Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley.
Matthew Harrison: And I'm Matthew Harrison, Equity Research Analyst covering Biotechnology.
Andrew Sheets: And on this special edition of the podcast, we'll be talking about progress on covid-19 vaccinations and the road to herd immunity. It's Thursday, March 18th at 3:00 p.m. in London.
Matthew Harrison: And 11 a.m. in New York.
Andrew Sheets: So Matt, it's been a couple of weeks since we last spoke. And in that time we've seen some significant developments, including the release of a vaccine from Johnson and Johnson. Maybe catch us up to speed on the vaccine rollout, where we are in terms of shots and where we could be headed.
Matthew Harrison: I think we are in a very good place here. There are a couple developments. The J&J vaccine obviously is only one shot instead of two. And the timing of the doses that we're going to get from J&J is also in line with what we're expecting. But I think the bigger story is that the rollout of the two other vaccines are also going quite well. And the timeline for when those doses are going to be delivered has been moved up about a month earlier than when we last spoke. So we will get 300 million doses from each of those companies by the end of May, which would allow us to vaccinate broadly all of the adult population in the US. Now, we've said that may take some more time beyond May, but from a supply standpoint, we are doing very well. And from a distribution standpoint, we've moved up from about a million shots a day to north of two million shots a day in the US now.
Andrew Sheets: So when you think about that increase in the number of shots the US has been able to administer per day, how much farther do you think that that increase can go? Kind of what do you think is where we might be headed in terms of the number of shots the U.S. could administer a day?
Matthew Harrison: We don't have a formal prediction on what that number could go. We've looked at numbers as high as three and a half million shots a day. In terms of supply, each of the two mRNA companies probably can get to 10 to 12 million shots delivered per week. So purely from a supply standpoint, around four million shots a day is probably what you could tap out at. But I think the other key metric to maybe think about is of the supply that's being delivered, the US is tend to sort of leveled off at administering somewhere between 70% and 80% of that supply per day. So that puts you probably in the mid three millions once you get that full supply of where the current efforts in terms of supply and distribution could tap out.
Andrew Sheets: So related to that, a question about vaccine hesitancy. And we do see stories and polling that suggests that a portion of the population is still reluctant to get a vaccine, is not interested in getting vaccinated. How much do those dynamics matter when you think about the question of herd immunity? And I'd also be interested that as you think about this dynamic, you know, maybe thinking back to other kind of vaccination drives, is there evidence that those attitudes towards vaccination can change over time?
Matthew Harrison: Andrew, it's an important topic, so I'm glad you brought it up. I guess I'd note two items, so the CDC has been running longitudinal surveys starting since the beginning of the pandemic. And one of the interesting things when you look at that data is early on in the pandemic, the vast majority of the population actually was very enthusiastic about getting a vaccine. And then as the pandemic dragged on, you saw that number of hesitancy or a group of people who said they would definitely not receive the vaccine actually rise. And it got as high as a little bit north of 40%. And now that's dropped down, it's come from 38% down to 33% and we haven't gotten the next sample point there, but it seems to be improving.
Matthew Harrison: Unfortunately, the US hasn't had a mass vaccination drive probably since polio. And there it was fairly mandatory for most people to get it. So I don't know if that's a great comparison, but I guess I would note two things that are probably reasonable. One, as more people get it and we get greater and greater safety evidence, hopefully that will help some people who are hesitant to get the vaccine. And then secondly, at a certain point perhaps and we don't know this for sure, but perhaps some societal activities may either require or, you know, ask for vaccination proof. And so that could be travel, that could be certain vacations. And so I think that may help also some hesitant people think about getting a vaccination.
Andrew Sheets: So Matt, we talked a little bit about what this summer could look like. But obviously the summer has some added advantages. It's easier to be outdoors. You know, the cases were lower last summer when there was no vaccine. So as you look to the next step ahead and into next fall and winter, what's your current kind of best estimate of what the winter could look like?
Matthew Harrison: So I guess the first point that I would make is, people will be a little bit more hesitant about activities. There will be greater focus on worrying about a covid surge come winter. And so I think there will be public health officials warning people and asking people to be more vigilant. The second thing and one of the key things that I am watching is what happens in the upcoming Southern Hemisphere winter. There are two key things I am watching there. The first is the southern hemisphere will not be fully vaccinated as they go through this winter. So, will they see surges or not? And then perhaps more importantly, what I'm watching is will you see new variants develop in the Southern Hemisphere because they are not fully vaccinated yet as you go through winter and presumably see an increase in cases. My biggest concern for a northern hemisphere winter would be that there is a variant that develops in the southern hemisphere, which requires more attention and perhaps a specific vaccine booster for that variant. That's a theoretical possibility. I'm not saying that that's going to happen, but if you're worried about something, that would be the key thing that I would be tracking.
Andrew Sheets: So thinking a little bit longer term, it does seem like one of the most kind of exciting and promising things to come out of a very dark 2020 was these mRNA vaccinations and this what seems like a new technology. Do you think that's fair? And, you know, you cover companies that are involved in this technology. Where do you think it could go going forward?
Matthew Harrison: So mRNA has been a technology that's been under development for one to two decades. This is sort of it's prime time, obviously, where we've started to see the commercialization of those technologies. But what it's done for these companies is pretty significant because it's taken a new class of technologies and it's proven that they're safe because this is the first time they've been studied in tens of thousands of people. It's proven that they're effective. And that's allowed companies to really significantly increase their investment in the rest of their pipelines. And so many of the companies now are looking at a very broad range of infectious disease vaccines using mRNA technology, where previously maybe they were only looking at one or two.
Matthew Harrison: So you see a much broader range of diseases people are going after. You see a significant increase in investment, which could accelerate the time to market for those. And then I think it's also highlighted one of the key factors about mRNA technology, which is speed to market. And so as, you know, countries and World Health organizations think about how to prepare for a potential next pandemic and what sort of technologies to invest in terms of a rapid response mechanism, mRNA will obviously be one of those key technologies that they should consider.
Andrew Sheets: So maybe in the interest of ending my questions to you on a high note, what do you think could be one of the next diseases that these mRNA technologies are deployed against, kind of based on publicly available information?
Matthew Harrison: So their pipelines are focused on actually a couple of diseases that we already know. One of them is Cytomegalovirus or CMV. It's the third leading cause of birth defects in the US. It's a potential neurological defects in children. And so that's already in a phase three study and in the next couple of years that may come to market. So there are a handful of things that people are pushing ahead on. Flu, I think, is another area where you're going to see a lot of investment and companies are looking at potentially combining a covid and flu vaccine together so that when you need your annual flu shot, you would get your covid booster and therefore we would make sure people are protected on an annual basis.
Andrew Sheets: That's great, thanks Matt.
Matthew Harrison: Great speaking with you, Andrew.
Andrew Sheets: Tomorrow on the podcast, Matt and I will continue this discussion, with a focus on the international outlook for the vaccine rollout and the impact on markets. 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.