Three of the best performing shares over the last three months are healthcare companies. All of them are at the leading edge, developing testing kits, therapies and vaccines to combat the coronavirus pandemic.

Realistically, developing a vaccine will likely take at least 12 months, and so the immediate priority has been to test as many people as possible alongside isolating those with the virus.

Paris-based company Novacyt (NCYT:AIM) has developed a unique testing kit that gives results in under 30 minutes and is being used in hospitals and testing labs. The shares have risen 13-fold since 1 January.

As of 27 March, the company had sold and received orders for over £17.8m of its CE-Mark and research use-only test. Novacyt is now selling its test to more than 80 countries and supplying 21 hospitals across the UK.

Testing is fast becoming very competitive as a number of companies enter the space, such as UK biotherapeutics firm Avacta (AVCT:AIM) which on 8 April announced a collaboration with therapeutics company Cytiva to develop a rapid coronavirus test, pushing its shares up 69% on the day.

The company is aiming to get the product approved and ready for sale sometime in the summer. It will be a rapid test, giving results in minutes and will work similar to pregnancy testing strips, but using saliva instead of urine.

Shares in drug discovery company Synairgen (SNG:AIM) which specialises in respiratory diseases, have gone up more than 10 times this year, while anti-microbial hand sanitiser firm Byotrol (BYOT:AIM) has seen its shares more than triple.

WHAT IS A VACCINE AND HOW DOES IT WORK?

Evidence exists that the Chinese employed smallpox inoculation (or variolation, as it was then called) as early as 1000 AD. It was practiced in Africa and Turkey, before spreading to Europe and the Americas.

Edward Jenner developed the first modern vaccine in 1796 against smallpox. His method underwent medical and technological changes over the next 200 years, and eventually resulted in the eradication of smallpox.

Virologists take a sample of the virus and deactivate it by removing the proteins that would result in the virus multiplying within the human body. By introducing a ‘neutered’ version to the human immune system, the body is primed to recognise the virus in the future and produce antibodies to keep the invaders at bay.

THREE LINES OF ATTACK

There are three broad approaches being explored simultaneously by over 30 pharmaceutical and biotechnology firms across the globe in the race to produce a vaccine.

The traditional approach is to test new candidate molecules, but this will take considerable time and resources, both currently in short supply.

The rapid spread of the virus combined with the lack of bed capacity at hospitals has created an urgency which puts other, faster approaches directly into the spotlight.

That’s not to say that the search for a new molecule isn’t worthwhile because all successful exits from the pandemic require an effective vaccine to be found.

The second line of attack is to test the broad spectrum of antivirals already on the market to see if they can be used in the fight against coronavirus. These drugs have already been approved for certain use, saving valuable testing time needed to approve new drugs.

Antivirals were designed to reduce the inflammation associated with a large immune system response, which can ultimately lead to death if untreated. The downside to using this approach is that antivirals are not specific to treat coronavirus.

EXPLORING DRUGS USED TO TREAT OTHER DISEASES

The most promising approach near-term involves repurposing existing drugs that have shown some success in treating other diseases. Similar to the advantages provided by antivirals, this approach could mean getting a vaccine to market much faster than the traditional approach.

For example, some people have high hopes for Remdesivir, a drug originally developed by US firm Gilead Sciences for treating Ebola.

Before we go on to discuss some of the promising candidates, we should mention an important caveat. The scientific data gathered so far in this category is either of low quality (no double-blind randomised testing) or at the pre-clinical stage with limited hard data.

A double-blind study is one in which neither the participants nor the experimenters know who is receiving a particular treatment. This procedure is utilised to prevent bias in research results.

REMDESIVIR

The optimism for this drug stems from a 2017 paper showing it was effective against other viruses and could also improve the respiratory function in mice.

More recently, a single case report described clinical improvement after receipt of Remdesivir in a patient infected with coronavirus whose clinical status was worsening prior to receiving the drug. While encouraging, scientists need harder evidence.

