Barron's Streetwise - The Search for a Covid-19 Treatment

Episode Date: March 27, 2020

Jack Hough speaks with Regeneron CEO Dr. Leonard Schleifer and Wall Street biotech analyst Dr. Yaron Werber. Plus, a bagel store selling toilet paper. Barron's Streetwise is a weekly podcast from Barron's. Produced by Mette Lützhøft. Learn more about your ad choices. Visit megaphone.fm/adchoices

With record levels of dry powder available for investment, find out what's in store for private markets in 2025 and beyond. Listen to Crafting Capital in partnership with UBS at partners.wsj.com slash UBS, Spotify and Apple Podcasts. Remember that the big problem we're all worried about, the whole purpose of social distancing, staying at home, grinding the economy to a halt, is that if we all get sick

at once, people who could be saved by modern health care, we won't have enough intensive care beds to take care of them. So best case, a drug like this could really slow down the number of people who needed really intensive respiratory therapy. I'm Jack Howe. This is the first episode of a Barron's podcast called Streetwise. The voice you heard was Dr. Leonard Schleifer. He's the CEO of Regeneron, which is a big drug developer. And we'll hear more from him in a moment and from a Wall Street biotech expert about the search for a COVID-19 treatment.

for a COVID-19 treatment. This podcast wasn't meant to be focused on epidemiology, but then I wasn't meant to be recording this from my basement, hoping the kids and the dog don't make too much noise. Times have changed. Listening in is our audio producer, Metta. Am I popping my peas in this microphone, Metta? No, Jack, you sound good. No, no pee popping. So I read a column for Barron's called Streetwise, and under normal circumstances,

I weigh in on things like stocks, interest rates, Wall Street absurdities. I read about why people are suddenly drinking so much hard seltzer. I have passionate views on things like minivans and cinnamon toast crunch cereal. And my job gives me access to top CEOs whose views I share with readers. Whatever the long-term plan is for this podcast, I'm going to scrap it for these first few weeks to talk about the only things on people's minds. How to deal with the uncertainty of this pandemic and its effect on people's livelihoods and savings. I went down to the little bagel shop here in town because I'm trying to do what I can to support businesses that might be struggling right now in my town. So I go into the store and on the counter there is a stack of toilet paper,

right? It says Cottonelle Professional. I don't know how qualified you have to be to use a thing called Cottonelle Professional, but the rolls are there and they're selling them for a dollar and a half a roll. And these are nice folks who run the bagel shop. They're not trying to be profiteers or anything like that. What they're doing is they went in the back room and they said, well, some people out there can't get toilet paper because other shoppers are hoarding it all from supermarkets. So do we have any lying around that we don't need? Can we offer it up to people in the town who might need a roll? That's not something as an American I'm used to seeing. That's shocking.

Do you want me to make a bidet joke? I've been thinking a lot about this. Bidets should be coming back. You did not just use the B word. I feel like we need a whole episode just to deal with that. I feel like other countries have figured it out, though. In Japan, you have those little toilets that have a little rinser installed. Every toilet conversation leads to Japan. I don't know what's going on. Toilets over there are like a member of the family.

So let me say a word about the stock market and then we'll get to the interviews, which I hope you'll find interesting and informative. So the question I hear most often is, have we hit bottom in the stock market? Is it going to get worse from here? Or I have cash that I've been waiting to put to work. Should I do that now? If you're a long-term investor, you don't need to find the bottom. You just need to buy when prices aren't crazy. And prices aren't crazy now. Prices are pretty reasonable now. Go to it. If you're a long-term investor, buy something as simple as an S&P 500 fund. You'll do fine. If you're a short-term investor and you're trying to find the bottom, I would just say, good luck. There are Wall Street analysts who will give you very specific answers. Now,

those are the S&P 500 will bottom at 2000. I've got my own estimate about which orifice these analysts are pulling their price targets out of because there's no way to know a thing like that. Price to earnings ratios or things like that won't tell you anything in the short run. It's all about human behavior and fear and the course of this virus, really. And then some people predict a V-shaped recovery for the economy. They say, well, our near-term target is 20% lower. We've got a year-end target that's 30% higher. Now they're pulling out two estimates at the same time, which is dangerous. Don't hurt yourself, people of Wall Street, okay? I would just point out that most people don't have all their money in stocks.

If you've got a 60-40 portfolio between stocks and bonds, you might have gone down 20% year-to-date, which is about 10% versus this time a year ago. There wasn't fun, but it wasn't financial Armageddon either. So stay diversified. Better days will come. Now, since everything does depend on the pandemic and the virus, let's get right to talking with some people who are informed on the matter who can help us think about how soon we might expect help to arrive in terms of medicine. We've all heard that a vaccine to help with this pandemic might take 12 to 18 months to make from

people like Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases. So although this is the fastest we have ever gone from a sequence of a virus to a trial, it still would not be any applicable to the epidemic unless we really wait about a year to a year and a half. So that raises the question of what can we do before a vaccine is ready? And that's where Lenschleifer at Regeneron comes into the picture. Regeneron is a big biotech company based in Westchester County, New York. That's where I live.

