Bird Flu: Where Inexact Science Meets a Moat of Opportunity

Whether or not you realize it, the world really caught a break in 2003. That was the year that the mutated H5N1 virus -- known more loosely as the avian flu virus -- spread rapidly from China to other countries in southeastern Asia, and eventually Europe and Africa, despite the best efforts of these countries to quarantine those believed to have contracted H5N1. All told, the virus killed flocks of birds, many pigs, and claimed the lives of 360 humans.

But, the reality is that it could have been much, much worse. Thankfully for researchers scrambling for a cure, the H5N1 virus in 2003 presented a clear-as-day indicator for the world to see -- it occasionally caused the death of its host (i.e. birds and pigs). Identifying infected flocks was as easy as spotting where the dead birds and pigs were.

This time, researchers may not be so lucky.

Over the past couple of days, we've been privy to new information that a mutated avian influenza virus, known as H7N9, has been identified in China as the direct cause of death of three humans while sickening nine others. Although the World Health Organization asserts in these early stages of research and discovery that there's no evidence of human-to-human transmission, clearly people in the region, and around the world, are on guard.

The flu: A most inexact science
The most obvious reason for concern is that the avian bird flu strain H7N9, and even H5N1 for that matter, are flu strains that are treated more on a reactive than proactive basis.

Truth be told, there is no way that researchers can predict exactly what strain is going to be prevalent during the current flu season, or how those strains will react with other strains. This also includes how these strains will react among different mammals and whether or not they develop resistances to existing medications. Forecasting the severity of the flu and the types of strains that will strike humans is a completely inexact science that's done based on the best information available by researchers at the time.

This is one of the primary reasons why flu shot vaccination rates in the U.S. remain well below the levels that the Centers for Disease Control and Prevention would like to see. If you recall, when I examined the risks and benefits of getting a flu shot two weeks ago, the biggest takeaway was that it was worth getting the shot, but that the odds of the shot preventing the flu was nothing more than hit-or-miss.

The same goes for the emergence of the H7N9 virus. Researchers know very little about the virus at this moment outside of the fact that they believe it manifests itself in birds. However, unlike H5N1, the mutated H7N9 virus does not necessarily make them ill. That presents a very serious problem for quarantine purposes, because unless every bird is physically tested for the H7N9 virus -- a daunting and downright impossible task -- there is no guarantee that you've stomped out the potential for a global pandemic.

By the time researchers finally were able to unlock the secrets of the H5N1 virus, the disease had progressed well beyond China where it had originated and claimed many lives.

A moat of opportunity
Despite this wait-and-see approach that fails to inspire confidence around the globe, there's a moat of economic and human health opportunity just waiting to be unlocked from panics just like the H7N9 virus.

For starters, the advancements in genomic technologies have been incredible since 2003. When H5N1 claimed its first human fatality in Hong Kong in Febuary 2003, the cost of sequencing the human genome was around $50 million and took numerous weeks, if not months. Without the ability to map the specifics of the virus, it took an eternity for researchers to pass along relative biologic information to biotechnology and pharmaceutical companies to develop vaccines for the virus.

H7N9 will give life science companies a chance to shine, as in the past 10 years genome sequencing costs have fallen to just $6,618 per genome -- a 99.986% drop in cost -- in October 2012, according to the National Human Genome Research Institute. Better yet, these new machines, such as Life Technologies' (UNKNOWN: LIFE.DL  ) Benchtop Ion Proton Sequencer, which was introduced last year, can turn around a full genome analysis in 24 hours! Results like this are going to translate into considerably speedier virus marker identification that should help quell any fears of a pandemic.

This is also a big boon for the vaccine manufacturers themselves. With more reliable and faster information, avian flu vaccines should be available (if needed) in a much quicker turnaround. The most immediate expected beneficiaries would be GlaxoSmithKline (NYSE: GSK  ) , Novartis, and Sanofi, which all contributed H5N1 vaccines.

GlaxoSmithKline appeared to be an obvious winner after the Food and Drug Administration panel voted unanimously in favor of stockpiling Q-Pan H5N1 -- Glaxo's H5N1 vaccine consisting of inactive H5N1 virus and its AS03 adjuvant -- in case of a pandemic in the U.S. However, the FDA moved against its panel's unanimous decision by denying Q-Pan H5N1's approval this week. But that was merely due to an administrative issue that seems unlikely to hold up its approval for any meaningful length of time.

GlaxoSmithKline would seem like a logical go-to pharmaceutical company to develop an H7N9 vaccine should one be necessary. Still, I wouldn't count out Novartis, which developed Optaflu to treat H5N1, or Sanofi, which developed its own H5N1 vaccine that it sold to the U.S. government, as possible players in an H7N9 vaccine.

Balancing the unknown with rapidly improving research tools
The most difficult aspect for researchers and pharmaceutical companies will be to determine whether or not a vaccine is merited. While all life is considered precious, the pharmaceutical business is just that, a business; and if it isn't financially worthwhile to develop a vaccine to treat H7N9, then it simply won't happen.

We recently saw how this could come into play last month when Chinese biotechnology company Sinovac Biotech (NASDAQ: SVA  ) reported impressive late-stage results for its hand, foot, and mouth disease vaccine: EV71. While all signs would point toward an approval, the death rate among HFMD is less than 0.1% of all infections, and, as my Foolish colleague David Williamson pointed out, that likely won't merit the Chinese government buying extensive amounts of the vaccine.

What's yet to really be determined in the early stages of this H7N9 diagnosis is whether the potential for human-to-human transmission exists. If that turns out to be the case, then the likelihood that one of the aforementioned H5N1 vaccine makers will step up and begin work on an H7N9 vaccine will go way up. If no conclusive evidence of human-to-human transmission can be made and infections remain spotty at best, I have a strong suspicion not much will get done in the way of research.

So as always, when it comes to the flu in all forms, it's more of the waiting game.

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