It is clear by now that everyone is significantly affected by the COVID-19 pandemic, with immediate and longterm consequences.

It goes without saying that our portfolio companies are presented with challenging situations, some switched into survival mode and some see new opportunities.

Our Assessment

09 April 2020

Our highly interdisciplinary team at Redalpine, consisting of medical doctors, economists, biologists, physicists etc. has collected the latest thinking about the (future) course of the crisis and summarized it here in concentrated form. It shall serve as additional input for you on how to react and steer through the crisis. Most important is to remain mentally resilient and adjust quickly to the new reality. Please bear in mind that this represents our current view based on available public information and expert interviews. As the crisis progresses, the assessment will be updated. (Legal Disclaimer)

Summary

  • The developments in Wuhan China can serve as a role model
  • Stricter and earlier measures will lead to a shorter Initial Intervention phase
  • The economic consequences will ease but not end after the Initial Intervention phase
  • The major differentiators are tests, therapeutic drugs and vaccines (takes up to 18 months)

The course of the crisis takes four phases:

  1. Onset It takes a couple of weeks for the first cases to get confirmed and the first death. During that time, the virus spread is unimpeded due to the fact that > 80% of the COVID-19 cases occur silently.
  2. Initial Intervention: Governments and societies implement mitigating measures like social distancing, lockdown and even curfew. The goal is, mostly, to find a balance between slowing down the rate of infection to avoid a collapse of the health system and keeping the economic impact as low as possible. In Switzerland, the government intervened 16 days after the first case and 7 days after the first death.
  3. Longer term management: As long as there is no herd immunity, medication, or vaccine, some measures need to stay in place to limit the spread of the virus.
  4. Back to before: A state, where all measures can be lifted is most likely only possible when a vaccine is available. Currently, estimations are that this will take 12 – 18 months from now.

The main question is at what point in time the mitigation measures can be lifted and the Initial Intervention phase ends.

The choice of the Initial Intervention has vastly different societal and economic consequences:

  • Do Nothing: Due to the high contagion rate large proportion of the population get infected. 14% of all cases are severe (need hospitalization) and 5% critical (need intensive care). Therefore, the healthcare system gets overwhelmed and non-corona related cases cannot be treated. The overall death rate soars, estimations are that up to 3% of the population may die. Society and economy may break down. As a positive effect the population will gain herd immunity.
  • Mitigation: Let the virus run its course, while trying to reduce the peak of infections – flatten the curve. If the measures are not very drastic, the healthcare system gets overwhelmed, estimations are that up to 0.15% of the population will die. Measures taken into account: case isolation, household quarantine, closed schools/ universities and other public places, social distancing.
  • Suppression: Apply heavy measures to get the epidemic under control: Quick, complete lockdown (“Hammer”) – curfew and heavy social distancing. Estimates are that only 0.001% of the population will die but long-lasting measures will have to stay in place to avoid a resurgence of the virus. This strategy was implemented in China and Korea.
Own graph based on the medium-article “Coronavirus: The Hammer and the Dance” by Tomas Pueyo

Based on the example of Wuhan and epidemiological modelling, country-specific forecasts can be made for the course of the epidemic.

We took the severely affected Chinese city of Wuhan as an example to understand the course of the COVID-19 disease as it probably has the most thoroughly studied population and with 11 million people is quite significant. The city was completely closed as of January 23rd and the Chinese government loosened the curfew two months later, on March 23rd. The travel restrictions for Wuhan have been lifted on April 8th and we expect social life to normalize in the same month.

Based on this data, we have now extrapolated the course of COVID-19 for several countries based on the measures they have taken. For similarly strict measures applied in Western countries, we estimate a 2.5-month lockdown and a recovery period of another 0.5 months, simply because the Western population is somewhat “less disciplined” than the Chinese.

For moderate measures taken, we estimate a 3-month lockdown period and another 0.5 months until social life and travel return to normal. Finally, for countries such as the US with weaker nationwide measures, we estimate a lockdown period of 4 months and a recovery period of 0.5 months.

Note, that due to the expectation of the healthcare system being overwhelmed, the recovery period for Italy and Spain is assumed to be slightly longer.

After an initial modelling as described above, we now continuously monitor and update the forecast based on latest epidemiological AND political developments.

If after the initial intervention the situation is not proactively managed, the virus may resurge in uncontrollable waves. Therefore, a set of measures will have to stay in place for a period of time until either there is widespread herd immunity, or a vaccine available.

The degree of measures is largely dependent on a number of (some yet unknown) factors:

  • Availability of tests; as of today, up to 57 different diagnostic tests are authorized by regulatory authorities. In the longer term, serological tests will play a key role.
  • Availability of therapeutic treatments; as of today, 30+ compounds are currently under preclinical investigation while 39 programs are evaluated at clinical stage. However, no medicine has yet demonstrated efficacy in treating COVID-19.
  • Discipline, potentially combined with smartphone tracing apps. Such apps make it possible to interrupt COVID-19 transmission by informing potentially exposed people through their mobiles.
  • Mutation rate of the virus; luckily, this rate seems to be rather low as there are only 4 to 10 genetic differences between strains circulating in Wuhan and the US meaning any vaccine is expected to protect people for the long term.
  • Seasonality; unfortunately, not known yet. Although many respiratory viruses have a seasonality, significant COVID-19 outbreaks in the Southern hemisphere let us expect that the virus is going to be able to transmit at least to some extent over the summer.

The best-case scenario is keeping the virus contained with a range of measures (testing – tracing – isolating – quarantining) that will be directed in such a way that the virus does not spread.  South Korea and Hong Kong are in this phase. The worst-case scenario is recurring “Waves”. This may happen if the virus mutates, which now seems to be unlikely, or the measures are neglected.

Will be reached only with widespread herd immunity or a vaccine. Currently, already 6 vaccine candidates are evaluated in humans, while 60+ programs are still in early (preclinical) development. However, realistically the first vaccines will only be available in 12-18 months from now.

Reference List:

 

Epidemiological Models:

Redalpine Portfolio Fights Against COVID-19