By Ashley Kindergan From The Finacialist

For the first time since Ebola surfaced in Uganda in 1976, an outbreak has exploded beyond rural Africa to reach eight countries, including the U.S. and Spain. For all its notoriety, the most serious Ebola outbreak to date was the one in 2000, and it only infected 425 people. This time around, the U.S. Centers for Disease Control (CDC) believes 13,743 people have contracted the disease, of whom 5,000 have already died. Due to the painfully slow international response and the lack of effective treatments or vaccines, the disease is now spreading at an exponential rate in West Africa, and the CDC estimates there could be more than 550,000 cases worldwide by the end of January. Global investors have by and large kept their cool thus far, but whether they continue to do so depends on how the epidemic develops from here.

The financial costs are already gargantuan. SARS, a viral respiratory disease that killed 744 people between 2002 and 2004 (of 8,000 infected), cost Asian economies about $20 billion. The World Bank estimates Ebola could cost Africa $32.6 billion by the end of 2015. From a business perspective, however, the impact has been limited. ExxonMobil recently delayed an offshore drilling project in Liberia, while highly leveraged London Mining declared bankruptcy earlier this month, citing both falling iron ore prices and difficulty finding a buyer for a Sierra Leone mine due to Ebola panic. In Asia, where memories of SARS are still fresh, airline stocks fell 22 percent between August and late October, despite stable bookings.

Credit Suisse biotechnology analysts Jason Kantor and Jeremiah Shepard recently detailed four possible future scenarios for the epidemic. The most likely: Ebola spreads outside the three-country epicenter — Guinea, Liberia, and Sierra Leone — but remains a predominantly African phenomenon, the effect of which will be felt primarily among energy and mining companies. A scarier possibility is the emergence of a second epicenter outside Africa – with the worst-case scenario being an outbreak in a big city or a country with a creaky health care system. Since 64 percent of flights out of the three epicenter countries go to other poor countries, that’s not far-fetched.

Energy companies will take a hit if the disease gains traction in Nigeria, which produces 2.3 million barrels of crude oil each year. Cocoa producers and candy companies are nervously watching Cote D’Ivoire, which borders Liberia and produces 30 percent of the world’s cocoa. Traders have bid up cocoa futures to a multi-year high. Previous panics over SARS and H1N1 suggest U.S. shoppers tend to stay home during pandemic scares, hurting retailers. A slowdown in air travel would obviously hurt hotels, but also deal a blow to luxury goods. One-third of luxury items are purchased on trips and airport shopping comprises 5 percent of sector revenues.

But what of those companies actually working to fight the disease – from chemical companies that produce disinfectants to the biopharmaceutical companies developing Ebola treatments and vaccines? While six companies are working on Ebola drug candidates, some of which are being used to treat patients on an experimental basis, and five more are focused on potential vaccines, not a single one of them is being produced on a large scale.

GlaxoSmithKline and NewLink Genetics Corp. each have vaccines in phase I trials, while a partnership between Johnson & Johnson and Bavarian Nordic expects to begin the FDA approval process imminently. All three vaccines have shown efficacy in animals. The best-known Ebola drug, Mapp Biopharmaceutical’s ZMapp, has been tested in seven sick patients, five of whom recovered. Fujifilm’s Avigan has been used to treat several patients in Europe, and a patient in France who took the drug in combination with several others recovered. But positive results from animal research and anecdotal data are just that. Drugs for humans, which can be made at scale, are still out of reach. “We still have a lot to learn about the efficacy and safety of these drugs and vaccines in humans,” says Credit Suisse’s Kantor.

Acknowledging the ravages of Ebola – and the need to contain them – the U.S. Food and Drug Administration has said it will consider approving drugs that show effectiveness in animals. For the time being, Kantor believes that the U.S. government, among others, will likely sign initial procurement contracts with several different companies, renewing if manufacturers prove (a) that the drugs work and (b) that they can reliably produce an adequate supply.

The main thing holding back large-scale development of effective treatments and vaccines for Ebola to this point is the fact that the return on investment of doing so – the saving of human lives aside – has been a challenging one for private industry to wrap its head around. For one, there’s no chance of a Lipitor-like success. There is no retail market for such drugs, just as there wasn’t for pandemic flu vaccine in 2009. What’s more, governments and non-governmental organizations are pretty much the only buyers around. And until this summer, Ebola treatments were not high on any cash-strapped governments’ shopping lists. The U.S. government included Ebola in a 2004 law funding the development of treatments for dangerous diseases, for example, but no Ebola drugs were ever added to the U.S. government’s strategic stockpile. Other diseases took precedence – anthrax, because it has been weaponized, and smallpox and pandemic flu due their being more contagious.

It’s certainly a priority now. After the initial crisis is over, companies with promising treatments stand to win lucrative procurement contracts from the U.S. government, which buys in bulk for its stockpile, and regularly replaces outdated drugs. Uncle Sam spends $250 million a year buying all the anthrax vaccine a company called Emergent Biosolutions can produce, for example. “Once the government gets into this business, it’s responsible for maintaining what they call ‘warm capacity’,” Kantor says. “Hypothetically, if they want to stockpile 2 million doses of vaccine with the ability to scale to 20 million, they can’t buy the drug once and let the company go bankrupt.” It’s always going to be harder for drug companies to convince themselves of the relative merits of investing in a once-every-fifteen-years virus like Ebola versus funding research into lowering cholesterol levels. But from this point forth, there’s a market for Ebola drugs.

For more on this story go to: http://www.thefinancialist.com/the-state-of-the-ebola-crisis/