European drug companies are getting ready to work on new medicines and ramp up production of existing ones to be ready to help combat the possible worldwide outbreak of a new deadly flu strain.

Europe's leading vaccines makers said Monday they are ready to start developing a vaccine against the swine flu virus that emerged in Mexico last week, while Roche Holding AG (ROG.VX), the maker of an existing flu treatment, said it could quickly ramp up production of its viral drug Tamiflu if necessary.

Swiss drugmaker Novartis AG (NVS) has been contacted by the World Health Organization about the development of a vaccine that would protect against the deadly flu strain that emerged in Mexico last week, a company spokesman said.

The Basel, Switzerland-based drugmaker has already received some preliminary information about the swine flu virus, but will need a sample of the virus to get started on developing a vaccine, Novartis spokesman Eric Althoff said.

"The WHO and the CDC have reached out to us, and we are in contact with them and other health authorities about the development of a vaccine," he said.

Novartis expects to get the virus strain soon, enabling it to start work on a vaccine.

It typically takes between three and six months to produce a new vaccine, but it is too early to tell how long it will take to get one for swine flu, Althoff said.

The Swiss drugmaker has developed pre-pandemic vaccines that could easily be converted into a new one, but these products were based on the H5N1 bird flu strain which spread in Asia a few years ago. This virus was widely believed to be a likely root for a flu pandemic.

Given the recent outbreak of a deadly flu strain in Mexico, this new virus - which is based on a different strain known as H1N1 - now looks like the biggest risk for a pandemic.

In Paris, Sanofi-Aventis (SNY) Monday said it "stands ready to assess its capabilities to support public health efforts should the WHO and other health authorities request support from influenza vaccine manufacturers," a spokesman said.

So far, Sanofi hasn't been asked to start developing a human vaccine against swine flu, he added.

The two drug companies benefitting most at the moment from spreading pandemic flu worries are Roche Holding AG (ROG.VX) of Switzerland and U.K.-based GlaxoSmithKline PLC (GSK).

Each company has an antiviral drug in its portfolio, which can shorten the duration of the illness and can possibly also help protect people against contracting flu in the first place. Sales of these drugs started skyrocketing in late 2005, when health officials worldwide worried that a strain of bird flu that had emerged in Asia could result in a global epidemic.

At 1300 GMT Monday, Roche shares were up CHF5.30, or 3.8%, at CHF144.90, while shares of GlaxoSmithKline were 32 pence higher, or 3.2%, at 1039 pence each. The European healthcare sector as a whole was 1.7% higher.

In the U.S., shares of Gilead Sciences (GILD), which initially developed Tamiflu and receives royalties from its sales, were up 4.3% to $47.75.

Earlier this month, Gilead reported that royalties on Tamiflu dropped to $33 million for the first-quarter 2009, from $93 million in 2008. Roche had seen a similar slump in demand for its flu drug, because governments had largely completed their stockpiling of the product in preparation for a possible flu pandemic.

Roche has the key ingredients in place to quickly ramp up production of its antiviral drug Tamiflu, which may help contain the damage of the spreading swine flu virus, spokeswoman Martina Rupp said.

Roche's Tamiflu drug appears to be effective in the swine flu strain that emerged in Mexico, the World Health Organization said over the weekend.

Roche, based in Basel, so far hasn't yet received any new big orders for its drug, spokeswoman Martina Rupp said.

Such orders will probably hinge on how the WHO classifies the new flu outbreak, she added.

A WHO panel will convene Tuesday to consider whether to raise a global pandemic alert, a move that would signal that a new virus is causing large outbreaks and that governments should prepare for widespread transmission.

Roche had scaled up Tamiflu production a few years ago when health care experts feared a new bird flu strain that emerged in Asia could develop into a deadly disease for humans.

Back then, governments started to buy Tamiflu in bulk, because the drug doesn't only shorten the duration of the disease but it also can help protecting against getting it in the first place.

At the peak, Roche had the capacity to produce 400 million packages of Tamiflu a year, but that capacity has been scaled down recently after demand for the drug declined sharply.

Roche, however, kept big stocks of the drug's key ingredients, which will enable it to ramp up production quickly, Rupp said.

Still, because of the complicated manufacturing process, it takes about eight months to produce the drug from scratch, she added.

In 2008, Tamiflu generated sales of around 609 million Swiss francs ($535 million).

Analysts estimate that the drug generated around CHF4 billion in pandemic sales in 2006 and 2007. Roche declines to provide specific numbers, saying that many governments prefer to keep the size of their orders confidential.

GlaxoSmithKline declined to comment immediately on the possible impact on production and sales of its flu drug Relenza from the current flu outbreak.

In Australia, Biota Holdings Ltd. (BTA.AU), the original developer of Relenza, ended 81.6% higher Monday.

Company Web Site: http://www.novartis.com

http://www.roche.com

http://www.sanofi.com

-By Anita Greil, Dow Jones Newswires; +41 43 443 8044 ; anita.greil@dowjones.com

(Geraldine Amiel in Paris and Sten Stovall in London contributed to this article)