Ge­net­ic Med­i­cine Leads a Surge of In­no­va­tion in Biotech

Ge­net­ic med­i­cine, the de­liv­ery of ge­net­ic ma­te­r­i­al as a ther­a­peu­tic, has at­tract­ed record-break­ing cap­i­tal in biotech with ~$150 bil­lion in­vest­ed across ven­tures, IPOs, fol­low-ons, and M&A since 2013.

This in­flux of cap­i­tal, com­bined with some crit­i­cal sci­en­tif­ic break­throughs, has led to the ap­proval of mul­ti­ple drugs that are chang­ing the lives of pa­tients world­wide. We think this could be just the tip of the ice­berg giv­en that there are more than 1,000 clin­i­cal tri­als un­der­way, pre­clin­i­cal com­pa­nies are rais­ing record-break­ing cap­i­tal and mul­ti­ple aca­d­e­m­ic labs are work­ing on the lat­est it­er­a­tion of the tech­nol­o­gy. Im­por­tant­ly, while the first few drugs were ap­proved for rare dis­eases (such as spinal mus­cu­lar at­ro­phy, in­her­it­ed reti­nal dis­eases, fa­mil­ial hy­per­triglyc­eridemia), we now have two COVID19 vac­cines ap­proved (mR­NA based) and mul­ti­ple drugs poised to be ap­proved for more preva­lent dis­eases in car­di­ol­o­gy, neu­rol­o­gy, on­col­o­gy, and au­toim­mu­ni­ty. Out­side of COVID19, which is ex­pect­ed to gen­er­ate $50b+ in rev­enue this year, we ex­pect ge­net­ic med­i­cine to top $20b in rev­enue by 2026.

Gene Edit­ing is the New Fron­tier

Gene edit­ing has quick­ly emerged as one of the most promis­ing ap­proach­es with­in ge­net­ic med­i­cine as high­light­ed by the 2020 No­bel Prize in Chem­istry award­ed to Em­manuelle Char­p­en­tier and Jen­nifer A. Doud­na for their pi­o­neer­ing work of CRISPR-Cas9.

This tech­nol­o­gy, which in­volves dele­tion, in­ser­tion or cor­rec­tion of DNA, en­ables sci­en­tists to pre­cise­ly tack­le the ge­net­ic root cause of the dis­ease. Such an ap­proach can be “one-and-done” and avoid the chronic­i­ty of the cur­rent stan­dard of care. Rapid ad­vance­ments in this field are cre­at­ing a ro­bust prod­uct pipeline and at­tract­ing record amounts of cap­i­tal. We es­ti­mate $14 bil­lion de­ployed since 2015 and $43 bil­lion in cu­mu­la­tive mar­ket cap­i­tal­iza­tion. Im­por­tant­ly, all this cap­i­tal is trans­lat­ing in­to ben­e­fits for pa­tients as re­cent­ly shown by the NT­LA’s tan­ta­liz­ing clin­i­cal da­ta for TTR-polyneu­ropa­thy ear­li­er this sum­mer.

In Vi­vo Gene Edit­ing Like­ly The Fu­ture As High­light­ed By Re­cent Da­ta

There are two dif­fer­ent types of gene edit­ing:

• Ex vi­vo is lo­gis­ti­cal­ly com­plex and re­quires tak­ing cells from the pa­tient, ge­net­i­cal­ly ma­nip­u­lat­ing them in the lab, and re-in­fus­ing them back af­ter pa­tients have re­ceived a tox­ic pre­con­di­tion­ing reg­i­men like chemother­a­py.
• In vi­vo is a much eas­i­er ap­proach where cells are edit­ed di­rect­ly in­side the pa­tient. A de­liv­ery ve­hi­cle is of­ten used to tar­get a spe­cif­ic or­gan/cells but the route of ad­min­is­tra­tion is usu­al­ly a sim­ple IV in­fu­sion. Un­like ex vi­vo, there is no need for tox­ic pre­con­di­tion­ing (al­beit, a short course of pro­phy­lac­tic steroids is usu­al­ly re­quired) and the sim­pler lo­gis­tics sub­stan­tial­ly re­duce turn­around times.

While most pa­tients to­day have been “gene edit­ed” us­ing an ex vi­vo ap­proach, in vi­vo gene edit­ing is like­ly the fu­ture. The very first in vi­vo CRISPR-based gene edit­ing clin­i­cal da­ta was re­leased in June, and it looked promis­ing with no se­ri­ous ad­verse events, im­pres­sive bio­mark­er re­duc­tions, and ev­i­dence of dose re­sponse. It is ear­ly days, but the fu­ture of in vi­vo gene edit­ing is off to a great start as the news has un­locked ~$10 bil­lion in val­ue for gene-edit­ing, and sug­gests this one-and-done ther­a­py may beat cur­rent ther­a­pies on both ef­fi­ca­cy and con­ve­nience.

In­vestors Need To Weigh The Promise Of Gene Edit­ing Against Po­ten­tial Safe­ty/Reg­u­la­to­ry Risks

Based on promis­ing pre-clin­i­cal da­ta and the back­ing of blue chip biotech in­vestors, we think the an­tic­i­pat­ed de­but of ear­ly-stage biotech com­pa­nies of­fer­ing new­er gene edit­ing ca­pa­bil­i­ties (such as base/prime edit­ing) will pro­vide fur­ther mo­men­tum to the IPO mar­ket this year. Look­ing to the fu­ture, and de­spite all the en­thu­si­asm around gene edit­ing, we be­lieve com­pa­nies will need to tread cau­tious­ly with this tech­nol­o­gy. Gene edit­ing can’t be re­versed and we don’t ful­ly un­der­stand its long-term im­pli­ca­tions and po­ten­tial for on-tar­get and off-tar­get tox­i­c­i­ties. Un­til more clin­i­cal stud­ies play out, in­vestors need to weigh the promise of gene edit­ing against po­ten­tial safe­ty and reg­u­la­to­ry risks. There­fore, we be­lieve the ul­ti­mate “win­ners” in this field may not nec­es­sar­i­ly be the com­pa­nies with the most at­ten­tion-grab­bing tech­nol­o­gy, but those that can suc­cess­ful­ly tar­get the right in­di­ca­tions and clev­er­ly de­sign clin­i­cal tri­als.

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