Drugmakers get $1 billion for bird flu vaccine
Feds give Glaxo, Novartis, MedImmune nearly $700 million to help prepare for bird flu pandemic threat.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - The U.S. Department of Health and Human Services awarded $1 billion to drugmakers, including nearly $700 million to GlaxoSmithKline, Novartis and MedImmune, to help them develop a faster method of producing an influenza vaccine to better protect the nation against the possibility of a pandemic.

GlaxoSmithKline, the British drugmaker, received a $275 million contract, while Novartis, the Swiss drugmaker, received $221 million, and MedImmune, a Maryland-based vaccine maker, received $170 million, said the HHS. Solvay Pharmaceuticals received the largest contract, $299 million, with part of the money going towards building a new U.S.-based vaccine plant, and SynPort Vaccine got the smallest, $41 million. The money from the five-year contracts will be used to develop vaccines in cell culture, a faster process than the decades-old method of growing the vaccines in chicken eggs.

GlaxoSmithKline's (up $0.31 to $57.29, Research) andNovartis' (up $0.35 to $57.30, Research) stock price rose slightly following the news, but MedImmune's (up $0.51 to $32.40, Research) stock shot up nearly 4 percent. The other two companies are not publicly traded on stock exchanges in the U.S.

"The receipt of funding is important as a validation that these companies are developing important vaccine solutions for avian flu," said Vinny Jindal, analyst for ThinkEquity.

The drugmakers' announcements follow a White House report on Wednesday, which laid out a worst-case scenario for the threat of a bird flu pandemic sweeping through the United States. The White House said the pandemic could kill two million Americans, infect 50 million, and knock 40 percent of the work force out of commission.

Bird flu, or H5N1, has wiped out poultry flocks and wild game around the world, and infected humans in five Asian countries, as well as Azerbaijan, Turkey, Egypt and Iraq, according to the Centers for Disease Control. Some 200 people have been infected with a mortality rate of about 50 percent. The virus is transmitted among birds and then spread to humans, but there is no proven transmission from human to human. However, researchers recently discovered that the 1918 influenza pandemic that killed tens of millions of people emerged in birds, sparking fears that H5N1 could mutate into a virus that could spread among humans.

The cell-based method of vaccine development is not only faster than the egg-based method, but the cell cultures can be frozen and stored, and then brought out during a pandemic to quickly grow large volumes of vaccines, said the HHS.

This funding comes from the $3.3 billion proposed by President Bush and appropriated by Congress for fiscal year 2006 for pandemic preparations, said the HHS.

Sanofi-Aventis (down $0.54 to $48.41, Research), the French drugmaker, has also received U.S. government contracts for bird flu vaccine development.

Roche, another Swiss drugmaker, produces Tamiflu, the leading anti-viral treatment for bird flu, but the company does not have the capacity to meet worldwide demand. Anti-virals are treatments that are taken after infection, unlike vaccines, which are taken to prevent infection.

Vindal, the ThinkEquity analyst, said that BioCryst Pharmaceuticals (up $0.30 to $14.92, Research), developer of the anti-viral Peramivir, is the lead candidate for the $300 million in funding that the U.S. government plans to spend on anti-viral contracts.

"I think Peramivir is at least as good, if not better, than Tamiflu," said Vindal.

Vindal does not own stock in the companies mentioned here.

To read about biotechs and bird flu, click hereTop of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.