Covid variants, new vaccines and little hope for Japan’s summer Olympics

Covid variants becoming a key concern in fighting the virus
This week we have focused mainly on the Covid virus which once again is at the forefront of market concerns. Although we think we should reach the peak of Covid pandemic by next month, we are also keeping a very close eye on most recent findings regarding the newly discovered strains of the virus. Reports coming from experts that have been sequencing infections more thoroughly like in the UK and Denmark suggest that one variant which was initially detected in Britain as being far more contagious than its ancestors is already highly prevalent in Europe and will most likely be the dominant form in the US by March. 

This is a major cause for concern as it would require a much more draconian movement restriction measures to control the contagion. Moreover, according to new findings by UK authorities, this strain known as B.1.1.7 could also be more deadly which may explain the higher level of fatalities seen in this wave relative to reported infection rates and despite more known effective Covid treatments and therapeutics. Higher death rates among younger patients witnessed in Brazil where another more transmissible mutant has been discovered is also worrying. It seems that this pandemic is following the same path as the Spanish Flu when its winter wave proved far deadlier but interestingly, it also marked its peak despite the fact that there were no vaccine technologies to tackle the disease hundred years ago.  

More vaccines are coming!
The good news is that recent findings suggest that current vaccines seem to be still effective, at least against the variant initially found in Europe and we are waiting for research results for those found in South Africa and Brazil. But most epidemiologists agree that mutations seen so far are not advanced enough to resist the Covid vaccines already developed. As mentioned last week, according to mRNA vaccine specialists, reprogramming jabs to directly address the new genome of these mutations will take only days to achieve and less than six weeks to bring on to the market. Just like flu shots that are continuously tweaked every year to address that moving target, Covid vaccines will undoubtedly need to quickly evolve and be more rapidly authorised going forward.   

Vaccination programs in the West are also starting to become far more efficient as evident by falling stock levels which have put pressure on pharmaceutical firms to deliver more shots. As in the case of Pfizer, we think some initial production issues in scaling up output of vaccines are to be expected as we have also seen most recently by AstraZeneca. However, these teething issues although frustrating given the urgent backdrop, are unlikely to derail the vaccination programs in the current half of this year. It will be interesting to see if President Biden will invoke the Defence Production Act to raise the US-made vaccines output. 

Also, more vaccines are likely to come to the market soon, namely those developed by Johnson & Johnson and Novavax, bringing the total launched in the West to five, not to mention, the two already in China and the one in Russia. This week we are expecting the final trial results of Johnson & Johnson’s Covid vaccine which preliminary findings indicate to be 90% effective. According Dr Fauci, who has retained his post as the chief medical advisor to the Biden Administration, J&J’s vaccine is likely to get its emergency use authorisation by the FDA within two weeks and with 100mn doses scheduled to be made available by April. We think this vaccine could be a game changer in fighting Covid globally, not only because it is the first to be a one-jab inoculation, but also because it can be stored and kept for 3 months at temperatures of just above 1cc (and for two years at -20cc).  

Japanese government is once again fumbling its Covid response
As mentioned last week, in line with February of last year when we predicted that 2020 Olympics will be cancelled and Mr Abe would have to resign as leader of the country, we think the summer games will be called off again and Mr Suga’s days as Japan’s current PM look increasingly numbered. Similar to last year, the authorities seem far more preoccupied with reassuring the outside that the Olympics will be held as scheduled rather than tackling the more pressing issue of rising Covid infections domestically. 

With total number of tests conducted in the past year still below 5% of the population, Japanese authorities continue to fly blind, not knowing the extent of the contagion in the country, especially given that the more infectious Covid variants have already been detected within its borders. What is equally shocking is that the government seemed to have remained highly complacent in its efforts to secure vaccines quickly enough with none having been authorised yet with some suggesting that Japan’s inoculation program looks unlikely to start before April. 

Seeing how tardy the authorities have been in almost every aspect of their response in tackling Covid, we think it is safe to assume that the vaccination program will also prove painfully slow. This not only leaves little doubt in our mind that summer Olympics will be cancelled and will likely cost the newish prime minister his job, but we now fear that Japan looks likely to be among the last developed nations to overcome the pandemic.