Flu

Every year it’s time for our shot to protect us against flu.
Ok, even as the flu infects every year 10%-20% of the world population and kills around 500.000 people again and again, no one takes this stuff to seriously.
However, maybe this time it’s different.
Because Mexican flu is still hanging around, this year’s flu could be particularly tricky.
The big pharma companies will see sales increases. Big vaccine makers like GlaxoSmithKline could generate additional revenue due to this phenomenon. But unfortunately it will prove not to be substantial for their 40 bln USD budget.
Smaller companies where flu vaccine sales make up a large portion of total revenue however, can profit handsomely.
Take Dutch biotech company Crucell (ticker: CRXL), the seventh largest vaccine maker in the world. There are estimations sales could translate in an extra 40 million USD in revenue. Nice for a company with 400 mnl USD in sales.
Nice…

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Crucell

Drug groups to reap swine-flu billions: that’s a header in the dailies today.
Some 740 people have died from the H1N1 virus following the latest estimates. Analysts expect to see a boost in sales from GlaxoSmithKline, Roche and Sanofi-Aventis when the companies report first-half earnings lifted by government contracts for flu vaccines and antiviral medicines.
The fresh sales – on top of strong results from Novartis of Switzerland and Baxter of the US, which both also produce vaccines –
GlaxoSmithKline of the UK confirmed it had sold 150m doses of a pandemic flu vaccine – equivalent to its normal sales of seasonal flu vaccine – to countries including the UK, the US, France and Belgium, and was gearing up to boost production.
GSK also produces Relenza, an antiviral medicine that reduces the length and severity of the infection, and is preparing to increase manufacturing towards 60m annual doses. The UK placed an order for 10m treatments this year.
One beneficiary of the fears about the pandemic has been Roche of Switzerland, which sells Tamiflu, the leading antiviral drug, and has seen a sharp rise in orders from private companies as well as governments.
This story is well-known.
Less known however is that big drug companies do no develop these drugs themselves anymore. They produce. The development is done by small boutiques receiving a royalty on the sold volume. One such outlet is the Dutch company: Crucell.

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Biotechnology

The NASDAQ index was the motor for the rally which started back in March. The biotechnology sector was underperforming versus the NASDAQ. But tech is losing his leadership role. Relatively speaking we can state that tech now underperforms versus biotechnology.

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If pigs could fly...yes, they can

The Mexican flu has the world in his grip. In less than one week. Now, that’s fast. Governments are checking their stockpiles of vaccines. Most of them are stocking Tamiflu (Roche).
But in Australia there is a very small biotech company that has a share in the other drug from competitor GlaxosmithKline: Relenza.
If we may believe the reports, the drug is very effective, but… There are some inconveniences that make it difficult to market. The most important is that the drug only works in the very first phase of an influenza infection. And that point is very difficult to determine. What is a cold, an allergy or the start of swine flu?

The stock jumped 60% today in Australia. Biota has a market cap of 250 mln AUD and 60 mln AUD cash and equivalents.
So if you believe in a global catastrophe, this is your pick…

Or you can look to Deutsche Bank Agriculture short ETN (ticker: ADZ) or to AGA and BOM where a flavor of leverage is added.

More, losers for the moment are airline stocks, tour operators and animal breeders.

From Dennis (the Menace) Gartman, we learn:

This is over-reaction of the very first order, for “swine flu” does not affect livestock; it does not render livestock production useless; it should not result in massive liquidation of the livestock herd… but that does not matter at the moment. At the moment the specs are liquidating livestock and grain, and the margin clerks have the pencils sharpened and their sell orders in hand. For the moment, nothing else… not even rationality… means anything. Panic, rather than reason, have swept through the markets and are having their way with them.

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Icarus

As a reminder how fragile biotech stocks can act, we show a picture of Kendle International. Which was halved yesterday after the company announced that it will not meet analyst expectations for the first quarter of 2009.
From Reuters:

Shares of Kendle International Inc (KNDL) fell as much as 61 percent to a four-year low on Tuesday, a day after the provider of clinical development services to biopharmaceutical firms said it would miss analyst expectations for the first quarter. In a regulatory filing, Kendle said its cancellation rate in the first quarter was more than 45 percent, compared with a forecast of 18 percent.

Also colleagues ICON (ticker: ICLR) and Parexel International (ticker: PRXL) were beaten down.

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A medicine for a bad day

A lot of things are going on today. A lot of red. And a lot of investors worried about all this red and looking for the Big One.
However, we think there are some positive stories going on, worth to follow. One is the stabilizing CRB-index indicating commodities may bottoming.

This is one of my favorites: look to things which are hated and despised. And became cheap.
Than it’s a question to wait for an uptrend. Once established taking a position becomes an option.
We have commodities, infrastructure but also biotech, of late. Amgen (ticker: AMGN) is popping up on our renkoscreen. The CCI became positive a while ago and now the SAR is changing camps on a 60-minute chart.
Interesting to see where the price will walk in a negative environment.

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