What: Shares of Intrexon (NYSE:XON), a biotechnology company focused on using its proprietary gene-regulating programs to treat disease and provide medical solutions, leaped 15% in May, according to data provided by S&P Capital Market Intelligence. As you may have surmised, the buzz around Intrexon continues to be the concern over the spread of the Zika virus.
So what: The Zika virus is a disease often transmitted by the Aedes aegypti mosquito. In many of the people it infects, the disease, should it not lie dormant, creates symptoms that can include joint pain, rash, headache, and fever. However, researchers have witnessed an increase in birth-related cases of microcephaly tied to the Zika virus, as well as Guillain-Barre syndrome in adults. With researchers still figuring out to what extent the Zika virus can affect humans, fear and uncertainty about the virus continue to grow.
This is where Intrexon comes into play. Intrexon's solution derives from its subsidiary, Oxitec, which it acquired last year. Oxitec has genetically modified the male Aedes mosquito to pass along a gene that will kill the next generation of mosquitoes before they reach the reproductive age. In effect, Oxitec's method would dramatically lower the Aedes population and thus stem the spread of the Zika virus. At last check, fewer than 1,000 cases have been reported in the U.S., but we're talking about cases in the millions reported in South America. These are potentially big market opportunities for Intrexon.
Now what: The big question that's yet to be answered is whether Intrexon's solution is viable or just a bit too gimmicky. The U.S. could easily be one of Intrexon's most profitable markets, thanks in part to the higher standard of living and premium pricing power for drugmakers. However, it could be quite some time before the Food and Drug Administration even considers giving Intrexon the ability to sell its genetically modified mosquitoes in the United States. For the time being, Intrexon is working on testing its modified male mosquitoes in Florida.
We should also seriously consider what an approval might really mean for Intrexon. Yes, it would add some level of recurring revenue, but we're probably not talking about any more than $200 million to $400 million in peak annual sales from its genetically modified mosquito solution. Additionally, what happens if the problem is quickly resolved, or if world health agencies get together and find ways to control the spread of Zika? It's always possible that Intrexon's solution barely has time to get off the ground before it's again ground to a halt.
As I've opined before, I'll say again: RheoSwitch is what you should be paying attention to when it comes to Intrexon. Intrexon's ability to upregulate or downregulate genes with RheoSwitch could be a game-changer in terms of treating cancer, and that's where I see Intrexon's future valuation being derived. I'm not saying ignore Zika completely, but don't allow yourself to get too carried away with stock valuations as a result of Zika virus research.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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