We’ve all seen the headlines.
The flu has made its annual visit to the U.S., reacquainting itself with your kids, spouse, parents, friends and co-workers. But this strain has been especially nasty, resulting in shortages of the very vaccines that might have moderated its effects.
One of my colleagues here – an editor with a young son – finally got his just last week – only because he stubbornly went to the same Rite-Aid every single morning for an entire week.
I’m sure you have similar stories you could share.
When you think about it, this year’s flu season illustrates one of the great ironies of our time. Although advances in medical technology have enabled us to create the vaccines that so far have kept the yearly viral visit in check, the reality is that those advances have been leapfrogged by global travel, an advancement that makes a pandemic more likely than ever before.
Fortunately, there is an answer – an innovation worthy of the Strategic Tech Investor, and one that savvy investors can play for windfall profits. I’m going to show you four ways to grab those profits for yourself.
At the start of each flu season, I literally count the days until I see the first mention of the Spanish Flu pandemic of 1918. I understand the attention it gets: Not only was it the worst flu outbreak in modern times, it is thought to have killed between 20 million and 50 million people.
By that standard, the SARS crisis of 2003 was a drop in the bucket. It killed less than 1,000 people around the world. But it cost a small fortune. The World Bank estimates the total hit to the global economy at some $33 billion.
No wonder health officials urge us to get flu shots…
Then came the vaccines – which, as it turns out, are actually like a page from history. The technology is decades old. Many vaccines stem from portions of viruses grown in chicken eggs – not exactly cutting-edge tech.
But the new generation of flu vaccines I’m going to show you right now will change that. They are cutting-edge tech. And they will help checkmate the advantages that global travel had granted to the flu virus – restoring balance in the process.
These new vaccines are synthetic, meaning they stem from fragments of man-made DNA. In essence, they are “programmed” to fight the flu or other designated diseases.
I see this as “disruptive technology” that will turn the $30 billion vaccine market inside out. Besides the flu, firms in this space are working on synthetic vaccines for leukemia, HIV, malaria, hepatitis and cancer.
Currently, no firm has a synthetic product on the market for human use. But trust me, they’re coming… and you’ll want to be a player when they do.
In the meantime, let’s handicap the leaders that I see out in the marketplace …
Synthetic Vaccine Play No.1: Inovio Pharmaceuticals Inc. (NYSE: INO)
Just a few weeks ago, I had dinner with CEO and co-founder J. Joseph Kim. He’s an award-winning scientist and former vaccine exec at Merck & Co. Inc. (NYSE: MRK). And he studied under one of the towering giants of biotech, Robert Langer, a distinguished professor at MIT.
More to the point, Inovio has great science. That’s why the firm has received millions in backing for its anti-malaria vaccine from a group affiliated with Bill and Melinda Gates.
Inovio also is working on a synthetic “universal” flu vaccine. And its other projects include, but aren’t limited to, vaccines for leukemia and cervical cancer. And Kim has another hook in the market. It’s a novel process of giving injections known as electroporation.
Here’s how it works. When the patient gets a shot, the injection also delivers a short electric pulse that causes the cell’s membranes to open and accept the DNA. Those cells then produce antigens that tell the immune system to fight the targeted disease.
With a market cap of a mere $100 million, the stock trades at roughly 70 cents a share. Inovio has no sales at present, but has done a great job raising money from the government and foundations to fund its operations. It is engaged in several clinical trials.
Synthetic Vaccine Play No. 2: Vical Inc. (NasdaqGS: VICL)
This small-cap biotech firm already has two products approved for sale, both for animals.
In the U.S, it has a green light to sell a vaccine that combats skin cancer in dogs. Canada has approved the sale of a vaccine Vical developed to fight a virus that is virulent enough to wipe out wide swaths of salmon, a critical part of that nation’s food chain.
For humans, Vical says it will soon complete a Phase 3 clinical trial of Allovectin, a therapy designed to treat the late stages of skin cancer that has spread to other parts of the body. The company is also in the early stages of clinical trial for a flu vaccine.
Like Inovio, Vical also has a CEO who formerly worked as a senior vaccine exec at Merck. Founded in 1987, Vical was a spinoff from the University of California-San Diego that was originally formed to fight AIDS.
With a market cap of $302 million, the stock of this clinical-stage firm trades at about $3.50. Though it’s losing money, it has roughly $80 million cash on hand and no debt.
Synthetic Vaccine Play No. 3: Novartis AG (NYSE ADR: NVS)
Though better known as a Big Pharma concern, Novartis entered the synthetic vaccine field back in 2010. That’s when it joined forces with Synthetic Genomics Vaccines, an offshoot of Craig Venter’s pioneering work in sequencing the human genome.
Under a three-year deal, Novartis is creating synthetic seed viruses to combat flu epidemics. From the seeds, the team hopes to have the ability to create big batches of synthetic vaccines in less time.
Backed by the Department of Homeland Security, Novartis has opened a $1 billion production plant. In late 2011, the company said it had begun making a stockpile of vaccines at the federal government’s request. The stockpile could be used without the FDA’s usual approval process in the event of a surprise outbreak of a deadly flu strain.
With a market cap of $158 billion, NVS trades at roughly $65 a share and a forward P/E of 12. It pays a dividend of 3.8%.
Synthetic Vaccine Play No. 4 Sanofi (NYSE: SNY
For its part, Sanofi struck a licensing deal last July with the University of Pittsburgh. Sanofi and the school hope to create a vaccine that protects against all strains of the flu and that also ends the need for annual shots.
“Our vaccine is adaptable to any delivery method, whether it is a needle to the arm or a nasal spray,” says Ted M. Ross, a vaccine scientist at the university. “It would protect against whatever strain of seasonal flu happens to be circulating, and it can be produced in as little as four months.”
Recently trading at around $47.60, Sanofi has a market cap of $125 billion. It has a forward P/E of 6.7 with an annual dividend of 3.7%.
With so many efforts ongoing at once, synthetic vaccines will soon become an important and useful tool in the global battle against disease. And when something benefits humanity on such a broad scale, it can’t help but enrich investors at the same time.
And that’s the formula we look for here at Strategic Tech Investor.
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