Otello Stampacchia, founder, Omega Funds (illustration by Praveen Tipirneni)

Like most of you, I have been obsessively following “the virus.”

It is having a devastating impact on human life, hospital systems, governments and economies. The worst is still to come, based on what we know about this new coronavirus and its ability to spread with exponential force.

Here are some thoughts on the difficult choices laying ahead.

Before I start, here’s a little on where I’m coming from. I have the dubious advantages of being at the same time Italian-born and a US-based venture capitalist active in healthcare. This gives me a lens into the government, healthcare and culture of a country that has been decimated, and an insider’s view into the scientific community and its prospects for counterattack (mainly therapeutics in my case). As an investor in public and private markets, math is part of the job, and I have a somehow intuitive feeling about exponential growth rates. Please refer to two previous articles on Timmerman Report, warning of the upcoming disaster on Mar. 10, and then on Mar. 18.  

As with most (all?) of you, I am watching the daily avalanche of terrible news and the public / policy responses trying to catch up to the inexorable progression of the virus. Note the use of the words “catch up” here, they will come in handy later.

In the US, we went from 89 confirmed cases on March 1 to ~41,000 as I write on the afternoon of March 23 (source: www.worldometers.info/coronavirus). The US, so far, has lagged far behind other countries’ in testing capacity and administrations, so it is catching up there as well. A patchwork of local, state and federal measures are being implemented across the country to try to limit the spread of the disease and preserve hospital capacity (and healthcare workers’ safety).

The economic fallout (at least the initial one) is also becoming starkly evident. Starting in late February, US stock market indices have to date lost ~$12 Trillion (herein shortened to “T”) in market value, or roughly 25-30% from their pre-crisis peak (I will strive to be roughly accurate versus precisely wrong throughout this article).

More importantly, entire sectors of the economy (employing a huge portion of the US workforce) are veering rapidly towards bankruptcy: the lethal combination of lack of demand and restrictions on movement has made their business no longer viable (in these circumstances). Hotels, restaurants, airlines, gyms, physical therapists, etc etc are making millions of people redundant across the board.

The US lacks (for the time being) social safety nets that are much more prevalent in other countries. That increases the severity and amplitude of these kind of shocks. The US economy generates about~$40T per year in gross domestic product. Of that, ~70% is composed of services and consumers’ consumption. It is painfully obvious to see how broadening, enforcing and / or continuing “shelter at home” policies in the US for a much longer period will cause incalculable economic damage. The chief of the St Louis Fed was quoted recently saying unemployment in the US could reach 30% in Q2 2020, and GDP could go down by ~50%. This is equivalent to what happened to the US economy during the Great Depression of late 1929 and through the 1930s, and it is happening at a much faster pace – a matter of weeks.

In this context, I see / hear / read a number of voices arguing for a “let it rip” strategy: i.e., continue “life as normal,” spreading the contagion without any radical social distancing measures, accepting that there will be a (slight?) increase in the number of casualties but preserving the broad health of the economy. This virus has a mortality rate of close to, and quite possibly, lower than 1%. On Mar. 16, disease modelers at Imperial College London, factoring in the best available estimates at the time, estimated that the novel coronavirus would kill about 2.2 million people in the US alone under what you could call a “let it rip” strategy – one that doesn’t utilize the disruptive social distancing interventions currently being imposed. A day later, Mar. 17, Stanford University epidemiologist John Ioannidis argued that “we are making decisions without reliable data.”

One of the basic arguments underlying the “let it rip” strategy appears to be the Precautionary Principle: “The precautionary principle (or precautionary approach) is a strategy for approaching issues of potential harm when extensive scientific knowledge on the matter is lacking. It emphasizes caution, pausing and review before leaping into new innovations that may prove disastrous.” (Wikipedia).

Spoiler alert: this discussion is based on fundamental flawed assumptions, at many levels. The (strongly worded, high conviction, HIGHLY evidence-supported) response to this “argument” should be: “(expletive removed) no!” If you carefully, cautiously wait for all the data to come in, your actions will come way too late. Also, interestingly enough, I will end up using the same Principle to argue exactly the opposite of the proponents of “let it rip.”

Now please bear with me as I try to discuss in some tedious detail why this is the case.

