Unstoppable flu pandemic will boost vaccine drugmakers
AT the weekend, there was confirmation of Britain’s first swine flu victim, just three days after a decision on Thursday by the World Health Organisation (WHO) to officially declare an influenza pandemic – the first since 1968.
It might seem ghoulish to say so, but the prospect of a drawn-out battle against what WHO director-general Margaret Chan called an “unstoppable virus” will mean a boost for pharmaceutical giants such as GlaxoSmithKline and Pfizer among others, which are developing flu vaccines for governments. Indeed, all of the big drug manufacturers saw their share prices jump on Thursday and Friday following the WHO announcement.
Pharma is often seen as a defensive sector and in the early stages of recovery, it tends to lag behind those sectors such as financials or industrials. But swine flu means the sector is bucking the trend.
The race is now on to make the billions of doses of flu vaccine that will be needed to protect against the H1N1 pandemic. Companies like Sanofi-Aventis, GlaxoSmithKline and Novartis have invested in extra capacity, which means they are in better shape to meet the challenge of a pandemic than five years ago, when Britain’s seasonal flu vaccine stocks were in danger of running out. The companies are therefore well advanced in manufacturing supplies of the normal seasonal flu vaccine, which allows them to dedicate some capacity to a pandemic flu vaccine.
All this means that there could be lucrative sales and profits this year for the manufacturers; some have already received orders for the H1N1 vaccine from governments in Europe and North America – the US government has already bought $289m of H1N1 vaccines from Novartis, while the WHO announcement is likely to bring in new orders.
DRUG TRIALS
Pharma is a massive business, and it might well prove attractive to CFD traders. The movements in the market are not always as obvious as they are at the moment, though. To trade pharmaceutical companies, you have to be prepared to do your research. Share prices tend to move sharply on results of drug trials – a success is more than likely to boost future profits, while a failure – or a rival’s success – can damage long-term prospects.
In the UK, each potential drug has to go through six phases before reaching the market: discovery; pre-clinical; Phase I – where it is tested on healthy humans; Phase II – which assesses its safety and efficiency in a small sample of target patients; Phase III proves safety and efficacy in large-scale trials; and finally Phase IV trials are commercially-oriented trials conducted after the drug has been approved.
BUY RATING
A successful trial or belief that one will be successful can guide brokers’ estimations. For example, Citigroup analyst Kevin Wilson has just raised London-listed AstraZeneca to a buy rating. “The second quarter is likely to be strong due to Crestor used to lower cholestrol, Toprol XL for high blood pressure and Casodex used to treate prostate cancer. Crestor growth has accelerated … and the continuing absence of US generic Toprol XL and Casodex is also beneficial.”
AstraZeneca is also hoping to break into the antiplatelet market – a drug which improves circulation – currently dominated by Sanofi-Aventis’s Plavix. Full data on AstraZeneca’s Brilinta, will be released at the end of August. Wilson says: “If clinically meaningful superiority over Plavix is confirmed with acceptable safety, sales could be three to four times higher than our 2012 earnings forecast of $470m and could be positive for sentiment.”
Current events might pique traders’ interests in pharma, but the key to CFD trading on the sector is knowledge. Experienced traders tend to choose one or two companies and research their product developments in detail and are aware of key dates that could move the price. Just as in the industry itself, years of study and diligence are required for results. But when they come, they can be big.