New Frontier of Biotech: Genes!

Want to start with big disclaimer. Even though I have keen interest in science behind biotech and many successful investments (and some spectacular failures), I have no formal education in biotech or for that matter investing in biotech. On top of that, investing in biotech is extremely risky due to binary nature of outcomes. So if you are not a person with extreme risk tolerance, you can stop reading this week's blog (and save few minutes:-)

I got interested in biotech few years back due to science, potential to make outsize gains or losses (almost like bets) and just sheer progress happening in the field (personal situation was also one of the factor due to which I did lot of reading in this area). Last two years I started noticing emerging biotech companies in areas related to "genes". 

In general these companies can be divided in two broad categories:

Gene Therapy: 

1. "the transplantation of normal genes into cells in place of missing or defective ones in order to correct genetic disorders"

   Surprising lot of research is happening in this field for almost 50 years but successful treatments have started showing up just recently. Few companies to watch are:

• ONCE ($80) - genetic blinding conditions (approved drug which costs $800K for two eyes), hemophilia(A and B)
• RGNX ($52) - wet age-related macular degeneration, homozygous familial hypercholesterolemia, Mucopolysaccharidosis Type II
• VYGR ($20) - advanced Parkinson's disease, amyotrophic lateral sclerosis, Huntington's disease
• QURE ($33) - hemophilia B, congestive heart failure, huntington's disease
• BOLD ($37) - X-linked myotubular myopathy (XLMTM), crigler-najjar syndrome, pompe disease 

Since most of them are in early clinical trials (except ONCE), their valuations are hovering around $500M to $2B. Many of these companies are platform companies means they could be applied to multiple diseases.

Gene Editing:

Genome editing, or genome engineering is a type of genetic engineering in which DNA is inserted, deleted, modified or replaced in the genome of a living organism (courtesy Wikipedia). As of 2015 four families of engineered nucleases were used: meganucleases, zinc finger nucleases (ZFNs), transcription activator-like effector-based nucleases (TALEN), and the clustered regularly interspaced short palindromic repeats (CRISPR/Cas9) system

This is relatively new and one of the most promising field of biotech. In fact The CRISPR-Cas system was selected by Science as 2015 Breakthrough of the Year.

Companies in this area are:

• CRSP ($68) - sickle cell disease and beta-thalassemia. This is one of the most promising company and could start human trial in 2018
• NTLA ($25) - transthyretin amyloidosis, alpha-1 antitrypsin deficiency, hepatitis B virus, and inborn errors of metabolism programs
• EDIT ($37) - Leber Congenital Amaurosis type 10, a genetic form of vision loss that leads to blindness in childhood. The company has nice symbol too (EDIT) to suggest "Editing".
• SGMO ($16) - hemophilia B, Hemophilia A, and Mucopolysaccharidosis I (MPS) and MPS II. This uses ZFN which is older gene editing technology compared to CRISPER-Cas. That's why there is relatively less excitement around this company compared to CRSP.

These companies are opening new frontier of biotech similar to what KITE (got acquired by GILD for $12B), BLUE ($9B) and JUNO (got acquired by CELG for $9B) did 5 years back. I won't be surprised if many of the companies mentioned above get acquired for similar multi-billion $ valuations once their trials reach phase2/3 which should happen over next 3-4 years. Many of them would also fail leaving their valuations to dust. But that's nature of biotech. The "older" biotech companies like GILD, CELG as well as big pharma like PGE, Merck needs new sources of growth. So many of these companies have to acquire these to transform themselves. Last week President Trump signed "Right To Try" bill into law opening doors for many people to get access to these cutting edge treatments even before FDA approval. FDA is lot more friendlier under Trump. So all these factors are definite positive for these biotech.

Biotech investing needs patience and extreme risk-tolerance. If that's not your cup-of-tea, just stay away or follow biotech EFT (XBI)

Looking forward to sunny days of summer!

/Shyam