The Importance of R0 and Some Exponential Growth Rate Basics:

R0 (or R “naught”) is a measure of how many people one person infects. R0 = 0 (if you are by yourself on a desert island) means you will not infect anybody during the course of your infection; R0 = 1, means you will only infect one person. R0 = 3 means (ah, ok, I see that you got it by now).

For the sake of comparison, “normal” seasonal flu is considered to have an R0 of ~1.3-1.4. Coronavirus is considered to have an R0 of ~2.5-3.0. You REALLY want R0 to go below 1 to contain a pandemic. Importantly, in addition to depending on the virus’ infectivity, incubation period etc etc, R0 is ALSO LARGELY DEPENDENT ON PHYSICAL PROXIMITY. Simply put, if you have a highly contagious (possibly asymptomatic) Italian carrier in an Italian bar in Milan, every bar customer (and almost every surface) will be covered with virus by the time it takes to finish an aperitivo (kind of kidding, but kind of not kidding).

Now, let’s assume the coronavirus average infection cycle is ~4 days (meaning one person infects an R0 nr of people every 4 days). This is where problems start with exponential growth rates. What happens with 10 cycles following the initial infection(s) caused by that person: 10 incremental infection cycles (~1.5 months): normal seasonal flu (R0: 1.4): ~29 people infected. Coronavirus (R0: 3.0): ~59,000 people infected. That means one asymptomatic person, in this coronavirus season, leads to the infection of another FIFTY NINE THOUSAND (I thought that deserved all caps).

Professor Hugh Montgomery, Director of the University College London Center Institute for Human Health and Performance explains this really well (and with a better British accent that I could ever muster) in an interview with Channel 4 here.

The Problem is Hospital Capacity:

Again, please read the previous articles published on this topic on Timmerman Report from Mar. 10 and Mar. 18.

Basically, the important argument behind the “let it rip” approach is that a 1% fatality rate is a price (steep, but worth paying I guess?) for maintaining a functioning economy and not lose ~$1T / month in US GDP. We also do not know enough about the virus mortality rate, natural immunity etc etc so we should not “rush to judgment.”

I am not going to dignify the “natural / herd immunity” argument (there is no natural / herd immunity against the virus: it is a NEW VIRUS that no human on this planet has been exposed to before). What we know today about it is dwarfed by what we still need to learn.

First fallacy: consumption / economic activity will continue as “normal” should we lift restrictions on movements. I am really not sure how to address that one, unless it relies on the assumption that people are completely ignorant of the fact that there is a pandemic going on, and they’ll instantly snap back to life as normal once social distancing restrictions are lifted. Are you really going to take that trip to Milan for Easter now? Scheduling your wedding with all grandparents attending (knowing 1 in 4 of them will likely die if they get infected)? Assuming you could even board a plane, that is. (Full disclosure: my wife and I HAD a wonderful holiday trip planned to Milan to see my family there for Easter. Obviously, we cancelled).

Second, MASSIVE fallacy: the assumptions behind the 1% mortality rate. This might possibly end up being the “undisturbed” mortality rate, when it is all said and done: meaning, this SHOULD be the mortality rate IF you can obtain proper medical care (hospital bed, sufficient supply of oxygen / drugs if needed, caring and competent nurses and doctors).

Now is probably a good time to make the obvious argument that lean, efficient hospital systems (we are in a capitalist society after all) are not structured to be resilient and provide, additional capacity in a pinch.It is actually extremely expensive for a hospital to have spare capacity in terms of critical care beds, ventilators, nurses, doctors, drugs etc. So, they do not do it. Even countries perceived to be more like “social democracies” than the US do not have nearly enough spare capacity to tackle such a surge in cases. Italy has a very good hospital system. China, notwithstanding popular perception, has an excellent healthcare system, no lack of critical care equipment, and they moved 40,000 doctors into Wuhan’s hospitals to make sure they could cope. They also shut down the city when they had 500 officially diagnosed cases. Still, Italy and Wuhan had mortality rates skyrocket as soon as hospitals were saturated. Any incremental patient who needs oxygen (and cannot be properly tended to) will die. Mortality also greatly increases as hospital infrastructure degrades: you cannot fast track the training and education of new doctors and nurses in a few days. Healthcare workers are toiling under wartime conditions, getting infected themselves and dying. Which further compounds the lack of hospital capacity.

