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Karen Andersen: The Race for a COVID-19 Vaccine

The Morningstar healthcare strategist discusses the latest on COVID-19, including virus forecasts and vaccine updates from the leading biotech and pharma companies.

Editor's note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

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Our guest this week is Karen Andersen, a healthcare strategist on Morningstar's equity research team. She has written a number of influential commentaries and analyses on the healthcare sector, with a focus on the pharmaceutical and biotechnology industries. Her most recent work has focused on the outlook for the COVID-19 pandemic, treatments for the disease, and the race for a vaccine. Before joining Morningstar in 2005, Andersen earned her bachelor's degree in biochemistry from Rice University and received her Master of Business Administration from Rice's Jones Graduate School of Business. She is a CFA charterholder.

Karen Andersen's healthcare commentaries and analyses

Virus Containment and Diagnostics
"COVID World Map: Tracking the Global Outbreak," The New York Times, Sept. 15, 2020.

"Relaxing the Lockdown: Move Slowly, Stay Nimble," by Karen Andersen,, May 12, 2020.

Slow Burn Likely Until Coronavirus Vaccines Are Widely Available," by Karen Andersen,, Sept. 1, 2020.

"Patients Are Waiting Weeks for COVID-19 Test Results. Here's Why That's a Huge Problem," by Jamie Ducharme, Time, July 22, 2020.

Contact tracing definition

"Treatments for COVID-19," Harvard Health Publishing, Aug. 24, 2020.

Vaccine Development and Approval
"Vaccine Testing and the Approval Process," Centers for Disease Control and Prevention.

"The Drug Development Process," U.S. Food and Drug Administration.

"Draft Landscape of COVID-19 Candidate Vaccines," World Health Organization, Sept. 9, 2020.

"Potential Antiviral Drugs Under Evaluation for the Treatment of COVID-19," National Institutes of Health, Aug. 27, 2020.

"A Coronavirus Vaccine, or Three, Could Be Available by Year-End," by Karen Andersen,, Sept. 4, 2020.

"Morningstar's Guide to the Development of a Coronavirus Vaccine," by Carole Hodorowicz, July 16, 2020.

"Coronavirus Vaccine Progress Accelerates," by Karen Andersen and Debbie Wang,, May 13, 2020.

RNA vaccine definition

"Pfizer, BioNTech COVID-19 Vaccines Fast Tracked by FDA," by Anna Baran,, July 13, 2020.

"All Eyes on BioNTech's COVID-19 Vaccine," by Anna Baran,, June 26, 2020.

"AstraZeneca's Pause on Vaccine Raises Uncertainty," by Damien Conover,, Sept. 9, 2020.

Herd immunity definition

"What if 'Herd Immunity' Is Closer Than Scientists Thought?" by Apoorva Mandavilli, The New York Times, Aug. 31, 2020. 


Jeff Ptak: Hi, and welcome to The Long View. I'm Jeff Ptak, global director of manager research for Morningstar Research Services.

Christine Benz: And I'm Christine Benz, director of personal finance for Morningstar.

Ptak: Our guest this week is Karen Andersen, a healthcare strategist on Morningstar's equity research team. Karen has written a number of influential commentaries and analyses on the healthcare sector, with a focus on the pharmaceutical and biotechnology industries. Her most recent work has focused on the outlook for the COVID-19 pandemic, treatments for the disease, and the race for a vaccine. Before joining Morningstar in 2005, Karen earned her bachelor's in biochemistry from Rice University and received her master's in business administration from Rice's Jones Graduate School of Business. Karen is a CFA charterholder.

Karen, welcome to The Long View.

Karen Andersen: Thanks for having me.

Ptak: We're going to talk quite a bit about the outlook for a vaccine. But the subtext for that discussion seems to be that a vaccine has become a necessity. Is it fair to say that the course we're presently on is vaccine or bust?

Andersen: I think at least in the U.S., I think that's the way it's shaping up, unfortunately. We never really got a handle on containment, and even countries that appeared better able to contain the virus seemed to struggle every time they take another step toward more normal behavior. And, I think, at this point, the virus is so widespread, it's not going to just disappear. The only way to stop it is immunity. So, that can either be from people becoming infected or from vaccination. And so, the sooner we get a vaccine, the better.

Benz: You just wrote a piece laying out the reasons we're in that position. Can you explain why containment hasn't succeeded in the U.S. and whether it ever will?

Andersen: Without a vaccine containment really does rely on a lot of public health measures. And all of them kind of add up together to determine whether we are pushing hard enough against the vaccine for us to be able to contain it rather than allow the outbreak to grow. So, overall, I'd say public health is not something that the U.S. has invested in very much really over the past several decades. That's been one of the biggest hurdles in terms of containment.

Going through some of the general public health measures we can take--masking--that brings up a whole other issue of political issues, political reasons why people don't want to wear masks.  I think the U.S. overall has embraced wearing masks a lot less than a lot of other countries, particularly countries in Europe or Asia. Social distancing is something where I think that we've showed signs of being able to do this. Definitely we had a massive lockdown in March and April. And unfortunately, some states, I think, chose to open up prematurely. We saw restaurants and bars, in particular, opening up as early as May and so starting to see some states with huge surges in cases and situations that could have been prevented with just a little bit longer lockdown or maybe a little more gradual reopening process.

