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

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 that 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 said.

The two drug companies benefitting most at the moment from pandemic flu worries are Roche 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 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 1520 GMT Monday, Roche shares were up CHF4.40, or 3.1%, at CHF144.00, while shares of GlaxoSmithKline were 60 pence higher, or 6.1%, at 1067 pence each.

In the U.S., shares of Gilead Sciences (GILD), which initially developed Tamiflu and receives royalties from its sales, were up 4.3% at 1300 GMT to $47.75.

Earlier this month, Gilead reported that royalties on Tamiflu dropped to $33 million for the first quarter of 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.

Since the start of the outbreak, GlaxoSmithKline has supplied 100,000 packs of Relenza and 170,000 additional doses of its seasonal influenza vaccine to the Mexican authorities, at their request, the British drugmaker said.

The company said it is continuing to discuss with the Mexican authorities whether further support is needed.

GlaxoSmithKline said it is also urgently assessing how to increase production of Relenza.

Roche has the key ingredients in place to quickly ramp up production of Tamiflu, spokeswoman Martina Rupp said.

Tamiflu and GlaxoSmithKline's Relenza appear to be effective in the swine flu strain that emerged in Mexico, the World Health Organization said over the weekend.

Roche 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 said.

A WHO spokesman said Monday the organization is considering raising 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. 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 said.

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

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

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 report)