H1N1 vaccine approvals deflate biotech stocks

CHICAGO - Tiny biotechnology companies banking on a severe swine flu pandemic to speed testing of alternative flu vaccines and treatments got a surprise this week when U.S. health officials approved four H1N1 vaccines and said there would be enough for everyone.
Even though the government has ordered 195 million doses, short of the 300 million population, the announcement triggered a selloff of some of the sector's hottest names including Novavax and flu drug maker BioCryst.
Manufacturers and governments have been scrambling for vaccines to fight the H1N1 flu strain, which was declared a pandemic in June. The World Health Organization said it could infect as many as one-third of the world's population, or 2 billion people.
"A lot of the companies that are potentially in this influenza space are trading based on concerns about a pandemic," said Oppenheimer analyst Brian Abrahams.
News such as greater availability of vaccines would be seen as a negative, he said in a telephone interview. "Any news that says the pandemic might be doing more damage than expected would be a positive."
Months of dire predictions about how severe the pandemic could be have sent investors rushing to buy shares of companies like Novavax, whose stock has risen tenfold since the spring, Abrahams said.
Shares of Novavax, which is awaiting permission to begin human testing on a new H1N1 vaccine grown in caterpillar cells, fell 7.53 percent to $5.16 in midday trading on Wednesday.
Vaccine maker Vical, awaiting a U.S. Navy grant to start testing its H1N1 vaccine, fell 8.4 percent to $4.47.
And shares of BioCryst, which is developing an intravenous antiviral drug similar to Roche's Tamiflu and GlaxoSmithKline's Relenza that could be useful in hospitals, fell 7.54 percent to $10.79 in afternoon trading.
"It appears that investors are selling off some of the names ... because they believe the current pandemic has been addressed," said Ren Benjamin, a biotechnology analyst with Rodmen & Renshaw who follows BioCryst, Vical and Inovio Biomedical Corp.
"In my eyes, it's sort of the market correcting itself. There were certainly expectations that were set that maybe the vaccine would not be ready in time for this flu season," he said in a telephone interview.
Benjamin said there was still a chance the H1N1 flu strain would mutate, rendering vaccines less effective.
But, he said, the real opportunity for companies that has been caused by the flu pandemic has been to highlight the shortcomings of current technologies for making flu vaccines in chicken eggs, which is six decades old.
"It takes six months to generate these vaccines," he said. "In our view, the government is not going to stop funding the development of next-generation vaccines or antivirals that could address this limitation of the technology."

Source Reuters