Under our Enabling innovation in healthcare theme we take a closer look at how gene therapy is moving closer to being a viable way of treating disease while also presenting some interesting investment opportunities.
A revolution in the healthcare industry has been quietly happening over the past two decades as the field of gene therapy evolves in dynamic new ways – and we believe it is presenting exciting investment opportunities.
The first DNA sequencing programme– basically parsing out information on all the genes for an individual – began in 1990 and took 13 years and an estimated $3 billion to complete. Today the cost of sequencing a person’s genome can be as low as $200. This incredible reduction in sequencing costs has been driven by innovation and a scaling up of the technology by businesses. It means that identifying the genetics of disease is now an affordable process.
As a result, gene therapy is now being applied to cure inherited disease in areas such as blood diseases, congenital blindness and deafness as well as some kinds of cancer.
Last year the UK medicines regulator gave approval for the world’s first gene-editing treatment for blood disorders – the first regulator in the world to issue approval of this kind.
And, earlier this year, the case of an 18-month-old toddler who was born deaf but had her hearing ‘restored’ after ground-breaking gene therapy treatment was widely reported in the press. The toddler was the first person in the world to take part in the trial, which is now recruiting children from the UK and further afield.
Meanwhile, also this year, in the US five children who were born deaf had some hearing restored to them after taking part in a pioneering medical trial.
The history – and the future
Scientists have been working on gene therapy since the 1980s with the aim of correcting genetic defects and preventing many serious and even fatal diseases.
Gene therapy involves the introduction of normal genes into cells in place of missing or defective ones, in order to correct a genetic disorder. There are currently between 4,000 and 6,000 diagnosed genetic disorders1. While gene therapy is still an emerging field, we believe the turning point is ahead when gene therapy is likely to become commonplace – just as antibody/protein drugs became so around 30 years ago.
In recent years the field of gene therapy has been expanding rapidly, with notable progress made by pharmaceutical and biotechnology companies in terms of trials begun and products launched. Investment management firm TD Cowen recently estimated that sales from gene therapy products would rise from around c. $2.5 billion in 2023 to a staggering $10 billion in 2025 and surpass $20 billion by 2027.
One-time cures?
The basic premise of gene therapy is that it works at source – DNA – and provides a ‘one-time cure’, making it different to many medical therapies. This concept of a one and done treatment aligns well with our focus on sustainable areas within healthcare.
Under many current models of healthcare, companies are paid on volumes rather than outcomes. Arguably they could therefore be considered to benefit from a person’s continued illness – as long as the person remains ill, ongoing treatment is required. Added to this, is the likelihood of ongoing price rises too.
There are parallels between the gene therapy treatment paradigm and our preference to invest in vaccines, in GSK’s portfolio for instance, the objective is the same; serious value added, once and done.
Risks
As with any disease treatment, there are risks of unintended consequences from treatment and these side effects must be evaluated properly to ensure the rewards outweigh the risks.
There are two key types of gene therapy. The most mainstream – and the type being discussed in this article – is somatic cell gene therapy. This involves modifications that affect the individual patient only and not any subsequent offspring.
The second form of gene therapy, which has proved much more controversial, is germline cell therapy. This involves modifications that affect all cells in the patient and as a result they are heritable which means they will be passed on to later generations. Currently germline cell therapy is banned in most developed countries, including the US and UK.
In the Sustainable Future team we look out for companies that treat the science and the risks with the respect these deserve. We look to invest in companies that demonstrate good management of ESG metrics and in particular: focus on specific diseases, organs and product safety.
Time to invest?
We believe there is a strong case that now is the time to invest in some targeted companies with exposure to gene therapy. Several gene therapies have now been approved for treatment and are being used commercially in Europe – these include Glybera from UniQure and Strimvelis from GlaxoSmithKline. These were also boosted by Kymriah (a cell therapy from Novartis) and Luxturna (from Spark Therapeutics) which were approved in the US towards the end of 2017.
There are many ways to gain exposure to companies involved in this exciting innovative area. If we look across the value chain (companies involved in different areas of gene therapy), these include companies that:
- make the specialist equipment and consumables used in the research and development of disease treatments. These are bits of kit like gene sequencers and other super-specialist kit that scientists use in laboratories and the consumables they use.
- have significant diagnostic businesses (to detect disease early to improve patient outcomes). These tests are expected to have an increasing genetic component.
- are specialist manufacturers of more complicated drugs that often require organic manufacturing processes (batches in vats of active ingredients) as compared to simple mixing of inorganic chemicals.
- are specialist companies involved in the delivery systems needed for the increasingly complex molecules used in therapy that have gone from small relatively inert inorganic molecules (pills you can put in a simple container) to larger biological molecules that need specialist containment and delivery systems.
- are focused on particular diseases or types of specialist theory.
The Sustainable Investment team have been closely following developments in gene therapy since the SF Funds started in 2001. These funds have targeted exposure to companies involved in the specialist equipment and consumables used in research, such as Thermo Fisher; in the manufacturing of more complex biologics therapies such as Lonza; or the equipment used for this, and in the specialist manufacturers of delivery systems used in complex biologics therapies such as West Pharma and Stevanato. We are less enthusiastic about investing in pure gene therapy companies and betting on particular cures to be approved for specific diseases given the early stage and heightened risks.
As with all investments in the SF funds, our investment process is designed to gain exposure to companies experiencing positive structural growth from sustainability themes – in this case the broad gene therapy value chain – which are well managed and addressing the key social and safety risks, which will be profitable, and those we believe are undervalued on a five-year time horizon. This exposure is primarily through the SF equity holdings.
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