William Blair Investment Management Research Analyst Camilla Oxhamre Cruse, Ph.D., and Global Strategist Olga Bitel

COVID-19: Science and Economics

April 7, 2020 | 23:48

Listen to our moderator, Hugo, discuss the science of the coronavirus and its global economic impact with William Blair Investment Management Research Analyst Camilla Oxhamre-Cruse, who has a Ph.D. in medicine and an M.Sc. in biochemistry, and Global Strategist Olga Bitel.

Meet Our Moderator

Hugo Scott-Gall, Partner

01:09 Hugo asks Dr. Camilla Oxhamre Cruse to describe the details of what we do/do not know about the coronavirus. We know more about how the virus affects people, more about the infection and mortality rate, and who is most susceptible.
02:05 There is more we are constantly learning about. We need to know more about who has been affected and what is driving the disease.
02:40 Starting with Europe, the two discuss the infection and mortality rates around the world.
05:42 When we have all of the data to work with, there may be different infection and mortality rates in different areas. There are many factors that could cause this, including the age of the area’s population and the overall healthcare system.
06:17 Hugo brings up the topic of seasonality and how the coronavirus will react to different temperatures.
08:45 Dr. Cruse shares what a likely trajectory would look like to get a successful vaccine. She also talks about other drug combinations that could help.
12:23 How effective is social-distancing?
13:24 The conversation shifts and Hugo directs the topic of economic effects with Olga Bitel.
14:34 Olga shares preliminary predictions on the economic impact in China, Europe, and the U.S.
16:54 The resumption of activity in China is a sign of encouragement for the economy.
18:00 Olga talks about fiscal support packages. How quick and easy is this to access.
20:18 Hugo suggests that “The slope of recovery should be equally sharp as well …”
21:09 It may take about two years to be at the same level of output that we had pre-crisis.



Hugo Scott-Gall: With me I have Camilla Oxhamre Cruse, who is an analyst on our healthcare team. She has a Ph.D. in infectious diseases. Extremely relevant now. Also, with me is Olga Bitel, a global economist. Camilla, hi, and Olga, hi.

Olga Bitel: Hi.

Camilla Oxhamre Cruse: Hello.

Hugo Scott-Gall: So, Camilla, let’s start with you. Let’s start with a question around the disease. What is it we do know and what is it we don’t know and would really like to know about this disease?

Camilla Oxhamre Cruse: That’s a good question. And I must say that over the number of months that we now have seen the virus — this is a new virus to us. So, we obviously, have a lot to learn. But over the past couple of months we have learned a great deal about the virus. We now know better how it infects people. We know more about the infection rate. We know more about the mortality rate. We know more about how it interacts with humans, who are the most susceptible and who are less susceptible. And that is extremely valuable knowledge towards protecting those that are more vulnerable to this virus.

And we can then direct the efforts in hospitals and also on a community level to protect those that are more vulnerable. But of course, as we go, we learn more and more about the virus. So, it’s a lot of things that we need to know more about.

We need to know more sort of how many of us there that truly have been infected or are infected and what is driving the disease, really. And I believe that we’ll learn a lot more about that in the next coming months or so. And that information will then bring more clarity on the mortality rate. Because that is also somewhat unclear at the moment.

So, there’s a lot of things that we know, but there is, of course, a lot of things that we are learning along the way.

Hugo Scott-Gall: Okay. So, let’s talk a bit about infection rates and mortality rates. Tough things to talk about, but unfortunately, we have to and they’re very important. So, let’s go around the world a bit. Let’s start with Europe. So just in terms of Europe, what are we seeing — let’s do the good news first. What are we seeing that’s encouraging with regard to infection rates and indeed mortality rates across Europe?

Camilla Oxhamre Cruse: So, if we start on the positive front, we are seeing that Europe seems to have passed the peak here. The secular rate of new cases has been slowing. And that’s very, very positive. The situation is still very difficult in Europe. I don’t want to underestimate that. But it seems to be going the right direction.

On an even more positive note, in China, life seems to be slowly returning to normal. And we have seen that the number of new cases in China has been very close to zero over a long period of time now, and it seems to be sustainable. So that’s also very positive.

In the US, the situation is likely to get a lot worse before it gets better. We’ve seen the number of new cases increase significantly over the past couple of days. This is partly due to that we are catching up on testing. And I believe that these catch-up cases are likely to impact and inflate the numbers in the next coming days or so. So, I believe the next week, 10 days, will be very important to see how the number of new cases are evolving.

