In 2018, we told investors and global leaders that epidemics and pandemics, like COVID-19, are probable events, if not unavoidable events at this point in time. This foresight required only a conscious knowledge of medicine, economics and history. Governments, hospital systems and infectious disease specialists knew the biologic reality of infectious disease. We knew it. The World Health Organization (WHO) and The Centers for Disease Control and Prevention (CDC) quietly warned of it. Politicians feared the panic that such public attention would bring. In our typical fashion, we quietly told the world and invested in a solution. Consistent with our impact philosophy of Saving Lives, Reducing Suffering and Making Healthcare Technology Accessible to people around the world, we moved forward with confidence where others feared to tread. We committed to commercialization of technology from The U.S. Department of Defense’s elite research unit DARPA, and Harvard University’s Wyss Institute in anticipation of such a crisis. Here are our thoughts on COVID-19 and why our investment and the founding of BOA Biomedical are increasingly important to investors and patients in need.
On Mar. 5, 2020, a preeminent Silicon Valley venture fund labeled the 2019 Novel Coronavirus (COVID-19) as the “Black Swan of 2020” in a letter to investors that was widely covered by popular press. This designation references Nassim Taleb’s New York Times best selling book, The Black Swan, in which he explains how in the 17th century, the improbable existence of an imaginary black bird in a world of white swans, would have far reaching impact. In 1697 the improbable happened. Dutch explorer Willem de Vlamingh discovered the first black swans.Zoology forever changed and so too did our perception of what is possible. A Black Swan is an unpredictable, improbable event that has a massive incalculable impact. But was a pandemic improbable or unpredictable? Is it a Black Swan?
Coronavirus Is No Black Swan
The purpose of this brief paper is to show why, for those of us familiar with medical trends, pandemics such as COVID-19 are no surprise. Pandemics have occurred, and will occur again. The arms race against infectious disease has been going on since the beginning of life on Earth. Bacteria, viruses, protozoa and fungi are prevalent in our everyday lives, so much so that we take them for granted, only taking note when we catch the flu or are inconvenienced by a minor infection. These little creatures are so prevalent that a study published in the National Academy of Science reported that the average human body contains nearly 40 trillion bacterial cells, far more than human cells. The bacteria in the human body weigh about four and a half pounds. Combined, the bacteria on Earth weigh about 1,166 times more than the weight of all humans combined. Add in the weight of protozoa, fungi and viruses and we are outnumbered and in a lower weight class.
Why So Complacent?
Generally, bacteria have helpful functions in the body, and more often than not, we live in symbiotic harmony, except when things go wrong. In the last century, four major discoveries have made us believe we have the upper hand when things do go afoul and a fight breaks out between us and these infectious creatures. The first discovery was the development of the smallpox vaccine by Edward Jenner in 1796. The vaccine gave physicians a tool to control the spread of viral infection. Even with the invention of the smallpox inoculation, the virus ran rampant for another 184 years. The World Health Organization reports that up until 1967, there were 15 million cases per year with 30% resulting in death. Smallpox expert, Donald Henderson, estimated that the disease killed around 500 million people in the last 100 years before its eradication in 1980. The second key discovery was Louis Pasteur and Claude Bernard’s 1862 observation that bacteria soured wine, beer and milk, giving insight into the role of bacteria in biologic systems. Third was the invention of penicillin by Sir Alexander Fleming in 1928, for which he was awarded the Nobel Prize. As we know, Penicillin, was the first antibiotic to control human infections. The fourth major discovery was Joseph Lister’s observation that the microorganisms of concern to Pasteur were most probably the cause of the high death rates in the emerging field of surgery, and his subsequent recognition of an antiseptic compound that stopped those microorganisms. In a stroke of good fortune, not only did Lister’s compound kill bacteria, but it also denatured and rendered viruses unable to penetrate and infect human cells. As a result, the death rate among those treated with the compound during surgery dropped from 46% to 15% between 1865 and 1870, according to the Royal College of Surgeons.
