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Make that about 50 million doses of flu vaccine

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On September 24, the Centers for Disease Control and Prevention (CDC) said it thought about 100 million doses of influenza vaccine would be available this year in the United States.

The CDC noted that Chiron (NASDAQ:CHIR) $37.98 -16.38% had reported a delay in their vaccine delivery schedule, but the CDC, as well as Chiron, expected to distribute about 47 million total Fluvirin doses this year (2004) plus 2 million doses to the CDC stockpile.

However, today's news from British health officials that Chiron's Fluvirin manufacturing license had been suspended, cuts in half this year's expected 100 million doses of influenza vaccine as flu season is about to begin.

According to Chiron officials, practically all of the 48 million doses slated for the United States had already been manufactured at its Liverpool manufacturing facility when the Medicines and Healthcare Products Regulatory Agency (MHRA), which is Britain's equivalent of the U.S. Food and Drug Administration (FDA) yanked Chiron's license to manufacture and ship the Fluvirin vaccine.

Sanofi-Aventis (NYSE:SNY) $37.14 +0.97% has already shipped some vaccine and reports no delays in vaccine deliver, and is expected to deliver about 20 million doses of its flu vaccine by September, and an additional 32 million doses in October. In January of this year, shares of SNY surged to as high as $40 when children began dying from the flu virus. Sanofi-Aventis' Aventise (NYSE:AVE) $86.00 +1.39% subsidiary, of which 5% of its shares are publicly trades, was up $1.18.

MedImmune (NASDAQ:MEDI) $25.78 +5.78% jumped $1.41 in today's session on the Chiron news. According to the CDC's latest "Influenza Vaccine Bulletin #3," MedImmune expects to deliver all of its 1.5 million doses of preservative-free intranasal vaccine (FluMist) in October.

One item of note that I would make as a trader/investor and PARENTS today is a note from the CDC's website (http://www.cdc.gov) and its "Influenza Vaccine Bulletin #3."

Bulletin #3: CDC has legislative authority through the Vaccines for Children (VFC) program to purchase influenza vaccine for a national stockpile program for children through 18 years of age. Influenza vaccine is being stockpiled by the CDC to ensure sufficient supply in case of a shortage like the one experienced this past winter. 4.5 million doses will be purchased for the stockpile this year. Stockpiled vaccine may be made available directly to state immunization programs through the VFC program without additional cost to the programs, or manufacturers may "borrow against" the stockpile for non-VFC populations. Influenza vaccine for non-VFC populations will not be free of cost to vaccine providers.

It would appear to me (Jeff Bailey) that the CDC is/was preparing for what many believe could be a rather nasty flu season, and today's news out of Britain most likely halves many of the figures that had been posted on the CDC's web page on September 24, 2004.

I (Jeff Bailey) would by no means predict a major outbreak of flu, but should the number of flu outbreaks begin to mount in the months to come, it should not be a surprise that negative market psychology brought on by "fear" could present itself in the months to come.

U.S. Market Watch - 10/05/04 Close

Today's session was mixed, where weakness in the Biotechnology Index (BTK.X) 529.43 -1.25% was greatly attributed to Chiron's 16.49% decline.

Genentech (NASDAQ:DNA) $51.13 -5.29% fell back below its trending higher 200-day SMA ($52.05) after the company issued a press release Monday evening that it had received a subpoena from the U.S. Attorney General's Office. The investigation relates to the marketing of Rituxan, a treatment for non-Hodgkins lymphoma, a blood cancer. Rituxan is sold through a joint venture between Genentech and Biogen-Idec (NASDAQ:BIIB) $61.81 -1.0%, and had sales of about $1.5 billion in 2003.

The S&P Insurance Index ($IUX.X) 315.03 -1.37% was weighed lower, as was the Dow Industrials (INDU) 10,177 -0.38%, as American Intl. Group (NYSE:AIG) $66.50 -2.9% traded back toward three- month lows when the SEC and the Justice Department said they are still unhappy with how the company worded its press releases over some ongoing probes. The SEC said it may bring civil action against the company for its alleged role in helping PNC Financial Services Group (NYSE:PNC) $54.95 -1.41% hide bad loans.