In addition, if hospitals get saturated / overwhelmed: every heart attack can become fatal if ambulances cannot reach you / hospitals cannot administer proper care. The US has ~1.5M heart attacks a year, causing ~500,000 deaths when proper care can be administered. The US has roughly 1.9M new cancer cases per year (source: https://www.cdc.gov/cancer/dcpc/research/articles/cancer_2020.htm). These patients are usually immunocompromised after getting chemotherapy or radiation treatment, which makes them very much at risk from opportunistic infections like this coronavirus. In addition they need urgent, critical treatment to achieve remission. In 2018, 34.2 million Americans (10.5% of the population), had diabetes (source: www.diabetes.org/resources/statistics/statistics-about-diabetes). Apparently, diabetics coronavirus patients have a much higher mortality rate. We don’t really understand why that is yet. The list goes on.

One (scary, but I believe accurate) way to look at this in the US is to check out the website www.covidactnow.org: it simulates by when different US states’ hospitals will be overwhelmed by the number of confirmed  cases of infection, depending on how we slow down the virus by using different types of social distancing measures to reduce R0 as much as possible.

As you can see, for a number of places, in particular NY, it is too late already. The number of cases will continue to mount over the next two – three weeks. This is why New York Gov. Andrew Cuomo (I cannot help but appreciate another fellow Italian’s decisive response) has asked for federal assistance, and is trying his best to increase hospital capacity in the city. May the fates be always in his favor as well.

Finally, please read Tomas Pueyo’s insightful blog post on this as well. Conclusions are similar to what you will find herein and in my Timmerman Report from Mar. 10.

Bottom line: “let it rip” is not sustainable. The economic and (more importantly) social cost of the disease is going to be even higher than if we undergo a 3-4 weeks shut down. Assuming even modest degradation of the US healthcare infrastructure, the death toll could rise to much more than 1% of US population (about 329 million people currently, according to the US Census Bureau).

But: We Cannot Have Radical Social Distancing for 18 Months!

True, it is not sustainable to have the global economy on lockdown for 18 months. Most important, people cannot comply with such isolation measures (especially those pesky, frolicking fools celebrating Spring Break in Palm Beach). Absolutely agree on that.

OK, here then are some thoughts (feel free to pass them along your favorite policymakers): in temporal sequence from now:  

1. We (the US) need NOW a nationwide, ideally even globally-coordinated, “pause” of 3-4 weeks at a minimum, with as little movement of people as possible, across the entire US. I mean a shut down like Italy, enforced by police etc to make sure these frolicking teen fools in Palm Beach (see above) do not continue spreading the virus; no travel unless absolutely necessary. Note: from the moment you impose and enforce such a lock down, then it takes ~2 weeks for cases and deaths to reach a peak. They will continue going up in the meantime. New York City now is like Milan and could become very soon like Bergamo otherwise. ALSO NOTE: two weeks after you impose such a lockdown, things improve. Italy has now turned the corner: in the last two days, the number of new confirmed cases and most importantly, number of fatalities, is decreasing. The lockdown in Italy started on Mar. 9, exactly two weeks ago.  

2. There needs to be absolutely clear and effective communication from the federal government. They need to enlist any traditional media sources and social media (Twitter, Facebook) with a simple, clearly communicated message: Social distancing / stay at home will work to reduce the infection rate; BUT it needs 2-3 weeks to show some results and it NEEDS TO BE ENFORCED. Our social structure and citizen relationship to authority is very different from Asian countries: but this means even more clear communication is absolutely necessary. We need to enroll every citizen in the effort. Make sure supply chains / logistics distribution / food and essential medical equipment manufacturing / energy production / broadband infrastructure can take the strain. All these activities can enroll people otherwise made redundant by the industries most affected.