Hugo Scott-Gall: And when you think about the differences in, say, mortality rate, are those differences explainable when you look out how different countries record the cause of death when you look at social factors like number of people in a household, average age in a country, I’m sure there are other factors as well. Once we take all those things into account, are we seeing a consistent mortality rate? The differences are explained or are they unexplained?

Camilla Oxhamre Cruse: Right. That’s a great question. So, when it comes to mortality rate, what we’re seeing is the numbers are a little bit all over the place at the moment. And it will take some time before we have more of an exact idea of what the true mortality rate is.

But in the countries that have done testing, their mortality rate is about 0.7%. The more exact mortality rate we won’t find out until we have done serology testing. The FDA has just approved one of those kits. And I believe that we’ll learn a lot more about the mortality rate and how many of us that actually got infected by the virus over the next couple of months or so.

As you know, the testing of active cases has been somewhat limited for a number of reasons. We’ve probably only captured the severe, maybe moderate cases. So, we need to do the serology testing to find out the true number of infected cases. And then we can calculate the exact infection rate and the mortality rate.

You make a very good point that both infection rates and mortality rates are highly susceptible to various environmental factors and our behavior. So, we are likely to see, even when we have all the numbers on the table, we are likely to see that both the infection rate and the mortality rate will be different in different countries all for different reasons. Which reflect that different countries, the population has a different health status. The age of the population, of course, is very important. And also, our healthcare system is very important and it’s very different in very different in different countries. So, we are likely to see a variety in both infection rates and mortality rates. But we will have a lot better picture of this, I would say, in the next couple of months or so.

Hugo Scott-Gall: Sure. Before we get on the science side, just a couple more questions around — one around these analyses. Is there enough evidence that they actually — that the virus doesn’t do well outside of certain temperature band, or certainly on the warmer side? And the follow up from that is if it’s the case that it does better in winter conditions than summer conditions, should we expect it to move about to the southern hemisphere for the winter there, and therefore, potentially still rolling around the world following the seasons?

Camilla Oxhamre Cruse: Right. That’s also a very good question. So, like I said, so the infection rate of the virus depends on two things, environmental factors, and our behavior. And so, on the environmental front, I would say that it’s reasonable to think that this virus is impacted by a seasonality affect. This is what we see with all other coronaviruses, and it basically boils down to the composition of the virus.

Coronaviruses are surrounded by a lipid envelope that makes them all very sensitive to environmental factors, such as temperature and humidity. However, to what extent this virus is impacted by temperature and humidity is at the moment unclear. It also depends on the viral load in the society. So, if you have a lot of virus spreading, a lot of infected people in the society, of course, the impact of the environment will be on a relative aspect, less. But that’s why the social distancing aspect becomes such an important tool in order to curb the curve.

And then to your question about the southern hemisphere and how that would be impacted. So, if it just looked on the pattern for flu we do see that approximately around the May timeframe, the cases of inflames start to increase in the southern hemisphere. So I find it’s sort of reasonable to believe that while maybe the temperature in the northern hemisphere will be helping us in the next coming months or so, it will be a headwind on the southern hemisphere, it will probably help the virus to spread. So that’s how I see it at the moment.

Hugo Scott-Gall: Okay. So, I wanna pick your brains now on the science side. Could you talk to likely progress on the vaccine front? And then I think we’ll talk about the treatment side. And then after that, I wanna ask you about immunity and testing for immunity. So, let’s kick off with just kind of where we are and what would be a likely trajectory to a successful vaccine.

Camilla Oxhamre Cruse: Right. So, we’re working on a number of different diseases modifying treatment, as well as a number of vaccine candidates. So, if we start with the vaccine development, this is the ultimate goal. The ultimate goal is to develop a vaccine for the broader population. There are several different candidates that have started clinical trials or are about to start clinical trials. And I believe we will have the first set of data of these phases one trials during the summer, and hopefully, we will have an approved vaccine sometime early next year.

However, manufacturing is a huge bottleneck when it comes to vaccine. So, I don’t think that we will have a vaccine available for the broader population until fall 2021. And that’s 18 months out.

Until then, we’re working on building out our therapeutic drug toolset, if you wish. There are a number of different candidates in development. They basically fall into three buckets. We have the antiviral. So that’s the chloroquine, the hydroxychloroquine, as well as Gilead’s Remdesivir. So, these are all antivirals that inhibit the production of new viruses in the body.

