The early coronavirus warning that woke up Wall Street

It was late January, and there were just six known cases of COVID-19 in the US

The warning was stark.

It was late January, and there were just six known cases of Covid-19 in the U.S. A leading infectious disease specialist who previously had battled Ebola and SARS had an alarming message for a group of money managers: It was about to get a lot worse.


"In the 20 or 30 years I've been involved in emerging infections," Jeremy Farrar told the managers on the January 31 call, "I've never seen anything that has been as fast or as rapidly moving and dynamic as this has been."

The director of the Wellcome Trust, a U.K. health foundation, followed that up with an estimate on a February call that deaths in the U.S. related to the spread of the new coronavirus could reach between 500,000 to 1 million within a year assuming there were no lockdowns or other restrictions.

The calls held for managers of Wellcome's $33 billion endowment served as one of the earliest known warnings to investors about the coming impact of a disease for which humanity had no immunity. The information spread like a kind of samizdat among certain quarters of Wall Street, and beyond. Those who took heed of the predictions from Dr. Farrar, an adviser to the U.K. and German governments on the virus, spread the word to friends and family and took steps to try to protect their investments from the virus' fallout.


Investors from the Silicon Valley venture-capital firms Benchmark, Sequoia Capital and Thrive Capital dialed into at least one of the handful of calls Wellcome hosted, according to transcripts or audio of the calls reviewed by The Wall Street Journal and people familiar with the calls. So did portfolio managers or strategists from private-equity firms and hedge funds including the Blackstone Group Inc., Citadel and Valiant Capital Management, one of the biggest winners to date this year among hedge funds.

A Wellcome spokeswoman described the calls as briefings to help inform Wellcome's money managers and other close contacts and said Dr. Farrar's focus was on the "scientific, health and societal impacts of the outbreak." He did not comment on markets or investing, the spokeswoman said.

Wellcome said it encouraged participants to share the information widely but asked they refrain from identifying it as the source to encourage a more candid discussion. Dr. Farrar was separately sharing information with governments and health agencies around the world and through public statements.

"We held similar briefings during the Ebola and Zika epidemics and found that our community valued having access to high quality information to help them understand the science behind the outbreak," the Wellcome spokeswoman said in a statement. "We set up the briefing calls on coronavirus to offer similar insight."


The warnings on those calls turned out to be apt. Covid-19 has thus far caused more than 113,000 estimated deaths in the U.S. and an estimated 418,000 around the world. It brought the world's largest economy to a halt, triggering a recession and ending a more than 10-year expansion. Most countries, including the U.S., are starting to emerge from self-imposed lockdowns.

At the time of Wellcome's Jan. 31 call it wasn't yet clear how much life would change for most Americans. That same day what was then believed to be the sixth case of a person testing positive for the infection in the U.S. was reported in Chicago. The U.S. also declared a public health emergency and imposed entry restrictions on foreign nationals.

But familiar rituals were still intact. A crowded field of Democratic presidential candidates headed into their final campaigning push ahead of the Iowa state caucuses.


Just a few days earlier, Health and Human Services Secretary Alex Azar and officials at the U.S. Centers for Disease Control and Prevention had said risks of the virus spreading in the U.S. were low.

Those on Wellcome's roughly hourlong call heard a very different message.

Dr. Farrar said the virus appeared "highly infectious," as was evident in China and "increasingly, in the rest of the world." He also nodded at its fallout, saying airlines and potentially ships would stop traveling and supply chains and workplaces would be interrupted.

From there, it rippled outward.

One person struck by what he heard on the Jan. 31 call was Benchmark's Bill Gurley, one of Silicon Valley's leading venture capitalists. He said he had been scouring news coverage and Twitter that month and found reliable intelligence difficult to locate.

The information from Wellcome "was the best flashlight we had at the time relative to any other data source because they think about these things 24/7," he said.

Mr. Gurley said he started sharing content from the Jan. 31 call and subsequent calls with several founders of companies the venture firm had backed. Heather Fernandez remembers jotting down datapoints Mr. Gurley shared from the calls and thinking they were unfathomable.

"To be honest," said Ms. Fernandez, a founder of San Francisco digital health startup Solv Health, "they seemed a little crazy because it was inconsistent with what we were hearing from our partners, from consumers and then, of course, the news -- by an order of magnitude."


Solv helps consumers book same-day doctors visits by powering software for health-care providers.