Hospitals may have gotten a boost with the Morgan Stanley Health Provider Index (RXH.X) 347.68 +0.94% closing at a 2-month high. Triad Hospitals (NYSE:TRI) $34.91 +2.91%, Community Health (NYSE:CYH) $27.86 +2.35% and HCA Inc. (NYSE:HCA) $38.41 +1.99% were atop the percentage gainers list. While not mentioning any names, Piper Jaffray posed a potentially bullish scenario for the group. (See today's 03:15 PM EDT Update).

According to Dorsey/Wright and Associates, they group many of the RXH.X components (TRI, CYH, HCA, DVA, HMA, LPNT, SRZ, UHS, AHG, LNCR, RCI, THC, OCR and HCR) as belonging to their Healthcare Bullish % (BPHEAL), which is currently in "bear correction" status at 44.25% bullish having reversed up from "bear confirmed" status at 32% in August. It would currently take a reading of 76% to achieve "bull confirmed" status, where in January, this sector bullish % topped out at 74%.

Stocks that I think look compelling for bullish consideration that have a "hospital flavor" would be TRI, CYH and HMA.

The CBOE Oil Index (OIX.X) 401.49 +1.26% and Natural Gas Index (XNG.X) 275.01 +1.42% were bullish standouts in today's session, where we'll get updated weekly energy inventory data tomorrow.

November Crude Oil futures (cl04x) settled above the $51.00 level and another record contract high, where bulls bought to the close after the Minerals Management Service released its daily report showing roughly 1.7 million barrels of oil production per day from the Gulf of Mexico is still shut in after recent hurricane activity.

The AMEX Gold Bugs Index ($HUI.X) 232.68 +3.05% snapped back from Monday's declines after China said it would take its time in letting its currency float against the dollar.

Pulte Homes (NYSE:PHM) $52.45 -6.88% found buyers at its rising 200-day SMA ($51.94) to close off its lows of $51.25, but lead declines for the Dow Jones Home Construction Index (DJUSHB) 618.45 -2.06%.

Market Snapshot / Internals - 10/05/04 Close

Volumes were brisk again today, with the NASDAQ churning a rather impressive 1.7 billion shares. I say "impressive" as average daily volume for the NASDAQ during the month of September was just over 1.28 billion, and with three days of trading completed in October, NASDAQ's running a more robust 1.80 billion share per day average.

Sirius Satellite Radio (NASDAQ:SIRI) $3.35 +3.39% challenges Friday's 5-month high of $3.35 at today's close, and was the most heavily traded stock on building volume of 72.17 million shares.

The Semiconductor Index (SOX.X) 404.58 -0.11% tries to find a footing at 400.00, where Intel (NASDAQ:INTC) $21.31 approaches its trending lower 50-day SMA ($21.56) on consistent volume of 72.08 million shares.

Treasuries were little changed, and commentary from Alan Greenspan at the American Bankers Association Annual Convention in New York had Treasury bond traders little moved.

Pivot Matrix -

Of the major indices covered in the Pivot Matrix, only the Dow Industrials (INDU) and S&P 100 Index (OEX.X) reside below their respective 200-day SMA's of 10,300 (see MONTHLY R1) and 548 (see WEEKLY R1).

Correlative support for the INDU looks important at DAILY S2 and WEEKLY Pivot, where today's rise in the Market Volatility Index (VIX.X) 13.95 +4.02% above its WEEKLY Pivot has me looking at today's most actively traded SPX options, where the Dec. 1,100, Oct. 1,025, Dec. 1,125 and Dec. 1,050 puts were the top 5 most actively traded.

Both the Oct. 1,025 and Dec. 1,050 are way out the money, especially the Oct. 1,025 with expiration so near, and either that's a bunch of closing out of options (8,358 vs. 75,519 OI), or some bearish speculators looking for some type of "premium pop" on a speculative $0.25 per contract.

Dow Industrials (INDU) Chart - Daily Intervals

The INDU is notably underperforming the other major averages of late, thanks in large part to Merck (NYSE:MRK). Smaller priced components of this price-weighted index have been seeing some gains, but without Caterpillar (NYSE:CAT) the INDU most likely sits on or below its 50-day SMA.

American Intl. Group (NYSE:AIG) $66.50 -2.90% is one of the top 5 price components and becomes a stock that Dow index traders need to be monitoring.

Jeff Bailey

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