100 "super encouraging" signs of recovery

L1 Capital’s founders tapped the collective wisdom of vaccine companies from around the world in pandemic-proofing their portfolio. CIOs Mark Landau and Raphael Lamm have held around 100 meetings with vaccine specialists since COVID breached international borders last February.

“Today, our insights on the vaccine are more nuanced than what many out there in the market might be talking about,” says Landau.

And while eyeballs are on Israel, sadly for other reasons right now, Landau and Lamm have been watching vaccine progress there since January. “Israel is by far the best illustration of whether the vaccine is working globally,” Landau says.

In the following interview, Landau outlines three reasons for hope – even in the face of likely “mutant strains” – and why Australia’s response has lagged. This in turn affects L1’s preferred reopening plays, as discussed in the following video. 

We invest alongside you

L1 Capital is an independent global investment manager. The business is 100% owned by our staff and all members of the investment team are invested alongside clients. Find out more.

Interview transcript 

Mark Landau: In the first half of 2020, we spent probably every waking hour thinking about the vaccine and whether it was going to work. And we did more than 100 meetings specifically on the vaccine, and that included meeting with the leading players at all of the Western vaccine companies, as well as all of the Chinese vaccine company. So it was either the CEO or the Chief Scientific Officer or the Head of R&D for Pfizer, Moderna, Astra Zeneca, et cetera. And when we finished that research around the middle of the year, we felt like we had a huge point of difference versus the market. We were really confident that these vaccines were going to work. Today, our difference of opinion is probably more nuanced. There are probably different things that we're focused on versus what the market might be talking about. There are probably four areas.

The first one is that people should be looking at the Israel data. Israel is by far the best illustration of whether the vaccine is working globally, and what we've seen since mid-January is that whether it's cases or hospitalisations or deaths from COVID are down 97% to 99% in the space of only a few months. So, that's super encouraging. That's giving us a lot of confidence that the vaccine is working in real life.

There's a bunch of different strains that exist in Israel that have been talked about as a vaccine buster, so to speak, and that that's probably the biggest difference of opinion. The second one is that people focus too much on the efficacy percentages. So everyone talks about whether AstraZeneca is lower than Pfizer and compares it. They're comparing apples with oranges. So the efficacy percentages are testing different things, and what they're missing is the real-world implications.

In the real world, regardless of which vaccine you take, you're not going to end up getting hospitalised. You're not going to end up dying. Whether you're asymptomatic or you've got mild symptoms, it's probably not going to scare you into changing your lifestyle. So if you get vaccinated, you think you're never going to die or go to a hospital, you'll go and live your life the way you did pre-COVID. And I think that's a huge point of difference.

The third one is that, with the vaccines, the mRNA vaccines in particular, we think are superior to the other ones. So Pfizer and Moderna, because of their technology, are much more flexible and able to adapt to new strains. So at the moment, all of the new mutant strains we've seen globally are able to be handled with the mRNA vaccines. The question going forward is, are we going to find new mutant strains that evade the vaccines? And I think we will over time most probably.

But the positive thing is that the mRNA vaccines, you can sequence the new mutant strain. You can plug that into your existing manufacturing. You don't need any major regulatory approvals and you're good to go to scale up production and start distributing it. So it's really encouraging that, if we do get one of these mutant strains, which the media loves to talk about, we think that people will be able to get on with their life and you will be able to get a booster shot. And then I guess the last one is probably from an Australian point of view. It's a bit disappointing. We think that Australia is going to lag the rest of the world, particularly places like the US and UK. The amount of vaccine that we have is not sufficient for the population. There's going to be a lag until we get access to the Pfizer vaccine.

And lastly and most importantly, the public has lost a lot of confidence in the vaccine. So I think the take-up rate here will be dramatically lower than the US and UK. And within our portfolio, we've been rotating our vaccine recovery plays, particularly those overseas rather than in Australia, for exactly that reason: because we think that places like the US and UK will start to see the benefits of the vaccine in the operating metrics for those companies, and in Australia that might lag by another six months before we start to see that benefit.