New Variant 'Concerning,' Market Reaction 'Understandable' - Credit Suisse

Credit Suisse analyst Dominic Lunn has weighed in to discuss recent press reports about the new COVID-19 variant that is spreading around from South Africa in a swift manner.

It was reported that the first case was found in Botswana and then responsible for a sharp increase in COVID-19 cases in South Africa.

“Early evidence suggests a very rapid displacement of the delta variant, which is known to be dominant in South Africa. When we look back at the emergence of the delta wave, the key indicator was how quickly delta increased in its share of sequenced cases. Modelling data presented by the Financial Times would indicate a rapid rise in B.1.1.529’s share of cases to c.90% in areas where it is prevalent,” Lunn said in a client note.

“Initial thoughts from the [South African] institute are that partial immune escape is likely, a view that seems possible given the numerous mutations in comparison to the sequence that existing vaccines were designed against. We expect the first view on this to be from in vitro immunogenicity test or perhaps from computer modelling of the sequence. We estimate initial lab data could take less than 1 week to gene rate given the sequence is already known and work is already ongoing.”

Hence, the market reaction to a big new threat is “understandable.” On how quickly vaccine makers could adjust the shot to protect against a new variant, Lunn said:

“Previous comments from BioNTech have pointed to a 6-week timeframe in which to produce vaccines to new variants. We would assume that trials would also need to be conducted to determine if they are both safe and effective. This could add months. For mRNA vaccines, manufacturing is highly fungible, so a large portion of global capacity could pivot to the new vaccine much more rapidly than it took to scale up for the first wave of mRNA vaccines,” the analyst added.

The S&P 500 futures are down 1.5% in pre-open Friday.

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