A Guide to Investing in Gene Editing Stocks
If we had to pick one disruptive technology that has the most potential to change mankind, it would be subset of nanotechnology called synthetic biology (or synbio). A critical component of synbio is gene editing. You cannot have one without the other. When many people first hear about the potential of gene editing, they want to invest in it. The goal of this guide is to make sure investors with no domain knowledge whatsoever are equipped with just the information they need to invest in pure-play gene-editing stocks.
What is Gene Editing?
Simply put, gene editing allows us to change the genetic makeup of organisms. Gene editing isn’t considered to be GMO because it’s a much more precise method of genetic engineering. One controversial use case is using gene editing on humans at the germline which means we can start to remove defects such as inherited diseases and (here’s where it starts getting really controversial) perhaps even increase traits that are more desirable, such as intelligence. The tools used for gene editing are the focus of this guide. While we gave you the simplest definition of gene editing, things get complex in a hurry.
There Are Many Types of Gene Editing Tools
You may have seen the term CRISPR used before in relation to gene editing. CRISPR stands for “clustered regularly interspaced short palindromic repeats,” and it’s just one tool that can be used to edit genes. There are others, so we can’t just look for one winning stock. Here a few other gene-editing methods along with some pros and cons of each:
It is CRISPR that has generated the most excitement up to this point, and right now there is a mad rush as companies look to stake their claim through intellectual property and partnerships. In reality, it’s likely that many types of gene-editing methods will be used on many types of applications by many companies.
Gene Editing Picks and Shovels
There are two ways we can develop an investment thesis for gene editing.
The first approach would be to consider every company out there that uses gene editing in any capacity. For example, companies are now cropping up that use multiple methods of gene editing depending on what works best for their use case. Sometimes, changing the method allows them to work more efficiently.
The second approach is to look for companies that have their own proprietary gene-editing methods that they use internally and/or license to other companies. This “intel-inside” business model would ideally reduce single-customer risk as many companies would be licensing the technology to commercialize products with.
Today, we want to focus on companies that claim to have developed their own method for gene editing that they believe is superior to others. Let’s start by going through the list of 7 Gene-Editing Companies Investors Should Watch we first published back in 2015, starting with the first three high-profile gene-editing startups that became publicly traded companies (we’re currently holding all three).
The Holy Trinity of Gene-Editing Startups
The first gene-editing stock to have an initial public offering was Editas Medicine (EDIT) which claimed to have foundational intellectual property surrounding CRISPR gene editing. In 2014, Editas issued around 5% of their outstanding shares to license certain patent rights owned or co-owned by Massachusetts General Hospital, The Broad Institute, Harvard College, MIT, and Duke University. Editas believes they have some of the key intellectual property relating to CRISPR gene editing. Our next company does as well.
Weeks after Editas had their IPO, another gene-editing startup had an IPO – Intellia Therapeutics (NTLA). The woman behind Intellia’s accomplishments and its founder, Jennifer Doudna, was actually listed as a co-founder of Editas Medicine on their website when we published a piece on The Intellia Therapeutics IPO back in 2016. However, she split from Editas to found Intellia in an intellectual property dispute that was being touted as one of the greatest of all time.
Finally, we saw a A Third Gene Editing IPO from CRISPR Therapeutics (CRSP), a company that was founded by the co-inventor of the CRISPR/Cas9 technology, Emmanuelle Charpentier, who took her stake in the key CRISPR patent and co-founded CRISPR Therapeutics in Switzerland. (You’ll often hear the term CRISPR/Cas9 used. The “Cas9” refers to a protein that cuts DNA.)
Each of these three gene-editing pioneers are aligned with specific industry partners to develop a line of therapeutics using CRISPR gene-editing technology.
- Novartis: New CRISPR-based therapies using chimeric antigen receptor T cells (“CAR T cells”)
- Regeneron Pharmaceuticals: CRISPR-based therapeutic products primarily focused on gene editing in the liver
- Juno Therapeutics (subsidiary of Bristol-Myers Squibb Company): Engineered T cells that have been genetically modified to recognize and kill other cells.
- Allergan Pharmaceuticals: Co-developing a drug to treat LCA10, a disease which has no available therapies. Initiated a Phase 1/2 clinical trial in mid-2019.
- CRISPR Therapeutics
- Bayer HealthCare: co-develop and co-commercialize two products for certain autoimmune disorders, eye disorders, or hemophilia A disorders.
- Vertex: Develop and commercialize products for the treatment of DMD and DM1.
- ViaCyte: Develop allogeneic cell therapies derived from gene-edited human stem cells for use in the treatment of diabetes type 1, diabetes type 2, and insulin-dependent diabetes.
