These Stocks Are Getting the Bird Flu Chills

Vaccine Syringe NeedleAs more than six deaths in China have now been attributed to a strain of bird flu virus known as H7N9, government authorities have closed all of Shanghai’s poultry markets and more than 20,000 birds have been slaughtered to prevent the disease from spreading. As investors have begun to fear that people will be reluctant to travel to China, airline shares have dropped globally. However, within the tragedy there are opportunities for pharmaceutical companies to develop new treatments to combat the flu — including Novartis (NYSE:NVS), which recently won regulatory approval to use a quicker manufacturing technique for its vaccine.

A statement issued by the U.S. consulate in Shanghai Friday — which urged people to remain calm — precipitated the selloff.  “At this point the risk for international disease spread is considered low,” the consulate said. “The latest advisory from the World Health Organization as of April 4 is that no travel or trade restrictions with China should be applied based on the current information.” Yet history is proving to inform investors’ decisions rather than that update.

In total, 14 infections from the H7N9 bird flu strain have been reported in eastern China and at least four people have died in Shanghai — a city of 23 million and the showpiece of China’s flourishing economy — according to Reuters. “We currently have enough reserves of Tamiflu to meet with the current outbreak,” Wu Fan, director of the Shanghai Center for Disease Control & Prevention, told a news conference covered by the publication, indicating the country’s level of preparedness. Tamiflu is manufactured by Roche (RHHBY.PK).

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All though it is still early on in the disease’s progression, given that the 2002 to 2003 epidemic of SARS — Severe Acute Respiratory Syndrome — began in China and killed approximately 10 percent of the 8,000 it infected, concerns that bird flu will mark out a similar course have spread. “The bird flu issue is at the top of people’s minds now,” Alfred Chan, chief dealer at Cheer Pearl Investment in Hong Kong, told the publication…

Airline stocks in Europe plummeted based on fears that the outbreak would be widespread. SARS crippled tourism in China and Hong Kong, and shares of Chinese airlines — which were hit hard during the 2003 outbreak — dropped sharply, triggering the broader selloff in airline and travel stocks worldwide.

On Hong Kong’s benchmark Hang Seng Index, Chinese carrier Air China (AIRYY.PK) ended down 9.8 percent Friday, the stock’s biggest one-day decline since April 2009. Guangzhou-based China Southern Airlines (NYSE:ZNH), a carrier that deploys about 80 percent of its capacity on the domestic market, ended down 8.5 percent, while China Eastern Airlines (NYSE:CEA) was down 8.3 percent. In Europe, British Airway’s parent-company International Consolidated Airlines, Deutsche Lufthansa (DLAKY.PK), and Air France-KLM (AFLYY.PK) all ended the trading session in the red.

The cases in China mark the first time that humans have been affected by this strain of bird flu — which causes severe respiratory illness. Currently, the U.S. Centers for Disease Control and Prevention are monitoring this new strain of the disease in case a vaccine is needed, and the CDC has begun developing a “seed” virus — a genetically modified version that can be used by drug manufacturers to make a vaccine. Yet, before production begins, several questions must be answered, including whether the virus can be transmitted from person to person. “Right now there is no evidence to suggest that is the case,” CDC spokesman Tom Skinner told Reuters.

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In addition to Novartis, other flu vaccine manufacturers in the United States include Sanofi (NYSE:SNY), AstraZeneca (NYSE:AZN), and GlaxoSmithKline (NYSE:GSK).

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