And then, I'd say diagnostics is a huge reason why we've struggled with containment. There's been every imaginable issue with diagnostics. We've had inaccurate tests from the start from the CDC. We've had shortages of supplies to collect the samples, shortages of the test kits, shortages of the platforms that you have to actually run the tests on in the labs, at hospitals. All of these have made it difficult as demand has risen for people to get results back in a timely way. Instead of waiting just a few days for results, you might have to wait a week or two. And that makes it really hard for people to isolate for that entire period of time while they're just waiting for a test result. And it also makes it really hard for us to try to make any dent in the number of people that they might be infecting, because it could be that they were in contact with a lot of people after they've been infected. By the time this person is diagnosed, it's going to be too late to reach out to those other people and tell them to isolate. So many people are infected from people who don't have any symptoms yet, that it makes it that much more important for contact tracing to work. That's really difficult to do when you don't have a good diagnostics program.

Benz: We have more questions on some of these topics, Karen. But before we go there, can you talk about what you mean by this underinvestment in public health? Why would more investment have helped us fare better during this period?

Andersen: I think the issue particularly is well highlighted with contact tracing. Contact tracing often involves more local organizations, local public health groups. And if we were in a situation where we had, say, a few hundred cases a day that were being diagnosed across the country, each of these public health groups might have a couple of cases that they need to take care of and contact these people and obviously talk to them, have conversations about who they'd been in touch with and then follow up and reach out to their contacts. But unfortunately, when we have tens of thousands of cases being diagnosed every day, these very small organizations are really overwhelmed. There's just not enough staff to really be able to follow up with these people in a timely way. With more funding these organizations would have been expanded.

Part of the underinvestment is really, I'd say, a factor of the success we've had with public health issues in the past; success with vaccination efforts. We just really haven't had a situation like this come up. And, of course, there have been different working groups with the government trying to prepare for a potential pandemic, but when you haven't seen one, I think it's very easy to prioritize investment in other areas ahead of something like this.

Ptak: You recently forecast we'll see 274,000 deaths by the end of 2020 and that the percent of the U.S. population that's infected by COVID will roughly double to 20%. Those are sobering projections. How did you arrive at them?

Andersen: Actually, just looking at the numbers of where we stand today, we have confirmed deaths at the end of July was 145,000 in the U.S., and those are confirmed caused by COVID, but likely many more that are related to COVID in some way. By the end of August, that number was up to 175,000. By our estimates, that was roughly 11% of the population that was infected, although it really varies across the country--in some areas 1% infected, some areas more than 20%.

In terms of the forecasts and how I'm arriving at this … My background--I'm not an epidemiologist. So, this isn't an epidemiological forecast. The sheer number of assumptions that you'd need to make to run a simulation of future spread of the diseases is really overwhelming. And the forecasts out beyond a week or two, it's very difficult for those to be reliable using really any method by any epidemiologists. We're still learning about the disease. We're still learning about how to limit how it spreads, and about how societies are reacting to the restrictions that are put on them. The way I approached this was really looking at what I expect to change in the next few months relative to what we've seen happening over the summer in the U.S. Really, I expect more of the similar kinds of what's termed hills and valleys. Rising and falling of cases state by state. But overall, I don't expect a dramatic change overall for the country in the rate of new deaths or new cases. It's basically a balance between kind of the headwinds against us and the tailwinds that could be helping us a little bit. So, there's some things making this worse, like students going back to college, cooler weather, so people spending more time indoors where they're more likely to infect other people. But then, on the flip side, some things that could be helping us out a little bit. A lot of employees, employees at Morningstar, are continuing to work from home over the next few months. We're seeing a lot of schools that are either partly or fully on a more virtual system this fall. And then, you're also seeing progress in states that maybe had trouble earlier this summer. States like Arizona, where maybe reopened too early saw surging cases, but then are seeing those cases fall again as people start to wear masks and as they start to see fewer indoor gatherings. And then, finally, I'd say diagnostics, too, is a big area where I think we're potentially seeing more improvements as we go through the rest of the year as we start to see new technologies and new types of tests really meaningfully expand the amount of testing that we can actually do.

Benz: Let's dig into that a little bit. Testing levels have risen compared with where they were last spring, but they seem to have plateaued a little bit in recent months. Why aren't we seeing testing continue to ramp up? And more generally, why are we still dogged with challenges in achieving widespread quick-turnaround accurate testing?

Andersen: Yeah, I know. I feel like this has been one of the more frustrating aspects of the way we've approached this pandemic in the U.S. One of the issues has clearly just been capacity. And if you look at the number of tests being done per day, you're right, we have kind of plateaued somewhere around that 600,000 or 700,000 tests-a-day level. And that's partly because of just the sheer number of platforms that we have to run these tests. But another problem is just coordination. We have all these independent labs and hospitals running tests. There's no centralized group that is overseeing everything and saying, OK, this lab has more space for more tests, this one doesn't, and figuring out how to efficiently distribute the tests and get things done in a timely manner.

And I think also there have been options for more convenient tests that don't need to go to a lab and don't need to go through this longer process. But those tests weren't really embraced at first. Some of the first ones were really not very accurate. Patients felt like, and physicians felt like, they would need to go ahead with more complex PCR tests that takes longer anyway. Those are just some of the reasons why we've seen some of these issues.

