Live preview mode. Wire is not yet published.

Genomics Revolution: A compelling investment opportunity

Clay Carter

Macrovue

21st Century Medicine and The Genomics Revolution

Medicine has made incredible strides in the last 100 years treating and curing diseases that were once “death sentences” and totally eradicating others. However, the next 100 years will not be simply a cumulative progression of medical knowledge but rather an age of explosive disruption as new discoveries in genetic editing, immunotherapy / immuno-oncology, genomic sequencing, personalized medicine, liquid biopsy, and the digitization of healthcare literally turn the industry on its head. As one commentator has said, "the next century will look more like science fiction than contemporary medicine”.

At Macrovue, we see this as a compelling investment theme. Why? Well, we are clearly in the very early stages of some very significant discoveries, there is a large universe of companies to choose from, both large and small, and we believe the potential upside is considerable for long term investors.

So what types of companies will Macrovue be looking at?

The majority of the companies in this Vue will be Biotechnology companies, but some will come from the technology sector, as well as life sciences, and the medical device industry.

We intend to focus on the following sectors:

Next-Generation Genomics

The Human Genome Project (HGP) — which established the sequence of the first whole human genome — was completed in 2003 and while immensely critical to advancing science, has proved that tying DNA structure to curing disease was more complex than originally expected. However, over the past decade, the pursuit of tying an individual’s genomic makeup to disease has made significant advances due to the incredible computing power and speed of the latest sequencing machines. As our understanding of the genomic makeup of humans increases, so does the ability to manipulate genes and improve diagnostic treatments and outcomes. Next-generation sequencing also makes personalized medicine possible. Since individual patients possess unique genomes they can be affected differently by the same disease or therapy. The ability to genetically sequence all patients, along with the viruses, bacteria and cancers that affect them has the potential to better match the therapy each patient receives. Genomic sequencing underlies the majority of the new therapies described below. 

Gene Therapy and Editing 

Crispr or “clustered regularly interspaced short palindromic repeats” is a family of DNA sequences found within the genomes of prokaryotic organisms such as bacteria and is considered by many to be the “Holy Grail” of Modern Biomedicine. This is the technology that can permanently change the genetic code of a living organism, including human beings, and has huge significance for modern medicine. CRISPR/Cas9 can be customized to insert, remove, or replace a target DNA sequence for therapeutic purposes. For example, a disease-causing gene can be neutralized through disruption or deletion and corrected via the replacement of a nucleotide sequence. This technology can be applied ex vivo (edits to cells made in the lab and then administered to the patient) or in vivo (editing cells in the patient).

Immunotherapies /Immuno- Oncology / CAR-T

Cancer is the developed world’s second most common cause of death, accounting for a quarter of all deaths and with an economic cost estimated to be in the trillions of dollars. Immunotherapeutic approaches leverage the patient’s immune system to eliminate or slow the growth and spread of cancerous cells with the potential to dramatically improve the economic and medical outlook for cancer patients. One of the most promising approaches is CAR-T (chimeric antigen receptor T-cell therapy) a type of treatment in which a patient's T cells (a type of immune cell) are changed in the laboratory so they will bind to cancer cells and kill them.

Epigenetics

Epigenetic breakthroughs are creating a toolbox of powerful drugs to treat cancer and many other potential indications. Epigenetics incorporate changes in the genome other than just mutations in the underlying genetic code. Importantly, epigenetic drugs, which can switch genes on and off, may materially increase the percentage of patients likely to experience profound increases in survival in response to immunotherapy. Several epigenetic drug classes may materially broaden and deepen the efficacy of cancer immunotherapies, such as PD1 antibodies which enhance the body’s immune response to tumours. Low dose inhibitors of the enzyme catalyst DNA methyltranferase (DNMT) may improve immune priming by triggering the transcription or copying of repressed viruses long embedded in the human genome.

