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Swine flu boost for GlaxoSmithKline

Posted on 01. May, 2009 in General News

Shares in GlaxoSmithKline (GSK) rose 8 per cent this week after the outbreak of swine flu in Mexico increased demand for the company’s Relenza anti-viral drug. Shares in Swiss pharma group Roche, makers of Tamiflu, rose by a similar amount. But production headaches, stock-piles and the normally short duration of pandemics means that the companies are unlikely to see much immediate benefit.

The share price rises are more a reflection of future sales of anti-viral medicines – even if the current outbreak turns into a pandemic, it’ll be long past before significant new stocks of medicine are available for sale. Production of anti-virals is difficult, often requiring cultures to be grown inside special vats, and can take several months to reach a peak.

The ‘flu virus first seen in Mexico and now spreading rapidly around the world does seem to respond well to both Tamiflu and Relenza. GSK has already shipped more than 100,000 packs of Relenza at the Mexican government’s request, as well as 170,000 doses of seasonal flu vaccine. However, the main boost to sales will be later, as governments replenish their ‘flu vaccine stockpiles.

There’s a precedent for this. Similar share price rallies were seen in the aftermath of severe acute respiratory syndrome (Sars) in Asia in 2003; back then, GSK put on nearly 10 per cent in the first two weeks after the scare, but dropped back quickly as fears subsided. Roche also benefited from the avian flu scare in 2005, but Tamiflu sales stalled after governments had bought enough doses to control an outbreak.

Created: 28 April 2009, Written by: Julian Hofman, http://www.investorschronicle.co.uk/

Tags: GlaxoSmithKline, Swine Flu