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Rolling the dice on bird flu
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Tumblers in a cosmic lock ... click
Put it all together, and conditions for the rapid transmission of disease multiply. And for reasons that are somewhat mysterious, about every 50 years or so, conditions emerge like tumblers in a cosmic lock to create a ripe environment for the rapid migration of local diseases across international borders, which is the definition of a pandemic.
At the moment, the main thing you have to avoid is chickens that appear to be drowsy, have watery eyes and are stumbling into drugstores asking for Thera-Flu. Just say no. But experts say its also just a matter of time until the DNA of the virus slips a gear and changes in a way that makes bird-to-human transmission possible. Its a sort of a Viral Vegas, where physicians are waiting for Red 17 to hit randomly on the roulette wheel and trigger a payout to the dark forces of the human condition. Alarmists say that in a worst-case scenario, around 2% of the worlds population, or 150 million people, could die of pneumonia, or upper respiratory disease, caused by a H5N1 mutation.
In India this weekend, officials said they were taking the threat seriously. They will cull 900,000 chickens in the Nandurbar district of Maharashtra state, where the virus was detected recently. Theyre paying farmers up to 40 rupees per fryer, then poisoning them and laying them in seven-foot graves.
Profiting from the scare
Over here, conditions are quite different. Poultry factories are gruesome but largely clean. Cities have developed extensive plans for quarantining potential victims. Dont build a brick bunker in the backyard or buy a lot of canned food just yet. If the bug jumps from birds to humans, theres still no guarantee that it will be any worse than any other flu that races across the world. Indeed, it may be no more harmful than the much-hyped Y2K bug that incited needless panic among investors and politicians in 1999.
Still, those jackals in the media and on Wall Street who are specialists at making mountains out of molehills will certainly try to fan the fear of flu at any opportunity. They will tirelessly remind us that there were three pandemics in the 20th century, with the most severe coming in 1918-1919, when 50 million people died, including 625,000 Americans.
The recent lull in really bad H5N1 news is a good time for traders interested in exploiting the pre-pandemic media campaign to take positions in a list of drug companies that have announced products in their pipeline to either provide a vaccine against the new flu strain or treat its effects. Most of the bird flu plays ran up a bunch in the fall and have since traded down to less inflated levels, providing potentially reasonable entries.
Regular flu vaccines made by companies like MedImmune (MEDI, news, msgs), Chiron (CHIR, news, msgs), Sanofi-Aventis (SNY, news, msgs) and GlaxoSmithKline (GSK, news, msgs) are not proven effective against H5N1, but governments are granting billions in research money to these companies and others to accelerate the development of new vaccines. Even when enterprising lab teams come up with what appears to be an effective therapy, it would not be widely distributed for months. That's because the final vaccine must match the mutating virus before mass-manufacturing begins; only front-line health workers would likely get the first doses. Since worldwide vaccination is impossible to achieve -- it would require 4 billion doses -- many drug makers are developing therapies to contain outbreaks and reduce the fatality rate.
The following table lists drug makers that have announced plans to develop H5N1 vaccines, post-illness therapies or diagnostic tests. They comprise the full range of speculation, so do your own homework before investing: Some may double or triple, while others may go to zero. They are ranked by StockScouter rating. (Roche, a Swiss company that is the leading maker of a H5N1 therapy, does not have a StockScouter rating.) I will follow them all throughout the rest of the year and report back.
| 28 plays on bird flu | | Company | Mkt Cap | YTD % Chg. | 2/19/06 Price | SS | Key product | | Chiron (CHIR, news, msgs) | $8.5 B | 2.1 | $45.37 | 10 | Fluvirin, FDA-approved vs. influenza A *** | | Gilead Sciences (GILD, news, msgs) | 28.1 B | 16.9 | $61.46 | 10 | Invented Tamiflu, leading drug to lessen H5N1 symptoms | | Forest Labs (FRX, news, msgs) | 15.2 B | 15.3 | $46.89 | 10 | Flumadine, FDA-approved to treat influenza A | | Endo Pharma (ENDP, news, msgs) | 3.9 B | -1.5 | $29.80 | 9 | Symmetrel, FDA-approved to treat influenza A * | | Sanofi-Aventis (SNY, news, msgs) | 123 B | 0.7 | $44.20 | 8 | Rec'd $100M grant from U.S. to develop H5N1 vaccine | | MedImmune (MEDI, news, msgs) | 8.7 B | 2.8 | $36.01 | 7 | Flumist, FDA-approved to treat influenza A *** | | Roche Holding (RHHBY, news, msgs) | 103 B | -4 | $72.95 | | Tamiflu, leading H5N1, licensed from Gilead **** | | Carrington Labs (CARN, news, msgs) | 53.5 M | 4.9 | $4.96 | 6 | Rec'd $6M grant from U.S. to develop H5N1 vaccine | | Novartis (NVS, news, msgs) | 127 B | 4.2 | $54.68 | 6 | Announced plan to develop RNAi therapeutic for H5N1 | | GlaxoSmithKline (GSK, news, msgs) | 144 B | 1.5 | $51.23 | 6 | Relenza and Flurarix, FDA-approved to treat influenza A *** | | Quest Diagnostics (DGX, news, msgs) | 10 B | 2.6 | $52.80 | 6 | DNA test for flu viruses | | Acambis (ACAM, news, msgs) | 419 M | 8.3 | $7.83 | 5 | Ampligen, said to amplify effectiveness of Tamiflu | | Dynavax Technologies (DVAX, news, msgs) | 181 M | 44.9 | $6.10 | 5 | Imunostimulatory sequence technology to target virus | | Vical (VICL, news, msgs) | 118 M | 0 | $4.20 | 5 | Developing DNA-based vaccine vs. H5N1 | | AVANT Immuno (AVAN, news, msgs) | 136 M | -2.1 | $1.84 | 4 | Announced plans to research H5N1 vaccine | | AVI BioPharma (AVII, news, msgs) | 333 M | 118.8 | $7.55 | 4 | Antisense-based therapeutic | | Crucell (CRXL, news, msgs) | 1.0 B | -2.5 | $24.96 | 3 | PER.C6 tech used by Sanofi in H5N1 vaccine development | | Hemispherx BioPharm (HEB, news, msgs) | 169 M | 44.7 | $3.14 | 3 | Alferon, stimulates Interferon to defend vs. H5N1 | | Novavax (NVAX, news, msgs) | 225 M | 19.5 | $4.60 | 3 | Technology may help speed H5N1 vaccine development | | Quidel (QDEL, news, msgs) | 307 M | -13.2 | $9.34 | 3 | FDA-approved test for influenza A & B | | BioCryst Pharm (BCRX, news, msgs) | 504 M | 13.9 | $19.07 | 2 | Peramivir, which may inhibit H5N1 virus | | Alnylam Pharm (ALNY, news, msgs) | 373 M | 5.1 | $14.04 | 2 | Announced plan to develop RNAi therapeutic for H5N1 | | Generex Biotechnology (GNBT, news, msgs) | 102 M | 95.2 | $1.62 | 2 | Developoing anti-H5N1 vaccine w/ Antigen Express tech | | CombiMatrix Group (CBMX, news, msgs) | 62 M | 17.5 | $1.61 | 1 | Microarray for typing flu viruses | | Qiagen (QGEN, news, msgs) | 2.0 B | 15 | $13.51 | | DNA test for flu viruses | | Sinovac Biotech (SVA, news, msgs) | 156 M | 3.5 | $4.15 | | Anflu, licensed in China as antiflu vaccine | | Peregrine Pharma (PPHM, news, msgs) | 254 M | 57 | $1.46 | | Tarcivin, chimeric antibody in preclinical trials | | NanoViricides (NNVC, news, msgs) | | 137 | $1.92 | | FluCide I, antiviral targeting H5N1 ** |
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Source: PharmaWeek; MSN Money; company reports; * Proven ineffective against H5N1 in current formulation; ** Trades on Pink Sheets, an unregulated over-the-counter stock exchange; *** Has several additional potential therapies in development ; **** Swiss company that trades on OTC in U.S. in form of ADRs
Fine Print
Wondering where the H5N1 name comes from? Influenza viruses are divided into two types: A and B. Only the A viruses are known to cause pandemics. They are further divided into subtypes with an H number and an N number based on a count of hemagglutinin (H) and neuraminidase (N) proteins on the virus surface. Other pandemic viruses in this century were the deadly H1N1, H2N2 and H3N2. President Bush has designated $7.1 billion to battle avian flu and has asked for $2.6 billion more. Congress provided only $3.3 billion for this year. Most is for vaccine and drug research. About $350 million is for local health departments. Seattles health chief told The New York Times that amounts to only $70,000 for each of the nations 5,000 health departments. Immediate quarantine is likely to be cities primary response The U.S. government has a Web site to follow the coordinated federal and state effort to monitor the threat of avian influenza pandemic. The World Health Organization, a United Nations unit, is monitoring avian influenza at this site. The U.S. Centers for Disease Control and Prevention is monitoring H5N1 at this site. ... Conspiracy theorists like to point out that U.S. Defense Secretary William Rumsfeld was chairman of Gilead Sciences (GILD, news, msgs), developer of the top H5N1 therapy, before taking office. Shares are up 300% since the Bush administration began, vs. -10% for the Amex Pharmaceutical Index ($DRG.X) and +48% for the Amex Biotech Index ($BTK.X). ... Its not easy to get information on Roche, which has the Tamiflu license in Europe. Here is its Web site. ... On Jan. 18, I published a column listing 10 strong tech stocks that should outperform Apple Computer (AAPL, news, msgs) and Google (GOOG, news, msgs). Theyre up 10.6% as a group, vs. -21% for Google and -18% for Apple. The leaders are Broadwing (BWNG, news, msgs), +24%; Broadcom (BRCM, news, msgs), +19%.; and RELM Wireless (RWC, news, msgs). All are still OK for purchase. ... If you have another H5N1-related stock to add to my list, e-mail me at jon.markman@gmail.com and put AVIAN in the subject field.
Jon D. Markman is editor of the independent investment newsletter The Daily Advantage. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication, Jon Markman did not own or control shares of companies mentioned in this column.
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