And then the second bucket is neutralized antibodies or what is also called antibody cocktail therapy. And there are — and these neutralized antibodies, they also work directly on the virus, basically killing the virus.

The third bucket, they are anti-inflammatory drugs. And here we’re trying a number of available drugs, to see if they can alleviate the inflammation in the lungs. This is a huge problem, particularly for patients with severe symptoms.

At the moment, everything’s on the table. We’re trying different drugs, different combinations, different settings. And I believe over the next weeks, months, we will have a lot better picture on what additional therapeutic tools we can use and how to use it. With the goal of having a vaccine available for the broader population in the next 18 months or so.

Hugo Scott-Gall: Is there anything particularly challenging about this as far as when it comes to developing a vaccine? Is that a fairly normal timeline for doing it?

Camilla Oxhamre Cruse: I would say it’s a rather fast timeline, given that this is a new virus. It’s a coronavirus. So, we don’t really have everything up and running. So, for example, for a new influenza virus, we have all the — we have the platform already. So, we can make some tweaks to already available vaccines and therefore we can produce them relatively quickly. We don’t have that platform for coronaviruses, so that’s why it takes a little it longer time then for a normal influenza’s virus. But I would say that it’s still relatively fast. I mean, a lot of people are working, a lot of scientists are working literally day and night, 24/7 to get a vaccine out as quickly as possible.

Hugo Scott-Gall: I guess one of the things we hear at the moment is an effect of this crisis could be deglobalizing. But it sounds like the world of medicine is actually globalizing to try and fight this, is that right?

Camilla Oxhamre Cruse: Right. I mean, this is a global problem. Everybody’s engaged in it. Everybody, I mean, I would say there’s a lot of stake here. Everybody’s pitching in. Everybody’s working really hard. And that really — I think that we see how global the science world is in a situation like this.

Hugo Scott-Gall: Okay, what do you really see around social distancing. From what we’re seeing so far, it’s kind of working isn’t it? Is that a fair conclusion?

Camilla Oxhamre Cruse: So, yes. I think that what we’ve seen so far, both from Wuhan, from China, also from previous pandemics. And these go all the way back to the 14th century. So, we know that social distancing is highly impactful in reducing the spread of a virus.

In Wuhan, we saw for this particularly, that after one month of social distancing the infection rate decreased from about 4 to 0.3, with 1 being the target. But the impact of social distancing will of course be different in different countries, in different regions, because we do things differently. But it at least gives us the indication that the effect — there is a great effect of social distancing on reducing the spread of the virus.

Hugo Scott-Gall: Okay, with that, I think we’re going to pivot to Olga. Olga, social distancing, as Camilla said, is working. But it’s coming with substantial damage to economies. Can you talk about the economic outlook as you see it? A guess by geography and really just by quarters. What do you see as the hint of economies here?

Olga Bitel: Sure, Hugo. You’re absolutely right. The immediate economic impact of us trying to overcome this virus and specifically, introducing measures such as social distancing and physical distancing, and shutting down virtually entire sectors in regions of the global economy, such that today over 90% of the global GDP is affected one way or another by lockdowns. Means that virtually overnight, we found ourselves in what is probably going to be the deepest recession in modern times.

The scale of the decline in economic activity is unprecedented as is the speed. That is the bad news, but that is also the more immediate news. And as Camilla said, to the extent that the worst in terms of the number of cases in the US is yet to come over the next couple of days, the economic impact will feel that much worse in April.

So with that, the expectation, what we expect so far, and this is very preliminary because nothing like this has happened before in many, many years, from an economic standpoint, is that China, we’ll start with China, which is where the impact was first felt. And where economic activity bore the brunt of that impact in the first quarter of this year. We expect most of the recessionary impact in China to be concentrated in the first quarter, with the resulting declines in economic activity, sequential and year on year declines, in the order of 20 to 30% if not more.

Of course, we’ll know more when the final numbers for first quarter GDP are published. But so far, what we’ve seen from the industrial production data and the retail sales data suggest those orders of magnitude in terms of the decline.

Moving over to Europe and then ultimately the US. The shutdowns began in Europe in early to mid-March, with US quickly following by late March. So, the impacts are likely to be staggered in that order. But both jurisdictions are going to have a decline in the first quarter of GDP, probably in the order of three to six percent annualized rate. And of course, these numbers will grow very rapidly in the second quarter of this year, the quarter that we’re about to start. With the brunt of the negative impact and the decline concentrating in April and early parts of May.