3. In the meantime, during that pause period:

• Increase massively testing capacity and manufacturing (I mean, massively: the only way to resume some semblance of normal economic activity after the lock down, and only IF we have put R0 below 1 by then, is by having RAPID tests available on a massive scale). Including providing serological tests to make sure immune people can roam around freely (and ideally be enlisted in the healthcare / manufacturing effort).So, drive-thru tests, at home easy-to-use tests, phone booth tests, all within a few minutes ideally; and not administered in hospitals where infections can otherwise cluster.
• Increase hospital capacity and resilience: identify and staff separate physical hospital structures and caregivers for cancer patients; increase ICU and critical care capacity (ventilator manufacturing, etc ). Every city with an international airport needs to be prepared for surges in cases; train more nurses, doctors, to prepare for the onslaught; use / adapt hotel structures in big cities for isolating people tested positive (including asymptomatics); divert car manufacturing to more ambulances; increase manufacturing for oxygen, painkillers for intubated patients, etc.
• Have separate structures (hotels? island resorts?) for at-risk demographics: elderly, people with co-morbidities (diabetes).They need to be completely isolated for ~10-12 weeks, at least until prophylactic treatments are available (Japan has been using this strategy very successfully).This will reduce death rates and preserve hospital capacity; these structures can be staffed by (for example) airline staff who has recovered from the virus already.
• Massive increase in R&D spending: vaccine / antibody manufacturing capacity. We must start GMP manufacturing of all drugs that potentially look likely to work in pre-clinical models so we do not lose time for scaling up manufacturing. Diagnostics need R&D support, as well (Korea and China have portable CT scans, for example). There’s no time to lose. Every month of a lockdown the US loses >$1 trillion of GDP.

4. The other stuff (how to make sure workers maintain healthcare insurance), can still survive if tens of millions of people are unemployed starting next week etc. This is way above my pay grade but also super important to make sure we can come out the other side.   

We will come out of this. But, the next 6-8 weeks are critical in preserving our hospital infrastructure. The virus spreads way faster than you think. If we delay implementing these measures even a couple days more, the consequences are disastrous. The math is inescapable.

To leave you on a lighter note, and a perhaps more entertaining take on how efficient technocracies should make decisions (versus the dilemmas facing politicians), this video clip from the old British show “Yes, Minister” is priceless. Moral: I hope we can stop listening to other “opinions” and start listening to the science.

Follow Otello Stampacchia on Twitter: @OtelloVC

This article expresses the personal views and perspectives of the author. The views and perspectives expressed here do not necessarily represent the views or perspectives of Omega Fund Management, LLC or any officer, director, partner, member, manager or employee of Omega Fund Management, LLC or any of its affiliated entities.

Otello Stampacchia, founder, Omega Funds (illustration by Praveen Tipirneni)

The following is an update to my article on March 10, also published on Timmerman Report. The initial article is available (free to read here).

Before I begin, I would like to sincerely thank everybody who has reached out with comments / feedback after my first article. Thank you also for the outpouring of well wishes for my family in Italy. So far, they are all safe and sound (though increasingly going stir crazy from being locked up in their homes: you should really see the videos going around our family’s social media. They are hilarious).

So: it’s been a bit more than a week since that note of warning. Where are we now?

Unfortunately, the daily situation in Italy has continued to worsen: as I write, Italy has had more than 31,000 confirmed cases and over 2,500 fatalities. This is a Case Fatality Rate (CFR) of ~8%. If any more proof was needed, this is not the flu. China, where the outbreak began, has had a total of ~81,000 cases and ~3,100 deaths. Italy is quite likely to surpass China’s fatalities shortly (it has almost as many fatalities after 21 days as China did after 35). Note Italy has a population of ~60 million, compared with a Chinese population of ~1.5 billion.

Of course, China led the crisis response by initiating drastic social distancing measures and testing, followed by quarantines among those infected, very early on. These draconian actions probably did save a lot of lives.

As shown in the chart below (from the FT), other European countries (UK, France, Spain) are more or less tracking a similar path to Italy. The Spanish situation is even more dire than Italy at a comparable stage. It is to be hoped than the severe quarantine measures which have been put in place will contribute to “bending the curve” back to reduce the death toll. There is no time to lose if we want to preserve hospital and healthcare system infrastructure to adequately care for the 15-20 percent of those infected who require hospitalization.

Also from the chart above, the US seemed (at least at the beginning) to be following a very different curve from European countries, at least so far: it appears almost as benign as South Korea (which has had an exemplary response to the virus and has managed so far to contain the outbreak and limit the number of fatalities). As I write, the US has had ~6,500 confirmed cases, with ~116 fatalities, for a CFR of ~1.8%. Considering the US has had very limited testing capacity online to date, this is remarkable. Note, however, the curve seems to be steepening, not bending down.

I can almost hear your thoughts: this is not THAT bad! We are winning this! We are almost as good as South Korea! (I knew I did not have to study math in high school…). Why are we worrying about this virus so much AND shutting down the entire economy?? I do not want to be stuck at home with my children all day!

