How to make money from the fight against swine flu

Swine flu has caused alarm around the world, and could knock a £100bn hole in Britain's economy. But pharmaceutical companies working towards a vaccine should do well from the global pandemic. Here, Tom Bulford tips two.

Here are two pieces of advice I have been given by members of the medical profession about swine flu.

If you are going to travel long distance, go by plane and not by train. And don't use those hot air hand driers you find in washrooms.

Apparently the air quality is better on board an aeroplane than on a train. This is thanks to the filters through which the air is circulated. So if you find yourself sitting in front of someone who coughs and sneezes his way from Heathrow to Sydney, just hold on to that thought.

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As for those air driers, I have it on good authority that they simply send all those germs whizzing and surging their way through otherwise fragrant atmosphere of the washroom. So much for hygiene! It's back to paper towels for me, whatever the cost to the rain forests.

But seriously, it is a bit of a worry isn't it? OK so I am not a pregnant woman working as a doctor's receptionist but still I feel just a little vulnerable. I know that most of those who die from swine flu have some 'underlying medical problems'. But let's face it, once we get to a certain age, don't most of us?

So I think I will avoid sweaty, breathy pubs and restaurants and seize upon this perfect excuse to avoid the train up to London unless I absolutely have to. Instead I will stay here and contemplate the investment implications of this swine flu...

Of course, if we are not entirely immune from these viruses we are more or less immune to worrying about them. This is certainly not the first plague set to descend upon our shores. But somehow or another, bird flu, Asian flu and all other strains seem by and large to pass us by.

Is it a case of being unduly alarmed by the media? Or do we owe much more to the medical profession than we admit? A bit of both no doubt, but it is times like this that remind us just how much we are indebted to medical researchers, doctors and, yes, even all those civil servants who have set up our new Swine Flu helpline and web-site.

But maybe we have been lulled into complacency. Maybe this is the big one! Maybe we will all soon be going down like nine-pins, and piling up the dead bodies for burial upon Blackheath. Schools will be closed. Snuffling, shivering parents will be confined to bed. Businesses will suddenly find that half of their staff are phoning in sick, without even so much as a World Cup football match as a decent excuse! Then what?

It doesn't look good. It will be the equivalent of one of those apparently totally unpredictable snow storms that occasionally bring the country to a standstill. Things just won't get done. OK so a few of us, including me, can work from home. And no doubt some children will benefit more from running around in the park than they ever would at school.

But still this will have an impact on the economy. Some gruesome predictions have been made already. Oxford Economics reckons that a serious swine flu epidemic could cost the economy £60bn. As if that is not bad enough, Ernst & Young's Item forecasting club says that if half of the population get the bug, then 7.5% will be wiped off GDP that is about £100bn.

Potential winners from the latest epidemic

I can already hear companies using this as an excuse for poor trading later in the year. But let me turn the matter on its head and think more positively. Every cloud has a silver lining and suddenly the much criticized, rapacious global pharmaceutical industry is everybody's friend.

Let's hear it for this industry! Let us recall that infectious diseases such as smallpox have been virtually eliminated worldwide through vaccination. Let us applaud the efforts of the industry to find cures for malaria, HIV, tuberculosis, meningitis and yellow fever! Let us celebrate the fact that over one hundred million children receive vaccinations each year, preventing disease and death!

Vaccination is a big growth industry. It is popular and essential. Pharmaceutical companies deservedly make good money from it, without getting the credit they deserve. Baxter International, Roche and Glaxo look like three of the big winners from the latest epidemic.

But you know me I'm more into penny shares. That's where the real excitement could be for swine flu investment fever. Just look at Australian small cap, Biota (ASX: BTA.AX) or US Nasdaq-listed biotech stock, Novavax (Nasdaq: NVAX). These are both involved in developing vaccines and are up 149% and 324% respectively since this scare first started.

And I've tracked down one company that is doing terrific work in this area. Read about it in a forthcoming issue of Red Hot Penny Shares.

This article was written by Tom Bulford, author of Red Hot Penny Shares ,for hisfree investment emailThe Penny Sleuth.

MoneyWeek tipped one company making flu vaccines last year. It's risen 35% since we tipped it, and has soared 400% in the lastfive months. Read more here.