Glaxo, Novavax, other drug stocks leap due to swine flu

As concern spread Monday about a swine flu virus outbreak, investors saw opportunity in shares of companies that make or hope to make anti-flu drugs.

Britain's GlaxoSmithKline, (GSK) which makes antiviral Relenza, saw its U.S.-traded shares rise 7.6% Monday, while U.S.-traded shares of Swiss drugmaker Roche Holdings, (ROG) which makes antiviral Tamiflu, rose 4%.

The antivirals, which make up the U.S. government's stock of anti-flu drugs, reduce the severity of flu symptoms and may prevent illness. They're seen as the first line of defense in an outbreak.

Longer term, health officials look for new vaccines to ward off outbreaks. Novavax, a Maryland-based company that in 2005 turned its attention to flu vaccines, saw its shares leap 80% Monday.

Novavax (NVAX) is testing cell-based technologies to enable it to produce a flu vaccine in as little as three months, says equity analyst Elemer Piros at Rodman & Renshaw. That's half as long as traditional flu vaccine makers, which use an egg-based process. Shortening the process is key, because flu can mutate rapidly.

GSK and Roche also say they're prepared to expand antiviral production. The swine flu outbreak will reinvigorate stockpiling, says Jason Kantor, biotech analyst for RBC Capital Markets. He covers Gilead Sciences, which developed Tamiflu and gets royalties from Roche. The outbreak "raises the awareness that these threats still do exist," he says.