I will argue below that this is not necessarily the case. We are NOT “winning.” Again, I do hope I am wrong. Please bear with me as this becomes a bit wonky below (and yes, you should have studied math in high school).

We Are All Living in the Future

This is an important point.

I think I know most of the people who read this newsletter: you are living in the now, avidly watching today’s news. And I assume, as readers of the Timmerman Report, that you are well informed and are up to date with the zeitgeist. Good for you. Sorry to disappoint your own self-esteem, but that is not necessarily accurate for this situation.

To clarify: it takes ~17 days from initial infection to death on average. Fatalities we see TODAY are people who were infected more than two weeks ago.

Today’s news (and the increasing level of panic in financial markets, our own social networks, etc.) is based on the equivalent of the information coming from the light from a star (17 light-days away, ~3.6*10¹¹ km, roughly 100x farther away than Pluto, you can make your own conversion in miles if it is important to you). It was sent out 17 days or so ago. That star might as well have exploded since and you will only find out in 17 days (and what a great sunburn that will be).

Therefore, to recap, the fatalities reported TODAY are a snapshot of infections that happened THEN, not NOW.

Since then, remember the virus spreads exponentially, with an R0 (a measure of infection spreading, no need to get into that now) that is very high without social distancing measures. The R0 can be moved in a lower, more manageable direction with aggressive social distancing. But the US did not put those type of strong interventions in place until recently. And as of this writing, they don’t extend to every geography in the country.

One consequence of us living in the future is that, even if you start immediate, radical social distancing measures right NOW, the number of infections and fatalities reported will continue to climb for those ~17 days. Italy’s fatalities have grown almost 10-fold since northern Italy begun its quarantine.

Testing is (VERY) Important: Asymptomatic Carriers Contribute Massively to Spread

Let me introduce you to the small town of Vo’, in Veneto, West of Venice (Italy, not California). The town was in one of the initial cluster of cases in Northern Italy, and is close to the University of Padova, where there happens to be a great virology department, led by Prof. Andrea Crisanti.

The town’s mayor, may the fates be always in his favor, decided to test EVERYBODY in the town (~3,300 people). He tested them TWICE, at a distance of 10 days. In the first round of tests, ~3% of the town (~88 people) was infected. Asymptomatic carriers were the majority of infections detected (50-75%, I cannot seem to nail that number down from my Italian sources). Everybody infected, including asymptomatic carriers, were isolated (including from their own families). In the second test, 10 days later, the number of people infected had gone down to 7 from 88 (these were new cases who somehow had gotten infected in the intervening period). Now the town is virus free.

An article recently published in Science (Li et al., Science March 16, 2020, DOI: 10.1126/science/abb3221), using Chinese data, also broadly corroborates this finding. According to that article, ~86% of infections are estimated to be undocumented prior to the Jan 23 travel restrictions put in place. Undocumented infections (which for all intents and purposes we can understand to be asymptomatic, though that is not a 100% accurate assumption) seem to have a transmission rate of as much as ~55% of documented infections. However, because of their much greater number, undocumented infections were the source of almost 80% of documented cases!

What this means is that huge numbers of people – for practical purposes, let’s assume almost everyone you could potentially come into contact with over the course of a day – could be spreading the disease without even displaying symptoms. 

This again validates the Chinese and South Korean approach of population-wide, massive rapid testing. Once cases are confirmed (and note that individuals are held in isolation away from hospitals and families, while tests are underway), the infected individuals are isolated (even if they aren’t displaying symptoms). Note that the information from Vo’, though on a small sample size, seems also to indicate that isolating infected individuals seems to prevent the disease from evolving into a severe state.

These experiences and data point to a very important lesson: there is a very direct trade-off between capability to perform lots of (rapid) tests and the need to impose radical social distancing to prevent healthcare system collapse. The more you frequently test AND isolate individuals infected (including asymptomatic spreaders), the lesser there is a need for radical social distancing.

Unfortunately, the U.S. did not heed this lesson from Korea (Japan did not perform extensive testing, but they did isolate their entire demographic of >70 year olds, thereby reducing the fatality rate so far). The lack of testing in the U.S. has contributed to possibly quite widespread community-based spreading.

