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Regeneron Expands Agreement to Develop Coronavirus Therapy

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Regeneron Pharmaceuticals, Inc. (REGN - Free Report) announced that it has entered into an expanded agreement with the U.S. Department of Health and Human Services (“HHS”). Per the new agreement, the company will develop treatment for coronavirus named 2019-nCoV, recently found in China.

Shares of Regeneron increased 4.4% on Feb 4 following the announcement. However, the company’s shares have declined 12.4% in the past year compared with the industry’s decrease of 7.2%.

The World Health Organization recently declared the coronavirus outbreak a global public health emergency, as the viral infection has spread to more than 20 countries. While the coronavirus has infected more than 20,000 people in China with death toll crossing 400, isolated cases have been reported in other countries.

Regeneron will use its proprietary, rapid response technology – VelociSuite – to develop a promising antibody candidate to tackle the outbreak. The company and HHS entered into an agreement in 2017 to develop a portfolio of antibodies targeting up to 10 pathogens that pose significant risk to public health, including the Influenza virus and 2019-nCoV. The company is also developing a treatment for Ebola, REGN-EB3, in collaboration with HHS’ Biomedical Advanced Research and Development Authority (“BARDA”).

Authorities across countries, especially China and the United States, are initiating preventive measures to contain the risk of infection. Authorities in China have recommended AbbVie’s (ABBV - Free Report) HIV drug, kaletra, as a treatment for the 2019-nCoV infection. Per a Bloomberg article, the U.S. Centers for Disease Control and Prevention is trying to get an emergency approval for a test to diagnose 2019-nCoV, which may be used in hospitals across the United States for faster remedies. Several restrictions are in place to decelerate the spread of 2019-nCoV infection, including travel ban to and fro from China.

Meanwhile, several pharma companies have shown interest in developing a vaccine for the coronavirus including J&J (JNJ - Free Report) and Gilead (GILD - Free Report) . Stocks of several small biotechs have surged following the announcement of their plans to develop a 2019-nCoV vaccine, including Moderna, Novovax, Inovio Pharmaceuticals and Vaxart. However, we note that the development process will take time and the coronavirus infection may stop like SARS. This may negatively impact the shares of these biotechs as several of these planned therapies may not get effectively monetized. SARS, caused by another coronavirus, was found in 2003 but no infection was diagnosed beyond 2004. Moreover, another Bloomberg article stated that investors are developing short interest in some of these small biotechs following the initial hype.

Zacks Rank

Regeneron currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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