Source: Photochem_PA/Flickr.

You've probably had the joy of being bitten by a mosquito before. Annoying? Yes. Life threatening? Usually not for most Americans. But if you live in South Florida, mosquito bites can be more than just a nuisance. In recent years, health officials have observed an uptick in cases of dengue and chikungunya, two debilitating tropical diseases transmitted by mosquitoes that have no cure or approved vaccine. Before July 2014, no cases of chikungunya had ever been reported in the United States.

The Centers for Disease Control and U.S. Food and Drug Administration have two options for prevention: (1) control mosquito populations, and/or (2) develop vaccines against the viruses. Seems simple enough, but it's easier said than done. Florida officials have sprayed up to six different types of insecticides against the most common disease-carrying mosquito, Aedes aegypti, but local populations have become resistant to four of them. That reduces the effectiveness of the preferred go-to prevention tool.

Meanwhile, the second option has gained momentum. A dengue vaccine developed by Sanofi (NASDAQ:SNY) demonstrated promising results in multiple phase 3 trials, the last of which wrapped up last September, but it has yet to be approved by the FDA. Even with approval, it would be difficult to vaccinate enough Floridians to ensure immunity against a disease few Americans have ever encountered, especially given the public debate currently raging over vaccinations.

That leaves public health officials in a tough spot, which is why the FDA has turned to an innovative tool developed by privately held British biotech Oxitec. Don't be tricked by the word "biotech," though, as the company isn't developing vaccines. Instead, Oxitec has genetically modified mosquitoes that can be released into the environment to effectively control wild populations of disease-carrying mosquitoes. It may sound crazy, but it could be South Florida's best chance to get ahead of a potential health crisis -- and the first mosquitoes could be released in a field trial this spring.

Fight fire with fire
It may seem counter-intuitive to release mosquitoes to control mosquito populations, but that's where genetically modified, or GM, mosquitoes come into play. Oxitec has engineered a type of Aedes aegypti with fatal genes. When the GM mosquitoes mate with wild mosquitoes, the fatal gene is passed onto the resulting offspring, which die before reaching adulthood, thus dealing a rapid and significant blow to mosquito populations in a local area.

Since the fatal genes aren't passed beyond one generation, the approach gives health officials a high degree of environmental control over the tool. They can release a steady stream of GM mosquitoes to maintain populations at a healthy level (birds and fish eat mosquitoes) or stop releases to allow populations to regrow (in case that needed to be done quickly). It's also worth pointing out that Oxitec strives to release only non-biting male mosquitoes, and previous trials have demonstrated that only 0.03% of all mosquitoes released were female, which are also incapable of passing their genes beyond one population.

You may think the FDA is crazy. Of course, while Americans may have mixed feelings about releasing GM mosquitoes -- or even receiving a vaccine, unfortunately -- Oxitec and Sanofi are more focused on providing solutions for the world's poorest populations.

Dengue: A global problem
Here are a handful of quick facts to establish the reality facing global public health when it comes to mosquito-borne diseases and dengue:

  • Over 1 million people die every year from mosquito-borne diseases; 25,000 of which are caused by dengue. 
  • The disease threatens over 40% of the world's population.
  • Dengue affects 50 million people every year, most of whom are children. That's more than 2.5 times the population of Florida.

But if you think only poor tropical nations and South Florida are at risk, think again. A 2009 report (link opens PDF) from the National Defense Resource Council found that Aedes aegypti mosquitoes capable of transmitting dengue could be found in 28 states. It warned that an outbreak in South Florida coupled with humid weather would be all it would take to start a potential epidemic.

Better than vaccines?
The population control tool developed by Oxitec has several potential advantages over insecticide spraying and vaccines. First and foremost, releasing GM mosquitoes to control Aedes aegypti could potentially allow health officials to more effectively target both dengue and chikungunya by wiping out the carriers for both diseases. A pharmaceutical approach would require two separate vaccines, one for each disease, to fulfill its prevention goal.

Second, releasing GM mosquitoes is substantially less expensive than developing, manufacturing, and distributing vaccines. Oxitec has raised less than $100 million since 1999 to develop its technology platform, which includes an impressive lineup of GM agricultural pests that work in similar fashion to the mosquitoes targeted at public health. It even has several products nearing commercial readiness.

By contrast, Sanofi has spent nearly 20 years and more than $1.5 billion developing its dengue vaccine candidate and another $1 billion building a manufacturing facility capable of producing 100 million doses per year. While analysts believe the vaccine could notch peak annual sales of $1.4 billion given dengue's global presence, attaining these sales would require either less developed nations with poorer citizens to buy the vaccine, or the World Health Organization subsidizing tens of millions of doses every year.

Third, the effectiveness of Sanofi's vaccine has been called into question. There are four types of dengue fever, and although the company's vaccine has demonstrated effectiveness as high as 78% for one type, it only protected 42% of patients against another. In addition, the vaccine has shown varying degrees of effectiveness when comparing children (the most prone to contracting the disease) and adults. It has a big lead over dengue vaccines in development at Merck, Novartis, and GlaxoSmithKline -- none of which has entered phase 3 trials yet -- but the bar for the competition may not be set as high as investors think. Throw in potential future approvals for releasing GM mosquitoes in the hardest-hit regions, and Sanofi may have a difficult time achieving $1.4 billion in peak sales.   

What does it mean for investors?
Let's be honest. The seriousness and prevalence of dengue means multiple tools, ranging from GM mosquitoes to vaccines to insecticides, will be needed to combat its spread. But from an investing standpoint, Oxitec does present a risk to vaccine developers such as Sanofi. More effectively controlling wild mosquito populations provides the potential to reduce the number of disease-carrying mosquitoes capable of infecting humans, which could lead to fewer cases. That would chip away at the market for Sanofi, although it's much too early to quantify the effects. After all, while several field trials have already been conducted by Oxitec and demonstrated promising results, more data are needed before national governments approve commercial use of GM mosquitoes. 

Should the FDA approve Oxitec's tool, the United States could be one step ahead of a potential dengue or chikungunya epidemic. Ironically, preventing these diseases altogether would likely cause biotech's latest win to go unnoticed by most Americans. I'd say that's still better than contracting one of these diseases, though.