The Scary Truth About Gene Editing
A cutting-edge trend that's extremely controversial... This happened much sooner than anyone imagined... Serious debate at a meeting of surgeons... What it all means for investors... The scary truth about gene editing...
Troubling news out of China hit major news outlets at the end of 2018...
The Wall Street Journal, the Washington Post, and the New York Times all covered the story... And yet most folks likely skimmed over it, not fully recognizing the significance.
In today's Digest, I (John Engel) want to talk about this poorly understood cutting-edge biotech trend, which could soon be incredibly lucrative. I have to warn you, though... It's also rife with controversy.
If you start feeling uneasy, you're not alone. I've broached the subject with my family, friends, and colleagues at Stansberry Research, and the conversation always seems to leave folks questioning their sense of what's right and what's wrong.
Unsurprisingly, this debate is also taking the medical community by storm. That's because the potential benefits of gene therapy are hard to ignore, even if the ethical boundaries are still being drawn.
I'm talking about 'CRISPR-Cas9' – the gene-editing tool scientists discovered seven years ago...
CRISPR-Cas9 – which is more commonly referred to as just CRISPR (pronounced "crisper") – is like a "genetic scalpel." In simple terms, it's like running a search function on your computer. By typing a phrase, your computer can find that sequence in a document.
CRISPR has a similar function, except it "finds" the genetic letters of DNA. For example, CRISPR can seek out a string of DNA code within the vast sequence of the human genome. That's like searching through a document with 1.35 billion words – the length of nearly 2,500 copies of War and Peace.
But CRISPR isn't merely a powerful search function. It can also alter genetic sequences.
In other words, it's like the genetic version of the "find and replace" function in a Microsoft Word document. That's how the gene-editing tool earned its reputation as a potential miracle medicine that could correct some of the most troubling genetic diseases.
You might be wondering what any of this has to do with China...
The fact is, China's history of scientific oversight pales in comparison to those of the U.S. and Europe.
In fact, a rogue U.S. trained researcher slipped through the cracks as a result of this lack of oversight... And he used CRISPR in ways that overstepped scientific ethical boundaries.
Dr. He Jiankui, a professor at the Southern University of Science and Technology in China's Shenzhen province, claims responsibility for the first CRISPR-modified babies. Dr. He manipulated multiple embryos during in vitro fertilization, which resulted in the birth of twin girls.
The first CRISPR-modified human beings are now on the Earth much sooner than anyone could have predicted.
But this case is even more complicated than it may seem at first glance...
Though Dr. He's actions were presumably ego-driven, we can assume he wasn't acting maliciously.
His aim was to edit genes that in theory prevent the contraction of human immunodeficiency virus ("HIV"). He did this because the father of the first CRISPR kids was HIV-positive. He aimed to keep the girls' father from spreading the infection to his children. That's also what convinced the parents to agree to the experimentation in the first place.
Despite his alleged good intentions, this comes with some major problems...
First, the genes he edited aren't proven to eliminate the threat of contracting the virus. And more important, he circumvented standard scientific research practices. He did his work behind closed doors, without the consent of the broader scientific community. That's what has researchers and medical professionals up in arms.
According to reports from the Wall Street Journal, Dr. He took leave from his job as a professor. He says an unaffiliated hospital gave him permission to run the embryonic gene-editing experiments. But according to the Shenzhen health department, the hospital didn't have the authority to make that decision (hence why the investigation is still ongoing).
To make matters worse, Dr. He publicized his findings on video-streaming website YouTube. (Normally, such profound experiments publish in scientific journals after review by a panel of experts.)
Dr. He appeared to have a clear motive behind this unusual method of public disclosure...
It seems that it allowed him to control the timing of the subsequent media bomb.
He uploaded his videos to YouTube ahead of the second annual International Summit on Human Genome Editing last November. The meeting, which took place in Hong Kong, is the largest gathering of experts in the field. He tried to steal the show and win the admiration of his peers.
Clearly, Dr. He lacks social awareness. Anyone could tell you this plan was destined to backfire. Most experts are still in an uproar months later.
Massachusetts Institute of Technology professor Richard Hynes told the Wall Street Journal, "None of this would be acceptable in the U.S. and Europe and, in fact, in most parts of the world."
University of California, Berkeley biochemist Dr. Jennifer Doudna – the co-inventor of CRISPR – responded in a bioethics lecture given in January by saying, "He thought that he would be awarded prizes for his work, but in reality the reaction was quite the opposite."
The university in Shenzhen has since fired Dr. He. And after what happened, several scientific publications noted that the Chinese government is tightening its policies on gene editing and "high-risk biomedical technologies."
While Dr. He sparked worldwide alarm for genetically editing human embryos, the global response aims to keep anything like this from happening again.
The first step is setting general guidelines and continuing the debate.
I found this out in person about a month ago at the annual Society of Thoracic Surgeons meeting...
Thousands of surgeons meet in San Diego at the "STS" every year to keep pace in their field. But remember, these are surgeons. Their instincts for treating patients are, well, with surgery.
That's what had me scratching my head in confusion when I saw the following headline on the front page of the STS bulletin...
That story headlined a serious debate the next day. And it wasn't until I sat in on that debate that I understood the connection between thoracic surgery and gene editing.
The common connection is cystic fibrosis, a genetic disease of the lungs.
Overwhelmingly during the debate, doctors favored embryonic gene editing to cure cystic fibrosis. Eliminating the disease would reduce the need to perform invasive lung-transplant surgery.
The point is, surgeons are starting to see gene editing as a benefit to patients when used for the right purposes. Nearly all disciplines of medicine are preparing for major changes.
