Sentiment

Stocks fell despite merger news, a better-than-expected earnings report from Wal-Mart (WMT), and data that showed a decline in weekly jobless claims. Wal-Mart is one of only 5 Dow stocks moving higher after the retailer reported a quarterly profit of 84 cents, which beat Street estimates by 3 cents. On the economic front, the latest weekly jobless claims showed some improvement. According to the Labor Department, filings fell by 12,000 to 502,000 in the week ended November 7. Economists were looking for a smaller 4,000 drop. Meanwhile, the tech sector was in focus on news H-P (HPQ) made a bid for 3Com (COMS) and Advanced Micro (AMD) rallied on news of a long-awaited settlement with Intel (INTC).

However, the tech-heavy NASDAQ gave up its early gains and weakness in the commodities markets sent many metals, mining and energy names lower. Crude oil is down $2.52 to $76.76 on bearish weekly inventory data. Gold lost $8.50 to $1106.10 after the buck bounced a bit higher against the euro.

China life science news last week was dominated by stories of substantial foreign investments in China’s pharmaceutical sector. The Swiss biopharma Novartis (NVS) led the way, with nearly $1.4 billion in capital commitments to three separate initiatives in China. The company clearly feels that China represents growth – and Novartis has added significantly to its R&D, technical expertise, vaccine and marketing efforts there.

In its most spectacular investment, Novartis will begin a five-year, $1 billion China initiative with two aims: the company will dramatically increase its investment in its China R&D facility, and it will seek to make China one its top three markets worldwide (see story). The investment will increase the size of the company’s Shanghai R&D center from its current employee count of 160 to over 1,000 eventually. At that size, China will rank with Novartis’ R&D facility in Cambridge, Massachusetts. Only the company’s home research facility in Basel, Switzerland will be larger.

Sentiment

The major averages opened lower on disappointing jobs data, but then battled back and are little changed late Friday. Stock index futures sank early after the Labor Department reported that the US economy lost 190,000 jobs during the month of October. Stock index futures were higher ahead of the news, but then fell because economists were expecting a smaller 175,000 drop. In addition, the nation's unemployment rate unexpectedly jumped. The percent of unemployed rose to 10.2 percent and its highest since 1983. Economists were expecting the unemployment rate to hold steady at 9.8 percent.

The jobs report wasn't a complete disaster, however. September numbers were revised up to show a loss of 219,000, better than the -263,000 initially reported. August numbers were revised higher as well. Meanwhile, average hourly earnings rose .3 percent in October, which was better than the .1 percent economist had expected.

Sinovac Biotech Ltd. (SVA) will move the home for its stock listing from the NYSE Amex to the NASDAQ Global Market. The reason given for the change was “greater liquidity.” Target day for the transfer is November 16. Although most NASDAQ companies use a four-letter symbol, Sinovac will be allowed to keep its current three-letter identifier, SVA, so the new listing will not have a great effect on most investors.

Sinovac makes vaccines, most of which are sold in China. Its Healive vaccine for hepatitis B is the company’s mainstay product, though it has generated a great deal of news during the last six months with its H1N1 swine flu vaccine and the spillover of interest into its seasonal flu vaccine as well.

Sinovac Biotech (SVA) has received a very large order for 5.2 million doses of its H1N1 vaccine, Panflu.1. This is the third order Sinovac has received from various official China agencies, bringing the total to 11.5 million doses. Of the 5.2 million doses in the latest agreement, 2.9 million will be allocated to various provincial and municipal authorities, while the remaining 2.3 million will be placed in the national stockpiling plan of China's Ministry of Industry and Information Technology.

Sinovac must complete delivery of 2.9 million doses to the appointed provincial and municipal governments by the end of this year.

Sinovac Biotech Ltd. (SVA) has received a Certificate of Approval to distribute its swine flu vaccine, PANFLU.1, in Mexico, the first swine flu vaccine to be registered there. However, before vaccine can be shipped to Mexico, China’s government must approve the export. Sinovac is in the middle of filling a 6.3 million dose order of PANFLU.1 for Beijing and the national government. It expects to complete delivery of 4.5 million doses by the end of October.

PANFLU.1 will be distributed in Mexico by Laboratorios Imperiales S.A. de C.V., who also helped in the Mexican registration process. Sinovac established its relationship with them in 2005. Sinovac has also applied for approval of its seasonal flu vaccine, Anflu, in Mexico.

Disclosure: none.

