Mexican Flu Pandemic: Potential Trade Opportunity

The WHO raised the "phase" of the pandemic alert to "Phase 5" (Pandemic). This struck me as odd, given that the stock market has already declared this rapidly spreading pandemic a "non-event." The "flu trades" have already reversed, and traders have moved elsewhere.

The authorities are trying to rename this flu "H1N1" instead of "swine flu," due to protestations from the pork industry. "H1N1" refers to specific subtypes of viral proteins the virus expresses and uses in its replication and infectious cycle. l am partial to my name for this virus: the "Mexican Flu of 2009."

Somewhat ominously, the most deadly pandemic in recorded human history, the Spanish Flu of 1918, was also a virus type H1N1. Not very comforting. The run on the anti-virals Tamiflu (GILD and RHHBY.PK) and Relenza (GSK) has already started.

The earnings from the sale of these anti-virals tend to be lumpy for the drug companies, and some stockpiles are already in place. However, from what I can gather, stockpiles are on the order of 100-200 million doses world wide, maybe 50 million in the US. That would leave about 6 billion people world wide without medication.

I'm watching Dr. Nancy Snyderman on NBC nightly news demonstrate how to wash your hands to minimize flu transmission. After noting how quickly the Mexican Flu is speading, similar to other common flus, you're better off getting a respirator. The virus appears to spread readily through airborne droplets from infected individuals, often, before they know they're infected.

Glenn Beck was talking about shortages of Purell (JNJ) hand sanitizer in New York City. Anyone know a good company that makes surgical masks? They're all the rage in Mexico.

Disclosure: Long GSK and GILD.

Comments

[Dr. O:]

I should point out that Sanofi-Aventis (SNY) was up 5% yesterday; they're one of the largest vaccine manufacturers, and await flu samples from agencies like the CDC to begin mass production. Mass vaccination could begin as early as this fall.

You can add SNY to GSK and GILD as stocks with terrible charts that will benefit, at least short term, from this pandemic. I do wonder whether the demand for Tamiflu and Relenza will be more sustained; not only with usage during this pandemic, but due to restocking to much higher levels as governments and individuals build a bigger safety net of supply. I don't know if it works as a stock trade.

Apr 30 07:02 AM

[Dr. O:]

Job Biden speaks! I'm watching the Today show on NBC, and Vice President Biden says he's advising his own family not to travel by air or by train, due to the flu's ease of transmission in closed spaces.

He's right of course, but he's advising the American public not travel to work on trains or travel anywhere by airplanes. Probably not what the Administration would have wanted him to say, lol. Let's wait for the retraction, lol.

Apr 30 07:12 AM

[YoYoMama:]

Sigh. We've had one death here in Texas, in my hometown of Houston, from swine flu. Frankly, we get more deaths from homocides per day than the flu. Granted, it could get worse, but the media is more frenzied than we are, and we're at Mexico's back door...

Apr 30 10:09 AM

[goodwillk:]

I think APT ( Alpha Pro Tech) makes some of these masks that you are taking about.

Apr 30 10:40 AM

[Jake2:]

Dr. Who? Zero content. Reader, pass by.

Apr 30 12:22 PM

[Dr. O:]

Jake 2:

Your website links to a video game message board. Not sure what to make of that. I reread my posting, which was published as an article by Seeking Alpha. It is what it is.

I recognize it's not a highly detailed, researched financial analysis of GSK or GILD, nor even an attempt to quantify the potential increase in revenue or earnings from increased anti-viral drug sales.

That's beyond my expertise. The article is not all that dissimilar from other articles on SA which state, in essence: governments are printing money like crazy, gold is going to $9000 an ounce, or, the worlds running out of oil, it's going to $200 per barrel.

You can take a few selected facts and figures and make a case for anything. Or, you can write a small novel filled with charts and tables and spreadsheets. I'll leave that to the analysts.

I'm still learning, but whether you're a trader or an investor, the idea is to try to deduce where a stock, or commodity, or currency, or the market will be at some time in the future.

You go long, or short, or buy puts, or calls, etc, based on your own analysis. My analysis in this case was that stocks like GILD or GSK where not reflecting the potential surge in revenue from a pandemic.

Whether the pandemic plays out, and whether the companies actually realize any real revenue surge or are forced to give away their drugs, or whether the stock prices react, that I don't know.

I should have included a bit on each company and it's prospects, and why the stocks have been so depressed in the past year or two.

May 01 06:14 AM