As noted by others, the current BTA sell-off is due to the following:
(1) reports that swine flu has peaked in the US and Europe
(2) reports that many governments are trying to on-sell their H1N1 vaccine supplies to other countries and canceling new orders
(3) reports that some governments are also canceling Tamiflu orders
(4) reports of public disquiet in France over the excessive level of spending in preparation for a very mild swine flu pandemic
(5) Rumors of HH looking to further unload
The key question now is whether or not governments are going start canceling Relenza stockpile orders. Until a few weeks ago, I think every informed BTA observer was in agreement that BTA was going to easily generate $50mill+ in profit in FY10 and FY11 (indeed RBS is forecasting $75mill+). All of a sudden there is now a serious question mark over these forecasts. A few cancellations combined with lower than expected quarterly sales could see BTA quickly crash back to $1.20. This quarter will be strong no matter what happens; it is the third and fourth quarters that now suddenly have a question mark hanging over them.
IMO, it will be Tamiflu resistance levels that will largely determine Relenza stockpile sales, the LANI valuation, and thus the BTA share price. The withdrawal of the current strain of pandemic H1N1 actually creates an opportunity for the Tamiflu-resistant strain (with the H274Y mutation) to become dominant, as has happened with seasonal flu. Furthermore, a second change to the virus (D225G) makes it considerably more lethal and renders the current vaccines far less protective against the virus.
Should a pandemic H1N1 strain with the H274Y polymorphism become dominant, then Relenza and LANI will be the only antiviral game in town. All existing Tamiflu stockpiles around the world will be completely useless, as will Peramivir. Under this scenario, GSK would be forced to find third party producers to help raise global production capacity to near 400mill courses per year and Relenza sales would likely be comparable to peak Tamiflu sales (roughly somewhere between US$2-4bill per year). In short, BTA would quickly become an $8+ stock. At the present time, I rate the chance of this scenario occurring at around 50%.
Furthermore, under a low probability, worst case scenario, H274Y would combine with D225G in pandemic form. If this happens, not only do global Tamiflu and Peramivir stockpiles become useless, but also global vaccine stocks become near useless (at least until new vaccines can be developed, which will take 6-9 months once the required strain has been isolated). If this happens, I predict that the FDA would permit LANI to be rushed into production without North American phase III trials (since the mortality rate from the pandemic will soar). And under this worst case scenario, day traders could easily send BTA to $15+.
It is still relatively early in the Northern flu season, and I'd expect BTA to hover between $2 and $2.20 for the next few weeks until newsflow gives us a clearer picture as whether or not there will be second wave of pandemic H1N1 and whether or not this second wave carries the H274Y polymorphism.
If this second wave does not come, then BTA could be sold off quite substantially from current levels. If this second wave does come, then I see massive upside for BTA, as described above.
Tom
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