Seeking Alpha
Research analyst, value, growth at reasonable price
Profile| Send Message|
( followers)  

Biotechs that produce vaccines and drugs to prevent and treat viruses ramped up Friday April 5 on news that 6 people were confirmed to have died in China as a result of the Avian Flu outbreak. China officials advised people to avoid eating poultry and had over 20,000 birds slaughtered at a wholesale market in Shanghai where the Avian Flu (H7N9) virus was detected in a pigeon. BioCryst Pharmaceuticals (NASDAQ:BCRX) rose 28%, Pure Bioscience (OTCQB:PURE) and Hemispherx Biopharma (NYSEMKT:HEB) each rose 15%, Sinovac Biotech (NASDAQ:SVA) rose 9%, and Novavax (NAVAX) rose 6%.

John Oxford, a professor of virology, at Queen Mary, University of London, warned that this could turn into a pandemic if the H7N9 virus mutated and allowed human-to-human transmission. His concerns stem from influenza's history of emerging and spreading. Back in 2003, a previous strain of Avian Flu known as H5N1, killed over 300 people and devastated poultry stocks in Southeast Asia.

I will discuss some of the companies that experienced large moves in stock price as a result of the Avian Flu news.

BioCryst Pharmaceuticals develops drugs that block key enzymes involved in the pathogenesis of diseases. The company combines computer modeling with biology, chemistry, and crystallography to discover and develop small molecule pharmaceuticals through the structure-guided design process.

BioCryst has been approved to sell Peramivir in Japan and Korea to treat seasonal influenza. Peramivir is also undergoing Phase III clinical trials for acute influenza. The drug is a potent intravenous anti-viral agent that rapidly delivers high plasma concentrations to the sites of infection. The company received a letter from the FDA that outlines a pathway for BioCryst to file a New Drug Application for the approval of intravenous Peramivir in the United States. Peramivir could be an important treatment for the Avian Flu and other influenzas.

BioCryst is not yet profitable, so it should be considered speculative as an investment. The four analysts covering BioCryst have an average one-year price target of $3.20 for the stock which is now trading at $1.70.

Pure Bioscience is a company that manufactures silver dihydrogen citrate based disinfecting and sanitizing products. One of the company's products includes PURE Hard Surface, which is a hard surface disinfectant and food contact surface sanitizer for use on food processing equipment. Pure Hard Surface provides powerful broad spectrum protection as a disinfectant, fungicide, and virucide that kills germs in 30 seconds. The company also offers the following environmentally friendly cleaning products: PURE Floor Cleaner and PURE Multi-purpose cleaner for use on various resilient surfaces. Its other products include: Axen30, a hard-surface disinfectant; Axenohl, an anti-microbial formulation for use as a raw material in the manufacturing of environmental protection agency-registered products; and Silverion, an anti-microbial formulation for use as a raw material in the manufacturing of personal care products.

Pure Bioscience has the potential to be a successful player in the prevention of the spreading of viruses and bacterial germs in the manufacturing environment. However, the company is not yet profitable and should be considered speculative. The stock is currently trading at 3.7 times its book value per share at $0.68.

Hemispherx Biopharma develops drug therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. One of the company's products, Ampligen, is under clinical development for the treatment of Chronic Fatigue Syndrome, Hepatitis B, HIV, renal cell carcinoma, and malignant melanoma. Hemispherx received a complete response letter from the FDA with questions of the efficacy of the drug to be used for Chronic Fatigue Syndrome.

The company's Alferon LDO treatment is an experimental low-dose oral liquid formulation for the treatment of influenza. This drug is under development for specifically targeting the Avian Flu and other lethal viral diseases, which have high acute death rates. Alferon LDO is the oral liquid version of the company's FDA approved product known as Alferon N Injection for the treatment of external condylomata acuminata, which is the technical term for genital warts.

Although Hemispherx is not yet profitable, the company is expected to grow earnings annually at 25% for the next five years. Despite the 15% gain in its stock price, HEB is still trading under its book value per share of 0.27. Currently, the stock is trading at only $0.23.

Sinovac Biotech develops vaccines for hepatitis A, hepatitis B, and influenza viruses in China. The company's commercial products include: Healive, a hepatitis A vaccine; Bilive, a vaccine for hepatitis A & B; Anflu, a split virus influenza vaccine; Panflu, a vaccine for the H5N1 influenza virus; and Panflu 1, a vaccine for H1N1 virus.

Sinovac also has the following compounds under development: a SARS vaccine and vaccines for the EV71 virus, rotavirus, pneumococcal, rabies in humans, Chicken Pox, mumps, and rubella.

Sinovac is not yet profitable, thus making it speculative as an investment. The stock price of $3.93 is now trading at 1.62 times its book value per share. The company is expected to grow earnings annually at 12% for the next five years.

Novavax (NASDAQ:NVAX) develops vaccines that address a variety of infectious diseases. The company's technology uses virus-like particles (NYSE:VLP) and recombinant protein micelle vaccines. Novavax does not yet have any commercial products on the market. Its vaccine product candidates are being developed to address: seasonal influenza, pandemic H5N1 influenza, and respiratory syncytial virus (RSV).

Novavax has relationships with other companies to help develop its products. There is a joint venture with Cadila Pharmaceuticals to develop and market vaccines, pharmaceuticals, and diagnostic products in India. Novavax has a licensing agreement that allows LG Life Sciences to use Novavax's VLP technology to develop and commercialize vaccines in South Korea. NVAX also has a partnership with PATH to develop its RSV vaccines to protect infants through maternal immunization in low resource countries. PATH awarded NVAX approximately $2 million to support a Phase II clinical trial in women of childbearing age.

Just like the other companies featured in this article, Novavax is also not yet profitable. The current stock price of $2.42 is trading at 4.21 times its book value per share. The 6 analysts covering the company have an average price target of $4.42 for the stock.

Conclusion:

It is positive to see companies working to develop vaccines and treatments for the various influenza threats that are wreaking havoc with the health of individuals and in some cases causing fatalities. Let's hope that these companies can remain a step ahead of these viruses for a healthier world.

Be aware that the five companies featured in the article are not yet profitable and should be considered speculative. The stock prices can be highly volatile. These stocks can lose value just as quickly as they gain value. Only a small portion of an investor's portfolio should be allocated to speculative stocks such as these.

Source: Biotechs Ramping Up On China's Avian Flu Outbreak