Monday is looking like a SWINE FLU speculative flu stock stock bonanza, and we want to caution about some of the lessons of scares in the past of SARS, bird flu, Mad Cow, and even hoof & mouth as similar references. The two approved drug treatments, not vaccines, which are being released are Tamiflu made by Roche (OTC: RHHBY) and Relenza made by GlaxoSmithkline (NYSE: GSK). Gilead Sciences, Inc. (GILD) gets royalties from Roche for Tamiflu, and its shares are indicated north of $48.00 after a $45.80 close on Friday. There are also waves of tier-two and tier-three stocks which could move on this news, but be advised that we have seen these pops in the past from SARS and Bird Flu which were followed ultimately by lower share prices and many of the speculative players disappeared.
Of the tier-two stocks, you have BioCryst Pharmaceuticals Inc. (NASDAQ: BCRX) and Novavax, Inc. (NASDAQ: NVAX). Of the tier-three stocks you have Generex Biotechnology Corp. (NASDAQ: GNBT), Vical Inc. (NASDAQ: VICL), AVI Biopharma, Inc. (NASDAQ: AVII), and Crucell NV (NASDAQ: CRXL). More descriptive data has been provided for each move. On another scale, Smithfield Foods Inc. (NYSE: SFD), the iShares MSCI Mexico Investable Market Index (NYSE: EWW), and The Mexico Fund, Inc. (NYSE: MXF) have exposure here as well.
BioCryst Pharmaceuticals Inc. (NASDAQ: BCRX) was up big Friday as it is a maker of drugs that block key enzymes in viral diseases like the flu, shares are indicated over $3.00 after a $2.21 close on Friday. Novavax, Inc. (NASDAQ: NVAX) is another clinical stage company using its virus-like particle platform technology for flu treatments; stock is indicated north of $2.50 after closing up some 75% at $1.42 Friday.
Generex Biotechnology Corp. (NASDAQ: GNBT) is being passed around as a penny stock flu player with shares indicated around $0.40 after closing up 25% at almost $0.34 Friday. Vical Inc. (NASDAQ: VICL) closed up 3% Friday at $2.53 and shares are indicated up around $3.00. AVI Biopharma, Inc. (NASDAQ: AVII) rose over 20% to $0.89 Friday and shares are indicated up marginally as a result. Crucell NV (NASDAQ: CRXL) has a faster way of making flu vaccines. This closed up 1% on Friday and is hardly moving.
This could have an impact on food stocks and even an ETF and a closed-end fund that each track Mexico. Smithfield Foods Inc. (NYSE: SFD) is deemed as the big pork play among the U.S. food companies. There are also two plays on the fund side with a closed-end fund and an ETF. The iShares MSCI Mexico Investable Market Index (NYSE: EWW) may be taking a hard hit this morning because of the Mexico-tied swine flu being the source of the disease. There have been more than 1,300 suspected cases and roughly 100 deaths from swine flu. This is the key ETF that traders use to trade exposure to Mexico. The Mexico Fund, Inc. (NYSE: MXF) is a closed-end mutual fund that may also take a hard hit this morning because of the Mexico-tied swine flu being the source of the disease.
Those who believe that the sky is falling will point back to the flu scare of 1918 that decimated populations. Keep in mind that there was little communication and the treatment at the time was generally bed rest and no hygiene was practiced by the bulk of the population. You can probably bet that you will be hearing “squeal like a pig!” jokes sooner rather than later.
As a reminder, these huge gap-ups can last more than a day, but historically we have seen each successive move usually being less than the first. As with issues such as SARS and bird flu, the world did not end and it was only the SARS scare which actually caused real damage. We also had the great Mad Cow disease craze and even teh Hoof & Mouth scare, all of which created initial moves but ultimately had zero net impact on sectors and the economy as a whole.
JON C. OGG