Ptak: When you look at the state of testing now--and we're going to talk more about vaccine development and timetable for that--have we effectively lost the opportunity to contain through testing and tracing in your opinion?

Andersen: I think that diagnostics are poised to see a really meaningful change over this fall, really starting this month, because we are seeing millions of tests being released from Abbott and Roche that are going to be 15-minute cheap tests potentially increasing our testing from 600,000 or 700,000 a day to well over a million a day. I think that that could make a meaningful difference, especially with getting people tested who don't have symptoms--maybe students returning to school--preventing them from infecting other people. But the size of this outbreak and being able to control it to a level that can actually counter all of the headwinds we're facing as we're heading into cooler weather, I think we're approaching a time where progress with the vaccine will still be the ultimate marker for how we can fight this down and really contain it.

Benz: One positive it seems is that in the more recent phase of the epidemic, the disease has been less lethal. There have been fewer recent deaths as a percentage of cases. Can you talk about why COVID is seeming more survivable recently? It seems like earlier detection and treatment improvements have played a role, but have demographics been in the mix, too?

Andersen: I think that's a mix of things. And it's also, partly, you have to be careful what you're asking. What a lot of people talk about is this case fatality rate. So, that's the percentage of the people who've been diagnosed who have died. And that has clearly fallen with time. That was something like 6% at the start of the pandemic, and now we're closer to 3%. The actual death rate from the disease as a percentage of the total number of people who've been infected, that's a lot harder to pinpoint, because we just don't know how many people have been infected, short of testing everyone in the country. We have expanded testing, but it's possible we're still only testing 10% to 20% of the actual cases. Those are some of the estimates we've seen out there now. I think the case fatality rates improving partly because we're diagnosing more of the mild cases now than we were when diagnostics were in much more limited supply, and then the average age too is also falling. So, you're right. Demographics play a role here.

At first, this was clearly more of an elderly population getting hit harder. Death rates in that population are much, much higher than they would be for the under-65 age group. And I think treatments could be having a role here, too, although maybe on a more limited level and maybe more recently, we haven't had treatments that had a really dramatic impact on survival. Gilead, it looks like their drug remdesivir appears to have a trend toward improving survival. It looks like it certainly improves the speed that some patients are recovering. And some of the best treatments we've seen more recently--steroids--maybe a 10% or a 20% reduction in the death rate from those treatments. But I think steroids are going to be used more and more commonly in the coming months.

Ptak: Let's turn to COVID vaccine development, which I think we're going to devote the bulk of the remainder of the episode to. But before we do that, for listeners who are unfamiliar, can you briefly walk through the typical arc of developing a vaccine and getting it out to the public? How long does it usually take? And why does it take that long?

Andersen: Vaccine development, perhaps even more amplified than a typical drug-development program, it takes years. One example--HPV vaccine--15 years to reach the market. We've been trying to find an HIV vaccine now for decades and still don't have one. One of the reasons why it takes so long is that vaccine makers, they want to take risks in a very stepwise way. That has to do with both the way that they test it in patients, and then also on the way that they're preparing to manufacture it for mass vaccination. So, basically, as you get more information about how the vaccine works in animals, we find the right dose in smaller trials in humans, you see efficacy and you move to larger trials. While all that is going on, you're also building up larger manufacturing capacity.

Benz: Can you explain the difference between accelerated approval of a vaccine and emergency-use authorization and how can that affect the timetable for delivering a drug to the public?

Andersen: We're at the point now, where we have three of the most promising vaccine programs right now are in Phase 3 development. These are the large 30,000-patient-plus trials that are going to be required for emergency-use authorization, or for accelerated approval. And the exact amount of data that might be necessary before these vaccines can be administered to the public. That's really the key question. The difference between these two pathways is really looking at whether it goes through the standard FDA approval process, or whether it goes through the emergency-use authorization, which is just a midway step between allowing patients in clinical trials to receive it to getting approval. It expands the use of the vaccine beyond clinical trials without receiving FDA approval. And the way that that's done--typically, with these trials, they're these independent data-monitoring boards that are looking at the data and they're taking a peek at the data early at different time points to determine if the trial should be stopped early. If it's extremely successful, just continue on as planned. And every time that there are these interim looks, there's an opportunity for us to see data. Say one of these three leading vaccines--the first interim look--the monitoring board looks at it and says, this is excellent data. That could be the point where they actually decide, look, this is something that we want to send this to the FDA and say we need emergency-use authorization now based on the quality of this data. And the FDA can do that without going through the typical review process and causing a longer delay that might take weeks or months to reach patients.

Ptak: You've alluded to it--the process we're developing and mass delivering a COVID-19 vaccine has been supercharged and you mentioned a few of the ways in which they're trying to achieve that expedited timing. It's much faster than the norm. What implications do you think this might have on vaccine development more broadly in the future? Do you think this could be a template for future vaccine development?

Andersen: I think that's one of the more interesting implications of what's going to be happening beyond this pandemic when it comes to vaccine development. I mentioned there are three vaccines that are already in Phase 3. Two of those are RNA-based vaccines. So, this is very new technology. There aren't any approved vaccines yet with this technology. If those turn out to be successful, I think that has really positive implications for future vaccine development.

