A Pandemic Play

09/23/2005 12:00 am EST

Focus:

Michael Shulman

Editor, Short-Side Trader

"Pandemics, like weather, are hard to predict over the short term," says Michael Shulman, editor of the exceptional new service,  ChangeWave Biotech Investor . Here he looks at a "super-speculative" play on avian flu, suitable only for "your Vegas money."

"The World Health Organization (WHO) and others are convinced a flu-type pandemic is a ‘when’ not an ‘if.’ And, according to WHO, avian flu is the biggest threat to human life on the planet. There are several drugs available to combat avian flu, including Tamiflu from Roche and Gilead Sciences, and Relenza from GlaxoSmithKline.

"Another play in this area is Biocryst (BCRX NASDAQ), whose drug for avian flu, Peramivir, failed to get FDA approval because only one-third of the patients responded to the drug when ingested in pill form. However, the increased fears of a flu pandemic may give Peramivir a new lease on life. The company is now preparing an application to the FDA based on an injectable form of the drug.

"BioCryst also has the option of applying for FDA approval under the new Homeland Security initiative called Project BioShield. Using this program a drug can be approved for stockpiling under much less rigorous clinical-trial guidelines. In the aftermath of all the CDC and WHO warnings, the Katrina debacle and available funding from Project BioShield, it's a reasonably good guess that BioCryst has a very good chance of getting funding to stockpile Peramivir.

"Without the high interest in the Asian flu, BioCryst would be a failed company. BioCryst's other drugs aren't close to being ready for FDA review. Two drugs are in early stages of Phase II trials (both for leukemia) and four drugs are in Phase I development (three for leukemia and one for psoriasis). For now, a bet on BioCryst is a bet on Peramivir getting expedited review by the FDA due to the current Asian flu concerns and the new guidelines for drug approvals provided by Project BioShield.

"For those with some real ‘Vegas money’ to speculate, I like BioCryst as a buy under $12. If I am wrong about this, then the stock blows up. Therefore, use only your most speculative investment dollars for BCRX. BioCryst is, by far, the most speculative company on our Buy List and if I ever create a super-speculative category of stocks, this would be at the top of the list."

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