A Canadian company developing an experimental Ebola drug has seen its stock swing wildly in what one analyst describes as market overreaction to the latest headlines about the deadly outbreak.

Vancouver-based Tekmira Pharmaceuticals Corp.'s stock was down nearly 20 per cent in early afternoon trading on the Toronto Stock Exchange at $20.80.

Tuesday's drop followed a nearly 60-per-cent surge over the previous two trading sessions.

Tekmira announced last Thursday the U.S. Food and Drug Administration had "verbally confirmed" it would relax a clinical hold on its TKM-Ebola drug, potentially enabling its use in individuals stricken with the deadly virus.

The outbreak has killed more than 1,000 people in West Africa since March.

Jason Kolbert, a biotechnology analyst at Maxim Group in New York, said investors are "freaking out" because a Spanish priest, who was reportedly treated with another Ebola drug called ZMapp, died on Tuesday in Madrid after being transported by air from Liberia.

Kolbert said he sees "no relationship whatsoever" between the prospects for ZMapp and TKM-Ebola, as the two treatments take completely different approaches.

"However, just as the people were focused on Ebola and kind of drove Tekmira shares higher, now you're seeing selling in the stock. It's just volatility associated with a lot of I'd say retail buying of Ebola biodefence names," he said.

"It's a pendulum. It tends to overreact."

The World Health Organization said Tuesday it is ethical to use untested Ebola drugs, but that countries using experimental treatments have a moral obligation to collect data so the world can learn how to combat the virus.

The statement makes no reference to the fact that currently, these experimental therapies are in limited supply.

On Monday, ZMapp's San Diego-based developer, Mapp Biopharmaceutical, said it had exhausted its supply of the product, components of which were created at Canada's National Microbiology Laboratory in Winnipeg. Experts have said it will take three or four months for another small batch of ZMapp to be made.

That drug was given to two American relief workers who contracted Ebola in Liberia and both are said to be recovering.

It's unclear how much TKM-Ebola Tekmira has in stock, or how quickly manufacturing of the drug can be ramped up.

Tekmira says its drug, which targets the cells where the virus replicates, is the most advanced Ebola treatment option that's in development.

"We are pleased that the FDA has considered the risk-reward of TKM-Ebola for infected patients. We have been closely watching the Ebola virus outbreak and its consequences, and we are willing to assist with any responsible use of TKM-Ebola. The foresight shown by the FDA removes one potential roadblock to doing so," said CEO Mark Murray in a release last week.

Tekmira has a $140-million contract from the U.S. government to develop TKM-Ebola but last month a small human trial of the experimental drug was put on hold after safety issues emerged.

Restrictions remain on testing the drug on healthy volunteers, but Murray said the company is "focused on an expedient resolution" on that matter.

In a research note last week, analysts with RBC Capital Markets called the FDA move an "incremental positive" for Tekmira.

"Bottom line, we've confirmed with the company this lifts the obstacle in case one seeks the drug for compassionate use and they do have supply of some drug intended for clinical trials. To meet the much larger demand of the broader outbreak, they would have to ramp up manufacturing, which could take months," they wrote.

"While we acknowledge there is the potential for (Tekmira) to land significant revenues due to its Ebola program, this should only be considered a long-term upside opportunity as visibility is very low and predicting what happens with pandemic outbreaks and government contracts can be risky."