China's Swine Flu Darling Is No One Trick Pony

• By the Indie Research Staff
• On 10:51 am EDT, Wednesday October 14, 2009

Beijing-based vaccine company Sinovac Biotech (AMEX: SVA - News) has, like many of its peers, experienced its share of pops and drops riding waves of demand on the global epidemic rollercoaster.

While a SARS vaccine that fueled hype surrounding the stock in 2003 still isn't market ready, Sinovac's successful hepatitis A vaccine, Healive, has done more than just keep the lights on. The vaccine is a major contributor to Sinovac's bottom line - in April the company sold $12.8 million worth to the Chinese Ministry of Health. Meanwhile, the company's Bilive hepatitis A and B vaccine was approved for marketing in 2005, and sold about a tenth as many doses as Healive in Q2 2009.

Even as the hepatitis vaccines fuel the company's growth, Sinovac has continued to look for an infectious disease blockbuster. Developments relating to the H5N1 vaccine sent shares soaring, but, as bird flu hype subsided, so did the impact of flu vaccine efforts on Sinovac stock. An H5N1 vaccine quietly received China's approval for production in April 2008. A year later, Sinovac announced the initiation of preparatory activities for a swine flu inoculation.

On Friday, August 28, less than four months since the initial announcement, the Beijing Public Health Bureau announced that Sinovac would be one of four to supply 2.8 million of the city's citizens with seasonal flu immunizations. A few days later, the company announced that Chinese health regulators had approved its H1N1 vaccine for individuals between three and sixty years old - that's over a billion potential "customers." While Sinovac won't immunize the approved market in its entirety, a single dose is effective; meaning twice as many individuals may receive the vaccine as initially expected.

Sinovac's head start put it in a favorable position compared to some of its similarly volatile peers. However, while it was the first to announce that its vaccine was effective in a single dose, it would not be the last. In the weeks following Sinovac's announcement, pharmaceutical giants Novartis (NYSE: NVS - News) and GlaxoSmithKline (NYSE: GSK - News) also reported that a single dose of their respective H1N1 vaccines is sufficient as well.

Leading out of the gate helped Sinovac prove the efficacy of its vaccine early, and subsequently earned millions of orders from the Chinese government. On September 30, the company announced that China ordered an additional 3 million doses of its H1N1 vaccine, bringing its total order to 6.3 million. In the same press release, Sinovac said it expects the delivery of 4.5 million doses by the end of October.

Sinovac isn't the only small-cap that has seen a big boost from H1N1 headlines.

In a new 23-page report, Weekly Digest examines both small- and large-cap stocks with exposure to the swine flu pandemic, assesses which stocks will see further gains and which are just riding the hype.

Among the stocks featured in its report are Sinovac, Hemispherx Biopharma (AMEX: HEB - News), Novavax (NASDAQ: NVAX - News), Generex Biotechnology (NASDAQ: GNBT - News), Inovio Biomedical (AMEX: INO - News), and many others.

For a free 23-page report covering 15 H1N1 stocks, please sign up for our free Weekly Digest.

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