The Nobel Prize got Wall Street’s attention. On Oct. 7, the Swedish Academy awarded 2020’s Nobel in chemistry to two scientists for the development of Crispr-Cas9—a molecular scissors that can find and edit almost any sequence in a cell’s DNA. The 2012 discovery by Emmanuelle Charpentier and Jennifer Doudna had been commercialized with rare speed, and the Nobel was a boost for three companies founded to develop Crispr gene-editing therapies:
Crispr-Cas9 is the second generation of technologies that seek to repair thousands of inherited genetic disorders and battle cancer in new ways. Gene editing is advancing so quickly that next-generation technologies are already on the heels of Crispr-Cas9, including a more-precise tool called base editing, which has lifted the stock of
(ticker: BEAM) sixfold since its February 2020 initial public offering.
While gene-editing start-ups will lose money during years of clinical trials, it’s hard to say the stocks are overvalued. If their one-time interventions can cure diseases that otherwise require chronic treatment—or lack any treatment at all—then the stocks will fly. Patent rights and know-how also make them desirable partners or acquisition targets for Big Pharma. Premiums of 100% were paid in deals for first-generation gene-therapy start-ups, like the
(NVS) purchase of AveXis in 2018 and
(RHHBY) 2019 acquisition of Spark Therapeutics.
The breakthroughs made possible by gene editing were shown in the Jan. 6 news that base editing had repaired a genetic defect in lab mice suffering from progeria, a disorder that prematurely ages and kills children born with the mutation.
“The median life span of these children is just 14 years,” says David Liu, a Harvard University chemistry professor and gene-editing pioneer at the Broad Institute and the Howard Hughes Medical Institute, who led the research with a team that includes National Institutes of Health director Francis Collins. “We’re very excited about a potential one-time treatment for progeria that directly corrects the root cause of the disease instead of treating its symptoms.” Of course, researchers must now prove that the treatment will work in humans.
Researchers began to propose ways to fix genetic diseases nearly 50 years ago. Genetic instructions are spelled out in our DNA with an alphabet of four molecules known as bases and designated by the first letters of their chemical names: A, T, G, and C. The bases pair up—A with T, G with C—to form the three billion letter pairs of our genome. Specific sequences encode for specific genes, which in turn provide instructions for assembling specific proteins. If a mutation scrambles the letters, however, the instructions can become garbled and yield a different version of the protein that causes disease. Genetic therapies seek to correct these errors.
Gene-therapy experiments began in the 1990s, but it took until 2017 for the Food and Drug Administration to approve the first one—the Spark/Roche treatment Luxturna for a genetic defect that leads to blindness. The second FDA approval was for Zolgensma, an AveXis/Novartis therapy for a muscle-wasting disease. Both diseases are rare. But at over $2 million per treatment, Zolgensma sales in the latest quarter were running at a $1.2 billion annual rate. Novartis believes that sales will top $2 billion in 2021.
Most first-generation gene therapies use a hollowed-out virus to carry synthetic versions of a gene into cells. The transferred gene isn’t integrated into the cellular DNA, but the cell can still use the instructions to produce functional versions of the missing protein.
Hundreds of such gene-augmentation therapies are in clinical trials.
(PFE) are each in Phase 3 trials on therapies to treat hemophilia, the bleeding disorder resulting from a mutation in the gene for a blood-clotting protein. Pfizer is also racing
(SRPT) to treat Duchenne muscular dystrophy with transferred genes that can produce working versions of a muscle protein that patients can’t produce.
Pfizer is making a big bet on these gene-transfer therapies, with three clinical trials that could lead to approvals in the next few years. Manufacturing capacity will be critical, says Seng Cheng, the chief scientific officer of Pfizer’s rare disease division. Each muscular dystrophy patient must be transfused with trillions of copies of the gene-ferrying viruses, so Pfizer is investing in a North Carolina manufacturing facilities The company hopes to launch an approved product by 2023.
Each of its gene therapies could generate at least a billion dollars in annual sales, says Pfizer. The president of Pfizer’s rare disease group, Suneet Varma, says U.S. regulators expect to be approving 10 to 20 genetic therapies a year by 2025. “There could be 100 of these on the market in the U.S. by the end of the decade,” Varma says.
These gene-replacement therapies have limitations, however. Their effect wears off as children grow, or in parts of the body with high cell turnover, since transferred genes aren’t integrated in the genome and are left behind as cells divide. As a result, these expensive treatments might need to be repeated every few years. A patient’s immune system may then develop antibodies against the delivery viruses. And with gene-transfer therapy so new, its durability remains an open question.
Falling levels of clotting protein generated by BioMarin’s hemophilia therapy led the FDA to insist on another year of trials before the agency would consider approving it; BioMarin shares lost a third of their value in August after the news. Sarepta’s stock lost half on Jan. 8, after disappointing interim data on its muscular dystrophy gene-transfer therapy.
That ability to discriminate a single address, based on a certain sequence out of three billion letters in the genome—that is still kind of a magical outcome.