There's a reason why Moderna and BioNTech and Pfizer were the first few programs to enter Phase 3 development in July. And that's because their technology is such that they can really just--it's termed “plug and play”--they can just really take the genetic sequence that they know they need for the spike protein. This is the protein that helps the virus infect cells. They can put it into their system; put it into just basically a shell that they can inject into patients. And then, it finds its way into cells and patients are making this spike protein and patients have an immune reaction to that spike protein. If that works, anytime we're confronted with a new virus, we just need to plug in that new genetic sequence and the manufacturing capacity will already be built. That would definitely have implications on time saving and also confidence--the possible positive data from new programs as well.

Benz: To widen out for a minute, what is the approach that you've used to forecast whether a vaccine will wind its way through R&D trials and commercial production? And how do you do that? And is it different from how you'd forecast the odds of any other non-vaccine drug or therapy coming to fruition? Is this vaccine different?

Andersen: I'd say that we've seen the initial clinical data in humans from really four of what we would call the key vaccine programs. And we're assigning them somewhere between a 50% and a 70% chance of success. In my mind, that means that out of these programs we're very likely to have at least one of these become available, at least on a smaller supply level, by the end of this year. But getting to those actual probabilities, there's also some art to this, not just science. But I guess I'd say I'd start with a few benchmarks.

First of all, drug development in general--when drugs are in Phase 3, they have roughly a 60% probability of approval. That's kind of in line with our forecast. But more specifically on vaccines, on infectious disease vaccines, Moderna actually recently cited research looking historically at success rates, and they've seen a 42% probability of success for Phase 2 programs. Since these programs are in Phase 3, it makes sense it should be a little higher.

Also, I think the target in this case is fairly well validated. We've had experience with coronaviruses on a much more limited scale in the past--this is with SARS and with MERS. And during both of those outbreaks, we did have a lot of programs going on at drug companies trying to design potential vaccines. And none of these programs ever advanced to the point where anything was approved. But they did advance to the point where certain targets, like the spike protein, were identified and were researched in depth. There was a lot of background information here that helped us isolate what the most likely target should be.

And I've been encouraged by the data so far. As I mentioned, we've really seen Phase 1 data from these leading programs. And it's encouraging, but at the same time, it's difficult to have conviction much higher than 60% or 70% when we haven't actually seen data showing definitively whether the vaccines can prevent infection in humans or not.

Ptak: We're going to talk more specifically about the leading vaccine candidates. But before we do that--just to give listeners the lay of the land--in a recent piece of analysis that you published you laid out various treatment options, including not just vaccines, but also what you refer to as antibody programs and antivirals. And so, for our listeners, I would imagine, there's many of them, counting myself, who don't know the difference between them. Can you briefly elaborate on what the difference is between a vaccine, an antibody program, and an antiviral and why someone might want to care?

Andersen: The first drug that probably a lot of people heard about was Gilead's remdesivir--that's an antiviral. Antivirals generally they attack the virus itself. They make it harder for the virus to do what it needs to do to make you sick--that's replicate, infect cells, or make any kind of protein if they need to make to replicate. Antivirals--that was the first step that we saw in this case. And those tend to work early on in treatment. They tend to work when the virus loads are increasing after a patient has been infected.

Antibody programs, we've seen a variety of those enter development just recently. Hopefully, we see some data and the potential emergency-use authorizations later this year. But those, generally speaking, the programs we have for COVID-19 are antibodies that have been designed as antibodies against the spike protein. This is kind of mimicking what the immune system would do if it were confronted with the virus. These antibodies help basically target the spike protein and help the immune system get rid of the virus.

Vaccines--there's a lot of different ways that vaccines work. But the basic idea with a vaccine is that you're not giving the patient the actual virus that can make them sick. You're just giving them a part of it. You're giving them enough of a clue that the immune system can see what it needs to be fighting against. Sometimes you're just giving it the genetic material for the spike protein. That's what the Moderna and BioNTech programs are doing. Sometimes you're giving it the actual antigen or the actual protein, the spike protein itself. That might be programs from Novavax or from Sanofi. And other times you're using another weaker virus, the shell of a weaker virus, like a cold, just to include some genetic material for that spike protein for COVID-19. And that's what we're seeing from AstraZeneca and from J&J. There's a lot of different ways of going about it. But all of those vaccine methods require the patient to mount their own immune response, create their own antibodies, and create their own kind of longer lasting ability to prevent infection.

Benz: So, how many legitimate COVID-19 vaccine candidates are there and of that group, which do you rate as serious candidates for being approved and mass delivered--here in the U.S., I should say?

Andersen: The latest numbers I saw from the World Health Organization, they listed about 33 vaccines that are in clinical testing and well over 100 that are still preclinical, so not being tested in humans yet. I think that given how urgent it is to get a vaccine approved as quickly as possible, at this point, I think it's hard to imagine a lot of these preclinical programs rising to a lot of relevance within the next year, because that's really kind of the key time period we're looking at in terms of starting to get people vaccinated in developed markets.

