How the Healthcare Industry is tackling COVID-19
In conversation, Daniel Mahony and Gareth Powell, the two founders and co-heads of Polar Capital’s healthcare team, highlight some of the rapid advances being made by the healthcare industry in the fight against COVID-19 and provide a timeline or road map of when we may hear about potential progress of these efforts.
Daniel Mahony (DM): We see three areas that will be critical to understanding the near and long-term impact of this disease. First, diagnostic testing is critical for understanding the scale of the problem in the near term. We see a few therapeutics in development that may ameliorate the effects of the disease and ultimately a vaccine could prevent any further outbreaks of the disease.
The World Health Organisation has been very clear in its message. On 16 March, Dr Tedros Adhanom Ghebreyesus, Director General of the World Health Organization, speaking at a virtual press conference, said: “We have a simple message for all countries: test, test, test.” This is our key message: test, test, test. You may have heard about the mathematical models of the disease which have generated a lot of debate on social media. We need more data to refine the assumptions in those models and come up with a better understanding of how this epidemic has and will progress over the coming weeks.
Q: Can you explain what the different tests are?
DM: There are two types of test. The first detects the virus from a patient sample using a throat swab to determine if there is an active viral infection. This is the viral test, sometimes called the antigen test. Many companies have now developed these tests and the regulators have been rushing through approval over the past two or three weeks. The technology behind them has been around for years but the challenge is now logistics and the scaling-up of testing. This week, Germany will be close to performing 500,000 tests per week so is way ahead of the rest of the world. The UK is currently running only about 50,000 per week although there are plans to scale up. The lack of testing has been a real problem in the US as well.
The second type of test is a so-called antibody test, a simple type of blood test – again, the detection technology is not new – and this determines whether an individual has antibodies against the virus indicating they have been infected in the past. There are many companies trying to develop these tests that we know of, but it is critical they are properly evaluated. There are some coming out of China which have turned out to not perform particularly well, as well as one in Spain. The evaluation means you can determine what the false positive rate and the false negative rate is for such a test. In our view, this second type of test will be critical for determining the scale of the disease, especially as many people have been infected but experienced only mild symptoms. At present, there is no way of determining how many of these people there are. However, we are going to need millions of these tests and there will be a logistical problem of delivering these to individuals and collecting data, but this is not insurmountable. In the near term, I think this will be critical for us understanding what the scale of the problem actually is.
Gareth Powell (GP): Pharmaceutical and biotech companies and academia are working 24/7 to generate both therapeutics to treat COVID-19 and vaccines to protect patients from infection. For example, there are currently 202 clinical trial listings, 88 studies actively recruiting – 44 focussed on therapeutic treatments and vaccines – and 22 trials with study completion dates over the next 12 months. There is tremendous support from regulatory bodies, as you can imagine, to boost the speed at which these products can be used in patients. Focussing on the efforts to develop treatments first, there are three categories that are being worked on currently: antivirals, anti-inflammatories and antibody drugs.
Dealing with the antivirals, the idea is to treat a patient with these drugs once diagnosed to inhibit replication of the virus plus lower the impact of symptoms, allowing patients to stay out of hospital or leave much earlier without developing the most serious effects caused by the virus. Several drugs have been used on a compassionate basis so far across the globe, but robust clinical data has not been generated yet.
Many clinical trials are already ongoing. Chloroquine and Hydroxyl-Chloroquine are treatments currently used to treat malaria and there is significant supply available for these two products. At the request of President Trump, the US has been ordering vast quantities, however early data is mixed and there are toxicity challenges. More data should be available in coming weeks. Favipiravir is a weak antiviral that has been used to treat patients in Asia with some early encouraging evidence although more controlled data is needed which should be coming soon.
Last, perhaps the most significant compound in development by Gilead is Remdesivir, a potent antiviral drug initially developed for Ebola and quickly refocussed towards COVID-19. The drug is in four trials which should read out results in April. Gilead is building a manufacturing capability and seems optimistic considering the pre-clinical profile of the drug.
Q: And what about the second set of drugs in clinical trials?
GP: These are anti-inflammatory agents. In patients who unfortunately experience a more serious infection, the immune system can, in simple terms, go out of control in what is described as a cytokine storm. This can lead to serious lung damage and a poor outlook for the patient. Actemra and Kevzara are currently used to treat rheumatoid arthritis which is an autoimmune disease. They target a cytokine called Interleukin 6 (IL6) which is released as part of this cytokine storm. These drugs have been used in patients with positive reports and the companies are running trials as we speak to see if these two drugs are effective. Syna irgen, a UK-based biotech company, is starting a trial using their development candidate, which is inhaled Interferon Beta, designed to regulate antiviral defences in the lungs particularly in patients considered the most at risk from COVID-19. Data from these studies with these drugs are due in the next two to three months.
