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BIRD FLU
A Critical Juncture May Be At Hand
by Joe Duarte, MD
Joe-Duarte.com & IntelligentForecasts.com
May 28, 2006


Editor’s Note:

On May 27, 2006, a magnitude 6.3 Richter scale earthquake struck Indonesia, increasing the eruption of the island’s Merapi volcano. Earlier in the week, on May 24, the World Health Organization announced that it was increasingly concerned about the possibility that the H5N1 strain of bird flu was responsible for the death of seven people in an immediate family setting, raising the odds of a major development in the history of the “bird flu,” the possibility of human to human transmission. On May 27, the Associated Press reported that the World Health Organization (WHO) had alerted Roche Holdings, the manufacturer of Tamiflu, the only antiviral agent known to have some success in fighting H5N1 to ready its stockpile for shipment. So far, the WHO is considering the current situation a “practice run,” and according to AP: “the move was part of standard operating procedure when WHO has "reasonable doubt" about a situation that could involve human-to-human transmission.” Nevertheless, it is important to realize that the “bird flu” situation might be taking a sudden turn for the worst. If there is a natural catastrophe in Indonesia, and there are multiple clusters of H5N1 that are on the verge of making the leap toward human to human transmission, a refugee crisis could easily be the start of the worldwide spread of the disease. Much remains speculative at this point. But from a human suffering, and a market-influencing standpoint, this may well be the story that defines the next few weeks, and perhaps the rest of the year. Dr. Duarte explores the implications below.


Human To Human Transmission Of Bird Flu Mulled By WHO

A Family Cluster Appears

A family cluster of seven people has died in Indonesia, raising the calamitous possibility that H5N1 Avian Influenza, "the bird flu," may have finally evolved the ability to transfer from one human to another.

The news was broken by Bloomberg on Tuesday afternoon and widely disseminated by the Drudge Report. Financial markets, already jittery have responded in mixed fashion, with the currency markets moving most sharply and benefiting the U.S. Dollar.

According to the World Health Organization web site: "The case is part of a family cluster in the Kubu Sembelang village, Karo District, of North Sumatra. The man is the seventh member of an extended family to become infected with the H5N1 virus and the sixth to die. An additional person, who was the first member of the family to fall ill, died of respiratory disease on 4 May. No specimens were taken prior to her burial and the cause of her death cannot be determined. However, as her clinical course was compatible with H5N1 infection, epidemiologists at the outbreak site include this woman as the initial case in the cluster."

The latest death was a 32 year old man whose H5N1 status was positive and confirmed, and whose 10 year old son also died of H5N1 influenza. According to the WHO: "The father was closely involved in caring for his son, and this contact is considered a possible source of infection."

The evidence, although not overwhelming is increasingly suggestive that this may be the decisive set of cases in the saga of the H5N1 influenza, though, as: "Although the investigation is continuing, preliminary findings indicate that three of the confirmed cases spent the night of 29 April in a small room together with the initial case at a time when she was symptomatic and coughing frequently. These cases include the woman’s two sons and a second brother, aged 25 years, who is the sole surviving case among infected members of this family. Other infected family members lived in adjacent homes."


Rising Concern But No Definitive Proof

Although there is no complete proof that there is now human to human transmission involved in this case cluster, the World Health Organization is steadily raising the amount of alarm in its bulletins, though.

"All confirmed cases in the cluster can be directly linked to close and prolonged exposure to a patient during a phase of severe illness. Although human-to-human transmission cannot be ruled out, the search for a possible alternative source of exposure is continuing. Both the Ministry of Health and WHO are concerned about the situation in Kubu Sembelang and have intensified investigation and response activities. Priority is now being given to the search for additional cases of influenza-like illness in other family members, close contacts, and the general community. To date, the investigation has found no evidence of spread within the general community and no evidence that efficient human-to-human transmission has occurred."

This is very important. Viral analysis shows no evidence of mutation or resistance to the drug Tamiflu.

