Rumsfeld's growing stake in Tamiflu

NEW YORK (Fortune) - The prospect of a bird flu outbreak may be
panicking people around the globe, but it's proving to be very good
news for Defense Secretary Donald Rumsfeld and other politically
connected investors in Gilead Sciences, the California biotech company
that owns the rights to Tamiflu, the influenza remedy that's now the
most-sought after drug in the world.

Rumsfeld served as Gilead (Research)'s chairman from 1997 until he
joined the Bush administration in 2001, and he still holds a Gilead
stake valued at between $5 million and $25 million, according to
federal financial disclosures filed by Rumsfeld.

The forms don't reveal the exact number of shares Rumsfeld owns, but in
the past six months fears of a pandemic and the ensuing scramble for
Tamiflu have sent Gilead's stock from $35 to $47. That's made the
Pentagon chief, already one of the wealthiest members of the Bush
cabinet, at least $1 million richer.

Rumsfeld isn't the only political heavyweight benefiting from demand
for Tamiflu, which is manufactured and marketed by Swiss pharma giant
Roche. (Gilead receives a royalty from Roche equaling about 10% of
sales.) Former Secretary of State George Shultz, who is on Gilead's
board, has sold more than $7 million worth of Gilead since the
beginning of 2005.

Another board member is the wife of former California Gov. Pete Wilson.

"I don't know of any biotech company that's so politically
well-connected," says analyst Andrew McDonald of Think Equity Partners
in San Francisco.

What's more, the federal government is emerging as one of the world's
biggest customers for Tamiflu. In July, the Pentagon ordered $58
million worth of the treatment for U.S. troops around the world, and
Congress is considering a multi-billion dollar purchase. Roche expects
2005 sales for Tamiflu to be about $1 billion, compared with $258
million in 2004.

Rumsfeld recused himself from any decisions involving Gilead when he
left Gilead and became Secretary of Defense in early 2001. And late
last month, notes a senior Pentagon official, Rumsfeld went even
further and had the Pentagon's general counsel issue additional
instructions outlining what he could and could not be involved in if
there were an avian flu pandemic and the Pentagon had to respond.

As the flu issue heated up early this year, according to the Pentagon
official, Rumsfeld considered unloading his entire Gilead stake and
sought the advice of the Department of Justice, the SEC and the federal
Office of Government Ethics.

Those agencies didn't offer an opinion so Rumsfeld consulted a private
securities lawyer, who advised him that it was safer to hold on to the
stock and be quite public about his recusal rather than sell and run
the risk of being accused of trading on insider information, something
Rumsfeld doesn't believe he possesses. So he's keeping his shares for
the time being.

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The main ingredient for Tamiflu, the widely sought-after treatment for
avian flu, is literally right under our noses.

While Roche, the Swiss manufacturer of Tamiflu (generic name:
oseltamivir), suspended shipments of the anti-viral drug last week,
citing a shortage of the Chinese herb it is made from, that herb can be
had by ordering spareribs at most Chinese restaurants.

Tamiflu, which reduces the symptoms of avian flu but can't cure or
prevent it, is made from star anise, a naturally occurring herb that is
harvested in four Chinese provinces between March and May.

The licorice-flavoured herb is used in many standard Chinese dishes,
including spareribs and five-spice duck.

It is known to bring out the flavour in stewed meats and is an
ingredient in traditional Chinese five spice powder available in most
grocery stores.

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