The Swine Flu Effect 25 comments
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The sudden appearance of a new strain of influenza has become a dramatic lesson in stock market dynamics. If we apply the chaos theory to the market, a cough in Mexico can cause an economic storm in Asia.
Markets in Asia and Europe dropped sharply on speculation that the outbreak of swine flu will curtail travel and consumer spending. Shares of airlines and hotels were particularly hard hit, which is not surprising. The price of corn and soybeans dropped as well on speculation that an outbreak of swine flu may reduce demand for pork, and consequently the grains that feed them.
The World Health Organization called the outbreak a “public health emergency of international concern,” raising concerns of a similar outbreak to the H5N1 bird virus that spread across Asia in the past few years killing millions of poultry and several hundred people and slowing trade.
Asian money managers expressed fears that like the previous bird flu cases, this outbreak may slow international trade and disrupt government’s effort for an economic recovery.
On the other hand, shares of companies that will benefit from the outbreak have risen. The obvious ones are Roche (RHHBY.PK), the maker of Tamiflu, and GlaxoSmithKline (GSK), which produces Relenza, the other medication used to combat flu symptoms. Basel, Switzerland-based, Roche, which said it has an ample supply of the Tamiflu treatment that can reduce swine flu symptoms, added 3.9 percent in Europe to 145 Swiss francs. Chugai Pharmaceutical Co., the Tokyo-based unit of Roche, surged 14 percent in Asia to 1,845 yen. Roche gained a similar amount in the U.S. market on Monday, while Glaxo climbed even more, up to a 7% gain.
Similarly, shares of Biota, the small Australian company that holds the patent for Relenza, soared nearly 80% in that market.
Another company, this one based in the U.S., will also benefit, and that’s Gilead (GILD), which holds the patent for Tamiflu and will receive a percentage of Roche’s profits. It’s a much larger and more diversified company than Biota, however, and obviously won’t gain nearly as much. Other companies that will benefit include the makers of surgical masks, which would include 3M (MMM) and Kimberly Clark (KMB). Of these, Kimberly Clark would be the better choice for investors. The company maintains a Web site for preparedness in case of a pandemic.
Still another beneficiary is Quidel (QDEL), which makes rapid diagnostic kits for the flu.
More speculative stocks, which have already doubled and then pulled back a bit, include two makers of flu vaccines that are still being tested, Novavax (NVAX) and Biocryst (BCRX).
If the market holds to previous patterns, the stocks that plummeted the most will regain ground over the next few days, while those that have climbed the highest and fastest will pull back, leaving those that have made only modest or even negligible gains, like Gilead and Kimberly Clark, in the best positions.
Disclosure: Long GILD
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This article has 25 comments:
On Apr 28 08:09 AM Freya wrote:
> The vaccines produced via the Chicken/egg route may take many months
> to produce an adequate solution if the present vaccines like Tamiflu
> and Relenza do not provide the protection needed.
>
> After all, they were not designed with this in mind.
>
> Nothing out there has been designed with this in mind. I do not know
> about BCRX, but I do know that NVAX has a proprietary artificial
> means of producing vaccines. They have the potential to come to a
> solution much faster than the others.
>
> Thanks for the heads up on QDEL, I knew that there was such a device
> but didn't know who manufactured it.
"However, because of the much greater number of infected people there will probably be many more deaths."
Not necessarily at all. The common cold spreads more rapidly than any other illness, but the number of deaths is tiny. Same for the common flu.
Notably, there seems to be a clear distinction between the effects of this virus in developed countries and emerging/undeveloped ones. Whereas in the U.S. and the U.K. victims are being described as "stable" pretty much accross the board, that's not so much the case for those in Mexico.
This is why this virus is probably more significant for emerging market countries (and subsequently their economies) than it is for the U.S. and U.K. I'm not stating that as a fact, merely pointing out that this is the way it seems to be panning out for now.
