Swine Flu Stocks: Where Are They Now?

When the news initially broke about swine flu cases in Mexico, panic ensued. The media speculated that we might be looking at the next Spanish flu from the early 1900s where tens of millions died worldwide - more than World War II. People bled from their orifices and flooded morgues. The media was in full sensationalistic mode and ratings soared. So did something else. Opportunistic investors hopped on the internet and started searching out "swine flu stocks" in the hopes of identifying any company with the word vaccine or flu in its pipeline. They were rewarded handsomely with triple digit returns within weeks.

After a few months of speculation and media hype, it started to become evident that:

a) The current strain had relatively mild symptoms and mortality outcomes
b) The usual suspects weren't very susceptible to it - seniors - because they had prior exposure to H1N1 strains earlier in their lives; that was going to substantially reduce the mortality rate
c) Tamiflu and other experimental treatments seemed to meaningfully suppress disease in patients that were treated early
d) Probably only a handful of the usual large manufacturers would capture the vast majority of US supply and international tenders - the 80/20 rule.
e) The newer cutting edge technologies like VLP from Novavax (NVAX) (vaccine like particles) would probably not be necessary and the large manufacturers could meet US demand.

Occasionally, as news broke about the WHO preparing to announce a pandemic (which anyone following the situation knew had already been the case for weeks) and other sensational news items, the whole basket of smaller biotechs working on potential remedies would spike.

Well, it appears as though the party's over, or at least the DJ has left the building. Many of the then-darlings in the space have lost double digits over the prior month while global equities have continued their rally. I thought it would be instructive to take a look at some of the prominent names in the space and compare their initial runups to recent losses. The intent of this exercise is to caution investors considering jumping into swine flu stocks at this juncture on news that has already been widely digested/discounted by an efficient market.

Summary:

• Top Chart: Investors jumping on board during the first few months had great returns, even in comparison to an overall equities runup of 15% on the S&P500.
• Bottom Chart: While investors joining the party 3 months ago faired well, during the prior 1 month and 1 week period, the S&P500 trounced the returns of prominent swine flu stocks. The prior 1 month period is especially painful to look at.
• Overall Assessment: Unless something changes fundamentally with respect to either supply of vaccine from big pharma or virulence/contagion of the virus, investors may be late to the party at this point.

Disclosure: No active position in any of the aforementioned stocks. The author is invested in an S&P500 ETF.

Comments

[Freya:]

Or, the market has shown which small caps will benefit the most when the Actual Flu season begins.

This strain will eventually infect everyone in the USA. Will it spread the regular Flu with it?

There are too many unknowns. Studies on the incubation period and how long an area stays infected are still underway.

Thanks for the list though. It will help narrow my search.

Oct 02 05:05 AM

[laker5:]

These stocks are all vaccine/treatment stocks. There are at least two other ways to play the swine flu--N95 mask producers like APT, APNN, and NANM--and the novel aproach to treatment currently in trials at CVM. All except NANM have been up big recently. Take a look.

Oct 02 07:24 AM

[fishluvrain:]

Swine flu drug companies, or companies with a swine flu play. Be fair. Many of these companies are getting swine flu play because they have a related catalyst. Most have other types of drugs or technologies in the pipeline. Some are only back door flu plays but with potential.

Oct 02 08:21 AM

[fran grady:]

NVAX is not just hype. It has a good model that can revolutionize vaccine production. Hang in there.

Oct 02 08:36 AM

[User 97123:]

Of all the list only Sinovac has production and the H1N1 vaccine. They are also profitable and has revenues and real earnings. They also have orders for their H1N1 flu vaccine and have China, their core market. Why is Sinovac place together with all the rest of the companies where they have no productions nor revenues? Is it because they are Chinese?

Oct 02 10:11 AM

[jgdjgd:]

Nvax also is in phase 11 of HIV vaccine, SARS, Bird flu, Hepatitis among others. Years ago the scientists who ran the HIV and Influenza departments left the CDC and joined NVAX, coincidence or an opportunity. If you understand medicine and how the body reacts to viruses
VLP will be much safer for egg allergic and should have a definite safety factor regarding the controversy concerning autism caused by vaccines since no DNA material is contained in the Virus Like Particle
.

Game changer,currently rumors about buyouts in the big pharma are circulating estimates are in the billions.

Oct 02 10:58 AM

[Everyday Fi...:]

All,
Each company has a different stake in the swine flu play but as evidenced by the returns, they are much more highly correlated with each other and breaking news on swine flu than they are with the general market or the biotech sector for that matter.

On SVA, no, there is no "vast American conspiracy" to disparage Chinese stocks. They track pretty closely with the rest of the pack as I'm sure you'd concede.

On VLPs, the autism phenom is one of the biggest hoaxes trial lawyers have ever played on society. Not only will VLPs not cause autism, but any analytical person that doesn't treat the vaccine-autism topic like a religion knows that current vaccines simply do nit cause autism either. Study after study by independent panels of scientists have demonstrated this with massive data sets. However, what gets press in the US is Jenny McCarthy's story rather than actual evidence as conveyed by scientists.

Point? Even though VLPs (and conventional) vaccines will not cause autism, the public at large will always believe that all vaccines do. It is clearly genetic with possible environmental influences but when a kid gets a VLP vaccination in 10 years and is diagnosed with autism the next month, the parents will believe it is the vaccine.

Oct 02 11:43 AM

[yousaidwhat:]

Seems like you're listening to news other than what I've been hearing. Cases of Swine flu and related serious consequences appear to be getting worse, not better, and the flu season has only just begun. Also, the profit taking appears to be minimal for most of these companies when considering the outstanding gains made in only three months.

Oct 04 06:17 PM

[Everyday Fi...:]

Losing 1/3 to 1/2 value in an up market
over the course of a month is a pretty bad sign.

Vaccine is shipping this week. No doubt, the swine flu hype and conversation was a net positive for many of these companies to tout their new technologies and in some cases, win some tenders for supply, but on a long term fundamentals basis, was it a game changer? Doesn't appear so and shares seem to be reflecting that in recent weeks IMO.

Oct 05 10:15 AM

[Freya:]

I bring this forward because of the list of Swine flu candidates available for purchase:

" No doubt, the swine flu hype and conversation was a net positive for many of these companies to tout their new technologies"

lets see which of these "Hype" companies does the best in a National Emergency situation.

Oct 25 11:19 PM

[User 92589:]

Vaccines get the hype, and partly deservedly, but only partly. When they work, and hopefully they do and will, they can prevent a lot of illness and suffering.

There is more to disease prevention and prevention of spread though, then vaccines and antivirals post exposure, and that is prevention of infection by preventing transmission.

One way to do this is by proper hygene, hand washing, sanitizing agents, and masks. Masks are usually the neglected tool in the arsenal.

Everyone tends to make fun of the pictures of people in Asia walking around wearing masks, but the right mask used the right way can be effective.

Too many masks are not practical and will never be used correctly by the general public. There are masks and mask technology out there however,that can be effective, are easy to use, are practical and are relatively inexpensive.

Why are we not hearing more about this and these companies?

Nov 02 07:29 PM