The threat of Bird Flu has been percolating for the past 2 months after Bird Flu virus was found in milk. Then further testing revealed it was in dairy cows and spread over multiple states. The trend continued with cats, dogs, and goats testing positive for the virus. The CDC indicated that the threat to humans was low and then sure enough the first human case in the United States followed by more.
What set vaccine stocks moving up the charts was a confirmed human case of H5N1 in Australia which was ironically imported from India. Investors are worried that no one really understands the extent of the outbreak. In India there really isn’t any testing and it's just getting started in the United States. It could be well established like COVID was in the beginning and then came the blossom of infections. Adding to this concern are international outbreaks of bird flu in poultry farms in India and Australia. Bird flu is so contagious that the birds have to be culled and this is going to negatively impact Tyson Foods (NYSE: TSN) and Cal Maine Foods (NASDAQ: CALM). While one analyst is calling this Bird Flu move an “overreaction” the evidence suggests the greater frequency of Bird Flu news is still building and has not reached a crescendo. This is the beginning of a much bigger move.
Big Cap Vaccine Makers
The Bird Flu trade seems to be following the same pattern that COVID-19 did when it was just getting started. There is a rush to the big cap vaccine makers. CureVac (NASDAQ: CVAC) led the percentage gainer because they are collaborating with GlaxoSmithKline (NYSE: GSK) regarding a phase 1/2 study in avian flu to address a future pandemic. They also announced they had promising seasonal flu data from their mRNA platform and appear to be in a pole position in terms of vaccines. Following right behind was a huge money flow into Moderna (NASDAQ: MRNA) and BionNTech (NASDAQ: BNTX) because of their perceived rapid response capability to produce a new vaccine. Additionally if there was an avian flu there would likely be a shortage of eggs to make the other types of vaccines. The company also indicated they had plans to test their mRNA vaccine on H5N1, the current virus circulating in dairy cows. Novavax (NASDAQ: NVAX) has been on fire after they inked a deal with Sanofi (NYSE: SNY) as it validated their protein based vaccine platform technology while infusing much needed capital into the company. The move was magnified by the removal of the going concern language and the shareholder activist Shah Capital withdrawing its campaign against 3 directors, which removed the negative cloud over the company.
Small Cap Vaccine Tech
Small cap vaccine makers also participated in the charge higher. Dyadic (NASDAQ: DYAI) is working on a number of developments that revolve around their platform technology. They have a recombinant protein receptor binding domain booster for COVID-19. The idea behind the stock move is that this tech is superior to existing vaccines. Also in development is a recombinant ferritin nanoparticle for H5N1 that produced a strong immune response in animal studies. They also are working on an H5N1 vaccine for livestock which makes them more important in terms of an overall solution to a potential future outbreak. Even microcap player Geovax Labs (NASDAQ: GOVX) with a different manufacturing method for vaccines benefiting from the trend. They recently announced an At the Market financing with Roth Capital for $1.3 million.
Antivirals
Another way to play the Bird Flu trade is by investing in antivirals. Pfizer (NYSE: PFE) could be perceived as a therapeutic play with Paxlovid or a vaccine play. The stock was only bid up a little on the news because many in scientific circles understand that H5N1 more closely resembles influenza and the 3CL protease which is their target in COVID-19 was uniquely tailored to that virus and is unlikely to work on H5N1 and its 3CL protease.
The leading small cap antivirals represent the greatest alpha opportunity in the Bird Flu trade. These stocks were basically left for dead in the wake of PFE’s vaccine and therapeutic Paxlovid. The top 3 have market caps less than $25 million. CoCrystal Pharma (NASDAQ: COCP) has been very focused on a number of strains of influenza. Their antiviral targets the virus's replication machinery. Most of their drug candidates are in phase 1/2 clinical trials. They are looking at developing a pan-coronavirus oral antiviral with a phase 1 readout in Q2 2024. There are only 10 million shares in the outstanding and it trades at a discount to cash. This one could really generate some alpha because they have not specifically mentioned Bird Flu but it's clear as this Bird Flu chatter continues to gain momentum it's not hard to connect the dots to them expanding to Bird Flu.