Each of these innovations helped shape healthcare today. Dr. Lister’s work lives on in aseptic surgery, in addition to the omnipresent mouthwash Listerine. Dr. Pasteur is responsible for pasteurization, Dr. Fleming for broad-spectrum antibiotics and Dr. Jenner for vaccinations. However, these solutions are inherently limited by scientific constraints. Antibiotics are effective against a number of bacteria, but those that antibiotics do not kill can reproduce and create antibiotic-resistant disease strains. Antiviral vaccines are customized to specific viruses and must be administered before the patient gets sick, but history has shown that predicting which virus will spread in advance of an epidemic or pandemic is difficult.
Antibiotics: A Miracle That Will Not Last
Unlike almost all other medical products, antibiotics become less effective the more they are used. In Fleming’s Nobel Prize acceptance speech, on December 11, 1945, he gave a prescient warning:
The time may come when penicillin can be bought by anyone in the shops. Then there is the danger that the ignorant man may easily underdose himself and by exposing his microbes to non-lethal quantities of the drug make them resistant. – Sir Alexander Fleming, Nobel Prize Address, 1945
This warning became reality as the efficacy of penicillin and every other known antibiotic dropped in subsequent decades. The CDC estimates that more than 2.8 million antibiotic-resistant infections occur in the U.S. each year and more than 35,000 people die as a result. According to the WHO, by 2050, 10 million people will die globally each year due to antimicrobial resistance, overtaking diabetes, heart disease and cancer as the leading cause of death. On Sept. 17, 2013, the British Journal of Medicine published a public warning in which the Director of the CDC, Tom Frieden, identified specific microbial threats in a teleconference:
We talk about a pre-antibiotic era and an antibiotic era; if we are not careful, we will soon be in a post antibiotic era. In fact, with some patients, and some microbes, we are already there. – Tom Frieden (Director of the CDC), Warning Address to the Press, 2013
The Killers: Not Just Bacteria and Viruses; Protozoa and Fungi Too
On April 3, 2015, two years after the CDC’s announcement, Bill Gates gave a TED talk entitled The Next Outbreak? We’re Not Ready. His speech came on the heels of the Ebola outbreak, a viral disease with mortality rates estimated by the WHO to range from 25% to 90% (depending on the specific outbreak). Thanks to thousands of selfless healthworkers and some very good luck, outbreaks have been largely contained. This should have been one of a number of warnings about the growing pandemic threat. Despite containing Ebola, we know in hindsight what we should have done better. Gates suggests we should put all our good ideas into practice, from scenario planning to vaccine research to healthworker training. Did the world hear the message?
If anything kills over ten million people in the next few decades, it’s most likely to be a highly infectious virus. – Bill Gates, TED Talk 2015
The world did not hear the message and, despite the warnings, COVID-19 has infected people in every corner of the globe, and even those who are not infected are impacted.
Physical, Economic and Psychological Suffering
In addition to physical suffering and mortality, pandemics take a psychological and economic toll on society. In his 2018 book The End of Epidemics, Dr. Jonathan Quick states that “Bill Gates and his team predict that an epidemic like the 1918 influenza pandemic that killed 50 million people could happen again today—and that in the first 200 days could kill 33 million people,” nearly equal to the number of people killed by AIDS over the past four decades. Bank of America’s assessment that the threat of a global pandemic is “arguably higher than at any point in human history” is even scarier. This report states that a severe global pandemic could claim more than 300 million lives and cost the global economy as much as $3.5 trillion. We are not claiming that the current coronavirus outbreak will produce a tragedy of that scale, but this is no Black Swan—the evidence says we could have, should have and did know this type of pandemic event was brewing.
If the Death Count is Below the Flu, Why Does It Matter?
As of March 9, 2020, the WHO reports 109,577 confirmed cases globally, with 3,993 diagnoses in the past 24 hours. Global deaths to date are reported at 3,809, with 225 of those occurring in the last 24 hours. As of this week, three new territories have reported confirmed cases of COVID-19: Bangladesh, Albania and Paraguay. In the United States, the CDC reports 423 cases in 35 states including the District of Columbia, with 19 deaths to date.
Case Study: SARS
Economists have been using the SARS epidemic to put the coronavirus outbreak in context. The 2003 SARS epidemic is estimated to have decreased China’s economic growth that year by 0.5% to 1% and cost the global economy about $40 billion (or 0.1% of global GDP). Just like SARS, the coronavirus pandemic originated in China but it differs in a few key ways. China’s economy accounted for roughly 4% of the world’s GDP in 2003; it now measures 16.3%. If the coronavirus has a similar effect on China as SARS, the impact on global growth will be more pronounced. Moreover, China’s growth is weaker than it was in 2003—after years of rapid economic development, China’s growth stands at 6%, its lowest since 1990, according to the Center for American Progress (CAP). Even before the coronavirus outbreak, China had been shaken by the dual effects of general economic deceleration and the U.S.-China trade war escalation.
