Biotech behemoth Regeneron Pharmaceuticals (NASDAQ:REGN) has been on a roll recently, thanks in large part to Eylea, the company's blockbuster wet age-related macular degeneration and macular edema drug. Sales of this drug have been growing like gangbusters, taking investors on a profitably upward ride.
Recently, the company made news that it has a new disease in its sights: ebola. Regeneron has reached an agreement with Biomedical Advanced Research and Development Authority, or BARDA, to create a potential antibody for this deadly disease. But could this disease target really drive long-term growth?
A scary problem
You're probably all too familiar with the Ebola virus, as the outbreak last year had the world up in arms -- and for good reason. Even though the virus is fairly rare, the disease is very contagious, and can turn deadly very quickly. The mortality rate ranges between 50% and 90%, and the virus affects multiple organs in the body and is often accompanied by severe bleeding.
Currently, there are no FDA treatments. There's a huge unmet medical need for finding a proper way to deal with the disease, so perhaps it should come as little surprise that the U.S. government has reached out to a first-class biotech company like Regeneron to help develop a solution.
A vote of confidence
As disclosed in the agreement, BARDA is providing initial funding of about $17 million to support the early development efforts to get the wheels in motion. It's designed to get Regeneron to submit an Investigational New Drug application to the FDA. If all goes well, Regeneron could earn another $21 million to fund Phase 1 testing, which is currently planned to begin in January 2016.
BARDA chose Regeneron in part because of its in-house development technology that enables rapid preclinical validation of fully human monoclonal antibodies. Regeneron calls its technology "VelociGene" and "VelocImmune," and the company has already used this technology to build up its impressive pipeline of antibody compounds that are aimed at treating a huge variety of diseases like rheumatoid arthritis, atopic dermatitis, and respiratory syncytial virus, to name a few. It looks like Ebola can now be added to that list.
But does Regeneron's technology really speed up clinical research? BARDA Director Robin Robinson, Ph.D. certainly believes so. Here's what he said in a press release:
Regeneron's technology facilitated the discovery and development of this monoclonal antibody therapeutic candidate in real time in just nine months as compared to the normal development cycle of several years, and the technology may have potential applications in future public health responses.
If another outbreak were to happen, Regeneron should be able to ramp up manufacturing quickly.
Could this also benefit investors?
The word Ebola is bound to bring the company some attention. However, investors won't see a benefit from this development for a long time, if ever, because the company has yet to start phase 1 clinical testing.
Plus, the government isn't exactly betting all of its eggs on Regeneron being successful. BARDA has also recently awarded NewLink Genetics an $18 million contract to scale up its manufacturing capabilities for its Ebola vaccine candidate. The company has already partnered with Merck to potentially commercialize the vaccine, and its clinical results look quite promising. Companies of all different sizes are also working on creating treatments for the disease, from small players like Novavax and Inovio Pharmaceuticals to the big boys like GlaxoSmithKline and Johnson & Johnson.
With an already crowded field and Regeneron's research still in early stages, it's best to assume that this line of development will have no immediate impact on the value to Regeneron. Even assuming a best-case scenario, where the company is the only successful player in the race, vaccines tend to be wholly dependent on outbreaks and initial government stockpiling demands. Strong initial demand could be a win for the company, but after this stockpiling, sales could dry up, or at best be incredibly lumpy.
News about Ebola makes for great headlines but won't matter to Regeneron's bottom line for years, if ever. Regeneron is already doing so incredibly well with Eylea, and its newly-launched PCSK9 inhibitor Praulent looks to be a blockbuster in the making. As a result, investors don't need its potential Ebola vaccine to pay off at all for the company's valuation to make sense today.
Brian Feroldi has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.