Liquid Biopsy

A key requirement in the fight against cancer is access to better diagnostic testing capabilities that can improve the ability to detect and monitor tumours. Blood-based genetic testing, known as a liquid biopsy, is showing signs of filling that need and has the ability to dramatically improve cancer care in the coming years. With liquid biopsies (“LBs”), clinicians are searching for trace amounts of tumour DNA (“ctDNA”) circulating in the bloodstream that, when sequenced, can guide treatment decisions. While still in development, liquid biopsies will be tuned not only to detect cancer in its earliest stages but also to monitor patients in remission.

Anti-Aging

Many biotech companies are now developing therapies with the goal of extending the human “healthspan” — defined as the portion of a life lived free of age-related disease. Age-related conditions are the leading causes of death and health-care costs. Reducing the rate of aging would have enormous medical and financial benefits. Companies are exploring a number of potentially transformative approaches, including circulating youth factors, mitochondrial dysfunction, and the elimination of a specific cell type called “senescent cells”. 

Microbiome

Another emerging medical technology is the microbiome. The microbiome comprises all of the genetic material within a microbiota (the entire collection of microorganisms in a specific niche, such as the human gut) and focuses on microbes such as bacteria, viruses, and fungi that live inside humans. New research suggests that these microscopic organisms play a critical symbiotic role with their hosts thus a more complete understanding of this area may result in better treatments for cancer, intestinal diseases, and immune systems.

Big Data / Digitization of Healthcare

The electronic health record initiative and increasing consumer use of wearables have turned healthcare into a data problem. In 2013, at the onset of Meaningful Use, approximately 153 exabytes of healthcare data were produced. Looking forward to 2020, more than 2,310 exabytes of healthcare data are projected to be produced, creating a broad playing field for opportunities in these robust data sets for both the technology and life sciences industries who will also use artificial intelligence and machine learning in data reconciliation and interpretation. At the same time, rising costs in healthcare (~18% of U.S. GDP), an aging population, and the shortage of clinicians all create a need to monetize this data and bend the cost curve. Global consultancy McKinsey estimates these innovations could reduce healthcare spending by $300–$450 billion.

The Portfolio: The Genomics Revolution

Alexion Pharmaceuticals Inc (ALXN: NASDAQ)

Alexion Pharmaceuticals is a biopharmaceutical company, that researches and develops proprietary immunoregulatory compounds for the treatment of autoimmune and cardiovascular diseases. The Company develops C5 complement inhibitors and apogens which are two classes of potential therapeutic compounds designed to selectively target specific disease-causing segments of the immune system. The firm develops drugs that inhibit certain immune system functions that cause rare hematology, nephrology, neurology, and metabolic disorders. Its primary product, monoclonal antibody Soliris, is used to treat two rare genetic blood disorders -- paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). In 2017 it was approved in Europe, Japan, and the US for the treatment of the ultra-rare disease refractory generalized myasthenia gravis (gMG) in certain adults. Soliris is also being tested as a treatment for other conditions. The firm's newer products include enzyme replacement therapies Strensiq (the first approved treatment for hypophosphatasia, or HPP, in children) and Kanuma (a treatment for lysosomal acid lipase deficiency, or LAL-D). International sales make up more than half of Alexion's revenue.

Illumina Inc (ILMN: NASDAQ)

Illumina is the leading provider of DNA microarray and next-generation DNA sequencing products. In addition to selling instruments and consumables for high-throughput genetic analysis, the company maintains a service business that is comprised largely of whole human genome sequencing and non-invasive prenatal testing via the company’s 2012 acquisition of Verinata. In the long run, it is likely that the genetic analysis market will expand at a rate far faster than all others in life sciences. Personalized or “precision” medicine is the most important multi-year theme in this space. Illumina’s comprehensive portfolio of enabling products positions the company as the best play and an arch disruptor in the genomics revolution that is underway.

