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This Hedge Fund Is ‘Reasonably Confident’ a Covid-19 Vaccine Will Be Approved This Year

MKP Capital has also calculated the odds of the FDA approving a vaccine before the U.S. presidential election.

Asset manager MKP Capital Management has placed a 70 percent probability on a Covid-19 vaccine being approved in 2020, with a smaller chance of that happening before the U.S. presidential election. 

MKP Capital, an alternative asset manager focused on global macro and fixed-income relative value strategies, sees a 40 percent chance that a vaccine will be approved before the election on November 3, according to a report from the firm dated September 9. 

“It is now MKP’s strong base case that we will have at least one successful vaccine by the end of the year,” the firm said in the report. “A major question mark remains around whether a vaccine will be available ahead of this date and potentially provide a boost to President Trump’s campaign.”

Stocks and bonds were initially rocked by the Covid-19 pandemic this year, tanking during the first quarter before the Federal Reserve stepped in with a series of emergency measures. While markets have rebounded as investors look beyond the economic recession prompted by the deadly disease, some companies and sectors remain battered by the downturn.

While the world is beginning to “learn to live with the virus,” Covid-19 is still causing a significant break in economic activity, Michael Hume, MKP’s head of strategy and research, said Thursday in a phone interview. “There are sectors that are obviously just struggling to get back to any form of normality,” such as hospitality, travel, and leisure, he said, adding that a vaccine would be a “silver bullet” for getting there. 

MKP expects that major pharmaceutical companies including Pfizer and Moderna will focus on vaccines at their annual research and development and investor days over the next few weeks, according to the report. “We should therefore receive important news on recruitment, timeline, and potentially effectiveness so far,” the firm said, pointing to Pfizer and BioNTec, AstraZeneca and the University of Oxford, and Moderna as frontrunners in the race for a Western vaccine.

“All three have published promising phase I/II results and their final phase III trials are progressing well,” MKP said. While the U.S. Food and Drug Administration normally grants vaccine approvals only after phase III trials have been completed, the FDA is willing to allow emergency use authorization before completion in the case of Covid-19 provided its safety guidelines are met, according to the report. 

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MKP, which is “reasonably confident” that a vaccine will be approved this year, now views Pfizer as the sole drug company that could “feasibly be able to complete their trial ahead of the election,” according to the report.

“The outcome of the U.S. election is extremely significant for asset managers in general,” said Hume, who is based in London. “It is particularly important this year because of the very different fiscal expansion plans that are being proposed by the candidates.”

The presidential election for the world’s largest economy is also significant because of the candidates’ different business policies, he said, with “Joe Biden being perceived as much more anti-business with taxes on corporates” and some “anti-trust policies around tech.” Hume said the potential approval of a Covid-19 vaccine plays into the election because it could provide “a feel good benefit” for President Trump close to voting day.

Based on the 70 percent probability MKP calculates for at least one vaccine obtaining FDA approval this year, the firm sees a 40 percent chance of that happening in November and a 20 percent probability for December, according to the report. MKP believes emergency approval before the presidential election wouldn’t include any “corner cutting.”

“While political pressure may weigh heavily on government departments like the FDA,” MKP said that “it is likely to have less influence on the pharmaceuticals themselves, who have pledged that they will ensure the safety and effectiveness of their vaccine candidates before seeking government approval.”

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