Possible Swine Flu Profit Trades

Looking at the U.S. stock market futures we seem to be down quite a bit. The Dow is down 152, S&P 500 down 19, and the Nasdaq is down 23.75. Looks like Monday could be a rough day, with the likelihood of some depressing earnings reports as well as people worrying about the Swine flu, we could be down significantly.

Speaking of the swine flu, that story may actually shine some light on the Pharma sector Monday. A way to profit off of this highly talked about illness may be to flip some med stocks. I remember when Severe acute respiratory syndrome (SARS) was highly covered I was able to make some profits. One of the drugs given to patients that for SARS was Ribavirin. Two publicly traded companies which distribute popular forms of this drug are Roche (RHHBY.PK) (OTC) and Valeant (VRX). As one can see from the Google News Timeline below, the media heavily covered SARS in March-June and peaking in April.

click to enlarge

Now if we look at the Google Stocks charts for both Roche and Valeant, as well as other major drug stocks such as Wyeth (WYE) , Pfizer (PFE), and AstraZeneca (AZN) we notice an uptrend in these stocks.

The overall trend looks to be an initial pop as the possible first stories were reported of SARS in January, then a minor dip through February for both Roche and Valeant, but more or less a sideways move for the three giants. However, as the story gained more coverage the stocks rose very sharply, riding the wave until about mid-June. There is certainly a correlation here between the coverage of SARS in the media and the stock prices of these drug makers.

For Monday I would watch Roche very closely as they make Tamiflu which is a popular flu treatment and prevention drug. Also watch for large drugstores to move such as CVS (CVS) and Walgreen (WAG). Depending on how long this is HOT news in the media will certainly impact the stock prices for these companies. Just don't get burned by holding anything too long!

I am hoping they find a treatment quickly, and can contain this ASAP. My heart goes out to everyone affected, and I am hoping for the best.

Disclosure: Long PFE

Comments

[Just an inv...:]

What about Rolenza? by Glaxo smithe klein GSK

Apr 27 04:56 AM

[apppro:]

Just like all the other so-called pandemic diseases - this too shall pass. while in the short term most of the health care stocks may benefit, companies like CVS, etc. should not base their long term plans on hysterical reactions to the latest short craze.

Futures are way down early today, and from industrial to bank stocks - all are down. Short sellers are pushing anything they can!

Apr 27 07:02 AM

[CautiousInv...:]

I have pasted below material taken from Clusterstock and would add to the list 3M, who makes the masks that will likley be used if this thing reaches pandemic proportions.

----------------------...

The swine flu outbreak has come during a horribly vulnerable time for the global economy, but at least on Monday, toxic balance sheets won't be the #1 news story.

Instead we'll be trying to figure out if this is the big one, or if it's just a prelude.

Two of the ones to watch tomorrow: Biocryst (BCRX) and Novavax (NVAX), vaccine makers which were up 26% and 75% respectively on Friday as news emerged of the disease striking in Mexico. We'll be shocked if they don't go crazy again on Monday, now that the story's gotten much bigger and because Novavax still has a market cap of under $100 million. It won't take much to make it go crazy.

Other companies that may profit from swine flu include Roche -- who's Tamiflu has had some effect and Gilead (GILD), which gets royalties from its sale.

This blog offers up some more speculative names including NanoViricides (NNVC) and Sinovac Biotech (SVA)

A stock we'd expect to see selling in: Hormel (HRL).

Any other ideas and guesses as to how the story will effect the markets and individual stocks? We'd love to hear 'em.

Apr 27 07:31 AM

[Hedged In:]

Here's a compilation of Swine Flu Resources for Traders: seekingalpha.com/insta...

Apr 27 07:33 AM

[Scooter-Pop:]

Hey, what about the HUGE royalty GILD receives from Tamaflu?

Apr 27 08:34 AM

[guymar:]

What about Biocryst (BCRX)?

Apr 27 09:25 AM

[Marco Hickey:]

There are many stocks to be played while this is still hot news... I was just naming a few. Thanks for all your comments!

Apr 27 11:52 AM

[Dustinian:]

I am considering taking a position in Gilead. Not simply because of swine flu reaction, though that makes it more attractive. Gilead seems like a solid company with decent growth prospects and good analyst ratings.

However its book value is very high and a bit disturbing.

Apr 27 01:46 PM

[User 403296:]

PFE is undervalued anyway, the only drug that has shown any efficacy toward this swine-avian-people flue is Tamiflu (oste....)

No other antivirals such as ribravirin are useful, look also to sales of support drugs that do not cure the disease or target it, but cough sirups /w codeine, etc..


On Apr 27 04:56 AM Just an investor wrote:

> What about Rolenza? by Glaxo smithe klein GSK

Apr 28 12:26 AM