Morgan Stanley
  • Thoughts on the Market Podcast
  • May 6, 2021

Is Herd Immunity Even Possible?

With Andrew Sheets and Matthew Harrison


Andrew Sheets Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross Asset Strategist for Morgan Stanley Research.

Matthew Harrison And I'm Matthew Harrison, Biotechnology Analyst.

Andrew Sheets And today on the podcast, we'll be talking about progress on COVID-19 vaccinations and the road to herd immunity. It's Thursday, May 6th, at 3 p.m. in London,

Matthew Harrison And it's 11:00 a.m. in New York.

Andrew Sheets So, Matt, I think we continue to be at a very interesting place with regards to the COVID-19 crisis, because on one hand, you've seen new lows in fatalities in the U.S. If you look at the economic data, it's clearly getting a lot better. And yet there's some very troubling news coming out of India. We've seen a plateau in vaccinations in the U.S. and people are still very worried about the prospects of new variants or what next winter could look like. So I'd like to try to run through some of those issues and how you're thinking about it from a research perspective.

Andrew Sheets And so let's start in the U.S. maybe describe for us the next few months in the U.S. in terms of who's left to be vaccinated and what are you seeing in terms of vaccination hesitancy?

Matthew Harrison So the U.S. has reached about the mid 40% range of the eligible population. Now remember the eligible population in the U.S. is those over 16 years of age. In terms of the recent slowdown, which to be clear, has been actually somewhat dramatic. We topped out about a seven day average of three and a half million vaccinations per day. And as of yesterday, we're down to about two point three million vaccinations per day. I think there are two major factors at play here.

Matthew Harrison The first factor is obviously there was some safety news about vaccines that made some pretty significant headlines. I think that has had an impact on people's willingness to get vaccinated. But even if you look inside the numbers, while that specific vaccine use of that is down about 85% from its prior peak, the two other vaccines have also seen declines of about 18 percent as well over that time period. So it is not just focused on the single vaccine where there have been some safety concerns.

Matthew Harrison  And then the second item here at play is what you've highlighted, which is, you know, broadly vaccine hesitancy, but lack of willingness maybe to to get vaccinated. And one of the things when we've looked at the data that's been collected through surveys and other factors is the willingness to get vaccinated has generally been about 50 percent of the U.S. population. And we're getting close to that number right in the mid 40 percent right now of the adult population. But my hope is that we're going to plateau sometime in the near term and that's going to help us maintain the momentum to drive towards at least 75% of the population getting vaccinated.

Andrew Sheets  And maybe just to follow up there, because, you know, I think there are two ways to think about hesitancy, there's hard hesitancy where people really don't want to get the vaccine. And there might be what you could say is soft hesitancy where, hey, I just want to wait to see how it works for other people that I know. You know, when you look at some of the data, do you think do you think that's a fair way to think about some of the hesitancy that there are different levels of it? And how does that factor into when you think that the U.S. vaccination rate could kind of make that next move higher.

Matthew Harrison  Yes, I do think there are different levels of it, and in particular, even from the survey data that's out there, it's split almost in half. There's a group of people, that basically say they don't want a vaccine for any reason. Full stop. And then there is another group, call it about a quarter, who are in that maybe wait and see camp, are worried about specific potential safety issues. They're worried about other personal factors that's directly related to them. I think focusing on that group is what's going to drive a change potentially in the rate of vaccinations, again in the U.S. And then there's obviously a second group which is rural and harder to reach populations of which you've seen the White House focus on recently in the past couple of days. That obviously is a second group where focusing there could also increase vaccination efforts because that population may have not been as much of a focus when you had mass vaccination centers in large city centers.

Andrew Sheets This declining rate of vaccination is obviously very topical because I think a question on everybody's mind is when can we hit the so-called herd immunity? When can we get enough shots in arms where the populations vaccination rate is high enough, where the virus can really go away to a significant extent.

Andrew Sheets  A recent article in The New York Times mentioned the possibility that herd immunity itself could even be in question, given ongoing mutations of the covid-19 virus and vaccination hesitancy, how likely do you think is this scenario? And maybe taking a step back, when you think about herd immunity, what does it mean? And can we still get there?

Matthew Harrison  The way I think about herd immunity is when can we reach about two thirds to three quarters of the U.S. population being fully vaccinated because that should provide the population effect of making it hard to have significant transmission of the virus. In some cases, I think people have thought about herd immunity as eradication efforts of the virus. I think that probably isn't the right way to think about it. The second point is, but how can we get to a high enough rate of a vaccination such that we can drive disease spread and therefore risk to an individual down to a low level? We have plenty of supplies. So supply is not an issue. If you look at the individual state data, there remain states where demand is still either flat or slightly increasing versus some states which have seen dramatic lowering of demand. And then you're starting to see novel approaches where schools, you've seen most higher education schools require students to be vaccinated before coming back. So I think you're going to start to see some of these second layers. So I think all of those could help drive us towards that number.