They came up with a treatment for Ebola in Congo that they had some success with. Four drugs were tested in the middle of the current outbreak. A different drug from Regeneron brought the death rate down to 29%. The treatment did well in clinical trials in the fall of last year. Here's CEO Leonard Schleifer. We immunized these mice with a piece of the Ebola virus, and we took the antibodies, piece of the Ebola virus. And we took the antibodies, manufactured them at scale,

and gave them to patients who literally were dying from Ebola in the Congo. And the independent study, people found that they had to stop the study because our antibodies were overwhelmingly effective. They're working on a treatment that could help us with this virus while we wait for a vaccine. And that's super important. Here's Len explaining why. Remember that the big problem we're all worried about, the whole purpose of social distancing, staying at home, grinding the economy to a halt, is that if we all get sick at once, people who could be saved by modern health healthcare, we won't have enough intensive care beds to take care of them. So best case, a drug like this could really slow down the number of people who needed really intensive respiratory therapy. Regeneron is already testing a drug for

COVID-19 in clinical trials. It's called Kevzara, and it's similar to another drug made by Roche called Actemra. Regeneron's drug is for arthritis. You think to yourself, what does arthritis have to do with people in the hospital with COVID-19? The answer is inflammation, right? The same drug that might bring down inflammation in joints, it could also bring down inflammation in lungs, and that could stop a patient who, let's say, is in the hospital and getting supplemental oxygen, but deteriorating. That could stop that patient from needing a ventilator. It could save their life. It could free up that ventilator for someone who needs it more. And the hope is that this drug will block interleukin-6 and block the inflammation.

Regeneron has a unique platform for making drugs. They use what they call Velocimune mice, which are created through genetic engineering. What these mice can do through the miracles of genetic engineering is that you can take these mice, inject them, if you will, immunize them with a piece of a virus, and they will generate human antibodies, actually human antibodies that can be manufactured and given to patients as either a preventative or a treatment. I've been to the headquarters of Regeneron several years ago. I did a cover story on them. It's really striking. First of all, the building is like teeming with these, you know, 28-year-old biotech geniuses. It's really impressive. And they have these rooms where

the mice are. And the one specific detail that I remember more than any other, even though this is such a futuristic facility, near the doors, there were mousetraps, the kind with the glue. I asked the person who was taking me around, I said, do you have mice that try to jailbreak or something like that? He said, no, those aren't for the mice trying to get out. If we had a situation where a mouse came from outside and tried to get in, it could be disastrous for the work that we're trying to do to create a life-saving drug. So we need to really keep any mice from getting in. Wait, why would any mice want to get in? Isn't it like a death trap in there?

I don't know. It's not like they had, you know, water slides and, you know, Ferris wheels. It didn't look that fun. If I were giving this a review on Yelp for tourists, for mouse tourists, I would definitely give it a poor score. And the question is, were they trying to bust out the other mice? You're thinking in terms of making this into a Disney movie, aren't you? I'm just wondering, in your head, are the mice wearing clothes? Because that's your first signal that you're thinking in Disney terms. And guns, yeah. Water guns. Dr. Schlafer says they have already identified hundreds of antibodies that could neutralize the virus,

and now it's a matter of picking the best. We're going to pick the best. We're going to manufacture a cocktail, and we hope to get started testing patients in June and manufacturing at large scale by the end of the summer. This sounds hopeful. We're waiting for a vaccine. Meanwhile, companies are trying to create treatments specifically for this disease,

and they're trying drugs that are already on the shelves for other diseases like arthritis, maybe even malaria. President Trump says he's optimistic about some potential treatments for the novel coronavirus, in particular, a malaria drug called chloroquine. You know, this has been something that's been around for many years. It's been a phenomenal, strong, powerful drug for malaria. But we think it might work on this. What's frustrating here is I hear passionate arguments on both sides about these malaria pills, and I can't tell how much of it is politics and how much is medicine. So I called up Jeroen Werber. His first name, he says, you pronounce it Jeroen

like Jeroen Jeroen. And he's an MD, but he's also the managing director of healthcare at Cowan. So he's at this intersection of medicine and finance. And his audio recording skills are about on par with mine. Okay. Thanks a lot, Jeroen, for making a few minutes to speak with me. Yeah. Yeah, absolutely. Matt is going to ask you to get like as close to your microphone, I guess, as you can. Perfect. So I turned up the volume all the way up. I'm sitting at the computer pretty much. Okay. I asked Yaron how good of a shot he believes we have at malaria treatment being effective for COVID-19. You're referring to hydroxychloroquine, which is not technically approved yet by FDA,