Each of these firms has aligned themselves with at least one large pharmaceutical partner and established a drug pipeline based on their unique approach to CRISPR gene editing. (We recently looked at what progress they’re making in a piece titled What Do The Three Biggest Gene Editing Stocks Do?) Let’s talk a bit about gene-editing intellectual property and why it shouldn’t be a big concern to investors if they place bets on all the players in the game.
The Gene-Editing Intellectual Property Battle
In a 2018 update on the progress of gene editing, we noted that the intellectual property battle in progress is perhaps less important than initially thought. From that article:
“Round one of the CRISPR patent legal battle goes to the Broad Institute” according to an article by Science, which goes on to say that the “USPTO now has issued 50 patents related to CRISPR—14 have gone to Broad—and predicts many more will be issued”. (Feng Zhang, co-founder of Editas happens to be a core institute member of the Broad Institute so we can probably conclude that that decision should ultimately favor Editas.)Credit: Nanalyze
Here’s what Jennifer Doudna of Intellia had to say about Broad Institute’s patent “victory” in the aforementioned Science article:
“They have a patent on green tennis balls. We [likely] will have a patent on all tennis balls,” says Doudna. “I don’t think it really makes sense.”Credit: Jennifer Doudna
As investors, it’s not a good sign when the subject matter experts say that things don’t make sense while using tennis analogies.
In addition to the three CRISPR gene editing stocks we’ve covered already – Editas, Intellia, and CRISPR Therapeutics – there are a number of others we can include in our basket as well that are using some different approaches to gene editing we mentioned earlier – TALENs and “zinc finger nucleases.”
Engineering of “Chimeric Antigen Receptor” (CAR) T-cells is one of the technologies developed by French company Cellectis (CLLS) to construct new product candidates. Some years back, Cellectis tried to use CRISPR, but ended up going back to TALENs for developing their off-the-shelf immunotherapies. Members of the Cellectis management team actually invented TALENs, and the company has all the intellectual property wrapped up, even going so far as to trademark the name “TALEN”. Cellectis then spun out agricultural applications for TALEN into our next gene-editing company, Calyxt.
At the time of their 2017 IPO, Calyxt (CLXT) stated their strategy which was surprisingly different. First, they use their gene-editing platform to develop better crops. Then, they plan to partner with farmers to grow premium products and then buy these from the farmers. They will then contract with processors to create specialty food ingredients which they will market directly to food manufacturers. As of March 31, 2020, they had 18 projects at the discovery stage or later in development across alfalfa, canola, hemp, oats, potatoes, soybeans, and wheat.
Calyxt is a majority-owned subsidiary of Cellectis (as of March 31, 2020, Cellectis owned 68.8% of their outstanding common stock).
Founded in 1995, Sangamo Therapeutics (SGMO) is developing zinc finger-based therapeutic candidates that can target almost any sequence in the genome. The company has had many partnerships over the years, some not so successful, and today some of their major partners include:
- Biogen – Up to neurological disease gene targets selected by Biogen
- Kite Pharma – Engineered cell therapies for cancer.
- Sanofi – Therapeutics for hemoglobinopathies, focused on beta thalassemia and sickle cell disease (“SCD”).
- Pfizer – Early this year, Sangamo handed over development of hemophilia A gene therapy candidate SB-525 to Pfizer – it’s now advancing to phase 3 clinical trials
Sangamo has been a publicly traded company since their IPO back in 2000.
New Gene-Editing Approaches
So far, we’ve talked about three popular gene-editing approaches – CRISPR, TALENs, and zinc finger nucleases. We also need to consider new gene-editing techniques that fall outside of these three. Our next companies have set out on their own with gene editing platforms that are said to be better than what other firms are working on.
Homology Medicines (FIXX) has developed their own gene-editing platform, AMEnDR™ (AAV-Mediated Editing by Direct Homologous Recombination), which is based on technology for which they alone hold an “exclusive worldwide license.” The company believes that all nuclease-based approaches like CRISPR or TALENs suffer from the following limitations:
- Unwanted on-and-off-target DNA modifications.
- Inability to efficiently and precisely introduce entire gene to the genome.
- Complexity of vector delivery and manufacturing to achieve gene insertion
The company is initially working to cure monogenic diseases, or diseases that are caused by a defect in a single gene.
Then there’s Precision BioSciences (DTIL) which is developing their proprietary one-step gene-editing method called ARCUS which the company states “is not a CRISPR/Cas9 technology,” but a collection of protein engineering methods they developed to re-program the DNA recognition properties of the natural genome editing enzyme, I-CreI. Benefits of ARCUS include:
- Efficiency – A high level of on-target editing while rarely cutting off-target
- Easy Delivery – ARCUS is very small relative to other genome-editing endonucleases. As such, they believe it will be compatible with many different delivery mechanisms.
