The Top Line

• With the nationwide COVID-19 curve flattening and state curves flattening, states, counties, and cities are beginning to reopen with approaches tailored to their local needs.

• Key policymakers of the Federal Reserve have responded formidably to the economic effects of COVID-19 and have made it clear that the Fed will use its tools to “their fullest” to create the conditions for recovery.

• Global food supply-chains and markets have shown remarkable dexterity in shifting and reallocating food resources in the face of massive changes in how we eat.

• Smaller U.S. biotech companies lead the way in fighting COVID-19.

The State of Reopening

Source: U.S. Chamber of Commerce (circa 5/12/2020)

As the nationwide COVID-19 curve flattens, states are beginning to enter into the first phase of reopening with different paces and procedures based on their respective state curves. The measures taken by the individual states are varied, with responses tailored by state officials to best match the local and regional conditions.

• Arizona began allowing retail, salons, and limited restaurant service on May 8 with appropriate precautions and similarly reopened other businesses and community centers last week.
• New York, the hardest hit state, will begin a limited reopening in the upstate region while New York City will stay shut down until June.
• California likewise will begin a limited reopening county by county while local governments in Los Angeles and San Francisco will maintain restrictive measures for longer.
• Nebraska began easing restrictions on May 4 to begin a limited reopening of the economy with restaurants limited to half-capacity and other businesses using social distancing measures.
• Texas began reopening businesses on May 1 with high-traffic businesses restricted to 25% capacity with capacity restrictions easing as additional signs of COVID-19 abatement appear.
• Montana began its reopening on April 27 with additional local guidelines restricting capacity and setting safety standards for different types of businesses.

Keeping the Economy Fed

While they are busy counteracting the economic effects of the COVID-19 crisis, the officials at the Federal Reserve take time to do one of the most important parts of their job, talking to the public about their crisis-fighting efforts.

• On Wednesday, May 13, Chairman Jerome Powell spoke on a webcast, highlighting the rapid government response to lessen the economic effects of COVID-19 and emphasizing that the fight is not yet over.  Powell also spotlighted the Fed’s large programs designed to help small businesses, medium businesses, and state and local governments.
• On Tuesday, May 12, Vice Chairman for Supervision Randal Quarles gave testimony to the Senate Banking Committee echoing Powell’s sentiment that the battle against COVID-19 and its effects continue. In his testimony before taking questions, Quarles emphasized the overall safety and soundness of the financial system and the important role it has to play in recovery.
• Also on Tuesday, President Loretta Mester of the Federal Reserve Bank of Cleveland said that with social distancing measures being lifted, “the economy will begin to grow again in the second half of this year.” The day before, President Charles Evans of the Federal Reserve Bank of Chicago expressed similar sentiments.

Myth vs. Fact

MYTH: It has been suggested that banning mergers and acquisitions of companies in the midst of the COVID-19 crisis will save jobs, increase competitiveness, and prevent private equity firms from acquiring businesses at prices reduced by the pandemic.

FACT: Mergers and acquisitions can help businesses to maintain operations, better allocate resources, and share the successful model of another enterprise. While often derided as an investment vehicle for only the wealthy, private equity funds have institutions like university endowments and pension plans as investors that benefit when the funds’ investments are successful.

Keeping Americans Fed

As COVID-19 affects how we eat, American food consumption habits have shifted meals previously eaten in restaurants to take-out orders, delivery, and home-cooked meals. This shift has forced markets and businesses to adapt.

• Accounting for 10% of world GDP and employing 1.5 billion workers, the global food system has reacted swiftly to market incentives to shift food away from restaurants that have limited service and to grocery stores and supermarkets that have expanded their workforce to meet increased demand.
• Food and agriculture firms with a global presence have acted as a key nexus in responding to the shifts in demand sources. Their relationships with myriad suppliers gives them the ability to swap sources when shortages occur, keeping prices stable and supplies robust (see above).
• With global production of wheat, corn, and rice at historical highs, restrictions on agriculture trade can only hurt producers and consumers. American farmers affected by COVID-19 benefit from markets in which to sell their goods with some promise coming from increased exports to China and the UK increasing imports from the US as part of a potential free trade agreement between the two countries.

Disruption of the Week

Source: BIO

The U.S. is by far the leader in COVID-19 therapy development thanks to a rapid response effort led by emerging biotech companies. Will this lead to more partnerships between disruptive firms and the greater pharmaceutical industry?

• Biotechnology and biopharmaceutical companies are working around the clock to develop vaccine, antiviral, and treatment therapies to combat COVID-19.
• With over 235 potential candidates currently in development, vaccine therapies that provide immunity to COVID-19 and antiviral therapies that disrupt the virus’ ability to replicate, have the greatest chance in ultimately controlling COVID-19 and potential future outbreaks.
• While large pharmaceutical companies have contributed to the fight against COVID-19, over 83% of U.S. therapies in development have come from smaller companies; potentially signaling a shift in how we conduct drug research and development, and respond to health care crises.
• This change, along with increased partnerships between smaller biotech firms and pharma companies, has the potential to lead to quicker and more efficient drug development.
• While legislation that would threaten these innovative partnerships has been introduced, recognizing the potential “Team Science” has in quickly developing more effective drugs could drive down health care costs and ultimately save lives.

Further Reading

• As government has monumentally expanded its scope to contain the pandemic spread of COVID-19, a former Prime Minister of our neighbor to the north argues that as we begin to reopen, less government will be needed to allow workers and businesses to reverse the economic damage. Wall Street Journal