After all the R&D work is finished and the clinical trials have been completed, the most expensive part of running a drug company is the capital expenditures for production plants. It just got a little cheaper for MedImmune
MedImmune's five-year, $55.1 million contract from the Department of Health and Human Services will help the company retrofit its manufacturing facilities that produce the needle-free FluMist vaccine. It will contribute $14 million of its own money to the cause. The $77.4 million contract for Sanofi will help it retrofit a Pennsylvania plant that makes vaccines in chicken eggs. Sanofi is chipping in nearly $25 million to complete the project.
Sanofi is French, and MedImmune was recently purchased by the London-based AstraZeneca
Of course, Uncle Sam isn't doing this out of the kindness of his heart. Most of the world's flu vaccine is made in other countries -- Swiss Novartis
There aren't too many industries where you can invest in companies that get free money from the government. For a long time, the defense industry was the only major player for large government contracts. With the threat of bioterroism and pandemics, the government has its pocketbook out to prepare for the worst. It's hard to predict which drug companies will get these lucrative contracts, but, all things being equal, investing in companies with drugs that are useful to the government is a good idea.
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Fool contributor Brian Orelli, Ph.D., just got a full-time contract to write for The Fool and couldn't be happier. He doesn't own shares of any companies mentioned in this article. You could think of the Fool's disclosure policy as our contract with you, albeit kind of one-sided in your favor.