by Barry Cohen | September 1, 2011 9:04 am
Given this week’s news that bird flu is showing signs of returning and a mutant strain of the deadly H5N1 virus could be spreading in Asia, investors might want to keep their eyes some of the heavyweights of vaccine manufacturing.
They include Sanofi-Aventis (NYSE:SNY), Novartis (NYSE:NVS), GlaxoSmithKline (NYSE:GSK), AstraZeneca (NYSE:AZN), Baxter (NYSE:BAX), Novavax (NASDAQ:NVAX) and China-based Sinovac Biotech (NASDAQ:SVA).
The mutant strain could be spreading to previously virus-free countries by wild bird migrations, according to the U.N. Food and Agriculture Organization. It appears existing avian influenza vaccines aren’t effective against the new strain.
Of course, there’s no guessing how long it would take to develop a preparation that would give people immunity to the new strain — or if one could even be produced — but if it’s possible, the vaccine companies listed are the likeliest candidates to succeed. That could mean huge sales and profits for the first to market.
Bird flu is endemic in most of north and central Vietnam, Bangladesh, China, Egypt, India and Indonesia but was eliminated from most of the 63 countries infected at its peak in 2006, according to CBS News.
The FAO says wild bird migrations during the past two years have brought the H5N1 avian influenza to countries that previously were virus-free, including Israel, the Palestinian territories, Bulgaria, Romania, Nepal and Mongolia. The WHO says bird flu has killed 331 people globally since 2003 when it was first detected.
Bird flu is found in both wild birds and domestic birds such as chickens and ducks, and it can spread to people who have close contact with infected birds, although not by eating poultry or eggs that have been properly cooked.
The big risk is a pandemic. That could occur if the new strain of the H5N1 virus makes the jump from birds to humans. If that happens, “watch out,” cautioned economist Donald Luskin in an article in StreetTalk several years ago. “People can stay away from birds. But they can’t stay away from each other. And because H5N1 is so biologically unusual, the human race has no natural immunity to it,” he said. Luskin estimated such a pandemic could take the lives of 16 million Americans — the equivalent of World War III.
In the same article, A.G. Edwards analyst Al Goldman cautioned investors to consider all the unknowns and the hype. “The avian flu potential is something that you can’t get your arms around because no one knows if — or when — a pandemic is going to happen,” he said.
It might be in poor taste to talk about stock market winners in the case of an influenza pandemic, but in addition to the vaccine manufacturers there are likely to be other industries that would prosper. They likely would include drug companies that make antiviral medications, hospital health care, telecommunications, Internet technology companies and cleansing product manufacturers.
The big losers probably would be hotels and airlines, as well as companies involved in luxury goods, insurers and shopping malls.
Barry Cohen is long NVS and AZN.
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