Source: Ben Salter/ Flickr.

No, pigs still don't fly. They may, however, one day offer a solution for the approximately 115,000 Americans on an organ transplant waiting list. Synthetic Genomics and United Therapeutics (NASDAQ:UTHR) recently signed a collaborative research and development agreement to develop humanized pig organs with an initial focus on lung diseases. To demonstrate the seriousness of the deal, United Therapeutics will make a $50 million equity investment in its partner, as well as additional royalties and milestone payments. The collaboration could yield results well before we figure out how to grow fully functional human organs in mechanical vessels, as Organovo Holdings (NASDAQ:ONVO) seeks to do. What does it all mean for investors?

Why pigs?
While it may sound outrageous at first glance, pigs and humans actually share many anatomical and genetic similarities. Swine have extraordinary potential as a biomedical model for studying human disease and therapeutics and, as United Therapeutics and Synthetic Genomics believe, vessels for producing organs that are compatible in humans.

Why lungs?
United Therapeutics didn't just roll out of bed one day and decide to pursue pig lungs on a whim. This partnership is actually great news for investors for two primary reasons. First, it capitalizes on the company's expertise in treating pulmonary arterial hypertension -- abnormally high blood pressure in the lungs -- for which it has four approved products. The company's products offer a much needed answer for affected individuals, but even United Therapeutics admits that "the only reported cure is a lung transplant". And that's exactly why it has identified transplantable lungs as a key area of product development. 

Second, the partnership utilizes and monetizes the xenotransplantation -- the transplantation of living cells, tissues, or organs from one species to another -- platform acquired from Revivicor in 2011, which doesn't appear to have received much commercial use since then. While the deal was always approached with the intention of applying it toward transplantable lungs, investors haven't known exactly how it all fit together until now. Essentially, United Therapeutics can begin to develop products to monetize its Lung Biotechnology subsidiary. 

What is the product potential?
United Therapeutics has grown revenue and operating income 88% and 71%, respectively, since 2010 by treating one condition. The ultimate goal for the company is to cure pulmonary arterial hypertension, but other lung diseases could also be treated and cured with lung transplants. According to the press release:

In the United States alone, about 400,000 people die annually from various forms of lung disease including cancer, but scarcely 2,000 people are saved with a lung transplant and only about 2,000 are added to the transplant wait list annually. Not even 1% of deaths due to lung failure can be avoided due to the gross shortage of transplantable human lungs.

Successful commercialization of humanized lungs in pigs could really cement United Therapeutics' position as a leader in lung disease treatments and keep investors happy with years of growth. 

Do new methods threaten Organovo's approach?
It may be a distant commercial target for both companies, but investors likely think of Organovo, not United Therapeutics, when it comes to transplantable organs. The deal highlights the importance of distinguishing the differing approaches of organ development. One approach (in vivo) uses pigs as a growing vessel with the help of synthetic DNA and advanced genomic analysis, while the other (in vitro) uses tissue engineering and a mechanical vessel for a highly controlled growth environment. The former is the path chosen by United Therapeutics, while the latter is the path chosen by Organovo.

Will a living vessel or mechanical vessel produce the first marketable human organ? Source: Organovo. 

Each offers unique advantages and disadvantages, but there's clearly room for multiple companies and approaches. On average, 18 people die each day due to the perpetual shortage of available organs. However, it's important to note that United Therapeutics is focusing on humanized lungs for its first commercial tissue engineering product, while Organovo has only stated general intentions to one day develop fully functional human organs. If this partnership succeeds, then it seems almost certain that United Therapeutics will be the first company to market a transplantable human organ, not Organovo. 

Foolish takeaway
Partnering with Synthetic Genomics should be viewed as welcome news for United Therapeutics investors. In addition to capitalizing on the company's key strengths, the deal also monetizes the assets acquired from Revivicor in 2011. There is a long road ahead for both United Therapeutics and Organovo as they attempt to commercialize fully transplantable human organs and tissue engineering products, but the market need is there and the long-term opportunity is massive. The partnership also thrusts United Therapeutics into the tissue engineering conversation from which it has largely been absent. I'll certainly be keeping an eye on it. 

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.