The implications of this are very broad, particularly for the young demographic in the U.S. population (the U.S. skews young, see below): your partying and drinking in bars and restaurants during St. Patrick’s Day is not helping here. Stay home. One case, early in the outbreak, infects ~2.5 people on average (many, many more if in close physical contact like at bars, dance parties etc. I would not know personally, I am a terrible dancer, but so I am told). ONE SINGLE CASE, under those assumptions, can lead to ~244 more cases in one month. If you halve that transmission, by reducing social contact, that single case only infects 4 people in that month.

Now is a good time to teach young people about exponentials before letting them go out in the evening.

Viral Load is Also VERY Important for Disease Severity

The latest news from Italy is that ~9% of the fatalities are healthcare workers. This is tragic. These individuals have been working selflessly for weeks now in conditions akin to a World War II conflict zone, performing triage on patients, without adequate supply of protective equipment and often in isolation from their own families.

It also seems to point out that it matters how much of the virus you are exposed to when you are infected. These heroes on the frontlines are exposed to high virus titers for long periods of time.

It makes sense: the lesser the number of copies the virus has infected you with to begin with, the more it has to replicate (and the longer that takes) before it overwhelms your immune system. Logically, if fewer copies of virus enter the body in the first place, that gives the immune system more of a chance to adapt to the invader and mount a defense.

So: wash your hands. Stay home. ESPECIALLY stay away from people at risk (immune-compromised cancer patients, people with co-morbidities, etc.). The government needs to step up manufacturing of protective equipment for healthcare workers ASAP.

Social Structure & Demographics Makes a Difference

So back to the graph above. Yes, I hear you thinking: your graph (it is not “my” graph, but whatever) says we are doing better than the Italians so far. Almost as good as the Koreans! I thought we were winning (everybody likes winning, I get it) and you have not provided me with any counterfactual. Am done reading this!

My, what an impatient bunch. Go watch some less complicated news channels (lots of choices there) and then come back when you feel like you want to discuss complex issues. This is important.

Differences in social interactions and social networks seem to play a very important role early on in the epidemic, especially when coupled with different demographic structures (huge thanks to Prof. Moritz Kuhn at University of Bonn for publishing on this, I really invite you to read his stuff, he is on Twitter at @kuhnmo).  

Let’s start from the assumption that the virus was imported in Europe from mostly work-related travel. Different European countries are (very roughly) split in two categories: “A” countries, where grandparents do not live with their children and their grandchildren (France, Switzerland, Netherlands, Germany), and “B” countries (Italy, Spain) where there is a larger % of the population (close to 23% in Italy) in households with the three generations living together.

In “A” countries, the initial exposure of the elderly to the outbreak will be limited. This will lead to an increase in infections overall but with a reduced initial fatality rate (like we see now in Germany, and we saw earlier in France).

In “B” countries (sadly, Italy and Spain) the most at-risk demographics are exposed relatively early in the outbreak. This overwhelms hospitals sooner.

If I were to guess (remember, I am a recent guest to this country), the U.S. is an “A” country. So, I would assume that elderly demographics were less exposed early on at the population level.

In addition, the overall demographic skews much younger in the US. Have been trying to find graphs but I do have a day job. Trust me on this, Italy is overall a much older country (see all those monuments in Rome? Yes, current day Italians built those).

This factor probably helped reduce the initial fatality rate in the US. That is, until the epidemic has spread broadly enough that the cases reach more at-risk populations in the country.

This seems to explain the observation that infection growth rate (growth in nr of cases detected) in the US is actually higher than in Italy to date BUT fatalities are much lower to date (worryingly, starting to curve up).

When Hospitals are Overwhelmed, Fatalities Climb Rapidly

This is what worries me the most. See what is happening in Italy, Spain, look at the initial data from Indonesia, etc. etc.: all with CFRs exceeding 5-6%. As soon as hospital systems are overwhelmed, conditions resembling war zones start to apply and people who normally would have recovered in a healthy, functioning healthcare system are unfortunately not able to and perish.

We should not let that happen. Demographic and social structure have probably given us all a (short?) reprieve. Let’s use it productively.

Follow Otello Stampacchia on Twitter: @OtelloVC

This article expresses the personal views and perspectives of the author. The views and perspectives expressed here do not necessarily represent the views or perspectives of Omega Fund Management, LLC or any officer, director, partner, member, manager or employee of Omega Fund Management, LLC or any of its affiliated entities.