And then, focusing in really on those 33 vaccines that are in development. We've spent most of our time looking at about--there's about eight of them--that satisfy a few criteria for being really impactful vaccines here. One of them is that they're capable of entering the late-stage development, capable of entering Phase 3 trials this year. Another one would be, are they capable of manufacturing? Because if they're now only going to be making tens of millions of vaccines, that's not really going to be able to put a dent in our need for really billions of doses. There are other, clearly other programs, other than these eight that are in Phase 3 or even approved vaccines in China and Russia. But in some cases, the data there is limited. And the data might be partly mixed as well in terms of how effective they can be, and supply doesn't look nearly as strong as it is for some of these leading biotech and pharma players that are more advanced.

Ptak: Let's drill down on some of those leading candidates you mentioned in the U.S. And maybe you can talk about them in terms of trade-offs. What are some of the trade-offs in terms of efficacy, safety, manufacturability you see between the leading vaccine candidates in the U.S.?

Andersen: I'll start with Moderna and Pfizer BioNTech—those are both RNA vaccines. One of the positives here is that they're the most advanced in development. And so, one of these programs is very likely to be the first approved vaccine. We're assuming emergency-use authorization in December for these programs. The positives--we've seen solid data for both of them from Phase 1. They've been able to basically cause the healthy volunteers that have been injected to produce strong levels of antibodies and these antibodies, they're making them on a level that's very similar to what you see in people who have recovered from COVID-19. That is very encouraging. It's not proof that they're protected, but it's very encouraging.

Also, Moderna recently had data in elderly volunteers, which not all of the vaccines have data in yet. And that data was very strong. It looked like they had just as good a response as younger people and that's a concern that elderly people maybe can't have as good an immune response.

For Pfizer, on the flip side, they also had some additional data beyond antibodies showing a good T-cell response. So, this is something that people are concerned--you might need a good T-cell response to have a really long period of protection from a vaccine.

I'd say the weaknesses here--the biggest weakness by far, I'd say with the RNA programs, assuming they're successful, it is new technology, so there's no guarantee it will be. But assuming they're successful, the biggest problem is that they generally need to be frozen. And the process of after they're manufactured, transporting them, distributing them, and then getting them to pharmacies or clinics, is that something that's going to be feasible, keeping them frozen that entire time? So, that's something that I think right now groups like NIH, CDC, there's multiple meetings going on right now trying to figure out how we can prepare, how states can prepare, to administer those kinds of vaccines.

Looking at the other really key leading program here, AstraZeneca, I'd say they probably have the biggest supply. They've got a huge network of different contractors that are going to help them produce a vaccine. They technically started late-stage development outside the U.S. earlier than Moderna and Pfizer even though their U.S. trial just started here. Their data looks good. I'd say it doesn't look maybe quite as effective as the RNA vaccines. So, that's why our probability of approval is at 50% for this one. But this would be much easier to distribute. It just requires refrigeration. So, refrigeration is a much more common level of temperature control than requiring a freezer. But then as we start to get into more of the additional vaccines, I think we're going to see more that don't require freezers, like the J&J and the Novavax programs. We might even see programs like J&J, they're really aiming just to be a one-dose vaccine, which that would be huge. All the other vaccines so far will require two doses. You have to keep track of patients as they come in for their first dose, make sure they come in three or four weeks later to get their second. So, that's another kind of logistics hurdle for those. But I think we're overall looking at the top eight programs--all of these that we've seen data on have generated positive data and potential for generating hundreds of millions, if not billions, of doses in 2021.

Benz: Karen, in your latest forecasts, you assume that the two leading vaccine candidates have a 60% probability of approval and the third a 50% probability, as you just said. Judging from the market's continued rise, it seems like investors are more optimistic. They seem to be pricing in much higher odds of approval. So, if we have a scenario where maybe just one of these vaccines is approved, how might that impinge on our ability to mass vaccinate the population?

Andersen: I think that if you were in a situation where just one vaccine were approved, regardless of who that vaccine maker is, I think it would be impossible for them to serve the full market, at least based on the stated capacity goals that they've given for 2021. The best position might be Novavax or AstraZeneca. Novavax needs a much lower dose, but even then, it's more like 2 billion doses. And so, we're assuming that we--for just developed markets alone--we would assume we would need closer to 3 billion doses. That would definitely be a shortfall just from one being approved.

That said, I think there's one area--if we really did see this happen--I think that the entire pharma market would rally around that one winner to boost capacity as soon as possible. So, there might be a short delay. But say, if one of the RNA vaccines work and the other ones don't, the other companies hopefully try to adapt their capacity to help. And the same goes with AstraZeneca. Their manufacturing is much more like just general biologics manufacturing. So, there would be a lot of big biotech companies that should be able to pitch in and help if needed.

Ptak: Is the way to think about this, that we need really one successful, proven, or as proven as can be, vaccine? And then, the manufacturability part of it, there will be a market and public healthcare policy response that takes care of that piece of it. We don't need multiple vaccines in order to get out there and mass vaccinate the population? Is that a way to think about it?

Andersen: I think if that one vaccine that works ends up being the perfect vaccine where it needs refrigeration, it's one dose, it's got capacity right away, then, yeah, technically, I think you would only need one. But I think all of these are going to have--unfortunately, I think they're all going to have quirks. I think there's going to be some that work better, some maybe that don't work as well in elderly people. So, you want to favor a different one. Developing markets are probably not going to be wanting access to ones that require freezers for the entire storage time. I think we're going to have to try to balance this. Hopefully, we end up with a few vaccines that have their certain niches where they're working best.

