Stocks To Profit From a Bad Flu Season
Lee is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apologies if you are suffering from influenza this year but some of us have some investing to do! The early indications are that this going to be a nasty flu season so it’s time to think of the kinds of stocks that could be key beneficiaries. I will put forward some names and would strongly suggest following the JPMorgan Healthcare conference for some more ideas on how things are faring.
A Nasty Flu Season?
Flu seasons have been relatively benign over the last few years but this year looks to hit a lot harder. For example in December, the Centers for Disease Control and Prevention (CDC) stated this could be a bad season, saying:
This is the earliest regular flu season we've had in nearly a decade, since the 2003-2004 flu season. That was an early and severe flu year, and while flu is always unpredictable, the early nature of the cases as well as the specific strains we're seeing suggest that this could be a bad flu year.
Moreover it doesn’t appear to have got any better since then with the CDC recently announcing the situation to be still accelerating. Of course, it is difficult to be sure how the season will play out, so investors should keep up to date with the latest information. One useful resource could be Google flu trends, which is currently indicating "intense" flu activity in the United States.
Quidel Kicks Things Off
One company has already reported preliminary results and cheered the market with its flu outlook. Quidel (NASDAQ: QDEL) is a manufacturer of rapid diagnostic testing solutions and virology assays and it recently indicated that its Q4 revenues would come in at $53 million-$54 million when the market had been forecasting around $44 million. Quoted from its recent press release:
We saw a sudden and early onset to this year's influenza season. I am pleased, however, with how well we were able to respond to the increased and rapid demand for our flu tests.
This is pretty much a confirmation of what the CDC and Google flu trends. Now the efficient market hypothesis devotees would no doubt have argued that this would have already been in the price. Unfortunately, they would have missed out on the 8% move upwards after the results, not to mention the near 20% move since the end of December.
So which other stocks are worth looking at?
Other Flu Plays
I hold one company with heavy exposure. French pharmaceutical giant Sanofi (NYSE: SNY) is the largest supplier of flu vaccines in the world. Its vaccines division, Sanofi Pasteur, provided nearly 200 million doses in 2011 and I would expect an increase this year. The stock has appreciated nicely since December and I am sure that this because the market is pricing in the bad flu season. However, if Quidel’s performance is indicative then there maybe some upside left with positive news to be released.
Another leading (and European) player in flu vaccines is Novartis (NYSE: NVS). Its Optaflu vaccine is believed to be one of the fastest growing flu vaccines on the market. This would be good news for Novartis after sales of its Fluad and Agrippal flu vaccines were temporarily halted in Italy and Switzerland (its home market). No matter, the ban has now been lifted and Novartis’ stock has been rising in anticipation of good revenues from the current flu season.
Yet another European "flu play" is Switzerland’s Roche, whose blockbuster Tamiflu antiviral is a leading player in influenza treatment and prevention. However US investors can get exposure to Tamiflu by investing in Gilead Sciences (NASDAQ: GILD), which originally discovered Tamiflu but licensed it to Roche. Gilead earns significant royalties from Tamiflu and the marginal difference in sales will drop straight to Gilead’s bottom line. If the flu season continues its current trend then Gilead could be a beneficiary.
The last company to look at is another European company with a US listing, namely GlaxoSmithKline (NYSE: GSK). Glaxo’s Fluviral is one the best selling flu vaccines in the marketplace. Indeed this flu season is exactly what the "stock doctor" ordered for GSK after it endured a difficult year in the lab. The pick-up in its stock price recently is probably a function of the flu season and it may prove a catalyst for value players to look at the stock.
SaintGermain has a position in Sanofi Aventis. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!