Finding the cure: Gene Therapy

Today, physicians have far better knowledge of the causes and with them the treatment options for various diseases. Medicine is no longer a ‘one size fits all’ market. At the same time, global healthcare systems are under pressure to treat patients sensibly, move them through the system quickly and promote a long-term healthy lifestyle over a quick fix. The result is a huge surge in research into targeted, personalised therapies which has been aided by rapid improvements in the speed and cost of genetic profiling.

Made-to-measure medicine

Genetic medicine falls into one of three broad camps – gene therapy, cell therapy and gene editing – and each has its own specialists, nuances and potential applications.

In early 2018, a gene therapy for progressive vision loss caused by a fault in the RPE65 gene became the first commercially available genetic medicine in the US. Created by biotech specialist Spark Therapeutics (US:ONCE), the treatment – Luxturna – works by giving patients a working copy of the faulty gene, delivered directly into the DNA via a non-harmful virus that can pass through human cell walls. The treatment has been remarkably successful: after being injected, 90 per cent of formerly blind patients in a clinical trial were able to navigate a maze in low lighting.

Viral delivery mechanisms are also the key to cell therapies, but rather than correct faulty genes these treatments modify the DNA of immune cells so they can fight illness. Swiss pharma giant Novartis (CH:NOVN) fought off competition from Juno Therapeutics and Kite Pharmaceuticals to become the first company to gain commercial approval for a cell therapy to treat cancer. During treatment, a sample of immune cells is modified in a lab before being inserted back into a patient where they can fight off the tumour cells that cause leukaemia. First approved for young patients, the treatment has since been given the green light for use in adults as well.

But the speed at which genomics has progressed means that both cell and gene therapies are already starting to be described as old-fashioned. Instead, all eyes are on a type of gene editing known as CRISPR, which involves the use of tools to cut out bad parts of human DNA and replace them with good ones. The idea came about in 2012 when Jennifer Doudna, a molecular biologist at Berkeley, suggested that humans could make use of a highly advanced defence mechanism that certain bacteria use to fight viruses. These bacteria copy sections of the virus and store them in their own DNA, which means they are easy to identify should the virus attack again. Ms Doudna suggested that if these bacteria were given copies of human DNA, they could be used to target and snip out bad genes to make room for healthy ones to be inserted. “I can just programme it and it cuts DNA wherever I want,” she explained. In just six years, that concept has gone from a theory on a whiteboard in Berkeley to clinical trials in China.

But more recently, people have started to question whether Ms Doudna’s therapy has progressed too fast. In June, just before Swiss company CRISPR Therapeutics (CH:CRSP) was due to start its first human trials, researchers suggested that the technique could inadvertently cause cancer by triggering faulty DNA repair mechanisms. Then in July another study questioned whether scientists had “seriously underestimated” the number of changes CRISPR could make to a human genome. The studies sent CRISPR Therapeutics’ share price into a spin and put a halt on its US and European clinical trials.

Ms Doudna herself has also expressed concerns. In 2016, she told US programme Radiolab that the technology could result in alterations to humans who haven’t been born yet. Changes made to a person’s DNA “will be passed on to their children and you can’t ask [them] if that’s ok because you’re doing it before they’re born”. Biologists around the world are worried that gene editing in embryos could affect the evolution of humans and put us on the slippery slope that is designer babies.

Reward vs risk

But even with the ethical queries and the fact that gene therapies may not be the final answer to the world’s health problems, these treatments have enormous commercial potential. According to Goldman Sachs, it’s a $5 trillion market opportunity.

That explains why pharma companies and scientists are working so hard to take a slice of the market. In the UK, AstraZeneca (AZN) has upped its research and development spending to more than a quarter of its revenues as it ploughs money into gene-modifying cancer therapies, while GlaxoSmithKline (GSK) – not wanting to be left behind – recently made a $300m investment in genetics company 23andMe to give it access to a massive bank of genetic information. Consolidation has also been giving US pharma giants access to the genetics market: Gilead (US:GILD) bought Kite for a whopping $12bn in August last year and Celgene (US:CELG) spent $9bn on Juno in early 2018, despite problems with its cell therapy trials.

But look beyond the hype and it turns out that making money from gene therapies is not that straightforward, mainly because these are one-time treatments. Historically, patients with life-long diseases would take preventative medicines which could manage symptoms over the course of a lifetime – providing pharma companies with a steady stream of revenues. Gene therapies are curative, which means patients should only need to have them once. Goldman Sachs thinks that curing patients outright is not a sustainable business model as rather than providing massive commercial opportunities for the pharma companies, it could instead hurt long-term profits.

Recently launched treatments are a case in point. In a bid to recoup the cost of research and development investment, the companies with commercial gene therapies have stuck hefty price tags on their treatments. Luxturna costs $425,000 per injection (and each eye needs a separate dose), while Kymriah comes in at a cool $475,000. It’s therefore hardly surprising that both Spark and Novartis are yet to report impressive commercial traction from their respective medicines – they are out of reach to large portions of the population. By contrast, GSK’s newly launched traditional respiratory medicine Nucala has had an incredibly successful first few months on the shelves.

It is also worth noting that investment in highly experimental treatments has turned the pharma giants into high-risk companies – a stark contrast to the stable, defensive, income majors of the late 20th century. AstraZeneca is a £77bn company, but its long-term earnings potential hinges on the outcome of a small number of clinical trials. Celgene made almost $13bn of revenue in 2017, but nearly two-thirds of that came from just one drug.

Jumping on the bandwagon

Still, investors would be foolish to steer clear of all companies with exposure to genetics. Targeted, personalised therapies are the future of medicine and it is only a matter of time before pricing structure and commercial models catch up with the rate of drug development. The UK offers plenty of opportunities to jump on the bandwagon, which we've listed in the table below.

UK listed companies with exposure to genetics

Source: IC; Capital IQ; company accounts