As of late February, Ms. Fernandez recalled, Solv wasn't seeing anything unusual in the volume of appointments booked and health care partners weren't seeing Covid-19 cases.

But she quickly recalibrated when MultiCare, a Washington hospital system with urgent-care clinics close to the Kirkland, Wash. nursing home that became the site of the first outbreak in the U.S., reached out for help in early March. MultiCare needed to find a way for consumers to safely visit their sites without unintentionally spreading the virus. Solv quickly created a bot for MultiCare's website.

The startup then shifted to making sure it could quickly and widely roll out telemedicine, previously a small part of its business, recognizing consumers would need care even as they sheltered in place.

"Those calls made the scope of what could happen clear. But once we started to see the early signal on the ground, we knew we needed to act, " Ms. Fernandez said. Solv had 6,000 telemedicine visits in 2019. This year through May, it has logged more than 250,000 remote visits.

Mr. Gurley also alerted his close friend Rich Barton, a serial entrepreneur long backed by Benchmark and the chief executive and co-founder of Zillow Group Inc.

Mr. Barton had taken note of early indications home sales in China had fallen off a cliff when he received a recording of the January Wellcome call from Mr. Gurley, a former Zillow board member. Mr. Barton listened and then arranged to join the next call.

What he heard helped Seattle-based Zillow react quickly. On a March 23 investor call Mr. Barton said Zillow was pausing its program of buying homes and had intentionally slowed its rate of purchases in the last month given increasing uncertainty. He also said the reduction of its inventory of homes, including through sales, helped boost its cash reserves to $2.5 billion as of Feb. 29.

"In every crisis there is opportunity, and optionality is created with cash," said Mr. Barton in an interview. He regularly advises businesses he works with to have a cash cushion.


Wellcome "made a very data-rich argument, not just an intuition-based argument," he said. "It seemed like Wellcome was on an explicit strategy to get people ready."

Another company that acknowledged the seriousness of the virus not long after hearing Wellcome's warnings was Sequoia, the venture-capital firm in Menlo Park, Calif. that bet early on Apple Inc. and Google.

Sequoia's presence in China had alerted the firm in January to Covid-19, partner Roelof Botha, who leads Sequoia's business in the U.S., said in a recent episode of the tech podcast "Acquired." The experience of Sequoia's Chinese portfolio companies and a March 2 meeting where U.S. partners agreed the virus was important spurred the firm to send a rare memo to its founders and chief executives, Mr. Botha said in that interview.

The March 5 "Black Swan" memo ricocheted around Silicon Valley.

It warned of the virus' far-reaching impact on the global economy and urged Sequoia's founders and chief executives to "question every assumption" about their business. Its last such missive was a 2008 presentation titled "RIP Good Times" that spooked many Silicon Valley entrepreneurs and investors.

The Wellcome calls also helped inform Sequoia's thinking about the virus, a person familiar with the firm said. The person said the calls contributed to Sequoia's decision to shift to remote work in early March in the U.S. and to scale back its annual investor meeting, first from India to the San Francisco Bay Area and, ultimately, to a series of virtual meetings.


Hedge-fund manager Chris Hansen was on some of the calls, too. His stock picking hedge fund Valiant gained roughly 40% before fees through May on its early recognition of the virus' significance. A question Mr. Hansen asked on Wellcome's February call led to Dr. Farrar's estimating the number of possible virus-related deaths in the U.S., according to a transcript.

China's forceful response and alarms raised by several public health experts were key signals for the fund, the Journal previously reported.

Valiant's profitable wagers included bets against levered companies it viewed as likely to be hurt from an economic slowdown caused by the virus and a timely buy of credit protection on global investment-grade and high-yield bond indexes that became more valuable as the likelihood of corporate defaults rose.

Not everyone who was on the Wellcome calls fared well. Hedge-fund manager Larry Robbins engaged in a sustained back and forth with Dr. Farrar on Wellcome's March 16 call, asking what it took for public health measures to be effective and what the timeline for a vaccine was.


Mr. Robbins's Glenview Capital Management lost 30% in the first quarter -- including a 19% loss in March alone. It has made up some losses since but was down roughly 22% for the year through April, according to an investor. It had significant exposure to hospital operators coming into the year.

It was unclear how Glenview and Valiant's performance might have differed had they not dialed into the calls. Mr. Robbins and a Valiant spokeswoman declined to comment.

-- Yuliya Chernova contributed to this article.