority that it was safe to do so.
Despite that the economic outlook remains characterised by growth uncertainty and concerns over the continued rise of COVID-19 cases, more clarity on the vaccine progress remains one of the most important catalysts going forward. Encouraging news on the timing and availability of a COVID-19 vaccine is expected to boost growth sentiment and lower risk premiums. This should trigger a strong recovery in earnings growth, particularly for cyclical companies.
Disclaimer: This article was issued by Rachel Meilak, CFA equity analyst at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.