General outlook

Elaboration on some news regarding the coronavirus and its evident impact on the pharma industry, tech giants, China and the world trade system.

On Feb. 8th, according to the World Health Organisation, the n2019-nCoV coronavirus has killed 724 people and more than 34,000 people are infected in over 25 countries. [1]

Originating in December 2019, the problem was not getting wide attention on social media up to the point when the virus has started to spread with geometric progression. As this start-up is based in York, where there were 2 of 3 total infected in the UK, we want to raise awareness of the issue.

Looking at the case of SARS Coronavirus 2002

The n2019-nCoV coronavirus is believed to be the mutated version of SARS coronavirus. The first case of SARS was reported in Guangdong Province, China, in November 2002, which prompted the epidemic to begin.

Due to SARS's viral nature, antibiotics were ineffective and treatments were mainly supported with medication used to lower one's body temperature, antiviral medication, supplemental oxygen, and mechanical lung ventilation. Moreover, to stop SARS from spreading over, infected patients must have been isolated in negative pressure rooms with a complete barrier, thus protecting nurses if any necessary contact with these patients was needed.

As of 2020, there is still no cure or protective vaccine for tackling SARS that is both safe and effective in humans. However, the SARS outbreak was successfully stopped due to a prompt reaction of the World Health Organisation, which has developed a list of restrictive measures for medical and public institutions, such as hand hygiene, direct contact precautions (use of gowns, goggles, gloves) and measures to limit the airborne spread of infection (negative pressure in rooms where the patients are located.)

Effect on China's Economic Performance.

China has evolved into an essential member of the global supply chain, producing components needed by factories from Mexico to Malaysia at the approximate cost of $25.3 trillion per year. It has also risen into an enormous consumer market, a nation of 1.4 billion people with a growing appetite for electronic gadgets, fashion apparel and trips to Disneyland. [6]

The n2019-nCoV coronavirus outbreak would severely damage the global market. China's economic growth is expected to slip this year to 5.6 percent from 6.1 percent last year, according to Oxford Economics, based on the impact of the virus so far. That would, in turn, reduce global economic growth for the year by 0.2 percent, to an annual rate of 2.3 percent - the slowest pace since the global financial crisis a decade ago.

One of the affected sectors would be Chinese exports transported via passenger planes, and most world economies have banned the arrival of planes from China to stop spreading the virus. In 2018, exports had accounted for about 18.24% of China's gross domestic product, [4] which means that a slowdown in exports would certainly damage the economic growth of the economy.

Moreover, China's economic relationship with the rest of the world has worsened due to the protectionist policies implemented by other countries in an attempt to stop the virus from further spreading over. Thus, China has no other choice but to find ways to compromise the threat caused to its market: China announced it will halve $75 billion worth of United States' imports as the world's two largest economies continue to step back from a years-long trade war" [1]. They are trying to build better relationships with the largest economy in the world by allowing the US imports to be more competitive in the Chinese market, in hopes that the US economy would also go on a deal with China, thus allowing the Chinese market to grow via bilateral trade.

Additionally, a public health crisis can morph into a stock market plunge. Chinese investors have already sent shares in China down about 8% in recent days, thus negatively affecting the World Stock prices [6]. In response, China plans to inject fresh credits (a personal line of credit worth between $500 - $2,500) into the economy by including a net of $22 billion, in a mix with looser borrowing terms for Chinese companies to stabilize money markets.

Pressure on Global Drugs Companies

As the number of cases increases every day, the pharma sector becomes more interested in vaccine research. However, we are not talking about pharmaceutical companies' attempts to develop a vaccine, but about intellectual property. China's increasingly affluent population represents a huge opportunity for drugmakers; many are investing heavily in the region, despite previous data integrity and sales scandals.

One of the examples is Gilead Sciences Inc. Gilead's remdesivir drug was unsuccessfully developed in 2016 to treat Ebola but has shown promise in lab settings against diseases similar to the new n2019-nCoV coronavirus. The drug is currently being tested in clinical trials in short order, but the company could eventually be cut out.

