Briefing Stock Brief: Traders Edge: Aviron (AVIR)
02-Aug-01 09:43 ET
The biopharmaceutical company's shares have gone down the tubes since announcing on Friday evening that a Food & Drug Administration (FDA) panel had found the company's inhalable influenza vaccine efficable, but that current data were not sufficient to support the safety of the product. News of the FluMist panel rejection stunned investors, causing a 33% one day decline in the stock. While the chances of FluMist commercialization in time for the 2001-2002 flu season are now all but nil, we view the nay vote of the FDA panel as a temporary setback for the company.
Trading Points
A Kinder, Gentler, More Stringent FDA: Much has been made of the stepped up drug approval process at the Food & Drug Administration. After complaints from Congress that it was taking too long for life-saving drugs to make it through the FDA process, the agency went into fast-track mode -- knocking off two years from a review process that had previously averaged almost three.
However, after being forced to pull several high profile drugs off the market in recent years due to severe side effects, the FDA has seemingly become more rigorous in its review of drug candidates -- particularly those that are not considered life-saving.
Trypanophobia is Not Life-Threatening: In the opinion of the FDA Vaccines and Related Biological Products Advisory Committee, FluMist's efficacy alone was not sufficient to mitigate safety concerns associated with the investigational live virus vaccine. While a potentially faster and less evasive flu vaccine would clearly be favored by the public (and shareholders of Aviron), FluMist does not fall into the life-saving or breakthrough categories.
We believe that the panel was correct in its decision not to recommend FluMist to the FDA for approval at this time. More information is needed on the prevalence of transmission of the live virus from the vaccine to others, especially among children less than 2 years of age.
Vaccinated for 2002:While Aviron is now set to post another year of substantial losses, the 42% decline in price in the days following the panel decision has set the stock up for outperformance going forward. More important for those individuals with a short-term time horizon, AVIR appears poised for a reversal in price.
The positive efficacy vote on Aviron (13 to 2) puts the company that much closer to gaining FDA approval. Consequently, we think that long-term AVIR bulls have already begun repositioning in the stock, viewing recent price weakness as a buying opportunity. After several days of heavy selling, the buy interest from those investors who now view FluMist as a 2002 flu season story should begin to support the stock.
The high visibility of the Aviron blow-up should also attract active accounts to the name once the price reversal begins. With institutions laying the support for a rebound off recent lows, traders are likely to soon converge in an attempt to run the stock... A key area of support is found at the $21.00 level... Think that traders will view ability of AVIR to tack on a gain of at least $0.75 on an intraday basis as an indication that the short-term bottom has been put in, and that the stock will be poised for a 2-3 day period of positive trade.
Send comments or suggestions to Damon Southward
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