Otello Stampacchia, founder, Omega Funds (illustration by Praveen Tipirneni)

As background: I am Italian-born, and was raised in Italy. My entire family works and lives there, mostly in Milan or nearby areas. I have been communicating with family members about the noval coronavirus for the last month.

I have a PhD in Molecular Biology from Geneva, Switzerland, and I have been in biotechnology venture capital since the early 2000s. I live in Boston now.

The following is a personal account of what I think the lessons should be from the Italian situation, and their response, as well as what I think should be the immediate US response.

First, some facts (see graph below):

Cases started in Wuhan, China, probably late November / early Dec. 2019.

Reporting to the World Health Organization of cases of pneumonia, of unknown etiology, started on Dec. 31, 2019.

First death reported was on Jan 9, 2020.

First sequence of the 2019-nCOV virus was shared with the scientific community on Jan 12. The number of daily confirmed cases passed ~500 on Jan 16.

Wuhan City was shut down on Jan 23. Another 15 cities were shut down in China on Jan 24. WHO declared “a public health emergency of international concern” on Jan 30.

The first virus infection cases in Italy were confirmed on Jan 31, with two Chinese tourists (in Rome) positive for the virus.

It is unclear if the current outbreak in Italy derived from lack of containment of potential virus spread from those cases: on Feb 7, an Italian man repatriated back to Italy from Wuhan, China, was hospitalized and confirmed to be the third case in Italy.

A cluster of confirmed cases were detected later on. By Feb. 21, 16 cases were confirmed in Lombardy, in northern Italy. A day later, an additional 60 cases were reported. The first deaths in Italy were reported the same day.

As you all should know by now, the virus has an incubation time of roughly two weeks (with significant variability between individuals likely). The incubation time is defined as the time it takes between the day a person is infected, and the day that the person starts having symptoms of the disease. When people are suspected of having been in contact with the virus, it is highly recommended that they undergo quarantine for that two-week period, to limit infection spreading. 

By the beginning of March, 11 cities in northern Italy (all close to Lombardy) were placed under quarantine. By March 8, Italy had performed ~50,000 tests for the virus. Also on March 8, Italian Prime Minister Giuseppe Conte extended the quarantine to all of Lombardy and 14 other northern provinces; this was extended to all of Italy just one day later — on March 9.

Some background on Italy and in particular Lombardy: this is the richest region in the country, with excellent healthcare infrastructure. Italy has ~3.2 hospital beds / 1,000 inhabitants (a higher proportion than the US). Doctors and healthcare professionals in general are well-trained and dedicated. There are no negative incentives to getting tested (and skipping work) early in the disease progression phases, like there are in the US. Italy has universal healthcare insurance and coronavirus tests were made widely available very early on.

The case fatality rate in Italy has also been extremely high: close to the Chinese numbers, of roughly 3-3.5% CFR rate. Much higher than Korea, which has implemented massive scale testing and extensive contact tracing and quarantine since very early on. Some of this high number in Italy might be an artifact of the relative lack of testing of asymptomatic carriers, some might be due to an aging population (Italy skews very old in its demographics, and the elderly are particularly susceptible to high level of morbidities and fatality with this virus). Some more might be related to social customs (Italians are an extremely social culture and congregate regularly in large groups with extensive physical contact: greetings are two kisses on the cheeks even with relative strangers).

What does “quarantine” mean? It means everybody is stuck at home. People who can, are working from home. Shopping is done online preferably: alternatively, one household member only at a time can go to shops. Shops are closed on weekends. No schools, no gyms, no cinemas, no restaurants unless they can guarantee a minimum distance of ~3 feet (damn Imperial measurement system) between customers. No concerts, no conferences, nothing. If you are leaving / driving somewhere, the police will stop you, and will ask for the reasons for your travel. If it is not justified (medical reasons, urgent work reasons), you will be indicted for violating the quarantine and reported to the courts. And these measures are being enforced (startlingly enough).

I have family members who have been stuck at home for days now and are literally going nuts. And they have a way to go (weeks, if not months).

Early on, I had the hardest time making my family understand how serious this was (I started pestering them more than four weeks ago to prepare). This is called “Social Distancing.” It feels undemocratic, excessive. We are not China! We are a vibrant democracy of individualists who like to go out every night!