Because gene editing permanently changes the genome, it doesn’t appear to suffer from these issues. Nature evolved many tools to cut DNA at specific spots in the genome. As scientists discovered these tools, they became the foundations of public companies:
(SGMO) has mastered tools known as zinc finger nucleases, which it is using in collaborations with Pfizer, Novartis, and
(ALLO) use tools like meganucleases and Talens to develop therapies for cancer, as does
(BLUE) in its advanced trials against sickle-cell anemia and cancer. Bluebird announced this past week that it would split into two companies, one pursuing cancer and the other, rare diseases.
The most widely used tool for targeted DNA editing is Crispr-Cas9. Derived from a mechanism that bacteria evolved to recognize and destroy invading viruses, the tool pairs the DNA-cutting protein Cas9 with a strand of RNA that goes by the name of Crispr. RNA normally carries genetic information from DNA to the cellular factories that assemble proteins. Because RNA mates with a complementary sequence of DNA, RNA “guides” can be written to direct the Cas molecular scissors to almost any genomic address.
“That ability to discriminate a single address, based on a certain sequence out of three billion letters in the genome—that is still kind of a magical outcome,” says Beam Therapeutics chief executive John Evans.
Gene editing has proved adept at permanently disrupting troublesome genes. After latching on to a targeted sequence of a couple of dozen letters, the Crispr-Cas complex cuts cleanly across the two strands of DNA. Natural repair processes of the cell then rejoin the cut ends. However, the repair process is error-prone, and often inserts or deletes a base-pair letter. That can be a good thing, if inserts and deletions render a toxic gene inactive.
Although Crispr is faster and cheaper, zinc fingers and Talens can also be programmed to target and cut with precision. Nonetheless, the stocks that use them—Sangamo, Allogene, Cellectis, Bluebird bio—lack Crispr’s sizzle. That makes them a cheaper way to participate in a gene-editing boom.
Crispr Therapeutics (CRSP), Editas (EDIT), and Intellia (NTLA) all came public in 2016, endowed with licenses for the technology from Doudna’s University of California, Berkeley and Charpentier’s University of Vienna (she has since moved to Berlin’s Max Planck Society), or the Broad Institute. Each company has about a half-dozen programs. And they’ve raised lots of cash.
The market favorite is Crispr Therapeutics, co-founded by Charpentier, with a $13.8 billion valuation at its recent stock price of $212. It is in trials with a treatment that infuses cancer patients with tumor-targeting immune cells. This year, Crispr plans another trial of edited cells to treat diabetes. And it’s well along in trials treating one of the most common genetic disorders, sickle cell. With 100,000 Americans suffering from the disease, and 4,000 more born each year, Chardan Capital Markets analyst Geulah Livshits sees an annual demand for at least 3,000 one-time treatments a year, at more than $1.6 million per treatment.
Crispr Therapeutics CEO Samarth Kulkarni believes that gene editing will outperform gene-transfer therapies. “Gene therapy, while exciting, may only be a five- to 10-year solution,” Kulkarni says. “Gene editing is hopefully a lifelong solution.”
His company burned through some $160 million in the first nine months of 2020, but it has over $1.5 billion in cash, and partners like
(VRTX) to share development costs.
Vertex was one of the first companies to bet on Crispr, after gene therapies struggled with a genetic disorder that has been Vertex’s focus, cystic fibrosis. Vertex and Crispr Therapeutics are now developing editing therapies for cystic fibrosis, muscular dystrophy, and blood disorders such as sickle cell and beta thalassemia. Vertex science chief David Altshuler likes the versatility of gene editing, where the same therapy can be deployed against both sickle cell and thalassemia.
Editas and Intellia have more modest market caps of about $5 billion each. Editas has one therapy in trials, a treatment for a retinal disorder, and plans to start trials in sickle cell, thalassemia, and off-the-shelf cell therapies against cancer.
Sources: Sentieo; FactSet
Intellia is also targeting sickle cell, in United Kingdom trials backed by Novartis. Partnering with
(REGN), Intellia has also started trials of the first editing therapy systemically infused into patients—aiming to knock out a mutant gene that makes a misfolded form of the protein transthyretin, whose buildup slowly kills. Data may start appearing in 2021. Like progeria, the disorder can’t be addressed by gene therapy, since the mutant gene would keep producing mutant transthyretin and dominate the output of transferred healthy genes.
Therapies for genetic diseases are often pricey, producing potentially large markets.
- $4.8 B
Some 100,000 Americans suffer from sickle-cell anemia, a blood disease. Analysts estimate annual demand of 3,000 treatments at $1.6 million per patient.
Chardan’s Livshits covers all three Crispr stocks and rates each a Buy. “They’ve all gone in slightly different directions,” she says. But gene editing promises permanence, which she sees as an advantage.
Other analysts find valuations of the gene editors hard to rationalize, and have price targets well below where Nobel enthusiasm has carried the stocks. And if scarcity value is fueling enthusiasm, competition is coming. Nobel laureate Doudna is advising ventures that have yet to come public, including Scribe Therapeutics, Caribou Biosciences, and Mammoth Biosciences. Raymond James analyst Steven Seedhouse rates Crispr Therapeutics at Underperform, arguing that its lofty price overvalues the advantages of Crispr-Cas over other technologies. He thinks that Editas has gotten ahead of itself, and he rates it a Market Performer. Only the lowest valued Intellia is an Outperform in Seedhouse’s view.