Currently, Illumina absolutely dominates the gene sequencing space with a 70% market share and accounts for ~90% of DNA data produced. Its high- end product, the HiSeqX Ten, is the most powerful sequencer ever created and it can sequence genetic code for US$1000. It sells for US$10 million. One of the first purchasers was Australia’s Garvan Institute of Medical Research. In January 2017 Illumina launched its latest sequencing system, the next generation NovaSeq which can sequence the genome in one hour and may eventually do it for about US$100.00.

The addressable market for genetic sequencing and future growth opportunities is impressive. Illumina believes it is in excess of US$20 billion. Illumina sells the sequencing machines, necessary consumables, as well as the software to analyse the data. Illumina is also involved in liquid biopsy via its Grail spinoff. According to results published in the journal Annals of Oncology, they've come up with a method that can detect mutations in NSCLC patients’ blood with high sensitivity. In some cases, the technology was useful when tissue biopsies were inadequate for analysis. The new tool uses Illumina’s “ultradeep next-generation sequencing,” which involves reading a region of DNA 50,000 times, on average, to detect low-frequency variants. White blood cells were also sequenced to filter out "clonal hematopoiesis," which are noncancerous signals that can come from bone marrow. The sequencing information was then fed to a machine learning algorithm developed by Grail to determine mutation readouts.

Vertex Pharmaceuticals Incorporated (VRTX: NASDAQ)

Vertex Pharmaceuticals Incorporated discovers, develops, and commercializes pharmaceutical products. The Company develops drugs for the treatment of cystic fibrosis, cancer, inflammatory bowel, autoimmune disease, and neurological disorders. Essentially, Vertex Pharmaceuticals aims to cure patients with previously incurable diseases. The biotechnology firm uses an integrated, multidisciplinary approach -- employing biophysics, computer-based modelling, and functional genomics -- to speed up the discovery and development of new drugs. Its orphan drugs Kalydeco and Orkambi (launched in 2015) are used to treat cystic fibrosis; the firm is also seeking approval for the medications for other indications. Vertex has other drugs in development, including additional treatments for cystic fibrosis as well as cancer, pain, and the flu. Analysts see substantial opportunity in cystic fibrosis (CF). Symdeko is a therapy for cystic fibrosis (CF) for patients carrying two copies of the F508del mutation in the CFTR gene (the gene defective in CF). The company’s next-gen correctors (as part of a triple combination) have the potential—if successfully developed and approved—to drive substantial long-term upside in CF. Two of these triple combos (in conjunction with next-gen correctors 659/445) are currently in Phase 3, with a potential NDA filing in mid-2019. VRTX dominates the CF space, has potentially meaningful bottom-line leverage, and an advancing pipeline (including therapies for pain and SCD/beta-thal) that should sustain its competitive position and add to the company’s overall strategic value. The company is also in late-stage trials exploring the use of lumacaftor in combination with ivacaftor in children with cystic fibrosis.

Moderna Inc (MRNA: NASDAQ)

Moderna, Inc. is a clinical-stage biotechnology company. The Company focuses on the discovery and development of messenger RNA therapeutics and vaccines. Moderna develops mRNA medicines for infectious, immuno-oncology, and cardiovascular diseases. MRNA has spent almost a decade building a world-class platform around messenger RNA (mRNA) therapeutics, a new class of medicines that, if ultimately successful, could have broad and disruptive potential across the whole biopharma landscape. Messenger RNA (mRNA) can be thought of as functioning as the “middle man” in the complex process of turning genes found in DNA into proteins. mRNA is composed of nucleotides similar to DNA and serves as the bridge to translate this language into the language of proteins. Moderna believes that, through the delivery of mRNA-based treatments, it can co-opt the cellular machinery of a patient to produce the encoded therapeutic protein. The advantages of this approach include 1) the ability to produce naïve or nearly naïve proteins, even ones that are difficult to make; 2) better access to cellular (and subcellular) compartments; 3) the ability to multiplex; and 4) a more streamlined manufacturing process relative to more traditional approaches and synergies across individual mRNA therapeutics. Moderna has 21 candidates in the pipeline; 10 that have already entered clinical trials. While early (only one product has made it to Phase 2 so far), the company clearly has many opportunities to succeed. So far, Moderna has treated >760 patients in total with mRNA most of which have been in the context of prophylactic vaccines, and no safety signals have been evident. Furthermore, early signs of protein production/favourable immune response are evident in the trials.