Sentiment

Stocks opened broadly lower following a round of mostly disappointing stock news Friday. GE (GE) is down 4 percent and weighing down the Dow Jones Industrial Average after the company reported quarterly earnings of 22 cents per share on $37.8 billion in revenues. Analysts were looking for 20 cents on $39.5 billion.

IBM (IBM) is the Dow's biggest loser, falling 4.7 percent after the computer maker reported better-than-expected earnings and revenues, but also made cautious comments about corporate technology spending. Bank of America (BAC) reported a 26-cent per share loss for the quarter, which was a nickel worse than expectations. Revenues also missed estimates and BAC is down 4.2 percent on the news.

On Tuesday, shares of Sinovac Biotech Ltd. (SVA) jumped up $0.81 or 10.83% to end the day at $8.29 after its wholly-owned subsidiary, Sinovac Biotech (Hong Kong) Ltd, received the Certificate of Approval to distribute Panflu (H5N1), its H5N1 (bird flu) pandemic influenza vaccine, in Hong Kong.

The Anti-Monopoly Bureau of China’s Ministry of Commerce (MOFCOM) has given its okay to the merger between Pfizer (NYSE: PFE) and Wyeth (NYSE: WYE) (see story). However, MOFCOM will require that Pfizer divest its swine mycoplasmal pneumonia vaccine business.

Eli Lilly (NYSE: LLY) plans to double its workforce inside of China this year, bringing the total up to 2,000 (see story). At the same time, the company announced a 5,500 employee reduction in its worldwide staff count that will help trim $1 billion in annual costs. Inside China, Lilly will double its sales force from 800 to 1600 so that it can expand its coverage in central and western areas of the country. The company will also add operations and accounting personnel.

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:

Sinovac Biotech Ltd. (NYSE: SVA) announced a second large H1N1 flu vaccine order from China’s national government. The new order is for an additional 3 million doses, which follows the original 3.3 million dose order of early September.

Sinovac expects to deliver 4.5 million doses of its PANFLU.1 flu vaccine to the government by the end of October. Earlier, Sinovac said it planned to fill the original 3.3 million order by September 15. The company has enough capacity to produce between 20 and 30 million doses annually.

Sinovac Biotech (SVA), a Chinese drug company in the vaccine sector, is the best performer so far this year among all China ADR's with +543.48% yearly return and +1,084.00% return if calculated from its year low price.

If you look at company's growth history, it is quite impressive:

Bullish Calls:

Tenet Healthcare (TNH): "I think the hospitals are in the sweet spot they are the winners under Obama. They are a protected class."

Showing that it can organize itself to meet a potential health emergency, China expeditiously tested, approved, produced and began stockpiling H1N1 flu vaccine last week. The swine flu strain, which began appearing late in last winter’s flu season, seemed to carry a greater incidence of death than most variants of the disease. Accordingly, the health establishment moved quickly to combat an as-yet-to-appear major outbreak. No one wants to appear lax against a threat that afforded authorities a chance to prepare.

Sinovac Biotech (SVA) was one of the main beneficiaries of the threat. On Monday, the company reported a panel of experts recommended approval of the product (see story). The SFDA followed on Thursday by granting a production license and approval for Panflu.1 (see story). As expected, the agency SFDA approved the single-injection administration of the vaccine as sufficient to provide immunogenicity.

China has ordered 7.3 million doses of H1N1 (swine) flu vaccine from two domestic manufacturers: 3.3 million does from Sinovac (SVA) and 4 million doses from Hualan Biological Engineering Inc. Both companies received SFDA approval of their vaccines this week. All 7.3 million doses must be delivered by September 15. Financial terms were not disclosed.

The government intends to hold the flu vaccine in a stockpile, rather than making it available immediately.

Sinovac Biotech Ltd. (NYSE: SVA) has received an SFDA production license for Panflu.1, the company’s H1N1 vaccine. The SFDA approved the single-injection administration of the vaccine as sufficient to provide immunogenicity. As expected, the approval indicates the drug can be given to people from 3 to 60 years of age.

The SFDA’s action was almost a foregone conclusion after a panel of experts gave Panflu.1 their blessing earlier this week.

4:16 PM, Sep 3, 2009 --

• NYSE up 71.8 (1.1%) to 6,546.60.
• DJIA up 63.9 (0.7%) to 9,345.
• S&P 500 up 8.5 (0.9%) to 1,003.
• Nasdaq up 16.13 (0.8%) to 1,983.

GLOBAL SENTIMENT