Supply Chain Disruption: One of Many Economic Impacts of COVID-19
Disruptions to global supply chains are one of the clearest effects of the coronavirus, with the list of manufacturers both inside and outside of China forced to decrease production in their plants growing longer every day. For example, automotive plants across China have been ordered to remain closed following the Lunar New Year holiday, preventing global automakers Volkswagen, Toyota, Daimler, General Motors, Renault, Honda and Hyundai from resuming operations in the world’s largest car market. According to S&P Global Ratings, the outbreak will force carmakers in China to slash production by about 15% in the first quarter.
Last week, the 2020 Geneva International Motor Show, where automakers typically announce their flashiest, most future-facing vehicles and concepts, was cancelled after the Swiss government banned gatherings of 1,000 people or more. Last year, this convention saw the debut of “megacars” including the Koenigsegg Jesko, VW’s electric dune buggy concept, and the Pininfarina Battista, one of the fastest electric vehicles on the planet.
Geneva is one of a number of trade shows to get the axe following the coronavirus outbreak. In the tech world, the most notable have been the cancellation of music and technology festival South by Southwest, smartphone show Mobile World Congress and Facebook’s F8 developer conference. In sports, both Formula One and Formula E have canceled races in China, Italy’s top professional soccer league has suspended matches until at least April 3, 2020, and the International Olympic Committee has faced increasing questions about this year’s Summer Olympic Games in Japan.
Decreased Demand for Consumer Goods and Services
In addition to supply-side deficiencies, certain sectors of the economy are already feeling a decrease in demand, including food, beverage, transportation and hotels. Manufacturing in many sectors is already experiencing delays, and consumer spending will decrease in response to an expected (or, in some cases, actual) decrease in workers’ pay.
As an example, flight cancellations to and from China, which has been designated as a “do not travel” destination in the United States, means almost no one is traveling to China and, more importantly for U.S. firms, Chinese tourists are not traveling overseas. The Center for American Progress estimates that the United States will lose 1.6 million visitors from mainland China, with an associated decrease in spending of $10.3 billion.
The result is uncertainty, and while markets can manage uncertainty when risk can be quantified, calculated and contained, it is difficult for investors to be comfortable with the unknown. For now, the impact of this pandemic is unknown and the result is market volatility.
Alternative Asset Classes: Venture Capital
An alternative investment is a financial asset that does not fall into one of the conventional investment categories, including stocks, bonds and cash. Alternative investments include private equity, venture capital, hedge funds, managed futures, art and antiques, commodities and derivatives contracts.
One of the appeals of the alternative asset class is the potential for low correlation with, and often inverse movement from, standard asset classes. This feature makes them a suitable tool for portfolio diversification, offsetting the risk inherent in investing. Asset classes such as venture capital, while often considered riskier than the market in general, simultaneously offer the opportunity for outsized gains.
Sophisticated investors can find outsized gains and non-correlated diversification in what the rest of the market might mistakenly deem Black Swan situations—low probability and massively impactful. In certain cases, perceptions differ from reality, and the events regarded as Black Swans are, in fact, highly probable. While timing these events poses a challenge, predicting them before they happen and investing in a solution represents an alternative investment opportunity that is perfectly non-correlated—when the event deemed by the rest of the market to be a Black Swan triggers market volatility, the value of the solution skyrockets and the investors who identified the opportunity prosper. It is our opinion that the COVID-19 outbreak is one such non-correlated, causal event that was predictable in most respects but timing. While the rest of the market might see this pandemic as sudden and unpredictable, Miraki has been aware of the growing threat for some time. Well before the current outbreak and market turmoil, we founded a company that is currently developing a platform with the potential to diagnose and treat COVID-19 and future pandemics.