Albeit if the patent is granted, it will confirm long-standing drugmaker fears about China's commitment to IP protection, raising concern about the industry's future in a crucial market. It also could further erode the already weak incentives for pharma to invest in drugs to combat emerging infectious diseases.

Chinese researchers want to patent remdesivir specifically as a possible coronavirus treatment. Given the devastating impact of the disease in Wuhan, it is understandable why researchers would consider taking this step. For Gilead, it's not the worst-case scenario - that would be a full-on compulsory license where a country fully seizes drug rights in an emergency. Although, the company could see any potential return on the medication curtailed if China starts manufacturing it.

Whilst China has recently demonstrated a greater commitment to IP rights in its initial trade deal with the US, granting this patent could erode trust in the government and scare off foreign drugmakers. The consequences wouldn't be limited to declining corporate confidence in China, even if this is a one-time emergency event.

The world dramatically under-invests in drugs to combat infectious diseases, and a move like this by the Chinese government wouldn't help. Developing such medicines isn't very profitable, compared to drugs for rare diseases and cancer. That's especially true when it comes to emerging viruses, in spite of the obvious risk. Outbreaks are more common in developing countries, which limits pricing power. By the time a company has managed to get approval for any given drug, often a years-long process, there's a good chance that the outbreak will be over. It is arguably one of the rare cases where the ability of drugmakers to profit needs to be.

Consequences for Tech Giants.

Sudden exposure to the economic shock would have unavoidable costs to the rest of the trading world.

China has gained substantial power in lucrative goods like smartphones, computers and auto parts, thus impacting multinational companies. For example, the n2019-nCoV coronavirus epidemic has postponed the release of Apple iPhone 9 and Samsung Galaxy S20, for Foxconn, the manufacturer for Apple products, is based in China; thus, to avoid the risk of the virus transmission, the release of these products needs to be delayed. This damages both Apple and Samsung, and many other companies that supply these companies with raw material and intermediate goods, i.e. Qualcomm with their chips, which can affect Samsung's tendency to release flagman S line in February/March on an annual basis. Qualcomm, in particular, is the dominant maker of chips for mobile phones, is dependent on China, drawing 47 percent of its annual revenue - or nearly $12 billion - from sales in the country. The n2019-nCoV coronavirus shock would henceforth severely damage the revenue for the firm itself and the companies that demand their chips.[5]

Looking closely at the case of Hong Kong.

As Hong Kong authorities declared that a twenty-second virus victim was found, the island mourns its first coronavirus-related death, which was confirmed a few days ago as of the publication date of this article. The virus contagion has now reached another urgency peak for the authorities and the citizens, who demand a complete lockdown of the border with China.

This happens simultaneously with the intensifying of the hospital staff's local strike. Hong Kong authorities have canceled the 2020 Hong Kong edition of the famous international art fair, Basel. The director, Marc Spiegler, had unsuccessfully attempted to keep the event on before officials started considering the risk to be too high to maintain it. An "off" Art Central fair, which was scheduled during the same period (Marth 19-21, 2020), has consequently been canceled.

The iconic Hong Kong's Cathay Pacific airline has canceled 90% of its flights with China and 30% of its international flights. The firm's CEO, Augustus Tang, has asked all of his 27,000 employees, regardless of position, to take 3 weeks off between March 31st and June 30th. According to him, the company's current financial situation is as bad as it was during the 2007-2008 crisis.

How can you protect yourself?
 

The n2019-nCoV coronavirus is, indeed, a catastrophe for global economics and global health - but it cannot be called a pandemic, for now. A pandemic, precisely speaking, is an epidemic of disease that has spread across a large region, or even worldwide. The coronavirus has only massively spread in China, so far, and the number of patients in the world is relatively low. The main issue in the future is the further spreading of the virus, and the patients' quarantine, which lasts two weeks. During these 14 days, it is the incubation period - the patient does not display any symptoms due to asymptomatic transmission and might infect people around themself. That is what explains the virus outbreak.