The third category of products in development are antibodies used directly to block the virus as a treatment but also as prophylactic agents. The first class of antibody products are those being developed by companies that currently collect and filter plasma products from blood donors used to treat a variety of mineralogical disease. The idea here is to generate these to fight off COVID-19 infection. Novel antibodies are being developed artificially as opposed to taking them from donors. Antibodies target the virus and then two or three of these are chosen as a mixture to be used as a treatment or as a prophylactic product on healthcare workers for example. For instance, Regeneron has previously been successful in rapidly developing antibodies against Ebola during the most recent outbreak in Africa.
DM: Of course, vaccines are the long-term, ultimate goal for prevention and from what we can see there are currently 54 vaccine candidates in development. They broadly fall into two categories. I will not go into the science behind all of them, but they are so-called RNA vaccines – the leader there is a US company called Moderna – that are undergoing clinical trials. There are another three or four organisations that have similar technologies that hope to be on clinical trial, presumably within the next two or three months.
The other approach is using a viral vector to attack a virus. It essentially uses a copy of the protein from the COV-2 virus and introduces that into a patient using a viral vector to cause an immune response. There are, as I said, about 40 or 50 of these in development right now. The leader is a Chinese company called CanSino but there is also Johnson & Johnson and a really interesting programme coming out of Oxford that will all go into the clinic within weeks.
What I would say here is that the companies have been saying that a novel vaccine is at least 12-18 months away. I think that is when you may get the first data. The real problem with a vaccine is you are going to have to make hundreds of millions of dos es so manufacturing and scale-up will be really important to get this out to the general public. It is certainly something we need to keep an eye on because if these are safe, and even if they have modest efficacy, they may be enough to stem a major pandemic spreading for a protracted period of time.
Q: What timeline do you have in mind, for the science as well as the economic impact of coronavirus?
DM: While we think this is a medical problem, medical progress could have an impact more broadly on stock markets as, obviously, there is a huge economic impact from having all these lockdowns. Over the next month we are going to hopefully see some data from Remdesivir as well as the disease progression alongside the impact of the lockdowns that have occurred in Europe, the UK and ultimately what the impact is going to be in the US. I also think within a few weeks, so hopefully within May, we will start seeing some of the data from the antibody test to see how many people have been infected. I think this might be really critical for how to ease the lockdown. Governments are looking for scientific ways of determining who could be safe to go back to work so we can get the economy going.
In the second half of the year, we should get data from other clinical programmes as well as the first safety data from the vaccine programme but what is really critical is a potential re-emergence of COVID-19 next winter. This is something that makes governments very worried because if you go back through the data, particularly with Spanish Flu back a hundred years ago, you see different waves of infection as a pandemic with a brand new virus never seen before and how it spreads through a global population. It is important that if we have some clinical tools or drugs that can slow the progression of a disease, people may still become infected but we will be able to keep them healthier and that may be really important as we go into next year and beyond.
We have not talked about our investment strategy here as it is not pertinent today but, as always, we are available by phone. We are happy to chat through any of this in more detail and also tell you a little bit about what we have been doing with our portfolios. Thank you for reading and we hope everyone stays healthy.
Daniel Mahony and Gareth Powell
Co-Founders, Polar Capital Healthcare Team
15 April 2020
Important information
This document is provided for the sole use of the intended recipient and it shall not and does not constitute an offer or solicitation of an offer to make an investment into any fund managed by Polar Capital. It may not be reproduced in any form without the express permission of Polar Capital and is not intended for private investors. This document is only made available to professional clients and eligible counterparties. The law restricts distribution of this document in certain jurisdictions; therefore, persons into whose possession this document comes should inform themselves about and observe any such restrictions. The information contained in this document is not a financial promotion. It is not designed to contain information material to an investor’s decision to invest in Polar Capital Funds PLC – Biotechnology Fund, Polar Capital Funds PLC – Healthcare Blue Chip Fund, Polar Capital Funds PLC – Healthcare Opportunities Fund, Polar Capital Funds PLC – Healthcare Discovery Fund and Polar Capital Global Healthcare Trust plc, which is an Alternative Investment Fund under the Alternative Investment Fund Managers Directive 2011/61/EU (“AIFMD”) managed by Polar Capital LLP the appointed Alternative Investment Manager. In relation to each member state of the EEA (each a “Member State”) which has implemented the AIFMD, this document may only be distributed and shares may only be offered or placed in a Member State to the extent that (1) the Fund is permitted to be marketed to professional investors in the relevant Member State in accordance with AIFMD; or (2) this document may otherwise be lawfully distributed and the shares may otherwise be lawfully offered or placed in that Member State (including at the initiative of the investor). As at the date of this document, the Fund has not been approved, notified or registered in accordance with the AIFMD for marketing to professional investors in any member state of the EEA. However, such approval may be sought or such notification or registration may be made in the future. Therefore, this document is only transmitted to an investor in an EEA Member State at such investor’s own initiative. SUCH INFORMATION, INCLUDING RELEVANT RISK FACTORS, IS CONTAINED IN THE FUND’S OFFER DOCUMENT WHICH MUST BE READ BY ANY PROSPECTIVE INVESTOR.