Andrew Sheets  I want to turn from the U.S. now to Europe. There's been a lot of focus on Europe's vaccination effort. that has clearly gone more slowly than the U.S., but it's now starting to pick up. I was just hoping maybe you could spend a minute talking about how you see the European vaccination effort and signposts that you're watching there.

Matthew Harrison Recently I think the major issue for Europe has not been demand, which we were just talking about in the U.S., but is actually supply. And the supply picture continues to improve for Europe over the course of the next few months. So that should help. The second item is, my view is that vaccine hesitancy from the surveys I've seen is broadly similar across developed Europe and the U.S. So, my view is you should expect Europe to be a quarter to two behind the U.S. The supply picture is improving, and then I don't really see the hesitancy picture dramatically different between the two.

Andrew Sheets Matt continuing to move around the world. I wanted to move to the covid crisis in India. When you look at the situation there, maybe if we could take a step back, what do you think has been contributors to the severe rise in cases there?

Matthew Harrison  Yes, well, look, I mean, I guess we should first highlight that the humanitarian crisis in India is significant and we hope that everything can be done to help those people in need there. In terms of the issues and what are the underlying factors driving it. I guess to a certain degree, as you've seen globally, the virus waxes and wanes for reasons that aren't entirely clear all the time. And the first wave in India, while significant, was relatively modest. And typically what you've seen is that the second wave can be much more catastrophic and much more significant compared to the first wave historically with a lot of a lot of these respiratory diseases.

Matthew Harrison  I guess the good news is that in India, you are starting to see external help in terms of number of vaccines being delivered. And also the internal producers should by over the next couple of months, ramp their production from about 70 million doses per month, up to about 100 million doses per month. So I guess the unfortunate part is there is no acute fix for the significant suffering that is going on there. But hopefully over the course of the next few months, there will be much more supply of vaccine, which can help blunt any potential reemergence of infections as this wave starts to decline.

Andrew Sheets  So, Matt, another story that that comes up along with this is just the risk of new variants. What evidence do you see of further mutations making covid-19 more dangerous? And do you see any evidence that these mutations are allowing the virus to evade vaccines in a material way?

Matthew Harrison Top of mind question for a lot of people. People should continue to expect to see more variants develop. It's a natural part of the evolution of the virus and it also occurs when there are high rates of spread. So we should expect to potentially see additional variants come out of India and frankly, additional variants come out over the course of the winter in the southern hemisphere, So expect more variants.

Matthew Harrison Then the question is, how concerned should we be about those variants? All of those variants that may have some of these so-called “escape mutations” inside, they don't completely evade vaccines, but they do lower the effectiveness of vaccines. So the strategies that we're employing either giving people a booster with the same shot that they already had come this coming winter in the northern hemisphere, or giving a variant specific booster of which we should have evidence around those in the coming months, are going to be two very effective strategies towards dealing with variants. And then secondarily, even in those variants that do have a significant impact on vaccine efficacy it looks like people will only get mild disease and you're not going to get severe disease or severe hospitalizations.

Andrew Sheets So Matt, over the course of a number of our conversations on this podcast, we've focused primarily on the ongoing covid-19 crisis. But obviously, your day job is to cover biotechnology companies, which, you know, many of which focus on a wide range of other maladies. How has drug development for other diseases been affected by covid-19? And if you see that having a longer lasting impacts on your sector.

Matthew Harrison  In terms of how drug development has changed. I guess there are two things that I would highlight. First, you've seen companies much more willing to collaborate than they have in the past. Whether or not that persists will be of note. But collaboration tends to advance drugs more rapidly. And then, you know, the major, major theme of covid has been the willingness of the regulator to figure out how to streamline its process and potentially move therapies forward faster. Underlying, you've seen the regulator in certain disease areas that are very significant, like cancer or childhood diseases that are terminal, really try and work with companies to advance the regulatory pathway over the past couple of years. And so I think the question will be whether that is more broad across other disease states. I think we have to see. The regulator obviously is very focused on making sure treatments are safe and effective and they take that very seriously, as they should. And so I don't think you'll see a dramatic relaxation, but perhaps you will see select examples where the unmet need is very high and they will apply some of the learnings that they have here from what they've done with covid.

Andrew Sheets  Fascinating. Matt, thanks for taking the time to talk.

Matthew Harrison Thanks for having me, Andrew.

Andrew Sheets As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts App. It helps more people find the show. 

Amid declining rates of vaccinations in the U.S, virus mutations and a crisis in India, is herd immunity from COVIS-19 still achievable? The latest insights from Biotech equity analyst, Matthew Harrison.

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