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Swine Flu Vaccine Reality Check - SNY, NVS, SVA, GSK, AZN

|Includes:AZN, BAX, CSL, GSK, NVS, SGP, SNY, Sinovac Biotech, Ltd. (SVA)

Is anybody really winning the swine flu vaccine race?

 

Following Tuesday's capitulation from the World Health Organization, any makers of a swine flu vaccine are back on investors' radars. What happened? The World Health Organization, or WHO, has determined the H1N1 'swine flu' virus is (and I quote) "unstoppable". The WHO, furthermore, urged all nations to vaccinate frontline healthcare workers and then start planning for wide scale vaccination.

The World Health Organization also gave any manufacturers of a swine flu vaccine the "go ahead" to start making whatever vaccine they could. I'm not really sure what the WHO'S 'go ahead' means, since some of these companies were already cranking out an H1N1 treatment anyway. I guess now it's official permission even though it was never really needed.

And if you're wondering what's in it for them, the U.S. alone is going to spend at least another $884 million on swine flu treatments (at least according to the Department of Health and Human Services).

The swine flu announcement reminded me of one the biggest challenges investors are facing right now - they still have to figure out which swine flu vaccines work and whether or not they're actually marketable.

Wait, strike that..... I meant to say "will be marketable". No meaningful amount of vaccine could be manufactured by most of these companies before October, as manufacturing and testing take time. I think these guys just want to hit the ground running, but don't be misled - no vaccine is ready to actually use at this time.

Since nobody else has compiled an actual list of these stocks and corresponding H1N1 vaccines I'll do the honors.

(By the way, this isn't necessarily the entire list, but it includes all the key players we need to think about first.)

Sanofi-Aventis (NYSE:SNY) - The HHS will be allocating $61.4 million for Sanofi's vaccine while France intends to purchase 100 million doses at a $1 billion price tag.

Just FYI, Sanofi was the first to go into wide scale production efforts. That early jump may be an edge. Fortunately, the vaccine also works reasonably well so they didn't waste their time. It's still not clear if this is the best treatment though.

Novartis (NYSE:NVS) will be receiving $346 million from the DHHS for whatever vaccine i can produce. A moment ago I mentioned that no vaccine would be ready before October, but Novartis' H1N1 vaccine might hit the market before that. The company used a much faster cell culture process to make the drug rather than growing it in eggs. The added adjuvant will make the vaccine even more potent.

If the Novartis treatment works then great - it'll be the first one to be used.

Baxter (NYSE:BAX) also has a cell-based method for producing a vaccine so their version, like the Novartis version, could be made pretty quickly. Same problem though.... does it actually work? So far it's untested with no word on when it will be tested.

On the flipside, Baxter is saying they could have a vaccine ready to go by the end of the month. Baxter seems to (for whatever reason)  have a 'fast approval track' already greased up in the UK. The country may be willing to approve a Glaxo/Baxter vaccine (non-Relenza) in as little as five days.

No word yet on how well (or if) it works.

Side note: Baxter's track record with rushed development has not been pretty. The company mixed live H5N1 virus with the H3N2 seasonal flu vaccine, and then shipped it to labs in four European countries where it was used to manufacture nasal applicator doses. The product was shipped to 1000's before the error was caught.

Schering-Plough's (SGP) Nobilon is indeed involved in the industry but we've heard next to nothing about any swine flu treatment they're working on. I'd count 'em out for the time being.

After Tamiflu's efficacy failure (see below) GlaxoSmithKline's (NYSE:GSK) Relenza emerged as the first choice. The company will be selling $71.4 million worth of its adjuvant to the DHHS.

A GSK spokesman said a "final vaccine" won't be ready until the fall.

Australian-based CSL (CSL.AX) plans to start their human swine flu vaccine trials. If all goes well the Australian government could approve it by August. If it does not go well the government may delay the approval until next year.
 
Translation: Coin toss.

AstraZeneca's (NYSE:AZN) MedImmune's nasal spray is a unique player. It's the only one in the bunch that is (1) a live virus vaccine and (2) is easier to manufacture since it's a spray. MedImmune will be getting $61 million for its spray.

Roche AG's Tamiflu was the early choice to take the swine flu lead but a handful of cases of Tamiflu-resistant swine flu forced Roche's investors to wonder if Tamiflu would be a pointless treatment. As it turns out the Tamiflu-resistant strain is (so far) a rarity.

In my personal view though, Tamiflu's flaw has already been exposed.

Chinese company Sinovac Biotechnology (NASDAQ:SVA) has said it could complete a clinical trial by the end of July. No word yet on effectiveness.

So, with the somewhat-detailed description out of the way, can we come to any conclusions? I've come to a few.

  1. First and foremost all these companies are talking a big game but we're hearing more than we're actually seeing.
  2. Second, just because a drug is on the market doesn't mean it actually works. That's where my big hang up is.... there's little to no information about which works best (or if they work at all; one working more than another).
  3. Third, if any of these H1N1 vaccines go through the normal approval process none will be approved until the end of the year. If they get fast-tracked due the extraordinary circumstances they could get approved in a few days (depending on the country). Point being, don't assume one country or another is going to delay any treatment if it has a shot at working. When they're ready to go ,expect approval.
  4. Fourth, the cell-based manufacturing process certainly looks faster, which pushes Novartis and Baxter to the head of the class.... if they work.
  5. Fifth, Glaxo and Baxter appear to have an inside track towards approval, at least in the UK.
  6. Sixth, I think Tamiflu is grasping at straws, and Relenza may not be able to hold a candle to other treatments either. That's a strike against Roche and Glaxo.
  7. Seventh, MedImmune's nasal treatment may be a little too unconventional to draw a lot of interest. Too bad people don't like things shoved up their nose since it seems to work.
  8. Eighth, don't assume the best drug will make for the best investment. Technically, Sanofi seems to be the biggest fiscal winner in the race so far but their vaccine is just so-so by my understanding.
  9. And ninth, though it's pretty clear it's way too soon to be making this call, I will anyway.... Novartis and Baxter are the closest to the finish line (the one that matters anyway). Sinovac could be picking up speed coming down the home stretch - the Sinovac horse is the one we know the least about.

If anybody has any actual efficacy data please chime in below. In the meantime I think I've convinced myself that nobody really quite knows where all of this is going or what the final outcome will be. That may not be a problem, but the swine flu vaccine race is still such a wild card that the best way to play may simply be to avoid it - none of these stocks is even close to being a sure thing yet.

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Stocks: SVA, AZN, CSL, GSK, SGP, BAX, NVS, SNY