On Apr 28 09:17 AM UmRebel wrote:
> The difference between this flu and Avian flu is the rapid person
> to person spread that this strain exhibits. Fortunately, it does
> not seem as deadly on a percentage basis. However, because of the
> much greater number of infected people there will probably be many
> more deaths. I think we have just begun to see the effects of this
> virus on the world economy. Not to mention, families lives.
Come on people, stop allowing the mass media to control your thoughts. Because there are those controlling the media who are using these scare tactics to stampede you into a situation you will not want to be in.
the drug companies are not unhappy and they pay for a lot of T.V. ads... so read carefully. It's not a big threat right now and no reason to get frightened about it all beyond reasonable caution to avoid areas where more illness occurs naturally.
Simple mathematics also proves what I originally said was true. If 90 percent of the people with avian flu die but there are only 1000 people infected that would lead to 900 deaths. If 1 percent of people die from the swine flu but 1 million people are infected (usually many more ar in the average flu season) that would lead to 10,000 deaths.
On Apr 28 12:00 PM Daniel Harrison wrote:
> UmRebel:
>
> "However, because of the much greater number of infected people there
> will probably be many more deaths."
>
> Not necessarily at all. The common cold spreads more rapidly than
> any other illness, but the number of deaths is tiny. Same for the
> common flu.
>
> Notably, there seems to be a clear distinction between the effects
> of this virus in developed countries and emerging/undeveloped ones.
> Whereas in the U.S. and the U.K. victims are being described as "stable"
> pretty much accross the board, that's not so much the case for those
> in Mexico.
>
> This is why this virus is probably more significant for emerging
> market countries (and subsequently their economies) than it is for
> the U.S. and U.K. I'm not stating that as a fact, merely pointing
> out that this is the way it seems to be panning out for now.
At least not in the U.S./Europe.
On Apr 28 02:41 PM UmRebel wrote:
> If youthink the number of deaths from the common flu is tiny, you
> have your facts wrong. The number of deaths from the avian flu has
> been small. Yearly death totals from the "common flu" are much higher.
> They may not be listed as such, but pneumonia and other secondary
> infections from the flu are large killers every year. This is why
> death totals in "emerging" countries are much higher. As this flu
> continues to spread in this country and less healthy people are infected,
> the death total will rise. This can best be seen as an increase in
> pneumonia related deaths on the CDC's website.
> Simple mathematics also proves what I originally said was true. If
> 90 percent of the people with avian flu die but there are only 1000
> people infected that would lead to 900 deaths. If 1 percent of people
> die from the swine flu but 1 million people are infected (usually
> many more ar in the average flu season) that would lead to 10,000
> deaths.
Also most people are stable during the initial phases of the infection It is not the influenza virus that kills people. It is the resulting complications. This can take many days. It "stacks up" because of the differences in prevalence of an easily transmissible influenza virus and the other illnesses that you have mentioned.
As times goes by, the prevalence of this virus will most likely far exceed that of SARS etc.
BTW, it is E. sakazakii, a bacterial infection, not an easily transmissible viral infection.
On Apr 28 04:13 PM Daniel Harrison wrote:
> My point is that the number of cases right now compared to the total
> population in the U.S. is so tiny that your point becomes redundant.
> In other words, it doesn't seem to be THAT deadly in the U.S. or
> Europe. If this was a "killer big" such as enterobacter sakasazii
> or some such thing, I'd give credence to your theory taht the big
> will kill off more people than SARS did, but given that almost everyone
> who gets it is reported "stable" within a matter of hours, I don't
> see how it stacks up.
>
> At least not in the U.S./Europe.
>
> On Apr 28 02:41 PM UmRebel wrote:
Disease spreads. More travel and commerce may makes it spread faster, but will not likely affect the range or mortality of the disease. No area of the world, no matter how remote, seemed to escape the Spanish Flu epidemic of 1918. Despite draconian public health regulations nearly everywhere.
Vaccines and antivirals seem the best, and less intrusive option.
NAIS(national animal identification system) is first and foremost, a business plan designed to benefit corporate agriculture and factory farming so they can sell their product on the global level but they way it works will put those who own livestock on a private basis, (such as the Amish) including whoever raised or owned that animal to to be under more surveillance than illegals, drug dealers or child molesters.