Veeva Systems Inc Class A (VEEV: NYSE)

Veeva is the leading provider of cloud-based software solutions for the healthcare and life sciences industries with its core CRM solution complemented by newer products like Vault and Network that are poised to drive company growth going forward. The Company offers enterprise applications, multichannel platform, customer relationship, and content management solutions. Veeva Systems is breathing new life into software for the health care industry. Its cloud-based software and mobile apps are used by pharmaceutical and biotechnology companies to manage critical business functions. Veeva Systems' customer relationship management software uses Salesforce's platform to manage sales and marketing functions. Its Veeva Vault provides content management and collaboration software for quality management in clinical trials and regulatory compliance for new drug submissions. Its software is used in 75 countries and available in more than 25 languages, but North America is its largest market.   

Intellia Therapeutics Inc (NTLA: NASDAQ)

Intellia Therapeutics, Inc. operates as a clinical-stage biotechnology company that focuses on the research and clinical development of gene editing therapies for patients with genetically-based diseases. It provides scientific expertise, clinical development, and intellectual property position to unlock broad therapeutic applications of CRISPR or Cas9 genome editing and develop a potential new drug class. Via its partnership with Swiss pharmaceutical giant Novartis AG, Intellia has access to proprietary lipid nanoparticle (LNP) delivery technologies. The company has focused on building an in vivo pipeline targeting rare and well-characterized monogenic diseases in the liver that can be addressed via modification of hepatocytes (A hepatocyte is a cell of the main parenchymal tissue of the liver and makeup 70-85% of the liver's mass). Intellia’s current in vivo pipeline includes its lead program in transthyretin amyloidosis (ATTR), as well as programs in alpha-1 antitrypsin (AATD), hepatitis B virus (HBV), and inborn errors of metabolism (PH1). Analysts believe Intellia has the most well-characterized in vivo pipeline of the public gene editing companies.

Ultragenyx Pharmaceutical Inc (RARE: NASDAQ)

Ultragenyx is developing therapies for rare and ultra-rare diseases. It has a full portfolio of promising therapies at different stages of development. Crysvita (burosumab, KRN23) is a fully-human monoclonal antibody administered via subcutaneous injection and is FDA approved (Apr. 2018) and EU conditionally approved (Feb. 2018) for the treatment of X-Linked Hypophosphatemia (XLH) and is currently being tested in a Phase 2 trial for Tumor-Induced Osteomalacia (TIO). Mepsevii (rhGUS) is an intravenous enzyme replacement therapy FDA approved (Nov. 2017) and EMA approved (June 2018) for the treatment of mucopolysaccharidosis 7 (MPS 7). Triheptanoin (UX007) is a medium odd-chain triglyceride of seven-carbon fatty acids and is being developed for Long-Chain Fatty Acid Oxidation Disorders (FAOD). rhPPCA is an enzyme replacement therapy in preclinical development for galactosialidosis. Ultragenyx has a collaboration and license agreement with Kyowa Hakko Kirin for the development and commercialization of burosumab for XLH and TIO. In Oct. 2017, the company acquired Dimension, a gene therapy company, for $150M cash. The deal closed in 4Q17. Ultragenyx is now developing gene therapy candidates DTX301 (OTC Deficiency) and DTX401 (GSD1a) in Phase 1 trials. DTX201 is being developed by Bayer for Haemophilia A.

