So You Want To Invest In Genetics …

Delwin Graham - Jun 19, 2018
One of the reasons why genetics is a growth industry is because of its recent arrival.

One of the reasons why genetics is a growth industry is because of its recent arrival.  The prospect of investing in genetics arose out of the Human Genome Project (HGP), completed in April 2003.  This international research project mapped the human genome, radically transforming the type of genetic research possible.  Today, geneticists work to discover more about the function and purpose of every gene, as well as studying anomalies that may contribute towards genetic disease.  Of course, one of the most obvious points of research interest is the bridge between gene mutations and specific types of cancer.  In one example of genetic therapy, a patient was diagnosed with lung cancer with an ALK (anaplastic lymphoma kinase) gene mutation.  Having undergone almost every other oncological treatment, the patient was administered a medication that targets the ALK mutation, Zykadia by Novartis (NVE:NYSE), at the Huntsman Cancer Institute at the University of Utah, and the cancer has been kept “under control” for the past 3 years.  (Cf., Gabrielle Lakusta, “What is Genetics Investing?”, Feb 23, 2018, www.GeneticsInvestingNews.com).

 

This relationship between genetics investing and pharmaceuticals has become particularly vital in recent years due to the turn towards “personalized medicine”, that is, looking to administer the right treatment for the right patient at the right time.  More specifically, tailored medical care is meant to be based on a patient’s genetic makeup, lifestyle, and preferences.  As a result, personalized medicine should ultimately improve health outcomes by providing individuals with a more streamlined, targeted healthcare plan.

 

By individuating treatment, personalized medicine is driving genetics investing.  The cancer gene therapy market alone is estimated to grow 20.7 percent to US$4.3 billion by 2024 up from US$805.5 million in 2016.  (Cf., Lakusta, “Genetics”).  The market will move according to new therapies, different regions, and high investments in R&D.   Some companies already competitive in this market are Amgen (AMGN:NASDAQ) and Aduro Biotech (ADRO:NASDAQ).  The applications include vaccine production, toxicity tests, biopharmaceutical production, gene therapy, drug screening as well as its development, and cancer research. 

 

The fact that we can consider individual genetics in the treatment of a patient is a product of technological innovation.  This possibility of gene therapies can be partly attributed to the revolution brought by the CRISPR-Cas9 System and gene editing, where DNA is inserted, deleted, modified or replaced in the genome of a living organism.  Similarly, the explosion in genetic testing has been accommodated by developments in gene sequencing so that it can be done on a commercial scale.   23andMe has pioneered direct-to-consumer genetic testing (DTCGT) and is the world’s leading personal genomics company and provider of personal genetic information.  The company started with a mail-order test kit that generated a detailed genetic report for approximately US$1000.  A simple saliva sample produced insights across nearly 200 categories – including risk factors for inherited diseases like cystic fibrosis and Alzheimer’s, genetic traits like lactose intolerance, and various details about your genealogical history.  By 2012, 23andMe had driven down the price of DNA testing to US$99.  As a result, 23andMe is now the largest private database of genetic information.  Like gene therapies, the market opportunity for global genetic testing is massive and growing.  Currently a US$4.62B market, it is projected to grow to US$5.78B by 2022.

 

Of course, there are potential problems with this mass consumption of genetic testing.  It is one thing to diagnose and treat a disease based on genetics.  It is another to attempt to treat the risk of developing a disease based on genetics.  Because so many variables, including diet and lifestyle, feed into that overall risk, it is often impossible to accurately predict which aliments a person will develop over a lifetime.  While the genetic tests carry disclaimers that insist that the kits are not diagnostics, many consumers will worry about the future.  In the case of Alzheimer’s, tests can prompt anxiety over a disease that has no effective treatment or cure.  (Cf. Chloe Cornish, “23andMe: The Genomic Test of Time,” March 15, 2018, www.ft.com).

 

All caveats aside though, genetics is set to profoundly change the way that we diagnose, treat and prevent disease.  Please contact me (Delwin.Graham@canaccord.com; 780-408-1518) for more details and a few actionable ideas.