Invest at your own peril in biotech stocks that could cash in on the Ebola outbreak. It's too early and they're too risky.
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Many of them have little to no earnings and highly leveraged balance sheets. Plus, they still face regulatory approval delays despite demands that governments around the world put the Ebola response on a war footing.
Officials with the World Health Organization are now saying governments will have to spend at least $1 billion, up from its prior estimate of $600 million, to contain the outbreak in the next six to nine months. The number of Ebola infections now sit in the "tens of thousands." Government health agencies around the world may begin stockpiling drugs, Wall Street analysts say.
There is no vaccine for the Ebola virus at this time, though scientists are working as fast as they can on a panoply to combat the virus. The U.S. Centers for Disease Control said the 2014 Ebola outbreak in West Africa is the largest in history and is now at epidemic levels. The CDC says the number of Ebola cases in West Africa are doubling every 20-30 days, with 6,574 Ebola cases to date, and a more than 50% fatality rate, with 3,091 who have died. Nigeria and Senegal appear to be containing their Ebola breakout. The U.S. has confirmed the first case in its borders, with a man infected with Ebola emanating from Liberia appearing in the Dallas area.
The Defense Department is already funding biotech start-ups with promising technologies. Wall Street analysts are now talking about a potential antibody cocktail of antiretroviral drugs that could be deployed to combat Ebola, much like treatments for HIV therapy. Concerns, too, have arisen over antibiotics since viruses have developed immunities to them. Vaccines may be more successful in stopping Ebola, including those currently under development at GlaxoSmithkline (GSK) and NewLink Genetics.
Glaxo’s unit Okairos is now working with the National Institutes of Health’s Vaccine Research Center to develop a vaccine that is getting set for clinical trials. Newlink has announced the Food and Drug Administration has given it the green light to start Phase 1 clinical trials for its Ebola vaccine.
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However, getting such drugs ready for use in humans is expensive and often takes a long time to ramp up, with typically a period of years passing between Phase I trials to commercial use, even if the U.S. government fast-tracks them.
The Department of Health & Human Services has already given a $25 million contract to Mapp Biopharmaceutical to fast-track ZMapp, now headed for early stage clinical safety studies. Mapp made news this summer when two American missionaries recovered from Ebola after using its experimental drug, ZMapp, but it has thin supplies of the drug, made out of genetically engineered tobacco plants.
BioCryst Pharmaceuticals (BCRX) last year was awarded a $24.4 million contract from the National Institute of Allergy and Infectious Diseases (NIAID), a unit of the National Institutes of Health to develop Ebola drugs.
The Department of Defense also awarded Sarepta Therapeutics (SRPT) up to $291 million in 2010 to develop a treatment for Ebola and the Marburg virus, also a hemorrhagic disease. Currently, Sarepta is trying to convince officials to allow field use of its experimental Ebola drug AVI-7537, which reportedly already has been tested on infected monkeys with anywhere from a 60% to an 80% success rate. Sarepta says it has enough doses to cover about 100 patients, with more on the way.
The DoD has already awarded Alnylam Pharmaceuticals (ALNY) a $39 million contract to develop a treatment for Ebola and other similar diseases. Tekmira Pharmaceuticals (TKMR), a Canadian unit of Inex Pharmaceuticals Corp., is also working on its Ebola treatment, TKM-Ebola. Four years ago Tekmira got a Defense Dept. contract estimated to be worth $140 million to help advance its early-stage drug’s development. In July, the FDA stopped clinical trials on its drug, and has filed requests for data and protocol modifications. Tekmira announced recently that U.S. and Canadian authorities have approved the use of its Ebola drug in patients who are either confirmed or are suspected to be infected by the deadly virus. However, like most biotechs specializing in exotic viruses, Tekmira had sales of just $4.4 million in the fiscal year ending March 31, 2014.