Teladoc Health Inc (TDOC: NYSE)

Teladoc Health Inc. provides healthcare services. The Company diagnoses, recommend treatment and prescribes medication for routine medical issues through phone and video consultations. Teladoc Health serves patients worldwide. There is a significant market opportunity for telehealth services (Teladoc estimates a total addressable market of ~$57 billion, including ~$17 billion on the ambulatory care side and ~$12 billion in behavioural health), which help to solve two key issues affecting the U.S. healthcare system: lack of access to care and rising costs. Analysts believe that the telehealth market is virtually untapped at this point. Teladoc is well-positioned given the company’s established brand and other competitive advantages, including an innovative and scalable technology platform and a high-quality physician network. With 80% of revenue currently generated from subscription access fees, this leads to a high degree of visibility. For a flat fee of $45 per-visit, Teladoc provides its members, around-the-clock, with on-demand appointments via voice or video chat. Teladoc estimates it will have roughly 38 million members completing four million virtual visits on its global platform this year. It also has partnerships with over 12,000 health plans, self-insured employers, and hospitals and health systems. The network includes more than 50,000 board-certified doctors.

NanoString Technologies Inc (NSTG: NASDAQ)

NanoString Technologies develops solutions and life science tools for translational research and molecular diagnostics. The Company offers profiling technology for gene transcripts and copy number variations. Basically, NanoString Technologies helps unravel the complexity of the human genome for research and diagnostic purposes. The company makes a complex genomic analysis device that can be used onsite at clinical laboratories, instead of shipping samples offsite for study. Called the nCounter Analysis System, the device uses tissue extracted from a tumour to analyze up to 800 genes in a single experiment. These tests can help researchers understand the molecular basis of some diseases, such as cancer. NanoString sells products such as instruments and consumables (55% of revenue), collaborating with partners (about 40% of revenue), and providing services (5%). The company also sells consumable items used in the testing process. They include custom codesets, panels, reagents, and cartridges. Custom Codesets, which enable users to evaluate specific genes being studied, account for about a third of consumables revenue. The ProSignia product is a molecular test for diagnosing breast cancer. NanoString also collaborates with companies such as Lam Research, Celgene, and Merck to integrate its products into their instruments. NanoString aims to establish the nCounter Analysis System as an invaluable tool in oncology research and diagnostics. The company also sees potential in immunology and neurology. The company is launching a new class of product, Digital Spatial Profiling, that provides researchers and clinicians with fast, accurate information on gene and protein expression across a tissue sample. The company makes about 75% of its sales in the US. Customers include Merck, Medivation, and Astellas.

Guardant Health Inc (GH: NASDAQ)

Guardant Health is a pioneer in the liquid biopsy market. GH develops and commercializes proprietary blood-based tests for the detection and management of cancer, with both clinical and biopharma applications. Liquid biopsy represents the fastest-growth vertical in cancer diagnostics and GH is a clear liquid biopsy market leader with a first-mover advantage. GH has developed its proprietary digital sequencing workflow to successfully commercialize two tests for personalized therapy selection while developing two programs (LUNAR-1/2) focused on recurrence monitoring and early cancer screening. Importantly, FDA approval for GH360 (73-gene panel) is expected in 2019, which should pave the way for pan-cancer Medicare coverage nationwide starting in 2020. While GH shares have had a strong run past its October 2018 IPO, analysts are positive on the company, given we are in the very early stages of liquid biopsy adoption, there are ongoing clinical validations, and long- term upside via the company’s LUNAR programs. Guardant is also well equipped to be a major player in the as-yet untapped $33B recurrence detection and cancer screening markets.


Clay Carter
Clay Carter
Global Investment Specialist
Macrovue

Clay has over 30 years experience investing in global equity markets. He has a broad knowledge of all global equity markets, economies and most major asset classes. Above all, Clay considers himself a “stock picker” with a focus on growth.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

Comments

Sign In or Join Free to comment