Pandemic threat prompts surge of speculative investments

Analysis

As governments and scientists rush to analyse the threat of the new influenza strain, investors are hurrying to spot which companies might stand to benefit. EP Vantage has identified 23 companies which have registered significant share price gains that can be attributed to the health scare, since news of the situation in Mexico began to make headlines last Friday (see table below).

Overall, $23.2bn has been added to the combined market cap of this group, a figure that is unlikely to be translated into real value in the long term. Of the group only nine could be in line for tangible benefits, most notably GlaxoSmithKline and Roche, in the shape of a surge in demand for antiviral drugs Relenza and Tamiflu. Realistically, very few of the smaller drug developers working on early stage, experimental vaccines with limited proof of efficacy are likely to end up winners in the short-term.

Biota and Gilead Sciences will also derive a tangible benefit. They are the originators of Relenza and Tamiflu respectively, and recipients of royalty payments, with Gilead pocketing almost $1bn from Roche in just the last three years.

As well as Glaxo other larger companies with vaccine manufacturing plants like Sanofi-Aventis, AstraZeneca and even Crucell may also see a benefit if a pandemic does break out. It is likely that they would be called upon to meet demand for large volumes of flu shots.

Speculative gainers

Topping the list of more speculative bets is Novavax, which has seen its shares triple in value since last Thursday. The researcher is working on virus-like particles which it believes could lead to a vaccine that provides broad protection across flu strains. If it works, this would be ideal for stockpiling in case of a pandemic, as it could be administered whilst the actual flu strain is isolated and a specific vaccine created.

The group is also working on cell-based vaccine technology, which has the potential to significantly reduce the lead time compared with traditional manufacturing methods. However, its flu jabs have not yet completed phase II trials, meaning considerable work remains to be done before regulators would allow them to be launched; unless the current threat reaches pandemic proportions when governments may be forced to try as many alternatives as available.

Another big gainer has been Generex Biotechnology, better known for an oral insulin spray, which has seen its share double, seemingly benefiting from a phase I avian flu vaccine, in what looks like a very speculative choice by investors.

BioCryst Pharmaceuticals's share have also doubled, and although its antiviral is only in phase II, it looks a better bet, given the lack of new antivirals in development, as highlighted by EP Vantage earlier this year (Flu antivirals in demand but few options in pipeline, January 12, 2009).

The majority of the companies in this list have not passed phase I with their flu vaccines, meaning that if the pandemic threat wanes their share prices will probably follow. Still, vaccines are a hot area of research, regardless of the current flu scare, and this extra attention could reinvigorate the scramble for any promising new technology.

Share Prices (local currency) Market Cap ($m)
Rank Company Currency Mon 27 Apr 09 Thu 23 Apr 09 % Chg. Latest Gain Tangible benefit? Notes
1  Novavax USD 2.55 0.81 +215% 208 +142 Claims ability to produce a vaccine to H1N1 within 12 weeks; also developing two phase II pandemic vaccines against H5N1 (avian flu) and H1N1
2  Generex Biotechnology USD 0.61 0.27 +126% 83 +46 H5N1 flu vaccine in phase I
3  BioCryst Pharmaceuticals USD 3.88 1.75 +122% 149 +82 Anti-viral drug, peramivir (neuraminidase inhibitor), in phase II
4  Biota AUD 1.58 0.91 +74% 179 +76 Yes Receives royalties from sales of Relenza by GSK; also has anti-viral drug, CS-8958 (neuraminidase inhibitor), in phase III
5  Hemispherx Biopharma USD 0.81 0.48 +69% 68 +29 Lead pipeline candidate, antisense drug Ampligen, in phase II to treat seasonal flu; Alferon LDO in phase I to treat H5N1
6  Sinovac Biotech USD 2.73 1.70 +61% 117 +44 Sells Anflu and is developing a pandemic H5N1 vaccine
7  NanoViricides USD 1.07 0.68 +57% 131 +48 A number of pre-clinical candidates for pandemic flu strains, H5N1, H7N, H9N
8  AnGes MG JPY 125800 100000 +26% 160 +33 Pandemic H5N1 flu vaccine (DNA-based) in phase I
9  AVI BioPharma USD 0.99 0.74 +34% 85 +22 Antisense flu drug candidate, AVI-6001, in pre-clinical 
10  Yuhan KRW 211500 183000 +16% 1,486 +200 Yes Supplies Roche with an ingredient for Tamiflu
11  Chugai JPY 1845 1632 +13% 11,119 +1,283 Yes Sells Tamiflu in Japan, $160m over last 3 years
12  PT Kalbe Farma IDR 870 770 +13% 747 +86 Company at the forefront of regional pandemic flu preparedness and control programs
13  Biotest EUR 32.58 29.27 +11% 275 +28 Developing flu diagnostics
14  Vical USD 2.70 2.40 +13% 109 +12 Pandemic H5N1 flu vaccine (DNA-based) in phase I
15  GlaxoSmithKline GBP 10.63 9.87 +8% 79,476 +5,682 Yes Sells Relenza for government stockpiles, $800m over last 3 years; Prepandrix/Pandemrix avian flu pandemic vaccine approved in Europe with sales >$400m in last 2 years
16  Roche CHF 144.5 134.9 +7% 108,802 +7,649 Yes Sells Tamiflu for government stockpiles, $4.4bn over last 3 years
17  Crucell EUR 15.50 14.51 +7% 1,305 +83 Sells a number of seasonal flu vaccines; developing a number of pandemic flu vaccines, the most advanced of which is in phase II with Sanofi-Aventis and targets H9N2
18  AstraZeneca USD 36.20 34.05 +6% 52,405 +3,112 Yes Sells Flumist, $283m over last 3 years; H5N1 flu vaccine in phase I
19  BTG GBP 1.41 1.34 +5% 518 +25 H5N1 flu vaccine in pre-clinical studies; interpandemic flu vaccine in pre-clinical
20  LG Life Sciences KRW 63800 60900 +5% 734 +33 Yes Sells flu vaccine in Korea
21  Sanofi-Aventis EUR 41.70 39.95 +4% 70,180 +2,954 Yes Sells a number of seasonal flu vaccines; developing a number of pandemic flu vaccines
22  Alnylam Pharmaceuticals USD 17.04 16.34 +4% 706 +29 RNAi therapeutic agent, ALN-FLU01, in pre-clinical studies to treat and prevent pandemic flu
23  Gilead Sciences USD 47.53 45.90 +4% 43,259 +1,483 Yes As the originator of Tamiflu Gilead receives 14% - 22% royalties from Roche, $935m over last 3 years
Total mkt cap gain +23,181

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