NextGen Antivirals - Best of Breed
Nanoviricides (NASDAQ: NNVC) and Bioxtyran (OTCMKTS: BIXT) are probably the best of breed in the Bird Flu trade. They have a very unique way of stopping the virus by neutralizing it so it cannot infect the cell. Both of these companies have a rare type of antiviral called an entry inhibitor. Buffalo Fireside Chats did an interview over the weekend about Bird Flu and mentioned the Insider Financial piece on NNVC. Fast forward to the 1:19 mark to see the video section that compares the tech of both companies and how they are the key players in the Bird Flu trade.
It's worth noting that NNVC is in the phase 1 stage of development while BIXT is phase 3 ready. Both of their drugs claim to be broad spectrum antivirals. The BIXT drug appears to have exceptional efficacy and had an 88% responders rate in the active arm compared to 0% in the control at day 3. BIXT had the only clinical trial in the past decade to get a 100% responders rate, and it was in standard risk COVID-19 patients. While a head to head comparison is unfair to BIXT 88% tested PCR negative in 3 days versus real world data on Paxlovid showed 20% testing PCR negative in 20 days. Both drugs have NO safety issues but let's dumb this down, would you rather be sick for 3 days and have no rebound or sick for 20 days and have a 20% chance of rebound and grapefruit mouth? There is a night and day difference between the two antivirals. One has zero in sales the other has tens of billions in sales and by many accounts barely works.
What makes BIXT the frontrunner in the Bird Flu trade is this LinkedIn article that predicted this outbreak weeks ago and spelled out in detail how it was going to evolve. They also provided a solution that doesn’t involve the vaccine makers or billions of dollars to roll out. They have a phase 3 ready broad spectrum antiviral that could displace the multi billion dollar vaccine market and enable people to get an antiviral if they get sick or perhaps take it prophylactically if the data supports that use. These stocks got lost in the shadow of the vaccine makers, but now may be their time to shine as they have the potential to save us from either Bird Flu or the next pandemic. NNVC is very thinly traded and BIXT has a very tiny float with large insider ownership. These stocks are poised to move.
Picks and Shovel Stocks
Another way to play the Bird Flu trade is by investing in the picks and shovels that would be in high demand should another pandemic ensue. Alpha Pro Tech (NYSE: APT) has a large disposable apparel unit that sells garments, face masks, and face shields. Traders are speculating on a boost in sales and margins as we move closer to an outbreak. Sharps Technology (NASDAQ: STSS) has an ultra-low waste syringe that would likely be used in any pandemic situation. There is also a safety feature with the syringe that eliminates needlestick injuries. Due to the existing syringe shortage the idea is that the company could get big orders with their disruptive design that would save vaccine makers money through less waste. ImmuneCell (NASDAQ: ICCC) provides cattle ranchers the immune protection they need against a number of animal diseases including E.coli. Investors seem to be anticipating that if there is a solution to stem Bird Flu in cows they will be part of the distribution network.
Investment Summary
Bird Flu has already proven to be an endemic threat in the animal kingdom once it jumped to cows. This genie cannot be put back into the bottle which means Bird Flu is going to constantly threaten the jump to humans. We cannot expect workers in the cattle industry to wear PPE that insulates them from the virus nor can we expect to segregate cattle from other animals like pigs. Bird flu is going to continue its evolution and spread unless we take corrective action. Will the stakes rise to the point where we have to slaughter beef the same way we cull the birds or will we embrace technology to neutralize the threat? Whichever path is taken biotech will be involved in the solution, and the most economically feasible approach is likely to win out this time instead of the politics of vaccination whereby the government picks the winners. Staying with the Blu Flu trade is a long term winning strategy.
Seeing through the FUD is not as easy. Those that picked PFE as the long term COVID winner saw their investments fall by 50% as well as many of the vaccine makers. There are so many disenfranchised by vaccines that the only viable path forward with infectious disease are therapeutic options. The markets often rotate which means the leaders of the last pandemic are unlikely to be the leaders of any new pandemic. The first broad spectrum antivirals were born out of the ashes of the last pandemic and sit in the hands of 2 small biotechs with little to no access to capital. Sometimes it's incumbent upon investors to tell the government who the winners and losers are as investors bet with their wallets. We think the top 2 bird Flu stocks are BIXT and NNVC and one of them is phase 3 ready and had a 100% responders rate in a P2 clinical trial and is woefully undervalued and we hope this article brings light to this market inefficiency. Needless to say, we pick opportunity. The move into Bird Flu stocks is not an overreaction.
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Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. A guest contributor wrote this article and solely reflects his opinions.
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