Swine flu portfolio rally

Shares of BCRX, NVAX, SVA, HEB, and APT all increased double-digit percentages today. I keep expecting the overall market to roll over and have protective puts in place--hence, the hedges keep eroding in value. But I am not complaining, given triple digit gains on the aforementioned stocks.

Exit strategies for longs need to be in place. But after polling several experts in the field, the swine flu will be worse than general public expectations. Also, very few understand the five vaccines and the anti-virals available, either approved or under Emergency Use Authorization review. Unless, of course, they've been reading these blogs for a few months (pardon the temporary lapse in modesty).

The most recent update is that egg-based vaccines won't be available until October, due to lower than expected yields. With a 21-day duration between doses, and one more week thereafter before immunogenicity kicks in, most students and young adults won't be immunized until November at the earliest. As noted before, with schools already in session, the swine flu will peak in October, rendering many vaccines useless among the targeted population.

Anti-virals will have to step in, even though Tamiflu has tolerability as well as efficacy issues due to resistance. Inhaled Relenza has limitations, so intravenously administered Peramivir has BCRX longs excited about an imminent EUA stockpiling order.

Good luck to all longs, and good luck to those who will become infected with the novel H1N1 virus.

Disclosure: Long shares in BCRX, NVAX, SVA, HEB, and APT.

HEB

HEB shares dramatically dropped $0.92 to $2.40, giving up all the gains from the past several days. The conference call update on swine flu initiatives worldwide didn't impress investors, as they focused on the delays in FDA approval for Ampligen as a treatment for Chronic Fatigue Syndrome. Days like today are exactly why one should take partial profits on recent large gains, which we did yesterday. As this is all "house" money, I can afford to wait for further developments on either the CFS or swine flu adjuvant front.

BCRX and NVAX share prices were up modestly today after large gains in previous trading sessions, waiting in anticipation of tomorrow's FDA vaccine advisory committee meeting. Both are waiting for pending positive news on Emergency Use Authorization, which will allow them to manufacture doses for the national stockpile. NVAX's VLP technology cuts down the time to manufacture vaccines, which is becoming increasingly urgent as the pending swine flu season is expected in September when schools re-open.

BCRX's Peramivir is not a vaccine, but an anti-viral treatment that reduces the symptoms of the flu and shortens recovery time. EUA is expected for intravenous use in severe cases requiring hospitalization.

Both NVAX and BCRX are working with health officials worldwide, with especially intense clinical activity being performed in Japan and the US.

Swine flu plays resurface ahead of next FDA vaccine meeting

BioCryst Pharmaceuticals (BCRX) gapped up again 22% from yesterday's close of $6.21 to $7.58 today, up 22%, while Hemispherx Biopharmaceuticals surged almost 33% from $2.49 to $3.31. Both are up triple digits since we bought them in May (see June 4, 2009 "Swine flu revisited" blog).

BCRX's Peramivir is an effective intravenous anti-viral against seasonal flu, avian flu, and the latest swine flu (H1N1), shown to reduce flu symptoms in Phase III trials conducted by Japanese partner Shionogi. BCRX is also waiting for Emergency Use Authorization (EUA) by the FDA for severe cases requiring hospitalization. The EUA is required since Peramivir is not approved by the FDA. Peramivir has shown at least equal efficacy against the flu when compared to Roche's Tamiflu anti-viral in clinical trials.

HEB is having a conference call tomorrow to update the investment and medical communities on their clinical developments for Ampligen, a flu adjuvant. Studies have been performed worldwide for use of Ampligen as a booster alongside existing vaccines. Ampligen is also under FDA review for approval as a treatment for Chronic Fatigue Syndrome.

Novavax (NVAX) ended today's session at $3.19, up from $3.02. They also named John Trizzino Senior VP of International and Government alliances, in a sign that they are intensifying efforts with government agencies worldwide on getting approved for their vaccine-line particle (VLP) platform. With VLP, the time to manufacture a vaccine is cut in half--approximately 10-12 weeks, and yields are higher because they don't require egg-based cultures. Fixed costs are also lower due to disposable manufacturing systems.

This Thursday, July 23, the FDA Vaccine and Related Biological Products Advisory Committee will meet with vendors to discuss vaccines against the H1N1 virus: http://www.fda.gov/AdvisoryCommittees/Calendar/ucm170908.htm

This meeting is a sequel to the National Biodefense Science Board (NBSB) meeting held last month (see July 20, 2009 "BCRX potential" blog). The questions held at the NBSB will hopefully be answered this Thursday during the FDA Vaccine AC meeting. Shares of all 3 aforementioned companies jumped in anticipation of positive results.