but has been approved for many years for malaria and now is showing some utility in COVID-19. So that could be pretty promising. Is there any way of knowing or guessing the promise of these arthritis drugs from Regeneron and Roche versus, I'm terrible with these medicine names, but- Hydroxychloroquine? Yeah. Yeah, it's a great question. They really ought to be used in combination. An antiviral or an entomallarial is designed to literally go and kill the virus directly. Whereas drugs such as the

anti-IL-6 antibody that you mentioned that's approved for arthritis is really designed to reduce the inflammation that happens in the body. It's the body's own reaction in trying to kill the virus. So you don't have to commit fully to one or the other now. You try what we have, you see what works. And by the way, for people out there saying, well, these medicines aren't proven to work for COVID-19. what works. And by the way, for people out there saying, well, these medicines aren't proven to work for COVID-19. These aren't approved by the FDA for this purpose. Yeah, I get it. This is something new. These drug companies and scientists are trying to save lives now. It's not like we're saying whatever we find to use now, we're going to commit to

this standard for the next 50 years of treatment for COVID-19. No, we're saying if we have something that can save lives until we get a vaccine available, let's try it. I want to just touch on the economics of making a drug for COVID-19 because I know there's a lively discussion in America about drug prices. There's like a preliminary backlash against drug companies with some politicians who said, well, the moment you get one of these drugs ready, you better be willing to sell at a cost. And this better not be a situation where you're trying to squeeze people for high drug prices. So I wanted to get some thoughts on that. I put a question like that to Dr. Schleifer at Regeneron.

Well, you know, I'll tell you, there's a couple of things, Jack. things, Jack. First of all, I just want to say that, you know, there's some people who suggest that we're sitting around rubbing our hands together trying to figure out how we're going to profit from the misfortune of this virus. This couldn't be further from the truth. You have people who literally are risking their health and that of their families by coming to work and literally working in the labs and working in the manufacturing facilities to do all this stuff with only one goal in mind, which is how fast can Regeneron and all of our dedicated people get together and produce this and deliver it to the public? I put a similar question to Jeroen at Cowan. He's a Wall Street guy, so he has a good sense

of the economics of different types of medicine. How would you characterize for a drug maker the economics of pandemic medicine versus, let's say, making a drug for a chronic disease? Yeah, so this is where the biotech industry, I think, shines in the ability to innovate and the ability to do right by humanity, especially now that there is so much negative press about this industry, which we think, unfortunately, has come to pass. But this is really an innovative industry that really does try to do the right thing. This is not what we think is going to be a moneymaker for them. That's because pandemics, even though they're devastating, eventually go away. So even if they're able to sell, it's going to be at a low price point. It's going to be hopefully a one and

done. It's possible that some governments are going to want to stockpile the antibody in case of a recurrence into next year. And so the fact that if the virus doesn't change in terms of the spike protein, it might suggest that the therapy can stay on the shelf and be used the next season. But this is more to do right by humanity. We've heard that there's no way to know for sure what path this virus will take, but Yaron has estimates based on past pandemics. If history is a guide, it will peak around May and around June, and then probably recur sometime in the late fall,

hopefully in resolve early next year. And certainly if we get therapeutics or vaccines to market early, that can help even faster. So would you expect the fall spike to be as bad as the spike now? Hopefully less so. And here's the good news. The good news is we're already doing social distancing. We are already taking all the preventative measures, which have grave economic consequences, but should limit loss of human life and resolve the spread of the disorder. And hopefully we will have some therapeutics and vaccines which can help resolve this. But I think we need to be cognizant that we have to follow the cases very closely into the early summer, and then again, get very vigilant again come fall. Meta, do you think I have to spell out for people that I'm not a doctor? Or do you think they will

catch on to that by the fact that I have trouble pronouncing drug names and things like that. I think they've got it, Jack. I think we're ready to wrap up. Okay. Well, thank you to everyone for listening. And I want to answer some listener and or reader questions in future episodes. So send me some questions. You can send them to me via email.

I'm at jack.how. That's H-O-U-G-H, at barons.com. And use your phone to record, use the voice recorder, record your questions, send in the audio file, and I'll play your question on a future episode. Just tell me your name and your town, and don't send me any obscene phone calls. You know what? If you really feel like it, send me an obscene phone call. But better to send me a question about your 401k, about the stock market, about the economy,

about your savings, or just your observations, what you're thinking about this. And please subscribe to the podcast. And thanks for listening.