Hedge funds eye “potent” anti-viral Covid-19 drug molnupiravir

new covid cure

The development of molnupiravir, a “potent” oral anti-viral Covid-19 treatment, could help boost flagging consumer stocks reliant on the global economic reopening, as healthcare-focused hedge funds look to rebound following recent losses.

US multinational pharmaceutical manufacturer Merck’s new drug – which is designed to help reduce Covid-19 symptoms for people with Covid-risk factors including age, obesity, and diabetes – offers “great potential” to fully re-open the global economy, Man Group noted in market commentary on Tuesday.

The London-listed global hedge fund giant’s ‘Views From The Floor’ note observed how the Goldman Sachs US Global Health Risk equities basket, which lagged the S&P 500 for much of 2021, has risen on the back of encouraging trials of molnupirarvir.

The Health Risk equities basket – which includes airlines, tour operators and hospitality names including such as Royal Caribbean, Expedia, Delta Airlines, and Nordstrom – relies on the post-pandemic economic reopening, which has stalled in recent months after powering 2020’s stock market rebound.

“At USD700 per course, it is not cheap, but is far cheaper than the cost of hospital treatment,” Man analysts said of Merck’s new drug. They pointed to forthcoming licensing agreements which should ease potential supply bottlenecks, and noted that Pfizer, Shionogi and Gilead also have oral treatments in development.

“Because it specifically targets those patients who are most at risk, the drug is likely to lessen the political cost of re-opening, leaving the level of infections unchanged but massively reducing hospitalisations and deaths,” the note, authored by Man GLG analyst James Terrar, and Ed Cole, Man GLG, managing director, discretionary investments, said.

“All in all, we are not surprised that the health risk basket has jumped on the news – molnupirarvir might just provide a final return to normal life.”

Meanwhile, Henrik Rhenman, founding partner and chief investment officer at healthcare-focused equity hedge fund Rhenman & Partners, said molnupirarvir seems “very potent”, noting that the treatment decreases hospitalisations by 50 per cent and is being delivered to Singapore, despite it yet to be approved by the US Food & Drug Administration. 

“That’s a vote of confidence,” Rhenman said in his firm’s monthly webcast update. “It seems like a really good treatment – we believe this new treatment will be on the market in just a few months.”

The Stockholm-based firm’s flagship Rhenman Healthcare Equity Long/Short Fund lost 4.6 per cent in its euro share class in September, but it remains up 7 per cent year-to-date.

All four of its sub-sectors – pharmaceuticals, biotechnology, medical technology and services – contributed negatively during September, as developed market equities broadly were down for the month. The fund’s best-performing position was Acceleron Pharma, whose share price was boosted on the back of Merck’s USD11.5 billion acquisition.

Overall, healthcare-focused hedge funds lost around 1 per cent on average during September, according to new Hedge Fund Research data. The drop leaves their year-to-date returns at 1.93 per cent, well behind HFR’s broader equity hedge fund benchmark, which has gained 11.46 per cent for the year.

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Hugh Leask
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