Infectious Disease: A Non-Correlated Opportunity for Diversification
Three key hypotheses form the basis for our assertion that the COVID-19 outbreak is precisely the type of false Black Swan referenced above:
- Epidemics and pandemics are a biologic guarantee. First, pandemics have occurred throughout history and will continue to occur. Cholera, bubonic plague, smallpox, influenza, HIV/AIDS and othersare some of the most brutal killers in human history, each one followed by yet another. Since just 2003, the world has faced SARS, Swine Flu, Ebola and now COVID-19. Infectious disease is predictable as Fleming, the CDC and Gates have taught us. Infections will inevitably occur and pandemics will follow because pathogens evolve quickly in nature and even faster when manipulated by humans. While their timing is unpredictable, environmental, socioeconomic and technological changes are creating opportunities for more rapid evolution. Existing risk factors are exacerbated by population growth, increasing population density, an increase in the vulnerable elderly population as people live longer and, perhaps most importantly, an airline network that provides free, rapid, direct flights for any pathogen that can get aboard an airplane and survive the trip. In short, physicians and investors alike can be guaranteed of epidemics and pandemics; it is not a question of if, but when.
Consider the current COVID-19 outbreak in this context. The disease originated in Wuhan, China, a megacity of more than 11 million people. Such megacities (defined as metropolitan areas with populations of more than 10 million people) are a relatively recent development in human history, and the number of megacities is predicted by the UN to grow from 10 in 1990 to 43 in 2030. By the time the threat was identified, visitors to Wuhan had already contracted the disease and had begun to spread it around the world, with the elderly and infants at the highest risk.
- Current treatments are inadequate. Increasing antibiotic resistance is hampering the ability to treat bacterial infections. The inability to predict virus strains and rapidly develop and distribute vaccinations prevents adequate treatment of viral infections. In general, the prospect of holding pandemics at bay will become increasingly difficult without new advances in identification, tracking, diagnostics and therapeutic interventions.
Consider another example from the COVID-19 pandemic: In a recent study published in the Lancet testing 191 patients that were hospitalized in Wuhan with COVID-19, 95% of them were given antibiotics. Of the non-survivors, 100% had sepsis as one of the outcomes of the infection and 50% had a secondary infection. The risk of sepsis and other infectious diseases increases when a patient’s immune system is compromised due to viral infection and is compounded by the overuse of broad-spectrum antimicrobials, which create disease-resistant strains. Blood culture still remains as the current standard of care for identifying pathogens despite its long turnaround time and a successful sepsis diagnosis rate of only up to 30%. The rapid spread of COVID-19 would not only stress global healthcare systems, but also exacerbate the antimicrobial resistance problem created by overuse of antibiotics.A rapid diagnosis of the cause of infection, paired with a treatment customized to COVID-19 (rather than a broad-spectrum, “scorched earth” solution) would help simplify treatment and reduce harmful side effects.
- Pandemics permeate every corner of society and can destabilize financial markets and economies. Due to the previous two factors, pandemics will occur and are likely to become more prevalent. Pandemics cause widespread panic, uncertainty and instability among the general population, the healthcare system, businesses and finally in global economic and financial markets. They have turned society and financial markets on their heads. Since Feb. 19, 2020 the S&P 500 has lost 19% in the largest stock market selloff since the 2007-2009 recession. This selloff culminated in a shutdown of stock market futures trades in the evening of March 8, 2020, and a 15 minute “circuit breaker” trading halt during the first few minutes of trading on March 9, 2020 with the market down approximately 7%. However, many healthcare stocks have fared far better than the market. For example LabCorp, a Fortune 500 diagnostics company, has been affected by widespread sell off of index funds, but has lost only approximately 10% (nine percentage points higher than the market as a whole). The Clorox Company, one of the best-known manufacturers of sanitation wipes, is up 6%.
Extend that logic to cutting-edge venture investments; if companies such as LabCorp and Clorox can deliver market-beating returns, imagine the impact of a company with a technology that can track, diagnose and intervene against coronavirus. Imagine the value of an off-the-shelf, instant diagnostic. What would an inoculation be worth? What would you pay for a technology that could warn of COVID-19’s presence in a school, office, hospital, ship or airplane?
