Why Standard Flu Vaccines Won't Make Stocks Investors Rich

A more recent addition to my transformational technologies portfolio, Medarex, has scored a huge win. The company, along with Massachusetts Biologic Laboratory, will get $60 million upfront from Merck for license rights to a monoclonal antibody that apparently cures C. difficile infection. They are eligible for another $165 million in milestones as well as royalties. 

Think about the service this company has done mankind. C. diff, as hospital diarrhea is called, is a growing cause of hospital deaths. Though many cases outside of hospitals are never diagnosed, we know it kills at least 30,000 Americans annually. Those who do recover, about nine out of 10, can suffer horribly for months. Bravo to Medarex and all those who made this breakthrough possible by stock investing your money in this incredibly worth effort.

So what does this have to do with swine flu?

So far, swine flu is a minor problem compared to C. diff. Only one person in the U.S. has died from the infection. Survival rates, in fact, are far higher than they are for C. diff. Still, it could get worse, and governments are looking for a vaccine. So, just what are the financial opportunities?

I see nothing significant in the short run. One can never account for mob psychology though, and there have already been surges in some vaccine companies. In terms of fundamentals, however, I don't think standard flu vaccines are going to make stocks investors rich. The reason is that governments are the real customers for flu vaccines. On top of that, vaccines are an established industry and yields tend to be driven down by competition.

Those who are interested in playing swings should probably look into:

Novavax  (NASDAQ: NVAX)

Dynavax (NASDAQ: DVAX)

Hemispherx Biopharma (AMEX: HEB)

BioCryst Pharma (NASDAQ: BCRX)

AVI BioPharma (NASDAQ: AVII)

deCode Genetics (NASDAQ: DCGN)

Crucell (NASDAQ: CRXL)

Vical (NASDAQ: VICL)

This does not mean there are not long-term flu-related opportunities. Even if swine flu doesn't turn into a major pandemic, influenza is a serious international problem that drains resources and lives. The World Health Organization, estimates that influenza infects 5-15% of the world's population in a typical year. This results in 250,000 to 500,000 deaths. The WHO and the Centers for Disease Control and Prevention are, of course, concerned about the potential for a major global pandemic. Medical science has progressed significantly since 1918, when the "Spanish Flu" killed upward of 50 million people; but it is still a serious illness.

Right now, the headlines generated by the flu are largely about trying to track and stop its progress. Today, this is extremely difficult. There are, however, solutions on the horizon.

I've written before about biochip sensors. These are a true transformational technology. Last year, agricultural losses of hundreds of millions of dollars were caused by the inability to quickly locate the source of a salmonella infection. What is needed, and will arrive in the not-so-distant future, are sensors that can detect disease pathogens cheaply and instantaneously. Think Star Trek tricorders…

And we're getting close. EETimes is reporting that CombiMatrix Corp. has made biochips that can be programmed to identify any known flu type. CombiMatrix says its microarray can be updated for new influenzas in less than a day and can deliver test results in only four hours.

A little bit further out are even bigger profit opportunities. Specifically, we're looking at is an end to specific flu vaccines.

Pandemic influenzas emerge from a sudden change in the flu virus against which there is no immunity. Vaccines are the mainstay of flu prevention, but they have two key limitations. First, they are developed against single, known flu strains. Therefore, they may be ineffective against new strains. Second, vaccines are produced using a lengthy process requiring incubation in chicken eggs. New flu vaccines take months or years to stockpile.

There are general antiviral medications approved to treat influenza. Influenza virus strains, however, can become resistant to these medications. For this reason, scientists are looking to RNA interference for a brand new approach to preventing flu viruses.

I know of at least two companies that have been engaged in the search for an RNAi flu cure. The potential advantage of RNAi antiviral therapeutics is that RNAi can be used to provoke an immune response that prevents replication of all influenza viruses, new or old. Stockpiling of an effective RNAi treatment would be possible in advance of a global pandemic and could be used for routine flus as well. Moreover, whoever produces the therapy would have a significant profit potential.