We think widespread availability of a coronavirus vaccine or curative treatment will probably be necessary to completely remove social distancing measures.

In our base-case US scenario, we expect states to wait for reassurance that the COVID-19 spread has flattened before beginning to reopen businesses, and we assume a 30 per cent reduction in visits to nonessential businesses from baseline by the end of the year.

This is a significant improvement from levels at the end of March (65 per cent reduction) and should improve further in 2021 with the availability of a coronavirus vaccine. We assume that less than 10 per cent of the US population is infected by the end of 2020, with a 0.7 per cent death rate, as improving levels of testing help control the spread of the disease.

  • Remdesivir’s recent emergency use authorisation in severely ill COVID-19 patients is a turning point, but efficacy to date does not look strong enough on its own to justify relaxing lockdowns. We project $2 billion in peak sales in 2021, assuming an eventual US price (after donated supplies) of around $500 per treatment.
  • Repurposed drugs could be the next wave of approvals. We expect IL-6 antibodies like Actemra and Kevzara could find a niche among the most severely ill patients by this summer, with data starting to read out on JAK inhibitors like Jakafi and Olumiant this summer, as well.
  • Novel, targeted antibodies, led by Regeneron’s antibody cocktail, are likely to be effective but are behind this schedule; they could be available late this year for high-risk populations.
  • While coronavirus vaccines have yet to produce clinical data, encouraging preclinical data, strong partnerships and funding, and rapid clinical progress all seem to indicate that use in high-risk populations could be possible by the end of 2020, with tens of millions of doses potentially available by that point. If just two of these vaccines succeed, we could have enough supply to protect high-risk populations in late 2020 and for broader vaccination as we enter 2021.

Considering the utter importance of diagnostic testing to help the US begin resuming economic activity in a manner that minimizes the prospect of increases in infection, we remain concerned about national testing capacity meeting necessary levels both in terms of volume and accuracy.

The US was already behind the eight ball when SARS-CoV-2 infections began to rise in February and March. Once the Food and Drug Administration began to approve COVID-19 diagnostic tests under the Emergency Use Act in March, we began to see new tests roll out and capacity for diagnostic testing rise. At the start of May, the US was above 300,000 tests per day, which gets us to roughly 2.1 million tests per week.

Nevertheless, this remains far lower than the 500,000 to more than 1 million tests per day that we see as the midrange of what epidemiologists and economists have projected is required to keep the COVID-19 infection from overwhelming our finite healthcare provider systems.

US testing czar Admiral Brett Giroir says our testing capabilities are in the right ballpark for reopening in May and that four types of testing are needed: surveillance (testing hundreds of thousands a month to get a radar view, even among asymptomatic), symptomatic (millions of tests per month to get a nearly 10 per cent positive rate, meaning 10 per cent of tests coming back positive ), contact tracing (five people per confirmed case on average), and antibody testing.

A 10 per cent positive rate is the maximum recommended by the World Health Organisation and a level the US recently reached, based on daily data. Cumulative testing results as of 7 May, with more than 8 million tests run, show an overall positive rate around 15 per cent.

Testing improving and positive rate moving in the right direction

In addition, comparing US testing rates to other countries gives some perspective. This comparison shows the slow start the US made in ramping testing, and while there is a clear improvement over the past couple of months, the extent of the US outbreak should justify even higher testing rates.

Another way of examining this is from the perspective of positive rates—the percentage of tests coming back positive. While the US is making progress on positive rates, we have just barely reached the 10 per cent threshold as a country, and some states are well above.

South Korea was at 2 per cent (roughly 10,000 positive tests out of 600,000), and we are higher than every other developed country outside the United Kingdom, which is at 30 per cent.

Prem Icon Morningstar's Global Best Ideas list is out now. Morningstar Premium subscribers can view the list here.