Back in August, BMO Nesbitt Burns went out on a limb and produced a report detailing the possible economic effects of the next major flu pandemic. Now, UBS Ltd. has issued a report of its own on the possibility of a major flu outbreak, which looks more specifically at possible beneficiaries among drug companies.

The report notes that the emergence of the H5N1 avian flu strain has raised concerns that, were it to become capable of effective human-to-human transmission, it could cause a flu pandemic with unprecedented mortality rates. “The ultimate fear is a combination of the avian influenza virus’s lethality with the human influenza virus’s infectivity,” it says.

“In a worst-case scenario, we believe the resulting virus could keep its high mortality rate but be capable of human-to-human transmission. Extrapolating estimates from the U.S. Centres for Disease Control, such an outbreak could infect 40% of the world’s population, potentially claiming an estimated 1.0 billion deaths (assuming 40% mortality, which is below the 52% mortality rate derived from the number of confirmed cases since 1997) and incurring inconceivable economic costs,” the report notes.

“While the avian form of the virus could move to Europe via migratory birds, we believe that the likelihood of a human flu strain with the currently observed 50% mortality rate is low,” it says.

Still, the report suggests that anti-viral drugs would not contain a flu pandemic, given logistical hurdles and availability. However, it suggests that selected pharma and vaccine players could benefit as governments stockpile drugs in preparation for possible outbreaks.

It notes that the U.S. government is looking to stockpile courses of Roche and GlaxoSmithKline anti-viral drugs to protect 20 million people as well as acquiring substantial amounts of vaccine from Sanofi-Aventis. The German government has also acquired some anti-viral drugs.

“However, in our view, the overall level of preparedness of governments to the threat of a pandemic flu is very variable and far from complete, so we would anticipate more action over time as concerns increase,” it suggests.

“Roche and Gilead are benefiting from the stockpiling of anti-virals, ie, Tamiflu, given its ease of use and longer shelf life. The U.S. government is stockpiling Sanofi’s H5N1. Acambis is developing a universal flu vaccine and offers a geared play,” it reports.