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Hospital capacity is key for COVID-19 containment going forward: Oppenheimer analyst

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Oppenheimer Wall Street Analyst Hartaj Singh joins Yahoo Finance Live to discuss what type of regulatory responses we could see from countries reacting to the new COVID-19 variant in addition to laying out how this news could create opportunities for vaccine manufacturers.

Video Transcript

- And we want to continue the discussion about COVID, but its relationship to the markets right now where we have Moderna. That is up about 13%, and we are going to talk about this with Hartaj Singh, the Oppenheimer analyst here. And Hartaj, we're seeing Moderna, that stock and some other vaxx stocks are up in the pre-market. A lot of these stocks have been beaten down with the advent of the antivirus pills, I'm just wondering how you're viewing this situation right now?

And Hartaj, you might be muted.

HARTAJ SINGH: Yeah, apologies. Sorry about that. I think the stock market is always forward looking as we say, right? Correctly. And I think the market was assuming that there could be a fall wave, like Ameesh was talking about before me. But it wouldn't be as bad as last year. And I think a lot of folks in the stock market have done their due diligence in that regard as we continue to do.

So, I think that's one of the reasons why there's been this surprise today is that we were expecting a fall and winter season that should be something that we could deal with from the point of view of the stock market. I think in terms of just the actual stocks themselves, right? Let's just think about what Ameesh just said. We don't really know what's going on with the virus, what we do know is that scientists, companies, and regulators are working on it furiously. The holiday weekends probably slowed them down a little bit.

We also know that there have been vaccines and therapeutics that have been developed by companies like Regeneron, like Moderna, we don't cover Pfizer and BioNTech, that are ready for future variants, not this specific variants, but they've got the processes in place to get it going.

Also, we know that there are labs that have been working with mutated viruses, thinking ahead in a Petri dish mutating the virus itself to think which forms it could take. And those folks are reaching into their notebooks and trying to figure out what's going on with this virus.

So I would expect us to get an update from scientists and companies shortly in then the next few days as to what this virus actually means. In terms of what that means for therapeutics and vaccines, well, Moderna and Pfizer, BioNTech, have said to us previously that they could get a vaccine into the clinic within a few weeks. And within three months, they could actually have it in clinical trials. And then it just all boils down to what regulators want.

Do they want to prove it based on pre-clinical data, or do they want another two or three months of clinical data, et cetera? So, again, I think that gives you the timeline of uncertainty here. It could be as little as a few days if this virus is something that the current vaccines and therapeutics could contain. Or it could be as much as six months if current therapeutics and vaccines might not be able to contain this virus and we need more vaccines and newer vaccines and therapeutics to be able to tackle it. I think that's the kind of window we want to think about.

- Hartaj, we also got the news out of Merck today, their COVID pill reducing hospitalizations and deaths by 30%. That's down from the initial estimate that we got a few months ago of the fact that it would lower it by 50%. What's your take on that and, I guess, how big of a role do you potentially see these COVID-19 pills playing in mitigating and getting the virus under control?

HARTAJ SINGH: I mean, look, that's a really good question. And it kind of, I think, there's many parts of it. Look, here's the simple thing as Ameesh before me said. We got many more tools to fight this virus this time around, including these oral pills, right? The key is if we want to avoid partial lockdowns or other restrictive measures that society struggles against all over the world, it's really at the hospital at the point of care that we have to be sort of worried about because if we overwhelm the hospitals with patients being hospitalized and in the ICU, then those counties, states, countries have no choice but to go into lockdown from what we've seen.

And I think these pills give more options at that level, at the hospital level, at the ICU level to be able to treat patients and get them out of the hospital. While we still live with these new variants and a virus that's probably going to be around for a few years, as most people who know this virus have said.

- When I look at a stock chart of Moderna, I have one on the WiFi Interactive here, it's still up 161% year to date, but it had been up 350%. It's now off more than 40% from its highs. Is this all the antiviral news that has caused a little bit of a problem for the stockholders? Or do you think that it had simply become overhyped and the valuations were an issue at the time?

HARTAJ SINGH: You know, I think it's a little bit of both. I think people, COVID-19 related stocks have been very volatile, including Moderna as the poster child for that. I think people are seeing more competition, more vaccines and therapeutics coming into the space, and they're having to move their models up or down in terms of revenues earnings. It's still a great unknown.

I think, maybe, Moderna might have gone too much to the upside in July, August time-frame. So it's a little bit of both. However, we've been making one point-- and I think this is a very important point. You know, I've heard some clients say to me, oh, well, this virus is kind of washed out, we might see some local flares. I think that might be right, but a better way, or maybe another way to think about it is using the COVID-19 stocks is kind of like a hedge against future virus variants.

Companies like Moderna, other companies that we don't cover, Pfizer, BioNTech, Novavax, Inovio, essentially serve as a hedge. For example, like today, if you want to protect your portfolio against the virus kind of doing things that we're not expecting, which will still possibly happen. So I think that's why Moderna and the other COVID-19 related stocks today are acting kind of logically. It's almost like a hedge against the broader economy.

- Hartaj, real quick. We only have about 45 seconds here. But taking a look at how Moderna is valued today, does it make sense? Do you think it's fairly valued?

HARTAJ SINGH: You know, it's interesting. If we have this virus strain being something that society has a really hard time dealing with, it's probably undervalued. If we have other virus escapes, it's probably undervalued because it's the only company, other than Pfizer and BioNTech, that can react with extreme speed and precision to tackle these viruses worldwide.

But, if the virus has kind of run its course and we have local endemic flares, then it's probably at a fair value right now. And we need to see other things from the pipeline in order to really, I think, to get pulled up on.

- Well, we thank you for being with us this morning. Hartaj Singh, Oppenheimer analyst.