Traders Are Getting Smarter About the Vaccine Race

Investors watching the Covid-19 vaccine development process could be forgiven for thinking it's not so hard. The effort has moved extraordinarily quickly so far, and with few hiccups.

That isn’t how things usually go, especially for new diseases. The world got a reminder Tuesday as AstraZeneca Plc paused the trial of its leading candidate, developed with Oxford University, to investigate a single volunteer's illness. It's easy to panic; a setback like this could mean big trouble for AstraZeneca’s efforts, and it raises worries about whether any vaccine will ultimately succeed, or if one does, how long the process will take. That's the wrong reaction. This pause shows the system is working as it should. The possibility of setbacks is why the world is testing many candidates in many people.

With every bit of vaccine news, the mantra is "don't panic, but do proceed with caution." It applies to investors, drug companies, and regulators deciding which vaccine to approve and when. And while the market has been known to go to extremes on virus developments involving treatments and vaccines, this time its reaction seemed about right: AstraZeneca shares slipped, but didn’t crater on the news. That was before the Financial Times reported that trials for AstraZeneca’s vaccine may resume next week, which actually prompted a rebound in the stock.

Traders Are Getting Smarter About the Vaccine Race

It's not clear how big a deal this particular pause is. Trial halts aren’t uncommon or a sure sign of a significant problem. Health care news publication Stat reported Wednesday that the participant received the vaccine and not a placebo, but it's possible that the volunteer’s illness — reported to be a spine condition called transverse myelitis — is unrelated to the shot. They may have already had the condition, or this could simply prove to be a singular outlier. The range of possible outcomes includes everything from a quick restart to a longer delay that could create concern about vaccines that use similar technology, including an effort from Johnson & Johnson and Russia's already approved shot. With just one event, the former seems more likely than the latter, especially given the latest news from the FT on the trial’s possible quick resumption.

The pause may slow enrollment in AstraZeneca's trial if it restarts, and may affect other efforts. It may also incline companies and regulators to wait for a bit more safety data before approval. That's not such a bad thing if it builds confidence in the eventual result. Still, halting to track down an answer is the responsible move for volunteers, the company, and the vaccine race.

It’s clear that the world must proceed carefully in developing shots intended for millions. While approved vaccines are very safe and companies working on Covid-19 candidates have reported few red flags in small early tests, the human immune system is complicated and unusual reactions do occur. Only large-scale trials on a diverse population can determine whether a particular shot is safe for general use and differentiate outliers from deal-breakers. Big tests are especially crucial in a pandemic scenario with less time for early research.

Because of the sheer number of people in trials — already above 50,000 with many more to come as candidates move forward — there will be more safety scares. Some will prove to be random; others will be of genuine concern.

That's no tragedy, even if it may feel that way to investors who underestimate vaccine development risks or take the wrong side. The real tragedy would be failing to run large tests long enough and only finding out about serious safety issues once vaccines are widely available, destroying already tenuous confidence. Another would be putting too many eggs in one basket, leaving countries without recourse if a particular effort fails.

At least so far, most of the world is working to avoid both outcomes. If companies and regulators can deflect political pressure to be hasty, planned and ongoing trials should give a pretty robust answer on vaccine safety. Just this week, nine major vaccine developers — including AstraZeneca and Pfizer — pledged not to submit their candidates for U.S. approval until they demonstrate safety and efficacy in a large, late-stage trial, allaying concerns that the Trump administration’s eagerness for a vaccine could undermine the process. Elsewhere, countries have signed contracts for multiple vaccines that aim to protect against Covid in different ways. The European Union, for instance, is one of AstraZeneca's biggest customers, but on Wednesday it also announced a deal for 200 million doses of a vaccine being developed by rival Pfizer Inc.

There are outliers. Russia is all-in on a vaccine approved with limited data that some scientists question. China is using a vaccine on its military without the benefit of robust testing.

It should be apparent which approach is right, even if the wait is painful.



©2020 Bloomberg L.P.

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