Ptak: I wanted to jump in with one quick follow-up. It does sound like bench strength, if you will, or redundancy is important just given the unknowns here. And you alluded to it earlier. But I'm curious… The drop-off between these leading candidates that we've been talking about, and then the next rung below that--how big a gap would we be looking at in the hopefully unlikely event that those leading candidates, they don't gain approval, or they aren't effective in suppressing COVID, or they simply can't be mass manufactured the way we need them to be?

Andersen: Those first three programs that I'm assuming have a chance of emergency-use authorization this year. Let's say those programs are just off the table, then you're looking at Johnson & Johnson poised to start Phase 3 trials this month. You've got companies like Novavax, I think, is poised to start perhaps in October. You've got Merck and Sanofi also poised to start by the end of the year, and then another RNA firm, CureVac, also poised to start potentially later this year. I think that would push the potential authorization dates from what we're estimating now to be very late 2020 to most likely first-quarter 2021. Again, enrollment in these trials and how quickly they can generate data is a huge unknown, but I think that would probably push us back by maybe two or three months.

Benz: Karen, you stated in your recent analysis that you expect to see broad vaccination in the first half of 2021. Let's talk about how that would unfold. When do you expect vaccines will begin to be deployed, who gets them first, how will they be administered, and when do you think mass immunization will be achieved? And also, what about those people who are saying that they probably won't get it even if something comes online? How should we think about that?

Andersen: I think what we've said is that we think 40% to 50% of adults in markets where they will be paying for a vaccine--these tend to be developed markets. Forty percent to 50% of adults in these markets would be vaccinated in 2021. In the U.S., we've really been leading the charge in terms of signing contracts, locking in capacity. And we've signed contracts for, I want to say, it's 800 million doses or so. Technically, if they all worked, we'd have way more than we actually needed to vaccinate every single person. I think we're in a very good position to be above that 40% to 50% of adults vaccinated. We're estimating maybe closer to 70%. So, if you assume something around 70% efficacy, which I think is a reasonable goal for these vaccines that are in Phase 3 development, and maybe 70% of the population getting vaccinated, I think you're in a very good position to achieve herd immunity and to really start to contain this virus by mid-2021.

And as you mentioned, it's hard to say who actually wants the vaccine. I know that there's a lot of concern about safety. I'm concerned whether we're going to be approving these just too fast to make sure that they're safe. I'm hoping that that these companies are going to be transparent enough with the data and the FDA is transparent enough with the process that people will feel a lot more comfortable once we've actually seen the data. But given the surveys, I think 70% is probably the top end so far of what we've seen in terms of people being willing, because I think there's just a very vocal minority that is against this sort of vaccination, at least in the context of the pandemic right now.

Then in terms of priorities to U.S., there's been a lot of talk about this. There was just recently an advisory committee meeting talking about this. I think prioritizing healthcare workers, that's been pointed out as one of the higher priorities, the elderly, other essential workers not in healthcare, and then it would be remaining adults. I think we're still waiting to see what would happen with kids. I think that would probably depend on doing additional studies in kids as well. So, that would be a later rollout.

Ptak: Since you referenced that, I'm just curious… I think many of us, we tend to think of mass immunization as having been achieved when every single person has been administered the vaccine. But I think you referenced the fact that that's not really the way to think about it. When you think about achieving herd immunity, so to speak, what kind of percentages are we talking about? Where do you need to get to where you've effectively stamped out the virus and its ability to be transmitted in the population?

Andersen: The way I'm thinking about it is herd immunity is essentially just the fact that if enough people are immune to something, the virus, if it's trying to spread person to person, it will get stuck and it will be contained. It won't be able to spread, just because there won't be enough points of contact that are actually an outlet for continuing to expand the outbreak. The estimate for the percentage that you need to be immune to get herd immunity, it actually varies quite a bit. We've seen epidemiologists, I think center in on somewhere around 60% to 70%. There's some more controversial theories that maybe you only need 30% or 40%. But I think going with that 60% to 70% level, I think it's still very likely that we'll be able to achieve this in the U.S. with the vaccine. Using those numbers I mentioned before, if you say 70% efficacy, 70% of the population, that's basically half of the adult population being immune.

On top of that, to get to that 60% to 70%, you can add in the people who were already sick but not vaccinated. We're estimating that that's going to be by the end of the year, 20% of the population. So, that adds another piece. And then, another more, again, uncertain area, more controversial, is there might be some people out there who are immune based on exposure to other coronaviruses. There's a theory that's rising, and there's much more support for it now, that some people are protected because of certain colds that they may have had and the immune system response that they formed to those colds, so they may be much less likely to get sick or at least to get a severe illness. If you add all those things together, I think you're very likely, even with just vaccinating the people who are willing to get vaccinated, and even without perfect efficacy for the vaccine, I think we're still very likely to get to that herd-immunity level.

Benz: If we were to lay out these vaccine candidates on a two-by-two effectiveness versus safety grid, based on the results we've seen so far, that you've seen so far, what would go where? Are you seeing clear differences in effectiveness versus safety?