As mentioned in previous blogs, the World Health Organization (WHO) raised the pandemic alert in June to Phase 6--the highest level possible, which last occurred 41 years ago. The foregone conclusion is that the H1N1 is spreading faster than previous pandemic flus. By the time it hits the US hard in the fall, it is estimated that 1 out of 3 Americans will contract the virus. So far, the mortality rate is lower than the avian flu, but should it mutate, the result strains could increase the severity as well as the virulence.

HEB

HEB message boards are gettings tons of chatter, most of it garbage, but it's usually emblematic of a pivotal inflection point in the share price, either up or down. Longs are expecting FDA approval of Ampligen for treatment of Chronic Fatigue Syndrome (CFS), a recently diagnosed debilitating medical condition. Patients and doctors swear by Ampligen's efficacy, despite the disease being marginalized in the past by the mainstream medical community. Now that CFS is recognized by the FDA, Ampligen's approval as an orphan drug (there are no other CFS treatments approved simply because CFS wasn't formally recognized as a disease) should be a blockbuster, according to long investors.

Ampligen has also been deemed effective as an adjuvant to flu vaccines in Japan and other countries, so the share price has spiked up in the last month from depressed levels. It has also been effective in clinical trials for boosting the efficacy of cancer vaccines in clinical trials. As Dr. William Carter, CEO of HEB stated in an interview last night, which is causing the uproar: "We have multiple shots on goal." See the June 4 blog on the swine flu.

Doubters (and shorts) will point to HEB's checkered history of FDA non-approvals and share dilution (altho HEB does already have one commercially approved drug for Alferon).

The pumping and bashing will continue unabated over the weekend, and the old adage "volume before price" will inevitably be proven again, as HEB will continue its high price volatility going into Monday.

HEB is a risky and volatile play. Do your due diligence. This is not a recommendation.

Disclosure: I am long HEB.

Swine flu revisited

In the bad news, good news category:

Bad news first: the swine is spreading rapidly, despite declining media coverage.

Good news: my two swine flu plays are doing well.

HEB has a history of FDA non-approvals, but is expecting a PDUFA decision from the FDA any day now, for approval of treatment for Chronic Fatigue Syndrome (CFS). CFS's acknowledgment as an official indication itself is controversial, and thus there are no current approved treatments for it. That's why HEB's Ampligen has so much potential, as patients and doctors in clinical trials swear by it. After being barely able to function, some patients on Ampligen have their lives restored.

But Ampligen is also being reviewed in Japan, Italy, and Australia (among other countries) for use as an adjuvant with vaccines to combat season flu, avian flu, and swine flu. Apparently, Ampligen in conjunction with other vaccines shows clinically significant efficacy.

I have sold 40% of my HEB holdings, locking up to 100% gains, and letting the rest ride in case they get approval for CFS. Any orders from the increasing threat of rising flu cases will provide further upside in the price per share.

BCRX is developing an anti-viral (vs. a vaccine) which shows efficacy in reducing symptoms for those with severe flu symptoms. Roche's Tamiflu is largely ineffective against some mutated influenza strains and GSK's Relenza has also been marginalized against resistant strains. BCRX's Peramivir intravenous dosage has been so effective against multiple flu strains in clinical trials that they are being evaluated for Emergency Use Authorization (EUA) despite not being FDA-approved (currently Phase II).

In Japan, they are in Phase III with fast-track approval targeted for 2010. Shionogi, their marketing partner, is working furiously to get approval in China, South Korea, Taiwan, and Hong Kong as well. East Asian countries are far more sensitive to influenza due to close living quarters and an aging population in Japan, which increases mortality and morbidity.

I believe WHO will raise the pandemic alert to Phase 6--the highest level soon. Despite the swine flu's rapid spread, confirmed cases are being under-reported for various reasons, whether political or just lack of testing facilities. For now, the H1N1 virus has been proven virulent, if not as lethal as its avian flu cousin (H5N1). But if they somehow mutate these winter seasons in the southern hemisphere, and then later in the northern hemisphere, we could have a strain that is both virulent AND lethal.

These are highly speculative investments, and these are not recommendations. Please do your own due diligence.

Disclosure: I am long BCRX and HEB.