As the WHO succinctly puts it: "All confirmed cases in the cluster can be directly linked to close and prolonged exposure to a patient during a phase of severe illness. Although human-to-human transmission cannot be ruled out, the search for a possible alternative source of exposure is continuing. Both the Ministry of Health and WHO are concerned about the situation in Kubu Sembelang and have intensified investigation and response activities. Priority is now being given to the search for additional cases of influenza-like illness in other family members, close contacts, and the general community. To date, the investigation has found no evidence of spread within the general community and no evidence that efficient human-to-human transmission has occurred."

The WHO added "The human viruses from this cluster are genetically similar to viruses isolated from poultry in North Sumatra during a previous outbreak."


Conclusion

Viruses, unlike other parasites tend to evolve much more rapidly. Although technically a virus is not alive, it does have the ability to replicate, but must use the genetic code of its host in order to reproduce.

Contrary to the commonly held belief, though, a virus is not interested in killing its host. Its programming is meant to incorporate the virus into the genome of the host. Thus, most viruses are only looking for a home.

The problems arise when the virus is detected by the host immune system and the battle for supremacy begins. That is what is perceived as the illness.

In this case, we are witnessing the very early stages of an evolutionary process which could take thousands or even millions of years to reach its full expression.

To put this in perspective, consider the common cold. It has taken the Rhinovirus, the most common producer of common colds millions of years to perfect its craft and not kill its host. The virus works the host genome into creating a set of conditions where the host coughs.

The saliva particles that are coughed or sneezed are the carriers of the virus, and that's how it propagates itself.

In other words, H5N1 is trying to work itself into the status of a common cold, reaching its own survival without killing the host.

For those with no interest in virology, it's about the chances of survival if there is a pandemic. At this point, the odds are not good, at least not on the first break out of the disease.

For the financial markets, it will be a source of volatility.

For epidemiologists and customs agents, travel from Asia, Indonesia in particular will be aggressively watched.

Thanks to Frank Kollar and subscribers who contributed to this report.


Bird Flu Stocks


Gilead Sciences (Nasdaq: GILD), Roche Holdings (OTC: RHHBY), Novavax (Nasdaq: NVAX), Biocryst Pharma. (Nasdaq: BCRST), and Quidel Corp. (Nasdaq: QDEL) are stocks to watch with regard to bird flu.

Gilead and Roche are the big players for now, since they share the licensing, development, and distribution of Tamiflu, the only known remedy that may work on some strains of H5N1.

The use of Tamiflu is controversial given the fact that it does not necessarily work on all cases, and that if successful it may lead to a faster mutation of the virus.

Biocryst has a Phase I antiviral in development called Peramivir, but it is not ready for marketing by any means.

Novavax has two flu vaccines in even earlier experimental stages of development than Phase 1 trials.

Quidel has a flu test that can be used at doctor's offices or at the bedside of hospital patients.

The purpose of this brief summary is to inform the reader about the possibilities of lasting up moves in any of these stocks due to the potential for a significant break out of the disease.

The only real potential of such a move, in our opinion, without some significant progress being made in a hurry lies with Gilead and Roche.

Even then, both stocks have had huge runs on the expectations of rising sales of Tamiflu. There has already been a surge in sales, and the stocks have both drooped.


© 2006 Joe Duarte, M.D.
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Joe Duarte, M.D.

Joe Duarte M.D. is founder and Editor in Chief of Joe-Duarte.com. Dr. Joe Duarte's Daily Market I.Q. is a premium service that provides daily intelligence, trading strategies, and technical analysis at www.joe-duarte.com. Duarte offers free analysis and news coverage at www.intelligentforecasts.com . Dr. Duarte is a board certified anesthesiologist, a registered investment advisor, and President of River Willow Capital Management. He is author of "Successful Energy Sector Investing" and "Successful Biotech Investing" (Prima/Random House). Duarte's analysis appears regularly in major outlets including CBS MarketWatch and Investor's Business Daily. 

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