Doctors aren't the only major group laying the foundation...
The U.S. Food and Drug Administration ("FDA") is getting in on the action, too.
You can learn a ton about the future of medicine just by keeping tabs on the FDA. The FDA has to stay ahead of major medical trends to staff its operations. For instance, if the FDA says it plans to hire a swath of new employees, that's a signal that a major trend is taking shape.
In January, FDA Commissioner Scott Gottlieb – who has since resigned from his post – called out an expansion in new product developments in gene therapy. The FDA aims to hire 50 specialists to oversee the clinical investigation, development, and review of new products. The opening paragraphs of the press release really say it all...
The FDA is witnessing a surge of cell and gene therapy products entering early development, evidenced by a large upswing in the number of investigational new drug (IND) applications. Based on this activity, we anticipate that the number of product approvals for cell and gene therapies will grow in the coming years, reflecting significant scientific advancement and the clinical promise of these new innovations...
The activity reflects a turning point in the development of these technologies and their application to human health. It's similar to the period marking an acceleration in the development of antibody drugs in the late [1990s], and the mainstreaming of monoclonal antibodies as the backbone of modern treatment regimens.
If that's not enough to grab your attention, Gottlieb also predicted that the FDA will approve up to 20 new gene-therapy products per year by 2025 (based on an assessment of the current pipeline of clinical treatments).
Let me put this in perspective... Over the last 10 years, the FDA averaged 33 new drug approvals annually. That means new gene-therapy treatments could account for more than half of all approvals by 2025. In other words, we're not just looking at a minor blip for this subsector of the biotech industry... We're on the cusp of a major storm of new medicines.
So what does this mean for investors?
If you're looking to squeeze gains out of the biotech sector, you should be paying attention to firms like Allergan (AGN), Regeneron Pharmaceuticals (REGN) and Novartis (NVS). They've all collaborated with small gene-editing startups.
That's just a fraction of the biotech companies building out their pipelines. Dozens of small-cap, developmental biotech firms are worth keeping an eye on, too.
Take Spark Therapeutics (ONCE), for example. The company's share price doubled overnight last month after it was acquired by biotech giant Roche for $4.8 billion.
Biogen (BIIB) acquired a gene-therapy startup called Nightstar Therapeutics (NITE) earlier this week for $800 million. The deal sent Nightstar's share price soaring nearly 70% overnight.
These acquisitions give us a good indication of what's to come as Big Pharma starts to consolidate the space.
Here's the scary truth about investing in gene therapy...
The best time to get excited is when fear drives prices lower. Last year, gene-editing firms were crushed. The downward momentum continued as the Dr. He controversy hit the mainstream media.
Despite these major headwinds, the arguments in favor of the trend are still intact.
At Stansberry Research, we continue to track this major trend... We provided an overview of gene therapy about a year ago in a special report for the Stansberry Innovations Report. And at the end, we shared a "watch list" of 20 publicly traded gene-therapy companies.
So far, four of these companies – a fifth of the list – have already been acquired by larger firms. That includes Spark and Nightstar... the two companies that we mention above.
Last April, we launched Stansberry Innovations Report with a recommendation of a mature gene-therapy firm. Subscribers who took our initial advice are sitting on 66% gains today.
Current Stansberry Innovations Report subscribers can access this special report right here. And if you're interested in learning more about a subscription, click here for all the details.
New 52-week highs (as of 3/6/19): Kinder Morgan (KMI).
Did today's essay interest you? Would you like to read more about gene editing in future Digests? Let us know at feedback@stansberryresearch.com. In the meantime, a subscriber writes in to tell us what he thought about our "unusual" Digest on Wednesday.
"Frankly, I'm not pleased about the 'breaking of the rules' in the recent Digest. As a paid-up lifetime subscriber to the Stansberry's Investment Advisory, I became aware of the amazing opportunity in Altria on Friday and was excited about the prospect of it but had not yet established a position. Then in reading the Digest today it seems that my lifetime subscription at least in this instance doesn't really set me apart from the masses.
"I greatly respect and admire Stansberry's position on educating individual investors and giving us the advice you would want if our positions were reversed. I do think you are the best investment research operation there is which is why I'm a lifetime subscriber to SIA. So needless to say I'm disappointed as I'm sure many other in my position are.
"I will continue my subscription with full confidence with the research you are doing knowing I'm getting the best there is but I'm also paying for the best there is. Frankly it wouldn't bother me near as much if this was on ongoing recommendation to SIA and a couple months from now if the price was still attractive giving it to all of your readers. But only allowing 3 trading days for your SIA members to establish a position before releasing it to the masses I think was a misstep. I am a new investor and I love your work. Please keep it up." – Paid-up subscriber Isaac S.
Brill comment: Our apologies, Isaac. We certainly didn't intend to upset loyal subscribers like yourself. In this case, we decided to make an exception for a couple of specific reasons...
First, as we explained, the recent change at the FDA could be an important near-term catalyst for the stock. This rare opportunity may not be available for long, and we wanted to give as many readers as possible the chance to take advantage.
Second, and more important, Altria is a big and liquid blue-chip stock. Unlike many of our recommendations, there was little risk that mentioning it to Digest readers would cause a meaningful move in its share price.
We'll also remind you that you aren't simply paying us for stock recommendations. You're also paying for our detailed analysis of the underlying business – which we only shared a portion of in yesterday's Digest – as well as our ongoing coverage of that business in the future.
Regardless, you can rest assured we won't make "breaking the rules" a habit. Thank you for the kind words and your continued support.
Regards,
John Engel
Baltimore, Maryland
March 7, 2019