Can Tekmira make money from its Ebola treatment?
Tekmira Pharmaceuticals Corp. (NASDAQ: TKMR) has made a name for itself pioneering new experimental treatments in the wake of the most recent Ebola scare. Ebola is considered one of the deadliest viruses on the planet with a fatality rate of up to 90%. Canada-based Tekmira is one of a few companies which are looking to tackle this problem.
The company hopes to alleviate the world of the ebola scare. The million dollar question (literally) is whether or not Tekmira and/or others can make serious money in the process – and whether it is enough to justify the current hope. Privately held Mapp Biopharmaceutical and BioCryst Pharmaceuticals (NASDAQ: BCRX) are also developing therapies to combat Ebola.
The US Food and Drug Administration as of last Thursday announced that it would give Tekmira the go-ahead to begin treating patients with its experimental Ebola treatment on humans that were infected with the Ebola virus. The following day after this announcement, Tekmira shares soared. Again, the question is whether or not Tekmira and other companies will be able to turn investor hopes into actual profits.
Investors may be concerned that the stock’s most recent highs are not even close to being at the levels they were in March. That is the case even if Tekmira’s stock price has been climbing higher since the FDA made an exception for the experimental treatment.
As of Monday, Tekmira shares reached a high of $26.05. This is a massive move when you consider that Tekmira closed at $14.27 just last Thursday. The long and short of the matter is that this stock has skyrocketed by more than 80% in a short period of time. Still, Tekmira shares would have to reach $31.48 to reach its all-time high.
Investors have one serious concern to think of here when it comes to how much the company can actually make here. There is a fear that outside of government funding for humanitarian concerns, the financial side of an ebola drug market alone may not be all that lucrative. Then there was a prior FDA scare from the drug having previously been on hold. One saving grace that could alleviate some of the concerns that ebola has been declared an international health
is emergency by the WHO. Another issue that investors have to consider is that some traders could think a blow-off volume top is being formed. Tekmira did not even average more than a few hundred thousand shares per day prior to this most recent ebola scare. Last Monday it traded almost 10 mln shares when it was at $13.26. Then on Friday it traded 28.6 mln shares when it rose to $20.70. Now we saw total trading volume of over 23 mln shares by the close of trading on Monday.
Tekmira’s 52-week range is $5.08 to $31.48 and shares were up another 18% at $24.40 late on Monday. The Thomson Reuters consensus analyst target price is $26.63, but there is only a very small handful of analysts covering this stock. Over the past week the stock has ranged $12.82 to $26.05.
The point here is not whether you have seen a peak in short-term trading. We have seen instances where biotech outfits have risen exponentially, and we would not dare count this as a situation that could not repeat the other gains elsewhere. Our question is how much money Tekmira can actually make long-term from this.
Tekmira’s revenues have averaged $15 mln per year over the last three years. It was in 2013 that Tekmira was awarded a US government contract worth up to $140 mln to develop an RNAi therapeutic against the ebola virus. This Department of Defense grant was under the DoD’s Chemical and Biological Defense Programme. More than 15% of the estimated value of that award was to be subcontracted to US businesses, and the initial phase made Tekmira eligible to receive up to $34.7 mln over the next three years.