How COVID-19 Innovation Today Provides Investment Insight Into Tomorrow
In the last few weeks, over a dozen companies in the HTEC Index have stepped forward to provide life-saving solutions to combat coronavirus. These innovators are working round-the-clock to develop, obtain regulatory approvals, and launch products that for some, may not generate much profit. However, in doing so, all these companies are demonstrating their market leadership, ability to mobilize and innovate rapidly and scale for further innovation. We view these as positive leading indicators that reaffirm these companies’ long-term growth potential and fit in the HTEC strategy.
Illumina is an institution in the world of genomics
We recently described how scientists in China used Illumina’s gene sequencing instruments to identify the genomic profile of SARS-CoV-2, the virus that causes the COVID-19 illness. China made this data publicly available in January, kick-starting the worldwide research and development efforts to combat the virus. Improving the long-term outlook, Illumina has such a strong presence that other companies develop new products that can be used on Illumina’s tech. There are over 15,000 Illumina sequencers being used globally. Last year the company shipped the most systems in its history, and with the continued expansion of genomic science, we believe a long runway for growth remains. Thus, we expect to hear Illumina’s name tied to new scientific breakthroughs even after coronavirus, and for years to come.
Coronavirus tests will come in all shapes and sizes
It seemed for a moment that there were more press releases about companies making COVID-19 tests than there were actual COVID-19 tests. This is because diagnostic companies around the world stepped up to develop SARS-CoV-2 testing capabilities and received either CE Mark (Europe) or Emergency Use Authorization (U.S.) approvals within a two-week span. Of these first-to-market companies, nine are in the HTEC Index. Quidel and PerkinElmer are making kits used for SARS-CoV-2 testing. Becton Dickinson provides an instrument (BD Max in Europe) used to automate the testing process. It enables many tests to be run at once and helps keep the lab technician safe.
Roche, Thermo Fisher Scientific, Hologic, and Abbott sell the kits for use on their own automation systems. Most of them can run thousands of tests per day in three-hour cycles. DiaSorin’s recently approved test can be done in just over an hour. Cepheid, a Danaher company, was the first to launch a point-of-care test that can provide a test result in 45 minutes. Abbott is also launching a point-of-care test that can provide a positive result in five minutes, and a negative result in 13. These tests can be run on small instruments, placed near the patient in a wide variety of settings, like a physicians office or an emergency room. Conducting a test at the point of care also eliminates travel time otherwise needed to send specimens to a lab. Depending on supply availability of components, these companies expect to ramp production and ship millions of tests in aggregate within weeks following their respective approvals.
They don’t got a pill for this
There are over 35 programs working on developing treatment or vaccines for COVID-19, and over 150 clinical trials associated with these programs. Biotech and pharmaceutical companies are seeking new ways to either use existing commercialized therapies or create new ones. Regeneron has been making progress on both fronts. For treating symptoms, Regeneron started a trial that would use Kevzara, its rheumatoid arthritis therapy, to treat the respiratory illness symptoms spawned by coronavirus. In a separate program, Regeneron is using its genetic engineering technology to explore a new vaccine, which it hopes to have available for trial in August. This would set an unprecedented pace, as vaccines historically take years before they’re ready for human trials.
Moderna, another HTEC member, is also reaching for world records. Only 42 days after commencing development, Moderna became the first company to make a SARS-CoV-2 vaccine available for clinical trial. Positive data could lead to emergency use in a small group of patients as early as this fall. This vaccine is also a contender in another race, as it would be the world’s first therapy using new technology known as mRNA, a method that will help the patients’ genetic code instruct their bodies on how to fight off the infection. If Moderna pulls this off, we believe this could further accelerate innovation in the mRNA space. For Moderna, the opportunity is vast, as it already has over 20 other therapies in trials, six of which are infectious disease vaccines. Regardless of what happens with COVID-19 developments, the speed at which these companies moved tells us that their technology is advanced and working, which provides us with confidence in their long-term growth opportunities.
Challenges only grow after a trial begins. For example, once a new therapy has been administered, the patients must be monitored, which requires more staff time and hospital occupancy. Hydroxychloroquine and azithromycin, which is being used to treat some patients for COVID-19, may cause a heart abnormality that can lead to sudden cardiac arrest or death. BioTelemetry has a device that can continuously monitor and adjust dosing if needed for their patients, as well as detect any cardiac abnormalities that may occur during treatment. Because it can work remotely, the device also gives hospitals the option to transition people from an inpatient to outpatient setting, and ease the burden on the hospital.
People will talk about life before telemedicine the way they talk about life before the Internet
We believe telehealth companies like BioTelemetry are well positioned for accelerated demand in a post-pandemic world. Other telehealth companies in HTEC, including Ping An, are providing telemedicine services that enable remote doctor visits. With the world at home right now, these companies are providing a vital platform to help meet medical needs, while reducing further spread of infection. Utilization of these services has accelerated, as seen with Teladoc’s recently reported 50% spike in patient visits. In the UK, nearly one-third of providers offer telemedicine, and they are seeing a significant increase in demand due to the pandemic.
This uptick raises the question of how much longer this trend can last. In our view, telemedicine is here to stay, and three drivers will accelerate utilization over the long term. First, providers around the world that don’t currently have a regulation-compliant secure platform in place will likely need to implement one. Second, first-time users of telemedicine are highly likely to use it again, and COVID-19 has driven an increased level of first-use cases. Third, the degree of anxiety and isolation caused by the pandemic may accelerate demand for mental health visits, which are offered by most telemedicine platforms.
There is an efficient way to invest in all this disruption
While much is unknown about the current and post-pandemic landscape, we do know for certain that other illnesses, like diabetes, heart disease, and cancer aren’t going away, and neither is the need to address these illnesses. The world can’t afford escalating costs of healthcare and will lean on new technology to drive better treatment outcomes and lower overall costs. The 15 companies mentioned above represent just a glimpse of the broader disruption on the horizon. There are 70+ other companies in the index that are investing to bring new technology to market in the fastest-growing areas of healthcare, including genomics, precision medicine, telehealth, robotics, and more. HTEC investors will be well-positioned to capture the upside of this innovation for years to come.
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