U.S: Avian flu expected this Spring

By Ciara Linnane

NEW YORK (Dow Jones) -- U.S. government officials monitoring the spread of avian influenza are expecting the first case to reach Alaska in about three weeks and to hit the West Coast by autumn, Prudential Equity Group said Wednesday.

The H5 pathogen has been confirmed in 51 or more countries, according to the Paris-based World Organization for Animal Health, causing the culling of millions of birds across Asia, Europe and, more recently, the Middle East.

The first cases in the U.S. won't necessarily make humans ill -- only the bird version of the disease is expected here, at least initially, said Kim Monk, a Prudential senior health-care-policy analyst.

"The virus might only spread bird to bird or, rarely, bird to human, and it may or may not ever mutate into a human-to-human virus," said Monk. "So for now, the only real threat is to the poultry industry."

More than 100 people have died since the H5 virus first occurred in Asia in 2003, most of them after direct contact with infected birds.

But scientists are worried the pathogen could mutate and become transmissible between humans, potentially creating a pandemic to rival the outbreak of Spanish Flu in 1918. That virus killed about 50 million people.

The Bush administration, like other governments, is bracing for a potential pandemic. It is seeking up to $7 billion to fund programs to develop and stock supplies of vaccines.

Among the companies most likely to benefit from the effort are Roche, the biggest manufacturer of Tamiflu; GlaxoSmithKline (GSK) , which makes the antiviral Relenza; and makers of cell-based vaccines such as Chrion (CHIR) , Solvay and Sanofi-Aventis (SNY) .

3M (MMM) could gain attention if there's increased demand for protective paper masks, the analyst said.

Trend Macroanalytics, a research firm serving institutional investors, has taken its analysis a step further and created an "avian-flu index" comprising 17 stocks in the health-care sector that can be expected to see a surge in demand for their products should the flu become a threat to humans.

The index includes stocks like Embrex (EMBX) , a leader in "in ovo" technology for the poultry industry; Hemispherx (HEB) , whose interferon inducer Ampligen is considered a strong candidate as a flu treatment, and BioCryst (BCRX) and Generex (GNBT) , which are both producing antivirals.

Donald Luskin, chief investment officer at Trend Macro, said the index has gained 105% since its inception last Aug. 31 and is up 40.5% so far in 2006.

Luskin said he considers the chance of mutation and a pandemic small.

"The reason why investors should buy these stocks, though, is because it is the vaccines, therapeutics and diagnostics of the companies in this sector that are making sure the pandemic doesn't happen," he said.

"Lots of money will be spent by governments -- spent with these companies -- to be sure to prevent the worst case."

He likened the bird-flu situation to Y2K, when companies spent billions of dollars upgrading technology to ensure computers could cope with the switch to the new millennium. "The worst case didn't happen because people were warned," he recalled.

Among the companies outside the health-care sector that might attract a sales spurt from avian flu is Pall (PLL) , which makes filtration systems that can also be used in vaccine production as well as breathing ventilators that can be used to discourage the spread of viruses such as SARS and certain flu strains.