Why is Italy now shutting down its entire country? With incalculable economic consequences (in a country already pretty much in recession)? For a virus with a likely case fatality rate of close to ~1% maybe? Are we insane?

No.

The country is, arguably belatedly, making a dry, cold calculation. The choice is the following: shutting down the country and preventing as much as possible fast spreading of the virus (“flatten the curve”) and in so doing limit its current, catastrophic impact on hospitals and caregivers; OR: continue life as usual and basically overwhelm the healthcare system.

What is happening to hospitals around Milan now (and it has been happening for days): ALL routine treatments / diagnostics, operating room procedures, even emergency procedures like trauma and strokes are being delayed / diverted to other centers to preserve what little capacity they have to treat virus patients. Virus patients with severe co-morbidities and/or over 65 years old are not being provided with ventilators: caregivers are triaging, like in a war zone, for people that have a possibility to recover and that they can save. ICU bed capacity has been nil for days.

Think of the implications. Caregivers are physically and emotionally exhausted. They were / are not being provided with protective gear: they are making mistakes. They are falling ill themselves. All doctors / nurses, of any specialties, are only caring for virus patients. More and more people will suffer fatal consequences of this. Not stopping as much as possible the spread of the virus is not an option. China and Korea did it. At great economic cost, for sure, but in so doing saved immeasurable number of lives.

I know what some (maybe most of you are thinking): Why should I change my way of life? This is overblown. It is like the flu. I am not in at-risk demographic.

It is not like the flu. There is no vaccine or natural immunity. The severity and fatality rate of the disease on the elderly and patients with co-morbidities is horrific (up to 18% of people over 70 years old seem to be fatally affected). Hospitals cannot possibly cope with hundreds of patients in intensive care, all at the same time. There are not enough beds, equipment, protective gear. By not contributing to reducing the spread / flattening the curve, even if you are not in an at-risk demographic, you are still contributing to spreading the virus.

So, what could / should the US do?

I personally think time for containment is over. A few hours ago, New Rochelle, New York was cordoned within a 1-mile radius by the National Guard. There were a few cases detected there days ago. Those people were infected ~2 weeks before that. There has been no extensive testing performed in the US at all for the last few weeks. Testing capacity is only coming up online now.

Here are my suggestions:

1. Implement radical measures of social distancing ASAP. No schools, universities, no concerts (sorry, but were we really still thinking about doing Coachella up until a day or so ago??). No restaurants unless appropriate distances between customers are enforced. Start asking everybody who can to work from home immediately. Elderly and other at-risk demographics should be isolated as much as possible. No contacts between kids and elderly people if at all possible.
2. Increase as soon as possible (massively) testing capacity and manufacturing of protective gear for healthcare workers. Test as many people as possible.
3. Start a program to help recall into service retired nurses / doctors. Create / speed up training programs for gig economy workers in non-at risk demographics to assist hospital infrastructure. [Update: 12:30 pm ET, Mar. 11. P.S. One of my suggestions was to start a program to recall into service all retired nurses and doctors. This may not be such a good idea after all, given the age susceptibility. The CEO of a large Cambridge-based biotech pointed out to me that a better option would be to recruit the entire cohort of medical school and nursing school students and give them crash training to provide back up support, perhaps offering retirement of their med/nursing school loans or to pay for the rest of their school costs as a reward. I agree.]
4. Take care of the people who will be most hurt by this: gig economy workers, restaurant workers etc. etc. who all could lose their jobs and livelihoods if they do not show up to work even if feeling ill. We should provide some federal guarantee for sick pay during the emergency. Provide immediate country-wide insurance payment relief for testing / hospital visits. Perverse incentive systems will result in perverse outcomes. 
5. Work with healthcare companies and ramp up / speed up regulatory paths to test new therapies / vaccines.

I hope to be wrong. I do. I fear I am not.

This needs to happen now. Looking at infection curves, the US is now where Italy was 11 days or so ago.

We have no time to lose. And may the fates look upon us with mercy.

Follow Otello Stampacchia on Twitter: @OtelloVC

This article expresses the personal views and perspectives of the author.  The views and perspectives expressed here do not necessarily represent the views or perspectives of Omega Fund Management, LLC or any officer, director, partner, member, manager or employee of Omega Fund Management, LLC or any of its affiliated entities.