Analyst Adam Barker at broker Shore Capital highlights two trials being undertaken by Gilead that may prove instrumental in establishing the drug’s effectiveness.

One is being tested on around 600 patients with moderate symptoms and the other is testing 400 severe cases, both due to be completed in May.

KALETRA

Developed by US firm Abbvie, this candidate was originally used as an HIV drug and has seen promising results in human studies against SARS and MERS, although the quality of the data is not great.

However, more robust studies are underway to support the initial findings, despite the first clinical trial (18 March) showing that Kaletra didn’t offer any improvements over standard treatments.

Many of the patients in that trial had already been infected for some time, with severe symptoms, so the impact of Kaletra in mild patients is still unknown. It was disappointing that the drug seemed to fail against more severe cases of the virus.

On 18 March the World Health Organisation (WHO) launched the solidarity trial, which is a multinational project to gather data on several different therapies to provide a reliable body of evidence for all scientists to draw upon.

LEADING THE PACK IN SEARCH OF A VACCINE

Barker believes one of the best prospects of finding a vaccine is an alternative technology being developed by US group Moderna Therapeutics. The technology is called mRNA and the idea here is to create a set of instructions that the body can use to makes copies of the vaccine itself.

Essentially, this means the company doesn’t have to spend time growing viral proteins, potentially a huge advantage when it comes to building manufacturing capacity. However, this technology requires injecting the mRNA sequence into the correct cells, a non-trivial task and is not commercial as yet.

Plans for phase two trials are underway which will see volunteers receive two doses of the vaccine and then followed for up to one year. The company is preparing for a ramp-up of manufacturing capacity in the event of the vaccine proving successful.

A UK company which is also relevant to the search for a vaccine is pharmaceutical giant GlaxoSmithKline (GSK). It is one of the biggest vaccine producers in the world, producing and distributing 1.9m vaccines every day to over 80 countries.

GlaxoSmithKline recently purchased (6 April) a $200m equity stake in US biotechnology firm Vir Biotechnology, paying a 30% premium to the market price.

The two firms are collaborating to find a vaccine by combining Vir’s antibody technology platform with GlaxoSmithKline’s expertise in genomics.

GlaxoSmithKline is also collaborating with Sanofi to find a vaccine.

HOW HAS THE VIRUS SPREAD SO QUICKLY?

Coronavirus can only spread by human contact, as far as scientists currently believe, and on average the typical infected person passes it on to between two and three other individuals. This means that the growth rate takes on a so-called exponential curve.

Exponential simply means that the starting base rate doubles each time, and the more often it doubles the steeper the curve.

For example, if the epidemic doubles every day, and one person is infected on day one, then on the eleventh day there are 1,024 infected. (The sequence is 2, 4, 8, 16, 32, 64, 128, 256, 512 and 1,024)

You might have heard the term ‘super-spreaders’ in the news – this refers to a person who spreads infection to significantly more people than usual. It is believed that one in five people in the population are responsible for 80% of transmissions.

There are two possible theories, the first being that some people shed large amounts of the virus, due them being sicker and therefore they are more likely to pass it on.

An alternative theory is that super-spreaders don’t show any systems and therefore don’t know they have the virus.

In the 1995 Ebola outbreak, two people were thought to have infected around 50 others while during the SARS epidemic, there were two super-spreaders in Singapore who infected 10 people each.

OTHER TREATMENTS

Preventing hospitalisation and shortening the length of stay is very valuable in the context of limited resources, as well as easing suffering for patients.

Synairgen is conducting a trial on coronavirus patients with its drug, SNG001, which the WHO identified as the only therapy capable of being delivered with an inhaler.

The drug has been shown to accelerate lung function recovery in patients with a cold or flu infection. This also opens up the possibility of using the drug at home for milder symptoms and relieving pressure on hospitals.