The part about tracking animal disease was added later.
All those who own even one cow, pig, horse, chicken or other farm animal will be required to register their premises, microchip (RFID) each and every last critter, no matter if it is a pet or potential food.
Then they must, under threat of huge fines, tell the govt about all birth, death and off-property movement reports (within 24 hours) on every last critter on the place.
If animal disease is even suspected in an area, the USDA can go in and kill all the animals. (6 mile radius or 140 sq miles of animals dead that never came in contact with each other!)
The claimed purpose of this oh-so-wonderful-thanks... program is to provide 48 hour traceback should a disease be suspected. Animals within a 6 mile radius could be killed, though most diseases are preventable, can be vaccinated against or the animal recovers.
The only problem with this program is that e-coli happens after the cow is slaughtered, which is when NAIS tracking stops. The beef is most vulnerable to being tainted in those processing plants.
And the fact the majority of beef is raised by corporate agriculture, who will not be required to tag and track each animal because they raise them in lots, they they get only ONE number per groups of animals. Any one of those critters in that group could be diseased and who would know. But as long as there are appearances of something being done, the city dwellers will eat in peace, while granny and her few egg hens will be tracked closer than the illegals everybody is making such a fuss about and that will make our beef supply oh so safe. See nonais dot org for more info on the true impact NAIS will have on all of us who eat!
The USDA claimed a reason for NAIS was to track and prevent mad cow disease. Yet when Creekstone Beef wanted to test every cow they process for BSE, the USDA says they cannot!!! Creekstone had to take the USDA to court to sue for the right to test for BSE! And what does my reporting to the USDA when I take my horse off my property have to do with big ag selling beef to Japan?
There are already disease protocols in place and they work. NAIS tracking stops at time of slaughter which is when many food safety issues occur by mishandling the meat.
I suggest checking out nonais.org and read about how NAIS will negatively affect everyone who eats. The British hoof and mouth disease was traced back to the local lab it had escaped from. The millions of animals killed, only a few thousand tested positive for the disease from which cattle can be cured or vaccinated. The British ag officials do not want to vaccinate. The famous 'bird flu' that ran from China through Turkey less than 300 humans out of 6 billion died from that disease while thousands die from regular flu in the US each month.
On Apr 28 02:41 PM UmRebel wrote:
> If youthink the number of deaths from the common flu is tiny, you
> have your facts wrong. The number of deaths from the avian flu has
> been small. Yearly death totals from the "common flu" are much higher.
> They may not be listed as such, but pneumonia and other secondary
> infections from the flu are large killers every year. This is why
> death totals in "emerging" countries are much higher. As this flu
> continues to spread in this country and less healthy people are infected,
> the death total will rise. This can best be seen as an increase in
> pneumonia related deaths on the CDC's website.
> Simple mathematics also proves what I originally said was true. If
> 90 percent of the people with avian flu die but there are only 1000
> people infected that would lead to 900 deaths. If 1 percent of people
> die from the swine flu but 1 million people are infected (usually
> many more ar in the average flu season) that would lead to 10,000
> deaths.
So Quidel (QDEL) will not benefit from anything other than hype.
Yet no one seems to be following this.
The Media is virtually gone, other than the "Good" side reporting.
It scares me frankly, that it is being dismissed so casually by the Media and our Administration, the gestation period is 7-10 days for god's sake!
It took years for the avian flu to run up 421 confirmed cases, Its a week, I seen 400 confirmed with 160 in the USA alone.
Treat it however you want, this is not the Avian flu. Person to person was absent for the most part.
Meanwhile, you may or may not survive.
After all, they were not designed with this in mind.
Nothing out there has been designed with this in mind. I do not know about BCRX, but I do know that NVAX has a proprietary artificial means of producing vaccines. They have the potential to come to a solution much faster than the others.
Thanks for the heads up on QDEL, I knew that there was such a device but didn't know who manufactured it.