As bullish as most investors are about Crispr-Cas stocks, they seem more excited about Beam. Despite starting four years after the other companies and trailing them into the clinic, Beam has a market cap of $5.7 billion, at a recent stock price of $107, which values it above Intellia and Editas.
Beam was launched by Liu and other co-founders of Editas to commercialize base editing, an even more precise form of Crispr-guided repair that came out of Liu’s lab in 2016. When a disorder results from a single incorrect base letter in a gene—and about 30% of known genetic problems are caused by such point mutations—base editing can swap a C and a T, or an A and a G, to correct the problem. And unlike other gene editors, it does not cut both DNA strands.
“The only thing the Crispr-Cas editors can do well is to cut DNA,” says Beam CEO Evans. “They can’t really control what happens to the cut after they’ve made it. With base editing, we change a single base and it’s as if the cells don’t notice they’ve been edited.”
After spending some $70 million in cash in the nine months through September, Beam still has over $300 million in cash. It is targeting several disorders pursued by gene-editing predecessors, including sickle cell, for which it hopes to start trials this year.
Base editing can address problems unreachable by other genetic technologies, like progeria. A single injection corrected the progeria gene’s errant T to a C in mice. Crispr-Cas DNA cutters might target the patient’s other healthy gene copy, which differs by just one letter from the toxic version. In mice, Crispr-Cas edits of the gene achieved modest results.
On the horizon are even newer gene-editing strategies. Base editing corrects only single-point mutations. Crispr-Cas technology can efficiently disrupt targeted genes, but so far it hasn’t lived up to hopes that it could reliably insert desirable stretches of code into a gene. In 2019, Liu’s lab showed a way to do that, with a technology called prime editing.
Prime editing can insert, delete, or replace a sequence of several dozen base pairs at a precise location. That might be what’s needed to permanently fix certain kinds of cystic fibrosis. Prime editors can also swap base pairs that base editing can’t, which is why Beam has licensed prime technology for a treatment that would repair sickle cell more directly than other therapies.
Prime editing can’t yet work efficiently in some kinds of cells, though Liu thinks that it will eventually allow therapies to address nearly 90% of pathogenic mutations.
To target still larger insertions and deletions, researchers are interested in how bacteria shuffle big chunks of DNA, using mechanisms called transposases and recombinases. Researchers like Liu have shown that recombinases can manipulate large segments of DNA in mammalian cells, but only in a restricted set of locations in the genome.
The technologies have caught the eye of one of the savviest venture investors in biotech, Noubar Afeyan. His Cambridge, Mass.–based Flagship Pioneering launched Covid-19 vaccine developer
(MRNA). Last year, Flagship unveiled a start-up called Tessera Therapeutics that hopes to use transposases to cut and paste entire genes. “What if you could directly paste an entire sentence, as opposed to the Liquid Paper equivalent of changing one letter on a typewriter?” Afeyan asks.
Neither Tessera nor other labs have yet shown that transposases can home in on a wide variety of DNA targets, at least in cells more complex than bacteria. But Tessera CEO Geoffrey von Maltzahn says his company will show that it can add new genes that won’t be left behind when a cell divides. That might allow therapies to be used in infants, instead of waiting until a child’s growth slows, as gene therapy must generally do. On Jan. 12, Tessera announced a $230 million infusion from investors that included
the Alaska Permanent Fund, and the Qatar Investment Authority.
There will be uses for all of these genetic tools, says Liu. “There are non-Crispr base editors and nucleases that are widely used,” he says. “In reality, nucleases, base editors, and prime editors all have their own strengths and weaknesses, depending on the specific application.”
Of course, investors can’t expect to see profits at these gene-editing ventures for some time. Clinical trials in gene-transfer therapies have dragged on longer than anyone expected, with the FDA imposing repeated halts to investigate potential safety issues. Gene-editing trials may not see approvals until 2023 or 2024.
As with gene-transfer therapies, revenues of $1 million to $2 million per treatment do add up, even for rare diseases. In developed markets, populations with a particular genetic disorder may number in the hundreds or thousands, creating billion-dollar opportunities for each disease. After those existing populations are cared for, annual sales would taper to the rate that new cases emerge.
Pfizer is discussing payment plans with government and private payers, even though the company has yet to win approval for its gene-transfer therapies. Pfizer’s Varma says that government payers are considering pay-for-performance plans or annuity models that spread payments over a number of years. Insurers have discussed risk-pooling plans for genetic diseases.
The drug industry will see its financial model change, says Varma, as one-time treatments replace chronic sales. “Traditional pharmaceutical products tend to hit their peaks in the last three or four years before a loss of exclusivity,” he says. “Gene therapies could be the reverse, meaning you hit your peak in the first three years.”
Although gene-editing stocks have shot through price targets, the examples of many biotechs show how hard it is to pick an entry point with new technology platforms. Smart investors may be waiting for a lull in the scientific news. But an acquisitive pharma company may be waiting, too.
Write to Bill Alpert at [email protected]