Andersen: That's a great question and that's definitely something that we want to be aware of as we wait for these Phase 3 readouts to come out. I think just looking at the data we've seen from Phase 1 and the preclinical data, just looking at everything on face value, the Novavax data to me implies that that could be the most effective vaccine. That would be followed by Moderna and BioNTech. And then I would put Astra among those four that have data as the least effective. I would say the huge caveat there would be that it's impossible to compare efficacy at this point. That's really because when we're looking at the data, we don't know what's most important. We don't know if it's most important to have the strong antibody response, the strong T-cell response, what kind of T-cell response, or if you need both. We also don't know how comparable their data is because they're all using different types of assays to measure these. They're using different benchmarks to compare two different sets of patients who have recovered, who all have different antibody levels and have different stories in terms of how severe their disease was, how long ago they recovered. There's just a lot of complications here that make it really hard to determine which is most effective without Phase 3 data.

I'd say on safety, though, generally speaking they all look relatively similar. I think Novavax requires the least amount of vaccine because they use a special booster that enhances its efficacy once it's in the body. So, potentially, that could have the least side effects and it had a good profile in Phase 1. Moderna, potentially the highest side effects, but these are side effects like fever. These are more flulike side effects, not what I would consider very serious side effects that would derail its use or really endanger people getting the vaccine. Overall, I think they all look very tolerable with the short-lived side effects that we've seen so far.

Ptak: Based on your experience analyzing other drug candidates, how likely is it that we'd see new and serious side effects at this stage of the trial process?

Andersen: I think it's looking less likely that there would be a major side effect. Thousands of people have already been vaccinated with these leading programs from Moderna, Pfizer, BioNTech, and AstraZeneca. I think the biggest risk that I'm really watching for right now--and this is one I would watch for with any new vaccine regardless of whether the development speed was accelerated as it is right now during the pandemic--but what I would be looking for would be very rare side effects that crop up once you start vaccinating millions of people. We have seen that before with a handful of other vaccines. There was a swine flu vaccine in the 70s that caused very rare immune reactions. So, it's not unheard of.

We've also had two trial pauses with the AstraZeneca vaccine. There was one in July and one just in September that I wanted to talk about. In July, Astra saw a case what they thought of as a potential case of transverse myelitis, which is a rare form of inflammation of the spinal cord. That can be triggered by viral infections and potentially by vaccines, although that link to vaccines hasn't been proven. The case in July turned out to be multiple sclerosis. That was unrelated to Astra's vaccine and the trial resumed. The new situation in September--Astra so far hasn't confirmed that the new case was diagnosed as transverse myelitis but has just said that the woman's symptoms were consistent with this disease initially. Phase 3 trials in the U.K. have actually already resumed because regulators and an independent committee both agreed that the trial was safe, which is reassuring. But there is a lack of transparency here. Astra is citing patient privacy concerns and it's hard to be sure what happened. However, I'd say, expert opinion is likely that the vaccine did not trigger the illness based on the resumption of trials. Astra has already vaccinated 18,000 people, but with most of the 30,000 people in the U.S. trial still needed to be enrolled, we're going to see a lot more data and more patients before regulators ever sign off on this vaccine, which I think is also reassuring.

Overall, I think Astra's pause here makes two things clear. I think that the vaccine makers are being appropriately cautious by stopping trials and analyzing any signs of safety issues. And then, also just that the public will need transparency on the final efficacy and safety data before being expected to sign up to get vaccinations in large numbers. I would expect to see increasing transparency as we get more data starting to flow out of the Phase 3 trials.

Benz: You've done some work sizing the market for these vaccine candidates, and you found that it could be a $40 billion market by the end of 2021. Are there any investing opportunities that these vaccines present or has the market already priced in any potential that they have?

Andersen: I'd say in terms of the way the market has reacted to the progress with these vaccines, I think it's been different depending on the kind of company that you're talking about. Clearly, the smaller firms that have had a huge runup in price, so Novavax, BioNTech, Moderna--even Regeneron, it's definitely much larger than those companies but not a large-cap pharma or biotech. All of those have had a pretty good runup in price. And in terms of the names that we cover, by and large, we don't see those as good a value right now. We feel like it's more than incorporated in the stocks.

Then there's other companies that maybe have seen a small increase--companies like J&J, Astra, Sanofi--but they've already talked about the fact that these programs are going to be not for profit. So, it's difficult at this point for us to put any kind of extra cash flow benefit from these programs. We'd have to wait and see if this becomes a recurring profit stream, something where these companies are, after the pandemic, may be able to price at a profit and see some kind of financial benefit here. But so far, these are companies that are saying, hey, we just want to get a vaccine out for the good of society.

Then you have some other larger firms that I think look undervalued relative to the potential of their contribution with vaccines or with treatment. Firms like Pfizer, Roche, Gilead, these are all companies that are either working on… It kind of runs the spectrum there--Pfizer more focused on the vaccine, Roche now working with Regeneron and an antibody. That's a relatively new agreement for them but could be huge upside and then, Gilead, of course, with remdesivir.

Ptak: You've a much wider subject matter expertise than just COVID vaccines and their developers. Let's talk about some of the more important trends you're observing in the biotech and pharma industries and the potential that might have to transform healthcare. What, in your opinion, does the next frontier look like?