- Type of cut – The way they cut the strand is superior and helps promote DNA repair after cutting
- Programmability – The ARCUS method used to present a major challenge to re-program for new editing applications. They spent 15 years solving those challenges and patenting them.
Gilead Sciences (GILD), an $80 billion pharmaceutical firm, has an exclusive license to this technology to treat Hepatitis B using “in vivo gene corrections.” Servier, a large private French pharmaceutical company, is working on cancer immunotherapy treatments using the platform. Precision BioSciences also has a fully-owned subsidiary, Elo Life Systems, which has been collaborating with food giant Cargill since 2014 to produce ARCUS-optimized canola varieties.
Beam Therapeutics (BEAM) has developed a technology called “base editing” which focuses on precision gene-editing which replaces single letters (C, T, G, A) without inducing a double-strand DNA break. Also called “point mutations,” incorrect single letters are responsible for approximately 58% of genetic errors associated with disease. Beam Therapeutics says that existing gene-editing methods like CRISPR, Zinc Finger Nucleases, ARCUS, and TAL Nucleases “lack control of the editing outcome, have low efficiency of precise gene correction, and can result in unwanted DNA modifications.”
Beam Therapeutics has a portfolio of twelve therapies based on their technology that they hope will result in an “initial wave of IND filings beginning in 2021.” Their initial focus is in hematology, oncology, and immunology, and diseases of the liver, eye, and CNS.
Diversification is Your Friend
Which gene-editing stock should you invest in? That’s the wrong question to ask. We don’t want to start speculating on which horse will win this race, so why not put a little bit of money in all gene-editing stocks? Since most brokers have waived all transaction fees, it doesn’t cost anything to buy a basket of the stocks we’ve talked about so you can enjoy the benefits of diversification.
Here are the companies we’ve talked about today along with their present-day market caps:
- CRISPR Therapeutics – $3.8 billion
- Editas Medicine – $1.6 billion
- Sangamo Therapeutics – $1.5 billion
- Beam Therapeutics – $1.4 billion
- Intellia Therapeutics – $1.2 billion
- Cellectis – $700 million
- Homology Medicines – $690 million
- Calyxt – $175 million
You might consider “market cap weighting” your portfolio as opposed to buying equal amounts in each stock. For example, if you invested $10,000 in this basket, that money would be allocated as follows:
- CRISPR Therapeutics – $3,434
- Editas Medicine – $1,446
- Sangamo Therapeutics – $1,355
- Beam Therapeutics – $1,265
- Intellia Therapeutics – $1,084
- Cellectis – $631
- Homology Medicines – $623
- Calyxt – $158
There may be other names we add to this list based on companies we unearth during research or new listings that have initial public offerings. If your over-the-counter (OTC) penny stock company isn’t on this list, there’s a good reason for that. We don’t recommend any investor ever invest in any OTC stock, no matter how compelling it sounds. Institutional investors don’t touch that garbage, and neither should you.
Update: One of the original gene editing pioneers, Caribou Biosciences, has filed for an IPO. We covered it in our piece titled Caribou Biosciences – Another Gene Editing Stock.
As for our own gene editing holdings, we did the old spray-and-pray on the first three CRISPR companies to go public – Editas, Intellia, and CRISPR. After vetting a list of 27 gene editing stocks, we decided to kick out Editas and replace it with Beam Therapeutics. We also decided that both Intellia and CRISPR are making enough progress to stick around.
The entire market cap of all stocks we’ve covered today is just barely breaching the $11 billion mark. (To put that number into perspective, a single company is considered large-cap if their market cap is above $10 billion.) Most of the companies we’ve talked about today are targeting drug applications, but there are numerous applications for gene editing across all industries. Nature is the most efficient manufacturing method we know, and now we can start to manipulate it.
To conclude, there are lots of overlaps between synthetic biology and gene editing. We suggest you read our Guide to Investing in Synthetic Biology Stocks next. This will provide you with additional information about some promising gene-editing startups that have yet to go public. We’ll also try to keep these guides updated as more firms have initial public offerings or become acquired by other publicly traded companies.
We believe gene editing is one of the disruptive technologies that will change the world as we know it. But which are the best gene editing companies to invest in? Find out in the “Nanalyze Disruptive Tech Portfolio Report,” a complete list of disruptive tech stocks and ETFs we’re holding. Now available for all Nanalyze Premium annual subscribers.