Market Update: October 5, 2020

Operation Warp Speed

Astonishing—one word that comes to mind when contemplating the events of last week. The week started with Disney’s announcement that it was laying off 28,000 employees—followed by major airlines, including United, American, and Delta, stating that they, too, were furloughing thousands. Shortly afterwards, the spectacle of a Presidential debate was followed by the news that the leader of the free world—and many in his inner circle—had tested positive for Covid-19.

The coronavirus pandemic has literally upended our lives for over six months, affecting the ways we interact at every level. A return to normalcy hinges, in part, on the promise of a vaccine. In today’s Market Update, we investigate Operation Warp Speed—one of the most ambitious scientific undertakings in modern U.S. history. (Today’s Market Update does not address the therapeutic medicines that President Trump has received while at Walter Reed; the focus is purely on the status of vaccine development.)

According to the U.S. Department of Health & Human Services, Operation Warp Speed’s goal is to “produce and deliver 300 million doses of safe and effective vaccines with the initial doses available by January 2021, as part of a broader strategy to accelerate the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics.” To date, the federal government has invested more than $10 billion in this public-private initiative, which encompasses advanced purchase agreements with six major players, including Merck (an American company, founded in 1891), GlaxoSmithKline (a British company) in partnership with Sanofi (a French company)—and four others that have entered Phase III:

  • A partnership between Pfizer (an American company, headquartered in New York City) and BioNTech (a German company);
  • Moderna (an American company, headquartered in Cambridge, Massachusetts);
  • A partnership between AstraZeneca (a British company) and Oxford University; and
  • Johnson & Johnson (an American company, founded in 1886).

What does “Phase III” mean? What does it entail? After all, in the history of medicine, rarely has a vaccine been developed in less than five years. That feat is attributed to the current mumps vaccine, which went into distribution as recently as 1968! A biomedical scientist named Maurice Hilleman used virus samples from his daughter that he systematically weakened over time—stimulating an immune response, but not causing the disease. After two years of human trials, the vaccine was licensed by Merck.

Certainly a lot has changed since 1968, including vaccine research and development that has evolved from an empirical approach to one that is supported by applied science—courtesy of the first bacterial genome sequence that was completed in 1995, along with mapping of the human genome that was completed in 2003. According to the U.S. National Institutes of Health, “…With the arrival of the genomics era, a paradigm shift is occurring in the development of vaccines—and potentially also in the development of antibiotics—that is providing fresh impetus to this field.” Today, terms like DNA and RNA, Deoxyribonucleic acid and Ribonucleic acid, are part of our mainstream consciousness… But how do they get reflected in modern-day vaccines?

Unlike a conventional vaccine, RNA vaccines work by introducing an mRNA sequence—a messenger molecule that tells cells exactly what to build. The mRNA is coded to mimic a specific antigen, i.e., any foreign substance that your immune system does not recognize and tries to fight—like bacteria or a virus, even pollen. Once the antigen is recognized by the immune system, it is prepared to fight the real thing.

Since they are not produced using active infectious elements, RNA-based vaccines are considered safer than conventional ones. Plus, RNA vaccines are purportedly faster and cheaper to produce than traditional vaccines because they employ standardized processes, which makes them scalable. Pfizer/BioNTech and Moderna are developing RNA-based vaccines as part of Operation Warp Speed.

Operation Warp Speed is also employing the use of “viral-vector” vaccines, under development by Astra Zeneca/Oxford University and Johnson & Johnson. Since the 1990s, researchers have been investigating how to use viruses to deliver genes into cells to immunize people against diseases. To create a coronavirus vaccine, they are taking a harmless virus and inserting a gene that contains the blueprint for a distinctive part of Covid-19. Through the marvels of science, the gene cannot replicate, making it safe.

With this high-level background regarding how vaccines are developed, it is natural to ask: How are they being tested? What rigors are being applied to ensure safety and effectiveness?

According to the Centers for Disease Control and Prevention, the general stages of the development cycle of a vaccine are:

  • Exploratory stage
  • Pre-clinical stage
  • Clinical development
  • Regulatory review and approval
  • Manufacturing
  • Quality control

Clinical development is a three-phase process. During Phase I, small groups of people receive the trial vaccine. In Phase II, the clinical study is expanded, and the vaccine is given to people who have characteristics (such as age and physical health), similar to those for whom the new vaccine is intended. In Phase III, the vaccine is given to thousands of people and tested for efficacy and safety.


Phase III Status: RNA-Based Vaccines


According to a joint press release dated September 12, 2020:

Enrollment in the trial has been proceeding as planned and expects to reach its initial target of up to 30,000 participants next week. The proposed expansion would allow the companies to further increase trial population diversity, and include adolescents as young as 16 years of age and people with chronic, stable HIV (human immunodeficiency viruses), Hepatitis C, or Hepatitis B infection, as well as provide additional safety and efficacy data.

The pivotal trial is event-based and there are many variables that will ultimately impact read-out timing. …Based on current infection rates, the companies continue to expect that a conclusive readout on efficacy is likely by the end of October.

PWA Observation: The Pfizer/BioNTech vaccine was mentioned briefly during last Tuesday’s Presidential debate. In part, this reference can be attributed to Pfizer CEO Albert Bourla stating: “…We could have vaccine data ready to submit to the FDA by end of the third quarter, in October, and hopefully a hundred million doses delivered by the end of the year.” Following the debate, however, Mr. Bourla sent a letter to all employees, emphasizing “…We are moving at the speed of science. …We would never succumb to political pressure.”