So, the sequential annualized rates of decline that we’re now expecting are probably going to be on the order of 20 to 50% in Europe and the US in the second quarter of this year. Followed by, hopefully, a gradual resumption of economic activity, starting in May. That is what’s currently in the forecast.

Hugo Scott-Gall: I guess the sensitivity there is that the economic damage is so significant that if gradually opening up an economy, if that happens a month later, the damage done in the meantime is really quite substantial, isn’t it?

Olga Bitel: Absolutely. So, the damage here is non-linear, so the numbers would be progressively worse if the resumption of activity were to be postponed by another month or even two.

At the same time, what we’re seeing from social distancing, what Camilla just talked about, the signs there are encouraging. So, we’ve seen the resumption of activity in China progressing quite nicely. We are expecting a similar pattern of gradual resumption of activity in Europe, perhaps as early as the second of April. And with the US following perhaps, in early to mid-May. That would be the base case for now. Although, as I said, April is going to feel very, very bad.

A critical component of this will be how well households and small and medium sized businesses are able to weather this storm. So, the duration of the shutdown is really critical.

Hugo Scott-Gall: Yeah. And the other critical thing we haven’t talked about yet is government aid. Fiscal stimulus. Fiscal packages. Can you give your thoughts around how big those are? Are they enough? Really tough question to ask you. I know I’m putting you on the spot. But is it enough and will it be able to get to the right places where it’s needed most?

Olga Bitel: Hugo, that’s absolutely the right questions right now. I would say that is the No. 1 critical question. What we’ve seen so far around the world is fiscal support packages on the order of 10 to 30% of GDP. And the crucial point here is that these packages will be made larger if necessary. That is really very important. This is an unprecedented level of support. Even in the great financial crisis of ’08, ’09, we have not seen numbers anywhere near comparable to what we’re experiencing now. To what is being rolled out on almost a daily basis.

Now that these support measures are enacted both in Europe and the US, the next critical part of this how affectively these measures are being communicated to the broader public. How easily these measures can be implemented and operationalized, and how quickly they can be enforced and proliferated through the economy.

So specifically, how easily is it for households and the less affluent households to understand what relief they can get. How quickly they can get paychecks. What relief they can get on their mortgages, on their loans, on other outstanding debt, etc.

For small businesses, the same idea. Before we really start laying off workers in mass, and we’ve already seen initial jobs claims in the US skyrocket in the last couple of weeks, are we really going to extend the support to small and medium sized businesses such that it’s easy to access, it’s quick, there are very few, if any, conditionalities attached to it, and very little stigma. And so, how easily is it going to be for our economies to bridge this what is effectively a forced, unpaid vacation, and turn this into at least a partially paid vacation, if I can use that phrase. That will really determine the speed and pace and slope of the recovery as we look at the economic activity resuming post the shutdowns.

Hugo Scott-Gall: And as you said, the recovery based on the base case that we see should be — in the same way, it’s hard. Six months ago it didn’t matter how sharp of a downturn we’re seeing. We just haven’t seen it like this before outside of wartime. The slope of recovery should be equally sharp as well, would you agree with that?

Olga Bitel: Absolutely. In fact, this is exactly what is being modeled right now, just not by us, but broader groups. We’re seeing very similar patterns of recovery being hoped for and estimated. And the challenge here is really to separate the levels of GDP versus the sequential growth rate.

So, when we talk about the very sharp recoveries, we are expecting, just to give you a sense, quarter on quarter sequential growth in GDP in the US and in Europe, in double digits in the second half of this year. That too, will be unprecedented if it materialized.

However, that doesn’t mean that the level of output will return to the pre-crisis levels by the end of the year. In fact, most jurisdictions around the world are going to record a recession for this year. And so, even with these very, very rapid, sequential quarter on quarter improvements on growth rates, we are not expecting to return to pre-crisis levels of output for at least two years.

And of course, the way the stimulus support and the way fiscal support get implemented will have a critical impact on whether we can return to all of the output lost and how quickly we can get there. Whether it takes us one year or three years.

Hugo Scott-Gall: Of course, of course. I think we will finish it there. I want to say, Olga, I want to thank you for all of that. Very, very informative, I hope.

Olga Bitel: Thank you.

Camilla Oxhamre Cruse: Thank you.

Meet Our Moderator

Hugo Scott-Gall, Partner

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