Investors had high expectations for Aimmune Therapeutics (AIMT) at the beginning of the year. Its stock performed well in 2019 -- with its shares surging by more than 30% -- and the biotech was on the verge of getting approval from the U.S. Food and Drug Administration (FDA) for Palforzia, an oral immunotherapy that can mitigate allergic reaction to peanuts. The health industry regulator gave Palforzia the green light in late January, and the drug became the first FDA-approved treatment for childhood peanut allergy.

However, Aimmune's stock has been on a downward spiral ever since, in no small part due to the COVID-19 pandemic. Year to date, shares of the company are down by 57.9%. But Aimmune could bounce back, especially considering that one of the biotech's potential competitors just hit a major roadblock.

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Palforzia is still the only game in town

DBV Technologies (DBVT 1.21%) is a French biotech that's working on several potential allergy treatments. DBV has developed Viaskin, a peanut patch that can desensitize patients from age four to 11 who have peanut allergy by exposing their immune systems to increased amounts of peanut protein through their skin. DBV Technologies first submitted Viaskin to the FDA in August 2019. But in March, the FDA questioned the effect of patch adhesion on its efficacy and the regulator required DBV Technologies to submit additional data.

Doctor giving a thumbs up.

Image source: Getty Images.

Although DBV Technologies promptly complied, it was to no avail: The FDA rejected the company's application for Viaskin. Now, DBV Technologies has to make some modifications to Viaskin and run additional clinical studies to have any chance of commercializing its product. In short, although Aimmune's Palforzia was supposed to encounter competition in the market for peanut allergy treatments this year, it will maintain its monopoly in this space, at least for a little while longer. This spells good news for Aimmune and its shareholders.

Looking at the market opportunity 

Peanut allergy is the most common food allergy in the U.S., and known cases of this condition have been rising rapidly. Between 2001 and 2017, incidences of peanut allergy increased by 205%, and the trends are similar abroad.  In Europe, cases of peanut allergy doubled between 2005 and 2015 and now affects 17 million people, making it the most common food allergy on the continent. Aimmune submitted Palforzia to the European Medicines Agency in June 2019.

Patients who have peanut allergy could attempt to avoid contact with the allergen for their whole lives. But accidental exposure to peanuts can have life-threatening consequences. Thanks to Palforzia, which works by increasing patients' tolerance to peanuts over time, these patients now have a much better option. According to Aimmune, this drug could rack up more than $1 billion in sales annually -- which would make it a blockbuster.

What's next for Aimmune Therapeutics? 

The COVID-19 pandemic disrupted the commercial launch of Palforzia. As a result, during the second quarter, Aimmune did not record a single dollar in revenue. But the company expects better days ahead. With social distancing measures relaxing in many states, medical practices that treat patients with allergies have been reopening. According to the company, most practices in the U.S. have reopened "in some form."

Aimmune should start to see its crown jewel generate some revenue before the end of the year. In the long run, the high prevalence of peanut allergy could turn Palforzia into a blockbuster product, especially considering it remains the only FDA-approved treatment for peanut allergy (for now). Given these factors, and considering that Aimmune's stock isn't that far off its all-time low, I think it is worth considering adding this biotech to your portfolio for the long term.