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Swine Flu Biotech Bubble Primed to Burst

Stocks in this article: NVAX VICL INO

To win government approval, a company must prove that it has a safe product that does at least as good a job at protecting people from the flu as what's already on the market -- no matter the flu strain, whether pig or bird or some deadly combination. Such proofs demand human clinical trials on the scale of more than 5,000 and as many as 30,000 people.

"It's a long drawn-out process, man," says Vijay Samant, CEO of Vical, a company not unfamiliar with the hyping of swine-flu vaccines. "It's like the reincarnation of Buddha: You can't get tempted by wine, women and food. If you do, you'll get sent back to the end of the line."

No biotech that has touted its non-traditional approach to influenza vaccination is anywhere close to starting a clinical trial of that size. Nor has any firm really demonstrated the kind of efficacy for its vaccines that would convince anyone that profits will be forthcoming even next year or the year after that.

Take Novavax, the Maryland developer whose vaccine is based on cell-culture technology, an alternative to egg-based vaccines that many companies have been attempting to develop, including the likes of Novartis and Baxter. A recent press release from the Maryland firm highlights the difficulty in determining up from down in the heady world of vaccine research, and how investors can get caught up in a thicket of complexity.

Novavax in this press release announced the conclusion of a phase II clinical trial of its vaccine, a study that looked at the immune response produced in 221 people against the three influenza strains that the Center for Disease Control had determined were the most dangerous last year. (These strains, chosen by the CDC for the 2008-09 flu season, did not therefore include currently circulating swine flu.)

On the surface, the results for Novavax appeared reasonable enough. But the company left out some crucial information: the immune response produced in the study's small control group of just 20 people, each of whom received a dose of Sanofi's Fluzone vaccine.

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