Andersen: I'd say there's a lot of kind of exciting trends going on in the backdrop before we entered COVID that we were highlighting. One of the things that we see in terms of the regulatory backdrop here is that, in general, I think the FDA has been very supportive of helping drug companies get new groundbreaking treatments to market. We've seen the time to approval just really accelerate. Instead of taking a year, some of these treatments are getting approval within weeks of filing. And that's because the FDA is talking to these companies throughout development, watching the data unfold real time. And that's the kind of process that we think could be applied when these vaccine companies do actually apply for a full approval. There is going to be this real-time analysis and this benefit from this faster regulatory support. I think that that's a trend that we've been seeing over the past several years that's really helping these companies move forward.

I'd say one area that just in terms of different therapeutic areas, we've definitely seen a lot of progress in oncology. I'd say we've seen just new types of therapies coming to market, new cell therapies where you take a patient's own cells, modify them and inject them back in, and that's actually proven to be curative for some patients with certain forms of blood cancer. It's kind of step by step, looking at various different subsets of different types of cancer. But I think step by step we're starting to find answers for some of these different types of cancer.

I think also in general gene therapy, that's going to be a trend going forward. We have seen some progress already there with some rare diseases. We've seen Zolgensma approved, that's Novartis' gene therapy for a rare neuromuscular disorder that's approved for young children. I think we're going to see just much more news more about focusing on our potential to cure diseases rather than putting patients on treatment that they will need chronically.

And then, just in general in neurology, I think there's just so much promise here. I know that Biogen, there's a lot of controversy around their Alzheimer's drug aducanumab and whether that's actually going to get approved in early 2021; whether it's actually that effective or not. But I think there's a lot behind that drug in terms of not just Biogen's pipeline but companies like Roche, several other neurology players, Ionis, that are looking at the genetic basis for some of these diseases, like Huntington's disease is a great example. There are no good treatments; devastating disease. But Roche and Ionis have a program that looks extremely promising that's in studies right now. I think we're going to just start to see more progress in areas that have seemed just so frustrating and so impossible to move forward in in the past.

Benz: Karen, how do you think the biopharmaceutical industry's response to COVID will change the public's perception about the industry and its practices? And do you think that will potentially reverberate when it comes to healthcare and public policy?

Andersen: I think that perception of the industry has been very poor relative to pretty much any other industry out there. I think that it's already improving. I think that during the pandemic, drug development, vaccine development have definitely been clear, bright spots I'd say and the response of the U.S. So many other things have gone wrong, but I think the drug development, the vaccine development have all been kind of trending all in the right direction. I think this does create a lot of goodwill toward the industry. And in my mind, it supports the argument that it's one thing to try to help patients afford their medicines to reduce out-of-pocket costs. But we may not want to implement any kind of just devastating price regulation. We may not want to just destroy pricing in an area where we've seen such solid innovation in so many areas. I think it makes it less likely that we would see more aggressive double-digit hits to pricing from any policies coming out of Washington.

Ptak: I wanted to close by asking a question from the patient's perspective. If we were to fast forward 10 years from now and try to imagine what pharmaceutical care would look like from the patient's perspective, where would that differ most strikingly from today, maybe taking cancer treatment as an example?

Andersen: Ten years--in a way, 10 years is kind of a short time for drug development. It basically is taking the programs that we heard about today that are maybe just entering clinical development and forecasting what could happen if those drugs, those treatments are available for patients in a decade. So, it's hard to say whether we're going to have additional just revolutions in cancer care. But in some ways we kind of already have over the past few years, because we've had so many new oncology therapies that really tap into getting the immune system involved in fighting cancer with drugs like Keytruda and Opdivo, these CAR T, these cell therapies I referred to. And then, there's a whole host of other types of oncology therapies that also try to bring in the immune system but are maybe more convenient to administer and don't take as much time to give to patients. So, I think there is a lot of promise for new types of therapy.

I think we're probably going to start to get better at diagnosing some of these diseases earlier, maybe with more blood tests that can determine early signs of disease. I think sequencing is also going to help where it's going to get cheaper, it's going to get easier. And using that sequencing information we'll be able to come up with more combination regimens. So, more treatments, kind of like we treat HIV. If you have three drugs you combine together, it keeps the virus under control. In cancer, it could be something similar, where if we find the right three drugs, it prevents that cancer from mutating and getting around those treatments.

I guess if I were to highlight just one really exciting potential area in oncology, it would be the idea of personalized cancer vaccines. I thought that would be something interesting to highlight right here because BioNTech--one of the companies that's one of the leading COVID-19 vaccine manufacturers--they're actually pursuing vaccines as treatments for cancer. And so, these can be designed for each patient individually based on the specifics of their cancer. Basically, the treatment helps the immune system mount a more effective response than they would have without treatment. This would be a very big leap in terms of really coming up with a treatment that's designed specifically for the mutations each person sees.

Ptak: Well, Karen, this has been terrific. Thanks so much for your time and valuable insights on these topics. We really appreciate it.

Andersen: Yeah, no problem. I enjoyed it.

Benz: Thanks so much, Karen.

Ptak: Thanks for joining us on The Long View. If you liked what you heard, please subscribe to and rate The Long View from Morningstar on iTunes, Google Play, Spotify, or wherever you get your podcasts.

Benz: You can follow us on Twitter @Christine_Benz.

Ptak: And at @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at Until next time, thanks for joining us.

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