In a similar vein, Tiziana Life Sciences (TILS:AIM) announced it has developed a new technology to treat the virus, consisting of the direct delivery of its TZLS-501 antibody into the lungs, using an inhaler. The device will work with other approved drugs, giving it a wider application.

The company is trialing a novel molecule aimed at certain patients with coronavirus who develop an uncontrolled immune response resulting in severe lung damage and possible respiratory failure.

Shares in medical diagnostics company Omega (ODX:AIM) surged 77% on 9 April after it became part of the UK Rapid Test Consortium to jointly develop and manufacture a COVID-19 antibody test.

Omega’s test kits look similar to pregnancy testing strips but a blood sample is required in place of urine.

The antibody test will allow individuals who were previously ill with the virus, but never tested, to potentially go back to work with the knowledge they had built up immunity.

Research company Ergomed (ERGO:AIM) has been conducting a trial sponsored by the Papa Giovanni XXIII Hospital in Bergamo, Italy, one of the worst affected areas. The study is testing the drug siltuximab for the treatment of patients with the virus who have developed serious respiratory complications.

Another drug that some people were touting as a treatment, including Donald Trump, is Hydroxychloroquine, used to prevent malaria. It showed promising results in one small study in France, but its methodology has been challenged. In another small trial in China, the drug was no more effective than conventional care.

SAFETY MORE IMPORTANT THAN SPEED TO MARKET

Governments and people alike are keen to fast-track trials and get things moving, but exposing healthy individuals to a potential vaccine increases the risks compared with a situation where sick people are given experimental drugs.

For instance, there have been examples of candidate vaccines which actually make acquiring the infection easier, such as Merck’s HIV vaccine study.

This emphasises the importance of doing good science, and making decisions based on robust evidence while giving companies the time they need to ensure any future vaccine for coronavirus is safe to use. After all, the number of people requiring the vaccine is likely to be very large.

---

OUR TOP LARGE CAP STOCK TO BUY

GLAXOSMITHKLINE

GlaxoSmithKline is a great way to play the hunt for a vaccine and to get broader exposure to the healthcare sector. It has a world class vaccine division which, even before the pandemic, was firing on all cylinders.

The vaccines business was the standout performer when the company reported its full-year results on 2 February, showing revenue growth of 19%, aided by the success of its Shingles vaccine, Shingrix where sales more than doubled, while meningitis and influenza vaccines also recorded notable growth.

Revenue from its respiratory business was up 15% driven by demand for its chronic obstructive pulmonary (COPD) drug Trelegy Ellipta and asthma drug Nucala.

Increasing research and development costs, related to the company’s push to beef-up its oncology (cancer) franchise and higher promotional costs, restricted 2019 profits, but analysts are pencilling healthy growth for 2020.

GSK and US pharma giant Pfizer are merging their respective consumer healthcare businesses, and plan to spin them off sometime in 2022. The demerged business will generate around $10bn of annual revenues and boast such iconic brands as Panadol, Voltaren, Advil and Viagra.

GSK’s pedigree, know-how and collaborations place it at the forefront of vaccine science and it is well positioned to play a key role in the current battle against coronavirus. Indeed, on 14 April GSK said it would partner with Sanofi to develop a coronavirus vaccine.

The candidate vaccine is expected to enter clinical trials in the second half of 2020 and, if successful, to be available in the second half of 2021.

---

OUR TOP SMALL CAP STOCK TO BUY

AVACTA

For investors with more risk appetite, biotherapeutics firm Avacta is also a great way to get exposure to the fast developing testing market for coronavirus.

The sheer numbers (billions) of people that will ultimately need to be tested for coronavirus means that the current lab-testing approach with its two to three day turnaround is not ideal.

That is why Avacta’s rapid testing strip, which can be used at home with no medical knowledge, and which will give a result within minutes, might prove to be a game changer in tackling the current pandemic.

The company owns all the intellectual property and commercial rights to the technology, but has not yet disclosed any further details.

‹ Previous2020-04-16Next ›