According to a press release dated July 27, 2020:

The Phase 3 study protocol follows the U.S. Food and Drug Administration (FDA) guidance on clinical trial design for COVID-19 vaccine studies. The randomized, placebo-controlled trial is expected to include approximately 30,000 participants in the United States… The primary endpoint will be the prevention of symptomatic COVID-19 disease.

Moderna has selected nearly 100 clinical research sites…that are working within their local communities to reach a diverse population. The Company hopes the participants are representative of the communities at highest risk for COVID-19…

The Company remains on track to be able to deliver approximately 500 million doses per year, and possibly up to 1 billion doses per year, beginning in 2021.

PWA Observation: If you are curious about the date of this press release (July versus September), it is because Moderna went from a genetic sequence of the coronavirus to the first shot in an arm in a record 63 days.

Worth noting: Once the RNA-based vaccines receive regulatory approval, the logistical hurdles surrounding their manufacturing and quality control are abundant. For example, the Pfizer/BioNTech vaccine must be shipped frozen at –94 degrees Fahrenheit, an ultracold temperature that is nearly impossible to maintain outside of a large hospital or university medical center with specialized freezers. To address this requirement, Pfizer has devised “thermal shippers.” Unopened, the thermal shippers can keep the vaccines frozen for up to 10 days; upon opening, the vaccines must be replenished with dry ice within 24 hours, then every five days. Further, the thermal shippers can be opened no more than twice a day to take out vials and must be closed within one minute. On the other hand, Moderna’s vaccine must be shipped frozen at –4 degrees Fahrenheit. Once thawed, it can last for 14 days at a normal refrigerator temperature.

Here is another hitch for both vaccines: They each require two doses per person over time, and the second dose must come from the same manufacturer as the first. For Pfizer/BioNTech, the second dose must be administered 21 days after the first, for Moderna, 28 days later—in both cases longer than the vaccines can be stored. This means that having the right number of vaccines for the right people will require extensive and careful record keeping.


Phase III Status: Viral-Vector Vaccines

AstraZeneca/Oxford University

According to a press release dated September 3, 2020:

Trial centers across the US are recruiting up to 30,000 adults aged 18 years or over from diverse racial, ethnic and geographic groups who are healthy or have stable underlying medical condition… Participants are being randomised to receive two doses of either the potential vaccine or a saline control, four weeks apart, with twice as many participants receiving the potential vaccine than the saline control.

Clinical development of the potential vaccine is progressing globally with late-stage Phase II/III trials ongoing in the UK and Brazil, a Phase I/II trial in South Africa and planned trials in Japan and Russia. These, together with the US Phase III clinical trial will enroll up to 50,000 participants globally. Results from the late-stage trials are anticipated later this year…

PWA Observation: Experts are concerned about AstraZeneca’s vaccine trials (which began in the UK in April), because of its refusal to provide details about serious neurological illnesses in two participants— both women, who received the experimental vaccine in Britain. According to Mark Slifka, a vaccine expert at Oregon Health and Science University: “If there are two cases, then this starts to look like a dangerous pattern. If a third case of neurological disease pops up in the vaccine group, then this vaccine may be done.”

The neurological repercussions caused AstraZeneca to halt its trials twice, the second time in mid-September. Studies have since resumed in Britain, Brazil, India, and South Africa—but are still on pause in the United States. So far, about 18,000 people worldwide have received AstraZeneca’s vaccine.

Johnson & Johnson (The vaccine is being developed by Janssen Pharmaceutical Companies, a division of J&J.)

According to a press release dated September 23, 2020:

The Phase 3 study is a randomized, double-blind, placebo-controlled clinical trial designed to evaluate the safety and efficacy of a single vaccine dose versus placebo in up to 60,000 adults 18 years old and older, including significant representation from those that are over age 60. The trial will include those both with and without comorbidities associated with an increased risk for progression to severe COVID-19, and will aim to enroll participants in Argentina, Brazil, Chile, Colombia, Mexico, Peru, South Africa and the United States.

Built on a legacy of purpose-driven actions and a commitment to diversity and inclusion, the Company aims to achieve representation of populations that have been disproportionately impacted by the pandemic in the implementation of its COVID-19 Phase 3 trial program. In the U.S., this includes significant representation of Black, Hispanic/Latinx, American Indian and Alaskan Native participants.

PWA Observation: Success in drug development is usually dictated by the first-to-market advantage. Simplicity of use, however—one shot, rather than two—during a pandemic could give J&J a leg up. Further, the September 23 press release indicated the J&J vaccine will be shipped frozen but can be stored in liquid form at refrigerator temperatures for three months.

Why Does This Matter?

This Market Update is loaded with material we hope you will find valuable and assuring during this period of uncertainty. We spend hours studying vast information so that we are equipped to make informed investment decisions consistent with each client’s objectives. Sometimes, that information is useful beyond the investment implications.

In essence, we are a company of people taking care of people. The news changes daily. Fear levels rise and fall. Like you, we pray for the speedy and complete recovery of our President and all those afflicted by Covid-19. We also pray for the wellbeing and longevity of our Democracy.

In the midst of tremendous uncertainty and turmoil, our goal remains steadfast: We are here to lead our clients on the path of financial security.

Thank you for your continued confidence.

Stay strong.


Joseph A. Scarpo

Founder and CEO

Market Pulse  //  Uncategorized
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