What happened

Shares of Vir Biotechnology (NASDAQ:VIR) more than doubled today after the company announced a collaboration with WuXi Biologics. The pair will work together to develop antibodies to treat the novel coronavirus strain, SARS-CoV-2, that is spreading from China and causes the respiratory illness COVID-19.

Vir Biotechnology will be responsible for the design and development of antibodies that bind to spike proteins found on SARS-CoV-2. It will own commercial rights outside of China. WuXi will be responsible for developing cell lines that can manufacture the antibodies. It will own commercial rights in China.

As of 12:48 p.m. EST, the pharma stock had settled to a 55.1% gain.

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Image source: Getty Images.

So what

Shares of Vir Biotechnology have gained 321% since the beginning of the year as investors have speculated about the company's potential to develop treatments for SARS-CoV-2. The company has previously announced the identification of two antibodies with activity against the novel strain of coronavirus. The idea is that the antibodies would bind to and neutralize the virus, disrupting replication and lessening the disease burden for those infected.

While many companies have announced their intention to develop treatments and vaccines against SARS-CoV-2, most of them lack a track record of success. Vir Biotechnology reported an operating loss of $114 million in the first nine months of 2019.

That said, the business ended September with $320 million in cash, which should allow it to easily divert resources to the new collaboration with WuXi Biologics.

Now what

The outbreak of SARS-CoV-2 has caught the world by surprise. It's likely to weigh on economic growth across the globe. The global pharmaceutical industry is bound to develop vaccines and treatments for the virus eventually. But investors are most likely getting a little carried away at the moment. Until companies report results from experimental therapies in real humans, investors might be better off avoiding the speculation.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.