One of several possible treatments made a significant announcement that buoyed flagging travel stocks. But is this COVID-19 vaccine the one?
Eli Lilly Announces Progress on COVID-19 Treatment
Pharmaceutical giant, Eli Lily, announced progress on a COVID-19 vaccine that sent the market into a flurry of activity.
“The authorization, announced on Monday, applies only to people newly infected with the virus, and the agency said it should not be used in hospitalized patients. The treatment is approved for people 12 and older who have tested positive and are at risk for developing a severe form of Covid-19 or being hospitalized for the condition. That includes people who are over 65 and obese, the agency said — a key group that early studies have shown can benefit the most from the treatment.”https://nyti.ms/36moQCh
The vaccine is not an end-all, be-all for COVID-19, but the market clearly saw it as welcome news. Early implementation of the treatment is critical.
“Eli Lilly said that its treatment, called bamlanivimab, should be administered as soon as possible after a positive test, and within 10 days of developing symptoms.”
Travel Stocks Rise
While nearly all travel stocks rose one the news, not all were treated equally. Spirit Airlines (SAVE) was an early winner jumping nearly 30% on intra-day trading before settling at 21% for the day with after-hours included. By comparison, American Airlines (AAL), which had jumped nearly as high, settled up 16% for the day. Disney (DIS) had jumped as much as 13.5% before finishing just above 10% on the day. Southwest had a similar performance.
Delta, United and Southwest all popped 17-19% on the news, Alaska and Jet Blue finished above 20% for the day.
Perhaps the company that most needed a boost, Carnival Cruise Lines (CCL) finished the day up 39%. For hotels, Hilton and IHG were up about 10% while Marriott rose 14% and Hyatt led the way at more than 19%.
The market, as a whole, reacted positively to the news and many stocks were up by a significant percentage on the day. However, Spirit, Carnival, and Hyatt were particularly strong. As a stockholder of AAL and SAVE, I am not entirely surprised by both the tepid reaction for American and the strong movement for Spirit. American has significant challenges to overcome with regards to cost structure and won’t be able to seize upon a newly active traveling public as Spirit will be. For Carnival, a vaccine is seen as needed and crucial to return to service.
Why This Treatment May Not Be The Answer
Eli Lilly’s treatment must be applied when a subject first contracts COVID-19 or very early in the process. Applying the treatment then can avoid long-lasting effects. However, skeptical resistance to the treatment could result not only from the emergency FDA approval it has received but resistance to testing in the first place.
As much as 40% of the US, the most beleaguered country in the world with respect to COVID-19, has stated they won’t be interested in a COVID-19 vaccine even if one came available. It’s not just right-wingers suspicious of vaccines more generally. In fact, Vice President-elect, Kamala Harris said she wouldn’t take one if it came recommended by President Trump:
“If public health professionals, if Dr. Fauci, if the doctors tell us that we should take it, I’ll be the first in line to take it, absolutely,” she said. “But if Donald Trump tells us that we should take it, I’m not taking it.”https://bitly.com/3nb2Pxi
While it’s unclear whether the FDA’s approval will be enough for the Vice President-elect to consider taking the treatment, the announcement comes just one week after a hotly contested presidential election in which she may not be alone. It’s not just the timing of the emergency FDA approval falling under President Trump’s watch, it also strikes at a time where the country is bitterly divided and the virus has been made a political issue.
This is one of many treatments and vaccines in the trial phases. The Eli Lilly treatment claims to reduce the need for hospital stays by 90%, but others progressing through the evaluation stage may offer a better performance metric. It’s also possible that governments that feel they are close to a better solution may hold out longer for something they feel is a stronger candidate to solve the problem in their country. Some may wait for a clinically-proven vaccine.
Progress in treating COVID-19 and reducing its damaging effects are key. Whether Eli Lilly’s answer is the antidote to the spread of the virus remains to be seen. But the potential of the drug’s effectiveness was enough to cure the ails of travel stocks that need some good news. Without abatement in the virus, the market can’t hold certainty that the travel will return before travel providers suffer losses from which they cannot recover.
What do you think? Is a vaccine just what the doctor ordered for travel concerns? Will resistance to treatment hold back the process? Are concerned citizens right to be wary of rushed medicine and emergency approvals?