Demand for such a technology would make the company that owned it one of the world’s most sought-after assets today. That demand would be inelastic, meaning that patients, investors, healthcare systems and governments will pay almost anything for a solution that saves lives, reduces suffering, can be deployed globally and mitigates the financial damage that a pandemic can cause to nations and continents. Any company or product that provides a solution for the coronavirus would immediately skyrocket in value, directly opposed to the greater stock market, which has been negatively impacted by the reality and the panic of a pandemic.
On March 4, 2020 the U.S. House of Representatives voted to approve the Coronavirus Preparedness and Response Supplemental Appropriations Act (HR 6074) that would make $8.3 billion of new funding available for a robust response to COVID-19, including vaccine and treatment development, support for state and local health agencies and loans for small businesses impacted by the virus. Although this represents a strong commitment to finding a solution, the problem with the current approach is that whatever solution emerges, whether it is a drug or an inoculation, will undoubtedly be customized to the current strain. The discovery of treatment requires primarily luck, and while it may treat coronavirus, it will not help protect against or treat future outbreaks. Of all the thousands of strains of bacteria, viruses, fungi and protozoa that could possibly “go viral,” and all of the infinite mutations that could occur, immediately innovating a treatment for any specific outbreak would be about as probable as getting struck by lightning.
Eventually, there will be a cure for COVID-19, but this cure will almost certainly be inadequate against future mutations because it will be customized solely to the current strain. Instead, imagine a technology that would allow doctors to identify, track, diagnose and intervene in the treatment of not only coronavirus, but also future infectious pandemics without having to predict exactly which pathogen would strike next. A technology that is broadly applicable no matter which pathogen strikes will be the next quantum leap in infectious disease treatment. The company that produces it will likely prosper in strong economic cycles, but will also provide a non-correlated growth opportunity when (not if, but when) future pandemics replicate the current economic uncertainty.
BOA Biomedical: The Miraki Method at Work
Well before COVID-19 captured the global consciousness, we began to search our network of universities, hospitals and other research institutions for a solution to what we had identified as the growing pandemic threat, and the general threat of epidemics and antimicrobial resistance. We were looking for a technology that solved several key shortcomings in the diagnosis and treatment of infectious disease and sepsis:
- Existing means of diagnosis are slow and unreliable. The current standard of care for diagnosis of sepsis and infectious disease involves a multi-day blood culture. Infected patients frequently show relatively vague and wide-ranging symptoms at first, and are often misdiagnosed and sent home from the hospital in the two to five days required for a blood culture. During this period, symptoms often worsen and by the time the blood culture comes back, the progression of infectious disease into sepsis is often beyond salvage.Even when it is not too late, a blood culture is estimated by NIH scientists to be only 50% effective, even in the most advanced septic patients with the highest concentrations of pathogens in the bloodstream.
- Pathogen-specific diagnostics and therapeutics may not be effective when dealing with novel biothreats. Some of the current lab tests are designed for specific pathogens and require providers to make an educated guess of what may be afflicting the patient based on non-specific clinical symptoms. There is an immediate demand for a product that analyzes samples and determines what pathogens are present, rather than providing a positive or negative result for a predetermined pathogen set. The same logic holds for therapeutics; current treatments that are drug- or vaccine-based, are effective only when the exact pathogen affliction is known and scientifically understood. This problem is exemplified by the current COVID-19 outbreak, as the vaccines and drugs that have cured previous pandemics are largely ineffective against the novel coronavirus. Even annual flu shots are nothing more than the industry’s best guess as to the characteristics of next year’s flu strain. The time taken to develop a novel pathogen-specific diagnostic and therapeutic is long, which means that the first wave of patients do not get effectively diagnosed and treated—this helps the contagious pathogen spread and potentially reach pandemic levels, as in the case of COVID-19.
- Drug-based treatments may exacerbate the patient’s current medical condition. Even if doctors are able to match a patient’s pathogens to the right drugs, it is entirely possible that drugs may be ineffective after a patient has turned septic. As an infection progresses toward the point of no return, the body starts to turn on itself and drug treatment becomes less and less effective. With the onset of sepsis, even if the drug is able to control the infection, the release of pathogenic toxins overwhelms the patient’s immune system and drives the organs and body into shock and failure. The ability to physically remove pathogens and their dangerous byproducts from the body, in conjunction with conventional treatments or lack thereof, would represent a quantum leap.
