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TheStreet Open House

Flu Stocks to Consider for a Healthy Portfolio

MILLBURN, N.J. ( Stockpickr) -- It's that time of year again: time to prepare for cold and flu season.

The Center for Disease Control recommends that everyone six months and older get the influenza vaccine. Of course, you will want to check with your own physician as there may be some side effects and risks. I have already been vaccinated.

Investors can prepare for things in another way: with stocks. With that in mind, I've compiled a portfolio of stocks to take advantage of the impending cold and flu season.

Traditional Vaccines

Sanofi -Avenits (SNY), through its Sanofi Pasteur subsidiary, GlaxoSMithKline (GSK) and Novartis (NVS) all manufacture influenza vaccines. For the 2010-2011 flu season, a total of 140 million doses are initially planned for shipment by these three companies: 70 million from Sanofi-Aventis; 30 million from GlaxoSmithKline and 40 million from Novartis.

Please note that all three of these companies are headquartered outside of the U.S.. Sanofi-Aventis is French, GlaxoSmithKline is British, and Novartis is Swiss. This may have certain tax implications upon the payment of dividends for which you should consult your tax advisor.

>>Who Owns Sanofi-Aventis?: Warren Buffett

Here is a quick comparison of all three of these pharmaceutical companies:

As is the case with large pharmaceutical companies, the research and development expenditures for the future drug pipeline is a huge drain on cash. Furthermore, the companies still face the uncertainty of the approval process, especially from the U.S. Food & Drug Administration. Each of these three companies is so large that I would expect them all to be acquirers in order to grow in the future. In fact, Sanofi-Aventis is currently engaged in a protracted hostile takeover of Genzyme (GENZ).

On a yield basis, GlaxoSmithKline is the most preferable company. In terms of earnings potential and R&D capability, I prefer Novartis.

>>Also: 10 Pharma Stocks With Upside

The impact of influenza vaccine sales on the top and bottom line is quite small for these companies. However, the vaccines remain important products as part of their distribution channels and relationships with doctors and medical facilities.

Flu Mists

An interesting addition to treatment of influenza that has come to market within the last decade is inhaled vaccines. MedImmune, a wholly owned subsidiary of AstraZeneca (AZN), another British pharmaceutical company, makes FluMist. GlaxoSmithKlike also has an inhaled influenza treatment, marketed under the name of Relenza.

>>Who Owns AstraZeneca?: Charles Brandes

Unfortunately, the sales of inhaled influenza treatments have so far been disappointments compared with manufacturer and market expectations. The efficacy of these products is still the subject of debate in the medical field and pharmaceutical industry.

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