This document is only aimed at professional clients and eligible counterparties as defined by the European Directive n° 2004/39/EC dated 21 April 2004 (MIFID) as the same has been applied into French law by articles D. 533-11 and D.533-13 of the French Code monétaire et financier. This document is not destined for non-professional clients who do not have the experience, knowledge or competence needed to take their own investment decisions and correctly evaluate the risks involved. Shares in the Fund should only be purchased by professional investors. Any other person who receives this presentation should not rely upon it. The law restricts distribution of this document in certain jurisdictions, therefore, persons into whose possession this document comes should inform themselves about and observe any such restrictions. It is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. This document does not provide all information material to an investor’s decision to invest in the Fund. Before any subscription, it is recommended that you read carefully the most recent prospectus and review the latest financial reports published by the Fund. The Key Investor Information Document, full prospectus, articles and latest annual report are freely available upon request from BNP Paribas Securities Services, the centralising agent of the Fund in France: BNP Paribas Securities Services, 66, rue de la Victoire, 75009 Paris, France. Contact: Zaher Aridi, Tel: +33(0)1 42 98 50 57.
Please note that the prospectus of Polar Capital Funds plc and the supplement in relation to the Fund are only available in English.
The European Directive on collective investment schemes n° 2009/65/EC dated 13 July 2009 (UCITS) established a set of common rules in order to permit the cross-border marketing of collective investment schemes complying with the directive. This common foundation did not prohibit different methods of implementation. This is why a European collective investment scheme may be marketed in France even though the activity of such scheme would not respect rules identical to those which are required for the approval of this type of product in France. The Fund received an authorisation for marketing in France from the Autorité des Marchés Financiers on 14 January 2014.
Statements/Opinions/Views: All opinions and estimates constitute the best judgment of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily represent the views of Polar Capital. This material does not constitute legal or accounting advice; readers should contact their legal and accounting professionals for such information. All sources are Polar Capital unless otherwise stated.
Third-party Data: Some information contained herein has been obtained from third party sources and has not been independently verified by Polar Capital. Neither Polar Capital nor any other party involved in or related to compiling, computing or creating the data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained herein.
Holdings: Portfolio data is “as at” the date indicated and should not be relied upon as a complete or current listing of the holdings (or top holdings) of the Companies or Fund. The holdings may represent only a small percentage of the aggregate portfolio holdings, are subject to change without notice, and may not represent current or future portfolio composition. Information on particular holdings may be withheld if it is in the Companies or Fund’s best interest to do so. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12 months is available upon request. This document is not a recommendation to purchase or sell any particular security. It is designed to provide updated information to professional investors to enable them to monitor the Companies or Fund. No other persons should rely upon it.
Benchmarks: The following benchmark indices are used: MSCI All Country World Index/Healthcare, NASDAQ Biotechnology Index and MSCI World Daily Total Return Net Healthcare Index. These benchmarks are generally considered to be representative of the Healthcare Equity universe. These benchmarks are broad-based indices which are used for comparative/illustrative purposes only and have been selected as they are well known and easily recognizable by investors. Please refer to www.msci.com and https://indexes.nasdaqomx.com for further information on these indices. Comparisons to benchmarks have limitations as benchmarks volatility and other material characteristics that may differ from the Companies or Fund. Security holdings, industry weightings and asset allocation made for the Companies or Fund may differ significantly from the benchmark. Accordingly, investment results and volatility of the Companies or Fund may differ from those of the benchmark. The indices noted in this document are unmanaged, unavailable for direct investment, and are not subject to management fees, transaction costs or other types of expenses that the Companies or Fund may incur. The performance of the indices reflects reinvestment of dividends and, where applicable, capital gain distributions. Therefore, investors should carefully consider these limitations and differences when evaluating the comparative benchmark data performance. Information regarding indices is included merely to show general trends in the periods indicated and is not intended to imply that the Fund was similar to the indices in composition or risk.