It is important to know that not only young or elder people are vulnerable to the virus. People of all ages can be infected by the new n2019-nCoV coronavirus. However, older people, and people with pre-existing medical conditions, - such as asthma, diabetes, heart disease, - appear to be more vulnerable to becoming severely ill with the virus. That's why the World Health Organisation strongly advises people of all ages to take the following steps to protect themselves from the virus.

• Wash your hands frequently - washing your hands with soap and water, or using alcohol-based hand rub eliminates the virus if it is on your hands. 
• Practice respiratory hygiene
• Cover mouth and nose with flexed elbow or tissue when coughing or sneezing, discard tissue immediately into a closed bin and clean your hands with alcohol-based hand rub or soap and water. This way, you can prevent the spread of germs and viruses
• Maintain social distancing - when someone who is infected with respiratory disease, coughs or sneezes they project small droplets containing the virus. If you are too close, you can breathe in the virus.
• Avoid touching eyes, nose and mouth - hands touch many surfaces that can be contaminated with the virus. If you touch your eyes, nose or mouth with your contaminated hands, you can transfer the virus from the surface to yourself.
• Seek medical care ASAP  if symptoms are present - for example if you have fever, cough and difficulty breathing.

• Avoid traveling to China or regions with known nCoV cases - If you have mild respiratory symptoms and no travel history to or within China, carefully practice basic respiratory and hand hygiene and stay home until you are recovered, if possible.

• Practice general hygiene measures when visiting live animal markets, wet markets or animal product markets - ensure regular hand washing with soap and potable water after touching animals and animal products; avoid touching eyes, nose or mouth with hands; and avoid contact with sick animals or spoiled animal products. Strictly avoid any contact with other animals in the market (e.g., stray cats and dogs, rodents, birds, bats). Avoid contact with potentially contaminated animal waste or fluids on the soil or structure facilities
  

• Avoid raw or undercooked animal products - handle raw meat, milk or animal organs with care, to avoid cross-contamination with uncooked foods, as per good food safety practices.

To sum up

The n2019-nCoV coronavirus is, indeed, a great danger to global health. However, from the official data provided by the Chinese government, we can sum up that its biological danger is relatively lower compared to its effect on global and Chinese economics.

The measures recommended by the World Health Organisation should be taken promptly to:

• keep the virus from spreading all over the world
  
• maintain global economics and to get rid of the virus outbreak

The resolution to this problem is still to be found and that is only the beginning of the virus spread.

Yet, the virus is affecting various industries, but there needs to be a closer look at some particular industries, thus we covered only a limited part of the markets the virus has covered.

Stay safe,

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Up to 08.02.2020

References:

1.https://www.worldometers.info/coronavirus/

1.1.https://edition.cnn.com/2020/02/06/economy/china-tariffs-coronavirus/index.html

2.https://www.bloomberg.com/opinion/articles/2020-02-05/coronavirus-china-drug-patent-grab-is-scary-for-pharma

3. https://twitter.com/Independent/status/1224694095672561664

4.https://www.statista.com/statistics/256591/share-of-chinas-exports-in-gross-domestic-product

https://www.nasdaq.com/articles/could-the-coronavirus-outbreak-hurt-apples-shares-2020-02-06

5.https://www.thebalance.com/china-economy-facts-effect-on-us-economy-3306345

6. https://www.nytimes.com/2020/02/02/business/global-markets.html

7.https://www.dailymail.co.uk/health/article-7973291/Man-caught-killer-coronavirus-15-SECONDS-standing-infected-woman.html?ito=social-twitter_mailonline

8.https://www.nytimes.com/2020/02/03/business/economy/SARS-coronavirus-economic-impact-china.html

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