Our search led us to the United States Department of Defense’s elite DARPA research unit, and Harvard University’s Wyss Institute for Biologically Inspired Engineering, one of the world’s leading research centers. Together they had funded research and developed an engineered protein with the ability to bind to a wide variety of pathogens and pathogen fragments, giving it a wide range of potential applications in diagnosis and treatment of infectious disease and sepsis. Imagine a substance that traps and removes the infectious stuff that makes you sick from your blood, and leaves the healthy stuff alone? What could doctors do with such a special substance to treat patients?
We realized that this technology had the possibility to not only treat known, current infections, but also potential mutations and novel new infections, such as one that was not known at the time, but that we had anticipated: COVID-19. Researchers at Harvard had validated the efficacy of their discovery against many known pathogens, and had run studies on human blood. The risk in the development of commercial applications, based on the considerable research work available, appeared manageable. We determined that this technology had the potential to address each of the three shortcomings we had identified:
- The technology can be used to diagnose precisely and immediately bypass the need for slow blood cultures. This capability has the potential to reduce diagnosis to less than an hour, rather than days. This means that doctors can perform a rapid diagnostic and deliver a precise, tailored treatment with confidence. In an environment where the mortality rate of patients with sepsis increases 8% for every hour without appropriate treatment, that means it may save lives.
- The protein binds to a wide variety of pathogens. The protein appears to catch a broad spectrum of pathogens it encounters, including known dangerous pathogens. This eliminates much of the guesswork in pathogen diagnosis and the cause of infection. This also means that the same protein will be effective against many evolving novel pathogens and biothreats, reducing the need to develop a novel diagnostic or therapeutic, which is a long and costly process.
- The technology rapidly captures pathogens and dangerous by-products of infections. The protein’s ability to bind immediately to pathogens means that it can be used in a filtration system that can clean the blood of infectious agents and by-products in precious hours, not days.
We founded BOA Biomedical and licensed this technology from Harvard University in order to bring it to patients around the world, realizing that rapid pathogen identification would be a giant leap forward in the treatment, tracking and intervention of infectious disease. We set out to build products with both diagnostic and therapeutic capabilities, and many additional applications beyond those.
BOA, Coronavirus and More
While we feared the next epidemic, and worse yet, a pandemic, we never anticipated that our fears would materialize so soon, nor that the COVID-19 pandemic was less than a year away. While the rest of the world was seemingly blindsided by the coronavirus outbreak, we realized this was quickly turning into the exact pandemic, and a variety of other equally compelling concerns related to treating infectious disease, that led us to invest in BOA in the first place. Recognizing that this was a matter of international health and security, we initiated conversations with our contacts at the U.S. Department of Defense (DoD) and Department of Health and Human Services to apprise them of BOA’s status, and the work that DoD’s DARPA unit had inspired and funded.
Authorities are already putting forth every available resource into finding a treatment for COVID-19. In his testimony to Congress on March 11, 2020 HHS’s Assistant Secretary for Preparedness and Readiness, Dr. Robert Kadlec, acknowledged that HHS would be suspending other funding initiatives to focus primarily on COVID-19. We have no doubt that a solution will be found, but just as they have in the past, research efforts are prioritizing vaccines and drug treatments. While these will likely solve COVID-19, they will leave us no better off when it comes to preparing for the next outbreak.
We are making every effort to determine how BOA’s technology can help fight the growing coronavirus pandemic, but BOA’s potential reaches far beyond the current crisis. For the reasons described earlier, it is inevitable that pandemics will occur with greater frequency and potency than ever before. If it continues to take months or worse still, years to find the right drug or vaccine to treat a given outbreak, the loss of thousands of lives and billions or trillions of dollars in economic value will be replicated with increasing regularity as these threats repeat themselves.
The true promise of BOA’s technology is its potential to diagnose and treat infection without needing a specific drug or vaccine tailored to a pathogen with an unknown scientific profile. When the next outbreak occurs, it is our vision that BOA’s technology will be on hand in every treatment center in every corner of the world to instantaneously identify the pathogen responsible and pull it out of the bloodstream. We see the possibility of using this technology to combat the spread of disease that seems more and more inevitable as the world becomes more and more connected. The future of disease prevention is not hand sanitizers and surgical masks; the modern world demands a quantum leap and we believe BOA has the technology to make it happen.
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