Regulatory Status: Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK FCA and is registered as an investment adviser with the US Securities & Exchange Commission (“SEC”). A list of members is open to inspection at the registered office, 16 Palace Street, London, SW1E 5JD. FCA authorised and regulated investment managers are expected to write to investors in funds they manage with details of any side letters they have entered into. The FCA considers a side letter to be an arrangement known to the investment manager which can reasonably be expected to provide one investor with more materially favourable rights, than those afforded to other investors. These rights may, for example, include enhanced redemption rights, capacity commitments or the provision of portfolio transparency information which are not generally available. The Fund and the Investment Manager are not aware of, or party to, any such arrangement whereby an investor has any preferential redemption rights. However, in exceptional circumstances, such as where an investor seeds a new fund or expresses a wish to invest in the Fund over time, certain investors have been or may be provided with portfolio transparency information and/or capacity commitments which are not generally available. Investors who have any questions concerning side letters or related arrangements should contact the Polar Capital Desk at the Administrator on 0800 876 6889 (PCGH) or +353 1 434 5007 (UCITS). The Fund is prepared to instruct the custodian of the Fund, upon request, to make available to investors portfolio custody position balance reports monthly in arrears.
Information Subject to Change: The information contained herein is subject to change, without notice, at the discretion of Polar Capital and Polar Capital does not undertake to revise or update this information in any way.
Forecasts: References to future returns are not promises or estimates of actual returns Polar Capital may achieve. Forecasts contained herein are for illustrative purposes only and does not constitute advice or a recommendation. Forecasts are based upon subjective estimates and assumptions about circumstances and events that have not and may not take place.
Performance/Investment Process/Risk: Performance is shown net of fees and expenses and includes the reinvestment of dividends and capital gain distributions. Factors affecting the Companies or Fund’s performance may include changes in market conditions (including currency risk) and interest rates and in response to other economic, political, or financial developments. The Companies’ investment policy allows for it to enter into derivatives contracts. Leverage may be generated through the use of such financial instruments and investors must be aware that the use of derivatives may expose the Companies to greater risks, including, but not limited to, unanticipated market developments and risks of illiquidity, and is not suitable for all investors. Those in possession of this document must read the Companies’ Investment Policy and Annual Report for further information on the use of derivatives. Past performance is not a guide to or indicative of future results. Future returns are not guaranteed, and a loss of principal may occur. Investments are not insured by the FDIC (or any other state or federal agency), or guaranteed by any bank, and may lose value. No investment process or strategy is free of risk and there is no guarantee that the investment process or strategy described herein will be profitable.
Allocations: The strategy allocation percentages set forth in this document are estimates and actual percentages may vary from time-to-time. The types of investments presented herein will not always have the same comparable risks and returns. Please see the private placement memorandum or prospectus for a description of the investment allocations as well as the risks associated therewith. Please note that the Companies or Fund may elect to invest assets in different investment sectors from those depicted herein, which may entail additional and/or different risks. Performance of the Companies or Fund is dependent on the Investment Manager’s ability to identify and access appropriate investments, and balance assets to maximize return to the Fund while minimizing its risk. The actual investments in the Companies or Fund may or may not be the same or in the same proportion as those shown herein.
Country Specific disclaimers: The Companies or Fund have not been and will not be registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company") and the holders of its shares will not be entitled to the benefits of the Investment Company Act. In addition, the offer and sale of the Securities have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). No Securities may be offered or sold or otherwise transacted within the United States or to, or for the account or benefit of U.S. Persons (as defined in Regulation S of the Securities Act). In connection with the transaction referred to in this document the shares of the Fund will be offered and sold only outside the United States to, and for the account or benefit of non U.S. Persons in "offshore- transactions" within the meaning of, and in reliance on the exemption from registration provided by Regulation S under the Securities Act. No money, securities or other consideration is being solicited and, if sent in response to the information contained herein, will not be accepted. Any failure to comply with the above restrictions may constitute a violation of such securities laws.
Country Specific disclaimers: This document has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Shares may not be circulated or distributed, nor may Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor Pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”) or (ii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. The Prospectus and Information Memorandum are available to download at www.polarcapital.co.uk alternatively; you can obtain the latest copy from the Polar Capital Investor Relations team. The Fund is a collective investment scheme but is not authorised under Section 104 of the Securities and Futures Ordinance of Hong Kong by the Securities and Futures Commission of Hong Kong. Accordingly, the distribution of this document, and the placement of interests in Hong Kong, is restricted. This document may only be distributed, circulated or issued to persons who are professional investors under the Securities and Futures Ordinance and any rules made under that Ordinance or as otherwise permitted by the Securities and Futures Ordinance
Country Specific disclaimers: Polar Capital LLP (Investment Manager) is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale investors in Australia and is regulated by the Financial Conduct Authority of the UK under UK laws which differ from Australian laws.